Businessmirror august 08, 2017 by BusinessMirror

Corruption is dead! Long live Corruption!

By Henry J. Schumacher

Nuvolanevicata | Dreamstime.com

t should be our clear understanding that every loud proclamation that corruption— as we know it—is “dead” is followed by something new. Let’s agree that there is plenty of resourcefulness out there to redefine and reinvent corruption. Resourcefulness generates options—through creative and curious problem “creation”, especially in an environment of lacking accountability and supervision. »continued on A14

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Tuesday, August 8, 2017 Vol. 12 No. 299

‘Freebies’ could cause PHL debt to balloon

By Cai U. Ordinario

@cuo_bm

here’s no free lunch, but in the Philippines there’s free housing, education and, soon, free irrigation and tax-free incomes.

Last week President Duterte blindsided his economic managers and signed into law Republic Act (RA) 10931, or the Universal Access to Quality Tertiary Education Act. The new law provides students free tuition in all state universities and col leges (SUCs)

nationwide—a proposition that was earlier opposed by the economic team, namely, Finance Secretary Carlos G. Dominguez III, Socioeconomic Planning Secretary Ernesto M. Pernia and Budget Secretary Benjamin E. Diokno. But this is not the first time

the government has given away freebies. Within less than a year of his administration, Duterte decided to give away housing units to victims of Supertyphoon Yolanda, Typhoon Pablo, and the urban poor. In Febr uar y the President See “Freebies,” A2

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An unrelenting war on drugs

RA 10931 The law that scrapped tuition in state universities and colleges recently signed by the President

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THE ENTREPRENEUR

e have known for a long time that the Philippines has a serious illegal-drug problem, and that illegal drugs were mostly involved in brutal crimes even among family members. In February 2015 the Philippine Drug Enforcement Agency (PDEA) reported that about 20.51 percent, or 8,629, of the country’s 42,065 barangays had illegal-drug problems. A barangay is said to be drug-affected when there is a drug user, pusher, manufacturer, marijuana cultivator or other drug personality regardless of number in the area. Continued on A10

CHELSEA BECOMES PHL’S BM Reports TOP SHIPPING FIRM, SETS SIGHTS ON E-COMMERCE Davao biz to grab growth options Duterte gave to city By VG Cabuag

By Manuel T. Cayon

@villygc

hen Chelsea Logistics Holdings Corp., owned by Davao-based businessman Dennis A. Uy, debuts at the Philippine Stock Exchange on Tuesday, it will take the crown as the country’s largest publicly listed shipping firm, shaking up the industry in the process. Starting out as a mere operator of tanker ships to support the operation of Uy’s Phoenix Petroleum Philippines Inc., Chelsea now controls about 33 percent of the shipping industry that struggled to grow over the last two decades, as many companies still operate dilapidated ships and trucks, as well as worn-out port facilities. “We hope to grow further [if] there is a willing seller. Everybody’s buying. It’s a seller’s market,” Uy said, signaling to the industry that his pockets are still deep enough for more acquisitions. Chelsea leading a very fragmented shipping industry in a span of just a decade, both in terms of market share and tonnage capacity is by design. After growing the operations of its tanker ships for Phoenix Petroleum since January 2007,

UY: “We hope to grow further [if] there is a willing seller.”

t he company decided to buy Trans-Asia Shipping Lines Inc., a 43-year-old Cebu-based firm that operates several roll-on, roll-off passenger vessels. It closed the deal late last year. In April this year Uy then became the president and CEO of 2Go Group Inc. Udenna C Torp., Uy’s holding firm, and the SM Group decided to partner to buy out the owners of 2Go, a company created by merging Negros Navigation Co. (Nenaco) and Aboitiz Transport System Corp., the company that created the SuperFerry brand. Udenna bought about 31 percent of KGLI-NM Holdings Inc., which owns some 60 percent of 2Go’s parent Nenaco. SM Investments Corp., meanwhile, owns a 34.5-percent stake in 2Go. At the moment, 2Go is not yet consolidated in the books of Continued on A2

PESO exchange rates n US 50.1850

@awimailbox Mindanao Bureau Chief

Part Two

AVAO CITY—The office of Davao Rep. Mylene J. Garcia-Albano has been the center of attention among business and government leaders, following her filing of the bill to create the Davao Airport Authority three years ago. The filing of the bill came at heightened agitation to allow the Davao International A irport (DIA) taste its own fruit of labor, being one of the most used airport facility in the country and the premier international airport in Mindanao. For the government and business leaders, DIA was being too much of a Good Samaritan to share its income to the rest of the 85 airports nationwide, while still receiving f lak for various issues. Some of the latter refer to lack of amenities, like lack of comfort rooms, need for tissue papers in current washrooms and the growing congestion in the terminal building. The council has also pushed for the inclusion of payment of terminal fees in the payment of plane fare to ease movement of passen-

This file photo shows the skyline of Davao City at night. A lawmaker behind the bill for a Davao Airport Authority believes the hometown of President Duterte would greatly benefit from tourism and investment to be facilitated if Davao had its own set of leaders independent of the Ninoy Aquino International Airport. BusinessMirror photo

gers inside the cramped terminal building. The DIA was able to collect P227 million in terminal fees in 2010, P267 million in 2011 and P284 million in 2012. Only in the Ninoy Aquino International Airport (Naia) and the Mactan International Airport (MIA) in Cebu are terminal fees already prepaid with the plane ticket.

Incidentally, the two airports are also managed by their respective airport authorities. With the Davao airport already handling about 10,000 passengers daily a decade ago, a prepaid terminal fee could declog certain sections of the airport and unburden loaded passenger as they move around the building.

Albano’s arguments

GARCIA-ALBANO, who represents Davao City’s Second District where the Davao airport is located, filed House Bill 6693 in 2014. She said the bill aims to maximize the opportunities opened by the openskies declaration. In arguing for the bill, Garcia-Albano said the Continued on A2

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Source: BSP (7 August 2017 )

BMReports BusinessMirror

A2 Tuesday, August 8, 2017

Davao biz to grab growth options Duterte gave to city Continued from A1

adoption of policy was also the best time to enhance the quality of the services and competitiveness of the DIA, officially named Francisco Bangoy International Airport. This would happen only “by creating a body that [will] principally undertake the control, management and supervision” of the airport. She added the bill’s approval will pave the way for the creation of a board, which will have full control of decision-making and budgeting. It will also have the power to levy and collect dues, charges, fees or assessments for the use of the airport, invest its idle funds and exercise police authority. As with the Naia and the Mactan airports serving as gateways, she said the Davao airport “also serves as the gateway to the subregional trade block known as the

Freebies. . .

Continued from A1

declared that recipients of the 200,000 housing facilities to be built by the government in the Yolanda corridor and for those affected by Pablo will be free of charge. In April unoccupied housing units intended for the military and police were given to 4,000 informal settler families and urban poor members of the Kalipunan ng Damayang Mahihirap for free. But the freebies do not stop there. The government also wants to exempt taxing Filipinos earning P250,000 or less a year under the proposed Tax Reform for Acceleration and Inclusion Act, as well as irrigation-system use for smallholder farmers under the Free Irrigation Act. Both bills are included in the list of 13 priority legislations identified by the Legislative-Executive Development Advisory Council Executive Committee this year. “Nothing really is free. Somebody ends up paying. Either the present generation who pays higher taxes or the future generation who ends up paying borrowed money used to finance ill-conceived political interventions,” Philippine Institute for Development Studies (PIDS) President Gilberto Llanto told the BusinessMirror.

‘Hefty price tag’

Oil-rich socialist country Venezuela recent ly plunged into a financial crisis, and reports stated that the country is al-

East Asean Growth Area, which is the center of economic cooperation in Southeast Asia”.

Cebu model

THE proposed Davao airport authority seeks to “encourage, promote and develop international and domestic air traffic in the Davao region as a means of making the region a center of international trade and tourism”. Only in 2006 did Davao City hosted its first international meeting, the Asean Tourism Forum, the biggest travel and tour event in the region, and earned the admiration of Asean tourism leaders for its warmest hosting ever. When Cebu attracted direct international air linkage outside of the Naia, it was admired by many areas with their untapped airports, including Davao City. It was largely acknowledged Cebu pulled a feat by marketing itself ready on its last $10.5 billion. The decline in government coffers was partly due to falling oil prices and sweeping economic and financial reforms. Its president, Hugo Chavez, who assumed office in 1999, used Venezuela’s wealth amassed from its oil exports to provide free housing, health care and better education. These, along with other measures, reports noted, contributed to rendering a previously oilrich nation destitute. Former Socioeconomic Planning Secretary Romulo V. Neri told the BusinessMirror that this can also happen to the Philippines under the weight of the freebies it is giving. The most recent of which is the decision to make college education free. Neri said he shares the sentiments of the President’s economic team and other economists in saying that the free college tuition in SUCs was nothing but a bad decision. With this decision already made, Neri added the government placed itself in a difficult situation—deciding which items in its budget or programs and projects will suffer to make room for free tuition in SUCs. This sacrifice is important to make because the Duterte administration wants to keep its deficit at 3 percent of GDP. This is the maximum level that the government can impose, since anything beyond this would already affect the country’s investment-grade status. “If you do things like these, and you don’t save on other measures,

as an island in Pacific and dissociating itself from being part of a politically troubled Philippines. A recent posting at the European Chamber of Commerce and Industry web site said “visitors find Cebu a better option for connectivity to other destinations”. “The Department of Tourism in Central Visayas disclosed that visitors no longer have to fly to Manila to explore other tourist destinations as Cebu is well connected to other parts of the country,” an article on the web site said. “New direct flights from Cebu to Davao, Palawan and Boracay [via Caticlan] starting in April are expected to boost tourism in southern Philippines.”

No progress

SUSAN Gomez Simpol, GarciaAlbano’s director for political affairs and constituent services, said the bill may be expected to stay longer in Congress. we will exceed 3 percent, and that will affect our credit standing, it will affect interest rates, and we will go back to the old times when we had unmanageable debt if we’re not careful,” Neri said. Ateneo de Manila EagleWatch senior fellow Alvin Ang agreed and said the problem with the current administration’s efforts to make a number of basic needs free is that there seem to be no “gatekeepers” that can lead to leakages. With the decision to make college tuition free, Ang said the government has opened the floodgates for richer and even ultrarich students enrolled in SUCs to avail themselves of the free education, which “defeats the purpose” of the law. This was also the main argument of the President’s economic team, as well as the PIDS study authored by senior research fellows Aniceto C. Orbeta Jr. and Vicente B. Paqueo, which indicated that poor students only comprise 12 percent of the population of SUCs nationwide. “It’s for the poor, so the rich should not be able to access it. If those who have the means to pay can access it, that will be unfair to the poor,” Ang said. L l a nto added t hat w it h this decision, the government should face the possible crowding out of the private sector in education. Students studying in privately owned higher education institutions may f lock to SUCs, making it difficult for them to remain open. This, he said, can also cause teachers and members of the

“We received a position paper from the Department of Budget and Management recommending further study of the bill,” Simpol said in a text message last Friday to the BusinessMirror. The House of Representatives’s Committee on Appropriation was also waiting for the position of the Department of the Interior and Local Government on the exemption from real-property tax requested by Garcia-Albano’s bill. The bill has since been refiled as HB 1371 in the 16th Congress (2013 to 2016) and again as HB 2002 this year. It was similar to what Congress did when it deferred deliberations last year of the similar proposal for the Laoag International Airport as it asked proponents to submit a 10-year feasibility study on the income profile, citing declining visitors’ arrivals through recent years. To be concluded administration staff of private schools to lose their jobs and freeze wage adjustments. Llanto also said the “irony” of the decision to extend these “freebies” is that the burden of the indirect revenue collection is placed on workers belonging to the middleand low-income classes. “The middle class and poor pay higher indirect taxes for goods supposed to be intended for the poor. But there are leakages. Those public goods could end up in the pocket of the nonpoor,” he added.

Adjustments

Economists said there is already no point in debating on whether the government should move toward extending these freebies because the Duterte administration seems firm on its decision. Ang said the government should instead focus on increasing the country’s tax effort—or the tax collection as a percentage of GDP— to around 20 percent, a rate that has eluded the Philippines in over 30 years. This will allow the government to finance the provision of freebies. Based on data from the Department of Finance, the country’s tax effort was at 13.7 percent in 2016. Between 1986 and 2016 the highest tax effort recorded was in 1996 and 1997, when it was pegged at 15.3 percent. He added the administration must also push for stricter rules in implementing these freebies, such as imposing income requirements as basis for accepting students in SUCs. The economists offered a number of suggestions for free education. Llanto said this can be done through a voucher system, which will work in tandem with a grantsin-aid program. Poor students will be given vouchers and allow them to choose the best school that will educate them. Neri, for his part, said the government must also be careful in preventing the decline in the quality of infrastructure projects as a result of the reallocation of funds to accommodate free economic services. “It ’s t he gover nment ’s de cision. So if they decide that these are public goods, then they should look for funds, appropriate it properly. Even if the funding needed is not large, such as in housing, it’s not right to just give them away for free because you have to have a holistic view,” Ang said. Above all, free services from the government should be welltargeted. Ang added this is key to achieving the Duterte administration’s socioeconomic goals.

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CHELSEA BECOMES PHL’S TOP SHIPPING FIRM, SETS SIGHTS ON E-COMMERCE Continued from A1

Chelsea. Uy admits the next battleground for the struggling shipping industry is in e-commerce, where he still lacks in capability. Uy said his company will partner with conglomerate SM Group for its entry into the e-commerce space, also known as online shopping. “That [e-commerce] is not easy to do. But it’s necessary that we should be there, if not now, then the next two years. It will be the normal thing in the future for consumers with the less time we have. As the country industrializes, we’ll have more options to shop. We won’t want to go to the mall,” Uy said. Shipping may take the bulk of the operations of e-commerce, but will also include other areas, such as warehousing and electronic payments, which many Filipino consumers today frown upon. Current online-shopping firms, such as the Lazada Group and Zalora, may have temporarily solved the problem by offering cash-ondelivery options. Chryss Alfonsus V. Damuy, Chelsea’s president and CEO, said the company will use 2Go, which already has its logistics business, as its jump off point for its e-commerce venture. “We are studying. We’re aiming to come up with a platform for that type of segment; nothing definite yet,” Damuy said. Uy said its main challenge is how to make its entry into the ecommerce space profitable. Chelsea, however, needed to decide as quick as it can, since other conglomerates are already studying their options. Lazada has partnered with the SM Group, while the Ayala Group already has a minority stake in Zalora Philippines. Even Metro

Congress. . . Continued from A14

promotions budget at about $67 million, Singapore at $80 million and Malaysia at $100 million. Congressional hearings on the proposed National Expenditure Program for 2018 submitted by the Department of Budget and Management begin this week. As per the National Tourism Development Plan for 2016-2022, target foreign arrivals for 2018 is 7.4 million, up from the 6.5-million goal this year. Foreign visitor receipts are estimated at P473 million in 2018 compared to the P407-million target this year. Alegre added that any new bids for an advertising campaign this year will be for the 2018 budget. Also, he stressed that the “branding campaign will still be ‘It’s More Fun In the Philippines’”. He said Tourism Secretary Wanda Corazon T. Teo wants different advertising agencies to be chosen for the various TVCs/ads that would be aired for next year’s campaign. He explained this would hopefully enable the DOT to get new and fresher concepts for the ads. For the rest of 2017, he said the DOT will continue with its promotions of the Philippines abroad: “We’re doing projects with BBC, CNN, general media placements, bus ads, billboards. We have not stopped projects; the promotions will continue

Dela Rosa. . . Continued from A14

fabricated and planted evidence during the operation. “We must be neutral, so let it go to the proper courts so that we will know because based on the findings of Soco [Scene of the Crime Operatives] scientific evidence versus testimonial evidence. The

Pacific Investments Corp. (MPIC) joined the fray after its purchase of several logistics and even trucking firms starting last year. Incidentally, MPIC’s predecessor, Metro Pacific Corp., previously owned Nenaco. In late-2006 MPC sold the thenbankrupt shipping company to the group of Sulficio Tagud Jr., whom Uy just recently replaced in 2Go as president and CEO. Now the two firms—Chelsea and MPIC—race to create their respective e-commerce platform and both say they are still in the planning stage. MPIC President Jose Ma. K. Lim said the company, through its unit MetroPac Movers Inc., has already invested some P2 billion in its venture, and the company still needs to cope up with the fragmented supply chain in the country. “It’s all part of the final decision; we’re going through a selection of consultant to help us answer these questions and identify where this opportunity is in terms of the industries that need to be served and the supply-chain components that are needed to serve this,” he said. MPIC Chairman Manuel V. Pangilinan said more of their assets at the moment are on distribution of goods, such as trucks and warehousing, and not on logistics. “[It] doesn’t have to be us [owning the logistics firm]. A more efficient logistics system is cost savings, at the same time there are other reasons companies want to have an efficient logistics system,” Pangilinan said. As the two firms battle it out on that space, it is unknown if the e-commerce in the Philippines can kickstart the shipping industry, which still needs more investments from the conglomerates. until the end of the year.” The DOT has yet to clear up the remaining issues surrounding this year’s P650-million advertising campaign that had been awarded to the McCann Worldwide Group. One of the largest advertising agencies in the country, McCann had already produced two TV commercials for the DOT, “Anak” and “Sights”. But the “Sights” ad led to a parting of ways between the DOT and McCann, after netizens pointed alleged that it “copied” from a South African TV ad with the same theme of a blind man enjoying sights in a destination. After validating these claims, the DOT said it found “glaring similarities” between the “Sights” and South Africa ad, and had stopped airing the local ad. It also asked McCann to publicly apologize for the negative feedback the department received. The public apology never came though. (See, “DOT stops airing of McCann’s ‘Sights’ as unofficial tourism ad reaps praises,” in the BusinessMirror, June 15, 2017.) An earlier interview with DOT Undersecretary for Public Affairs, Communications and Special Projects Katherine de Castro indicated that the government agency was toying with the idea of “crowdsourcing” the ads for the rest of the year. (See, “DOT mulls ‘crowdsourcing’ ads,” in the BusinessM irror, July 12, 2017.) No other details have been yet been released on this, but Alegre said the agency “was still finishing the issues with McCann”.

PNP holds the scientific evidence through Soco,” dela Rosa said. A m a n c l a i m i ng he wa s a survivor during the raid said that policemen manipulated the crime scene and intentionally killed the victims. “A companion of the mayor has his testimony…what do you expect? He is from the camp of the Parojinog, so he will surely side with them,” dela Rosa said.

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House leaders agree to reset barangay polls By Jovee Marie N. dela Cruz @joveemarie

eaders of the House of Representatives on Monday agreed to postpone the 2017 barangay elections and synchronize it instead with the plebiscite for Charter change and the proposed Bangsamoro basic law.

May 2018 The projected new schedule of the barangay elections agreed upon by House leaders, which, they say, will be synchronized with the Charter change plebiscite and the proposed Bangsamoro basic law

In an interview after the House majority caucus, Majority Leader Rodolfo C. Fariñas of Ilocos Norte said members of the lower chamber have reached a consensus to hold the barangay elections in May 2018 from October 2017. According to Fariñas, the lower chamber has also agreed to retain the incumbent barangay officials in a holdover capacity. The last barangay election was conducted in October 2013. The decision of the lower chamber appears to be in contrast with the proposal of President Duterte to appoint replacements of barangay officials. Earlier, Speaker Pantaleon D. Alvarez supported the call of the President for the postponement of the barangay elections in October this year. Alvarez said Duterte is concerned that, if the elections were held in October as originally scheduled, the candidates backed by money from drug lords would likely win. He said it would help Congress to act on the proposed measures for the postponement of the October elections if the President would certify these as urgent. There are several bills currently pending in the House of Representatives seeking the postponement of the synchronized barangay and Sangguniang Kabataan polls in October. Alvarez said that, aside from allowing the government to thwart the growing influence of drug lords over the barangays, postponing the October barangay and SK polls will save the government money.

Best milk for babies

Editor: Vittorio V. Vitug • Tuesday, August 8, 2017 A3

Comelec’s Bautista has to disprove wife’s ill-gotten wealth rap–Palace By Elijah Felice E. Rosales

@alyasjah & Joel S. San Juan

@jrsanjuan1573

resident Duterte will personally escort embattled Commission on Elections (Comelec) Chairman Andres D. Bautista to the exit door if it is proven he had amassed ill-gotten wealth, Malacañang said on Monday. Presidential Spokesman Ernesto C. Abella said, if Bautista has a case to answer in court, the President will certainly support his removal from office. “The President’s stand is pretty clear regarding this matter that he will not tolerate corruption, even a whiff of it,” Abella said in a news briefing. Andres is facing allegations from his wife, Patricia Paz C. Bautista, of amassing ill-gotten wealth amounting to as much as P1 billion. Patricia has

transmitted an affidavit to the National Bureau of Investigation (NBI) disclosing information on the alleged misdealing and corrupt activities of Bautista while in government service. Justice Secretary Vitaliano N. Aguirre II, meanwhile, said he has directed the NBI probe the allegations against Bautista. Specifically, Aguirre instructed NBI Director Dante Gierran to conduct a case buildup into Bautista’s alleged failure to disclose

AFP cancels deployment of more troops to Marawi City

S clearing operations in war-torn Marawi City are set to wind down soon, the Armed Forces of the Philippines (AFP) has suspended the deployment of another battalion, as reinforcement to units still engaged in fighting Maute Group terrorists. For reasons of operational security, AFP Public Information Office chief Col. Edgardo Arevalo declined to say where the battalion is based, but added the officers and enlisted personnel of the unit were “disappointed” with AFP Chief of Staff Eduardo M. Año’s decision to cancel deployment of more troops. “The chief of staff desisted on bringing this Army battalion due to the [recent positive developments] ongoing there,” Arevalo said. A battalion’s strength is estimated to be around 300 to 500 officers and enlisted men. Arevalo added the battalion’s deployment was finalized some two weeks ago and that officers and personnel have packed their equipment, waiting for orders to go to Marawi City, only to be informed that Año had canceled the order as there are sufficient troops in the area. Earlier, ranking military and defense officials said the remaining Maute Group fighters, estimated at around 40 to 60, are now pocketed in two barangays measuring less than a square kilometer. PNA

Some 2,000 moms simultaneously breastfeed their babies to promote awareness on the health and economic benefits of breastfeeding and providing proper support to breastfeeding mothers as part of the National Breastfeeding Awareness Month and International Breastfeeding Week this month. The activity hosted by the online support group Breastfeeding Pinays and the Department of Health was held during the “Hakab Na 2017” at Araneta Coliseum in Cubao, Quezon City, last Saturday. The event is also part of the “Big Latch On”, an international activity where mothers simultaneously breastfeed their babies within one minute from different locations around the world at 10:30 a.m. last Saturday to create a world record. PNA/Oliver Marquez

information required in his the statement of assets, liabilities and net worth (SALN). The DOJ chief added that the NBI should also look into other allegations made by Bautista’s wife Patricia in her sworn affidavit submitted to the NBI. Among the documents that she disclosed to prove his husband’s illgotten wealth were 35 Luzon Development Bank passbooks with a total balance of P329.2 million; a foreigncurrency account with Rizal Commercial Banking Corp. (RCBC) with $12,778; an RCBC personal account with P257,931.60; an HSBC account with HK$948,358.97; a condominium unit in One Bonifacio High Street at Bonifacio Global City (BGC) in Taguig City; a condominium unit in The District in San Francisco California. She, likewise, claimed that she was kept in the dark by Bautista with regard to 13 other real properties listed in his SALN. Patricia has claimed she met with Duterte on July 26 to inform him of the purported anomalies of her hus-

band in his stint as poll chief. However, Abella did not confirm Patricia’s claim of meeting with the President, but divulged Duterte has a scheduled close-in meeting with an unidentified party on the said date. The President’s spokesman added, “The whole matter has to be fully investigated” before Malacañang issues a position on the corruption allegation. If one thing is certain, Abella said the President will support the removal of Andres should prosecution prove a case against him. Patricia on August 1 submitted to the NBI an affidavit containing documents pinning Andres of amassing wealth—passbooks, bank accounts and real properties—undeclared in his statement of SALN. Patricia said her husband might have accumulated as much as P1 billion worth of ill-gotten wealth, in spite of declaring a net worth of P176.3 million in his SALN. Under Article 11, Section 2 of the Constitution, members of the Constitutional commissions, which include the Comelec, “may be removed from

office on impeachment for, and conviction of, culpable of violation of the Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public trust”. In a news statement, Bautista said his estranged wife is only propagating false allegations against him and “allowing herself to be serve the political agenda of some opportunistic people”. “Her allegations are all lies, and I categorically deny all of them. It was my hope that we could still fix our marital problems or, at least, address them in a civil and decent manner,” the statement read. Bautista added his wife allegedly stole financial assets, including cash and gift certificates, belonging to himself and his family. “Throughout this time, she has repeatedly attempted to extort and blackmail me using her lawyers and media contacts, and, when she realized that no windfall was forthcoming, she decided to file her affidavit based on fabrications and lies,” the poll chief said.

Economy

A4 Tuesday, August 8, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

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Broker names BOC officials ‘on the take’ By Jovee Marie N. dela Cruz

@joveemarie

Customs broker on Monday named officials of the Bureau of Customs (BOC) who allegedly divided among themselves some P27,200 “grease money” for each container shipment at the port.

At the continuation of House Committee on Dangerous Drugs probe into the P6.4 billion worth of smuggled illegal drugs, Ruben Taguba said there are people who texted him to collect tara, or

grease money. “This [P27,200 is needed for us to] skip inspection for the shipments and to expedite processing of documents and to avail ourselves of the benchmarking,” he said. Taguba

₧27,200 The reported amount of “grease money” for each container shipment at the port

added he is handling around 100 containers at any given week. He identified officials who allegedly receiving the grease money are Customs Deputy Commissioner Teddy Raval of the Intelligence Group, Customs Intelligence Officer Teodoro Sagaral and District Collector Vincent Maronilla of the Customs Manila International

PIDS study traces roots of chronic food poverty By Cai U. Ordinario

@cuo_bm

ore Filipinos will become food poor if they are not educated, unemployed, bereft of assets, live in conflict areas and those affected by weather disturbances, according to the Philippine Institute for Development Studies (PIDS). In a discussion paper, titled “Chronic Food Poverty in the Philippines”, PIDS senior research fellow Connie BayudanDacuycuy and research specialist Lora Kryz Baje said these factors are the most common determinants of chronic food poverty in the Philippines. These are also some of the reasons that explain why there are many “never food poor households” in Metro Manila and there are a lot of food poor households in the Autonomous Region in Muslim Mindanao. “This paper finds that rural areas have substantially higher percentage of always food poor households than urban areas,” the authors said. “Results show that the probability of chronic food poverty is affected by education, employment, assets, conflict and rainfall deviation.” Dacycuy and Baje added this is also the reason it is important for the government to provide living assistance, such as meals and transportation, to students enrolled in state universities and colleges (SUCs) nationwide. While the President ratified the extension of free tuition in SUCs, meals and transportation stipends are important to ensure that stu-

dents from poor households will complete their tertiary education. “ These expenses are equally important to ensure that students from poor households will finish college and that public investments in their education are not wasted,” the authors said. The PIDS researchers also urged the government to “carefully consider” the possibility of institutionalizing the Conditional Cash Transfer (CCT) Program. They said the government would do well to impose time-bound conditions to education under the CCT, which is one of the program’s weaknesses. Further, the authors urged the government to work with social enterprises (SEs) that can help poor households access financial resources through decent livelihood opportunities. “The government should explore the role of social enterprises, which use local knowledge and resources to address not only financial but social and environmental issues within the community,” the paper stated. In terms of armed conflict, the authors urged the government to engage various stakeholders to create initiatives that will help the affected communities and other stakeholders. An example, the authors said, is the initiative of the former environment secretary to involve the New People’s Army into its ecotown projects to encourage communities to use natural resources in a sus-

tainable manner. The authors added it is important for local government units (LGUs) to get involved in the development of a climate-smart agriculture for communities frequented by typhoons and other weather-related events. “People in rural areas can easily slip in and out of poverty since their livelihood depends on stable environments, such as stable temperature and steady supply of water,” the authors said. LGUs can tap the People’s Survival Fund (PSF), which was created through Republic Act 10174 signed on August 16, 2012, for their environment-related engagements in communities. The PSF has an annual appropriation of P1 billion. Despite this, only two projects were approved by the Climate Change Commission for Surigao del Sur and Surigao del Norte with a price tag of only P120 million. Apart from these, the authors said financing for environment or climate change-related efforts is also available through the adaptation fund (AF) established under the Kyoto Protocol of the UN Framework Convention on Climate Change. Through the AF, LGUs can have a direct access to international financing that they can use in the design, implementation and monitoring of climate change-related projects. Further, the authors also said the government can also explore the use of adaptive social protection initiatives.

ADB expert cites benefits of land value capture for congested urban centers

ongested cities like Metro Manila can benefit from land value capture (LVC) that can improve accessibility to prime locations, according to the Asian Development Bank (ADB). In an Asian Development Blog, ADB East Asia Department Principal Transport Specialist Sharad Saxena said governments will not have enough public funds to address infrastructure needs, such as those needed to improve mass-transport facilities. Saxena said LVCs capture the increase in the value of land generated by improved accessibility through taxes. These taxes are then “recycled” or invested in much-needed infrastructure projects that can improve access in congested cities. “Rising urban population growth and private vehicle ownership are making Asian cities unlivable. City dwellers lose precious time in traffic jams, where they also suffer the negative health impact of deadly air pollution,” Saxena said. The use of LVCs has proven efficient for cities like Tokyo, which is also one of the most populated cities on the planet. The funds collected through LVCs allowed Tokyo to build efficient mass-transport facilities that ultimately discourage residents from taking their cars to go to work or elsewhere in the city. Saxena said Tokyo’s private railways partly financed railway-development costs collected from profits from real-estate developments through LVCs. He said private railway companies were able to benefit from higher passenger volume, while increasing the value of their commercial and residential real-estate holdings. Cai U. Ordinario

Container Port; Director Niel Estrella of the Customs Intelligence and Investigation Service, Director Milo Maestrecampo of Import and Assessment Service, a certain Major Gutierrez, who is already deceased, a certain Jayson and a certain Maita of the Formal Entry Division of the bureau. He said there are still other individuals from the bureau who receive bribes from him every week. For their part, Raval, Maronilla, Estrella, Maestrecampo and Saragal denied the allegations hurled by Taguba. The lower chamber has granted Taguba a legislative immunity before naming BOC officials in the alleged corruption activities. Taguba said of the P27,200 bribe

money per container of shipment, P2,000 is allocated for the intelligence group, P3,000 for the port collector, P500 for the Customs Intelligence and Investigation Service director, P500 for the Customs Intelligence and Investigation Service district collector, P500 for the Enforcement and Security Service director, and P500 for the Enforcement and Security Service district command. Ten thousand pesos is for the Import Assessment Service; P1,000 for x-ray; P200 for the Pier Inspection Division; P500 for the Formal Entry Division; P1,000 of the Assessment and Operations Coordinating Group and P7,500 for the section division. For his part, Party-list Rep.

Harry Roque of Kabayan said the revelation of Taguba only shows that “our collections in the BOC should double if done properly”. “This discovery and admission only goes to show that we do not really know how much we should really be earning by way of Customs tariffs and duties,” he said. “If only correct tariffs and duties are imposed and collected, then we would not have any budget deficit,” he added. On May 30 members of the BOC and the National Bureau of Investigation personnel raided a warehouse in Valenzuela City and discovered the shipment of illegal drugs after receiving a tip from their Chinese counterparts. Taguba was the broker of the shipment.

‘Free-tuition law ushers in next wave social revolution’ By Rea Cu

@ReaCuBM

he Department of Budget and Management (DBM) on Monday said the implementing rules and regulations (IRR) for the Universal Access to Quality Tertiary Education Act, or Republic Act (RA) 10931, which President Duterte signed last week, will be crafted starting Wednesday this week. Budget Secretary Benjamin E. Diokno said the DBM will meet with the agencies implementing the Unified Student Financial Assistance System for Tertiary Education (UniFAST) Act, the Commission on Higher Education (Ched), the Technical Education and Skills Development Authority (Tesda), the President of the University of the Philippines (UP), the appropriations committee of the House of Representatives and the Senate finance committee. This developed as Rep. Joey S. Salceda of the Second District of Albay, principal author of the bill, said RA 10931 will usher in the “next wave social revolution in building a more egalitarian society”. RA 10931’s landmark components include 1) free higher education in state universities and colleges (SUCs) and local universities and colleges (LUCs); 2) free technical-vocational education in post-secondary technical-vocational institutions under Tesda; 3) tertiary education subsidy (TES) for Filipino students; and 4) student loan program (SLP) for tertiary education The breakthrough legislation is estimated to cost the government P10.486 billion in tuition and P6 billion in miscellaneous expense for 984,000 students in SUCs in 2018. In the state-run Bicol University in Albay’s Second District, which Salceda represents, some 28,000 students stand to benefit from the measure with a subsidy of about P340 million per year. “We will meet on Wednesday, with UniFAST, CHED, Tesda, UP president, the members of appropriations committee [of the] House, and members of the Senate finance committee, [at] UP. We will meet to formulate the IRR,” Diokno told reporters at the sidelines of the Senate finance committee hearing on the budget-reform bill on Monday. Diokno added that the final budget amount for the implementation of the program will be discussed on Wednesday. Last week the President signed into law RA 10931, which aims to provide free tuition and other miscellaneous fees in tertiary education for students enrolled in SUCs in the Philippines. He said funding for the program will either be sourced from within the budget or requested through

Fish be with us

A fish vendor at the Navotas Fish Port Complex (NFPC) in Navotas City sprinkles clean, cold water to extend the freshness of his fish stocks on sale at his wetmarket stall. The NFPC is a haunt for fish bargain hunters who want to buy fish—either in bulk or for household consumption—at a price much lower price. NONIE REYES

supplemental budget, since the 2017 appropriations have already been approved. “Well, you know the budget, as approved by the President, cannot be increased by Congress, so we will look for money from within the budget and if that is sufficient, then we wouldn’t need supplemental budget. If it’s not sufficient, then we will ask for supplemental budget. Remember, this will be for implementation on the first semester of 2018 because the 2017 requirements are already covered,” Diokno said. Earlier, Finance Secretary Carlos G. Dominguez III has pointed out that the Development Budget Coordinating Committee (DBCC) will be discussing the IRR headed by Diokno. “He [Diokno] will prepare the IRR for that. I think that will be in the DBCC, and since he is the chairman of the DBCC [so] we will sit down with him on that,” Dominguez told finance reporters. Salceda said the new law drew much of its provisions from the Albay model on Universal Access to College Education program he pioneered when he was governor for nine years. The program, which had helped some 88,888 students in completing their studies, also served as “inclusive tool and key to Albay’s poverty reduction from 41 percent in 2007 to 17.1 percent in 2015.” Students in community colleges may have to wait awhile, however, since only 16 out of 111 LUCs are presently accredited by the Ched. The government sub-

sidy for LUC students is estimated at P113 million. Salceda said the program also provides for some P1.3 billion in student loans for those who belong to the lowest 30 percent who may need additional financial resources in pursuing their college studies. “Thank you, Mr. President, for launching the second-generation social revolution in erecting a pillar of a more egalitarian society,” Salceda said following the announcement of the President’s approval of the measure. Contrary to misperceptions, the new law has built-in mechanisms that would encourage increased participation in the program from all socioeconomic classes, especially the poor. Salceda said Republic Act (RA) 10931, would now give poor students the drive to strive further for self-development through free tertiary and technical-vocational education, the high costs of which had previously demoralized and forced them to settle for low-paying jobs to survive. Salceda added RA 10931, aside from its mechanisms that provide all Filipinos equal opportunities to quality education in private and public educational institutions, also aims to prioritize academically able poor students, ensure optimized utilization of government resources in education and recognize the complementar y roles of public and private institutions in the tertiary educational system. With PNA

Agriculture/Commodities BusinessMirror

news@businessmirror.com.ph

Editor: Jennifer A. Ng • Tueday, August 8, 2017

DA suspends accreditation of Brazil’s meat plants

By Jasper Emmanuel Y. Arcalas

@jearcalas

he Department of Agriculture (DA) has temporarily suspended the accreditation of all Brazilian meat establishments to export meat products to the Philippines after some shipments from the Latin American country tested positive for salmonella. Agriculture Secretary Emmanuel F. Piñol issued Memorandum Order (MO) 32, dated July 31, which authorized the temporary suspension of the accreditation of all Brazilian foreign meat establishments (FMEs). “According to Memorandum Circular 9-2008-5, Series of 2008, entitled ‘Microbiological limits for assessment of microbiological quality fresh, chilled and frozen meat’, microbiological limits for salmonella spp. must be absent in 25 grams sample”, Piñol said in MO 32, a copy of which was given to reporters on August 7. “A total of 246 out of 492 container vans were sampled and subjected to laboratory analysis from March 1 to June 30 wherein samples from 18 containers [7 percent] tested positive for salmonella spp.” he added. MO 32 formalizes the DA chief’s earlier pronouncement that he will impose a total ban on Brazilian meat imports and repeals MO 30, which imposed a tempo-

Diego Giudice/Bloomberg

PHL readying to ship more sugar to US T he Sugar Regulatory Administration (SRA) is now helping Filipino traders prepare the additional 63,830 metric tons raw value (MTRV) of sugar that will be shipped to the United States under a preferential trade scheme. The SRA on Monday issued Sugar Order (SO) 6, which authorized the extension of the verification period for the quedan permits of “A” sugar, or those bound for the US, to August 11. SRA Administrator Anna Rosario V. Paner said extending the quedan permit verification would ensure that the Philippines would be able to fill the additional sugar quota provided by the United States Trade Representative (USTR). “It is for the long-term interest of the Philippines and sugarcane industry to fill-up the regular and additional US quota for quota year [QY] 2016-2017,” Paner said in SO 6 dated August 2, which was recently uploaded in the SRA web site. The SRA, a government-owned and -controlled corporation attached to the Department of Agriculture, noted that the Philippines has a carryover volume of 57,684 MT of “A” sugar after filling up the original quota of 136,188.54 MT. “To ensure the timely arrival of the additional US quota shipment/s in the US Customs Territory on or before October 31, there is a need to resume the verification of ‘A’ sugar in order to determine the volume of ‘A’ sugar quedans available for shipment,” SO 6 read. Under SO 6, all “A” sugar quedanpermits issued for crop year (CY) 20162017, which will end on August 31, and in the previous crop years are eligible for verification. “The deadline of verification of ‘A’ or US quota sugar produced as of week ending July 30 of CY 2016-2017 and previous crop years shall be on August 11,” Paner said. “Any ‘A’ sugar quedan-permits not verified by August 11 shall be declared homeless and non-negotiable, non-marketable and the same cannot be withdrawn from the mill,” Paner added. The USTR recently announced that it will allow the Philippines to export more sugar to America at reduced tariff rates under the tariff-rate quota

(TRQ) scheme. The total additional volume given to the Philippines for the current fiscal year reached 63,830 MTRV, or 61,154.49 MT commercial weight. Of the total volume, 14,932 MT came from the unused volume of other quota holders. The remaining 48,898 MT is part of the 244,690 MT shortfall in the sugar supply of the US for fiscal year 2017. “The 244,690 MT is in addition to the minimum amount to which the US is committed under the World Trade Organization Uruguay Round Agreements,” the USTR said, adding that the allocations were based on the countries’ historical shipments to the US. The Philippines got the highest reallocation volume from Washington among other countries exporting sugar under its TRQ scheme. “The USDA also announced that all sugar entering the US under the FY 2017 raw sugar TRQ will be permitted to enter US Customs territory through October 31, a month later than the usual last entry date,” the USTR said. Sugar industry stakeholders have earlier welcomed the additional quota, saying this would help reduce the country’s high sugar inventory and stabilize sugar prices. “Filling up the quota will reduce greatly our sugar inventory, relieve sugar mill warehouses of congestion and give us a fresh start in the new crop year,” Philippine Sugar Millers Association (PSMA) Executive Director Francisco D. Varua told the BusinessMirror in an earlier interview. “Definitely, PSMA can find a way to fill up the additional quota,” Varua said, adding that the additional shipments could arrive in the US by September. Jasper Emmanuel Y. Arcalas

rary import ban on 25 Brazilian FMEs. “This temporary suspension is for the protection of the Philippine consumers pursuant to Food Safety Act,” the order read. Piñol noted that under Republic Act 10611, or the Food Safety Act of 2013, the DA is responsible for the development and enforcement of food-safety standards and regulations for food in the primary production and postharvest stages of the food-supply chain. “[The DA] shall monitor and ensure that the relevant requirements of the law are complied with by farmers, fishermen and food business operations,” MO 32 read. Piñol said the temporary suspension of the accreditation of all Brazilian FMEs will remain place pending the results of an investigation to be conducted by the DA. The government has already suspended the processing, evaluation of the application and issuance of sanitary and phytosanitary (SPS) import clearance for

meat from Brazil and canceled the SPS import clearance of meat products that have not left Brazil. “Shipments of meat in transit upon the issuance of this order will be allowed to enter subject to 100 percent physical and laboratory examination inspection,” MO 32 read. The National Meat Inspection Service (NMIS), an attached agency of the DA, started performing tight inspections on all beef and poultry meat imports from Brazil on March 24. This was done following media reports of the alleged “rotten” Brazilian meat in March and the submitted communication of Brazil to the World Trade Organization on March 22. Based on the list available on the NMIS web site as of September 16, 2016, there are about 57 accredited Brazil-based FMEs allowed to export meat and meat products to the Philippines. However, the document showed that the validity of the accreditation of all 56 FMEs in Brazil are “for revalidation”. In 2016 Brazil exported a total of 55,581.853 metric ton (MT) of meat and meat products to the Philippines. The figure was 5.86 percent higher than the 52,505.429 MT recorded in 2015. Beef accounted for 33.3 percent of meat purchases from Brazil. Government data showed that beef imports reached 18,524.966 metric tone (MT), 69.04 percent higher than the 2015 record of 10,959.168 MT. More than half of the country’s meat imports from Brazil were mechanically deboned meat (MDM) of chicken. Chicken MDM imports last year reached 30,557.036 MT, 18 percent lower than the 37,314.374 MT posted in 2015.

Banking&Finance BusinessMirror

Tuesday, August 8, 2017 • Editor: Jun B. Vallecera

news@businessmirror.com.ph

Managed float mechanism keeps peso competitive

eeping the local currency’s competitive edge took its toll on the country’s dollar reserves, whose level went down for the second consecutive month in July, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

The gross international reserves (GIR) showed a diminution to only $80.786 billion, significantly lower compared to both the previous month’s and the previous year’s level. Compared to the previous month, the July GIR was some $530 million lower than the $81.32 billion reported in June. Compared against the previous year, it was $4.72 billion weaker than gross reserves of $85.51 billion in the same month last year. Despite the decline, the BSP gave assurance the gross foreign-currency reserves

should still be enough to cover 8.6 months worth of imports of goods and payments of services and primary income. It was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity. The BSP attributed the decline in foreign-currency reserves to outflows arising from the BSP’s foreign-exchange operations. In July the local currency traded weaker versus the dollar, averaging only P50.638 against the greenback, according to data

from the central bank. This was weaker than the previous month’s P49.85-perdollar average. BSP Governor Nestor A. Espenilla Jr. earlier acknowledged having “actively managed” so-called volatilities in the foreign-exchange market. The central bank endeavors to keep a market-determined foreign-exchange framework where the players “dictate” the rate of exchange, even as the BSP “maintains an strategic presence” to smoothen exchange rate dips and surges. This mechanism is called managed float by economists. The BSP also said payments made by the national government for maturing foreign-currency obligations played a role in the decline of the country’s gross reserves. The decline could have been larger were this not partially offset by socalled revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market and net foreignc u r renc y de posit s by t he n at ion a l government. Bianca Cuaresma

Consolidated Metrobank income up 5%

etropolitan Bank and Trust Company (Metrobank) raised its consolidated income by 5 percent to P9.5 billion in the first half of the year as net interest income from target markets expanded by 16 percent to P29.6 billion, or 73 percent of total operating income, based on an unaudited or preliminary numbers. Metrobank sustained its double-digit growth in loan volume from the same period last year with 24-percent increase in commercial loans to businesses and 24-percent in consumer loans to individual clients. Among the latter, auto loans posted the largest growth at 17 percent. The recent performances moved total loans and receivables 21 percent higher to P1.1 trillion year-on-year. “Results from recent quarters demonstrate our ability to deliver quality earnings from our core banking business,” Metrobank Senior Vice President Jette Gamboa said in a statement. “We are staying the course and executing in line with our strategic goals. Our deliberate effort to focus on our customers and continuous improvement in service delivery has positioned us to generate stable recurring income despite the volatility in the financial

markets,” Gamboa added. In April the universal lender committed to increase loans to agribusinesses in the countryside by employing up to 80 percent more personnel for its 959 branches, 55 percent of which are located in the provinces. Low-cost deposits also increased by 15 percent, surpassing the industr y growth in current account and savings account (Casa), or combined savings and withdrawable accounts, at 10 percent in May 2017 and resulting in 61-percent Casa-ratio growth on its P1.5-trillion deposit base. The measures contributed to higher profitability as net interest margin, which reflects revenues from paying deposits and lending funds, rose by 3.7 percent. Metrobank also improved liquidity as nonperforming loans (NPL) ratio with unpaid interest declined by 0.9 percent, which is lower than the industry rate. Thus, NPL coverage remains to be more than adequate at 109 percent.

‘Yes to SSL exemption but accept private-sector hiring

he Department of Finance (DOF) agrees with the proposal excluding the Bureau of Internal Revenue (BIR) from the Salary Standardization Law (SSL) on the condition they give up the security of tenure extended to civil servants. “I already said many times, you want to be exempted you’ll also be exempted from security of tenure. You want to be paid like the private sector, you should also have the same terms of employment as the private sector. No security of tenure, that’s one of the points that we raised,” Finance Secretary Carlos G. Dominguez III told financial reporters. Under the Constitution, security of tenure means a civil servant may not be dismissed from service for causes other than those provided by law and only after due process. Earlier, BIR Commissioner Caesar R.

Dulay said the proposal to exempt the BIR from the SSL would be studied further since there may be other areas the bureau can tap for the increase. “I [the proposal] is still in Congress. We will study it because there may be other ways for the increases. We are discussing it,” Dulay told financial reporters. Aside from the DOF supporting the increase in the salary of employees of the bureau, one other proposes the privatization of certain government assets to support the increase. “The improvement may be through privatization,” he added. Earlier in the year, the BIR emphasized the need for the agency to be exempted from the SSL so as to recruit more personnel to fill gaps in manpower and to help stop corruption in the bureau. Rea Cu

Case clippings

By Justice S J Ranada Jr.

RAPE–moral influence or ascendancy In rape cases, it is not necessary that actual force or intimidation be employed; moral influence or ascendancy takes the place of violence and intimidation. Even absent any actual force or intimidation, rape may be committed if the malefactor has moral ascendancy over the victim. Considering accused was the common-law spouse of the victim’s mother, and he as such, was exercising parental authority over the victim. People v. Amoc 05 Jun 2017

GR 216937 Tijam, J

Noninterest income reached P11 billion, which consisted of P5.9 billion in service fees and commissions and trust operations, P2.5 billion in net trading and FX or currency exchange and P2.7 billion in miscellaneous income. Shareholders also contributed capital of P205.6 billion in equity in the first six months. Operating ex penses, on the other, sl ight ly increased by 9 percent to P23.8 billion that helped secure total capital-adequacy ratio at 16 percent, which is over the 12-percent requirement. Capital from Common Equity Tier 1 ratio, which includes shares and retained earnings, also surpassed the 7.5-percent requirement at 13 percent. Thus, total assets reached a new record high at P2.0 trillion. “Metrobank is very optimistic about the growth prospects of the economy. Our strong capital position and healthy balance sheet allow us to continuously support the business needs of our customers,” Gamboa said. Kathryn Jose

TWIN CELEBRATION

Publicly listed Citystate Savings Bank held a Thanksgiving Mass on August 4 at its head office in the Citystate Centre Building, Shaw Boulevard, Pasig City, to signal the celebration of its 20th anniversary. Fr. Roby James of San Carlos Seminary celebrated the Holy Mass, which was followed by the blessing of bank offices. A decorated booth was set up at the ground floor, where tenants and visitors had free coffee and ice cream, and where they also liked the official Citystate Savings Bank Facebook page. In photo are Citystate Savings Bank officers and employees attending the First Friday Mass anticipating the 41st anniversary of sister company Eternal Gardens on August 11. With them are (seated, second from left) D. Edgard A. Cabangon, chairman of the board and CEO of Eternal Gardens; Fr. Joselito Buenafe, mass celebrant in Makati; and Benjamin V. Ramos, president of Citystate Savings Bank.

UCPB posts P2B six-month income

nited Coconut Planters Bank (UCPB) posted a 12-percent growth in net income to P2.01 billion in the first half of the year, from P1.8 billion, as loans climbed by 15 percent to P153.37 billion, from P133.38 billion, according to its news release on Monday. Car loans contributed the largest growth and helped expand net interest income by 16 percent to P5.47 billion, from P4.72 billion, in the same period last year. Year-on-year growths also include total deposits rising 23 percent to P284.33 billion from P231.48 billion. “UCPB continues to post significant growth in its core business in the first semester of 2017. We were able to expand our loan portfolio and even exceeded our yearto-date target. The strong demand for financing coupled with our other initiatives, such as our strengthened relationships with partner dealers and agents, boosted the rise in consumer-loan availment. Our consumer, loan portfolio was funded by low-cost deposits that we continued to build this year,” UCPB President and CEO Higinio O. Macadaeg Jr. said. Results in noninterest income, which includes stock investments and government

Building an emergency fund

s there a sophisticated technology that can predict or give certainty to the future? I am very keen to answer a resounding no. The only thing that is certain is an uncertain future. Can you imagine one day getting into an accident or some fortuitous event, and you no longer have money or resources left to defray the necessary expenses needed to recuperate or buy the necessities? Just asking this question while I am writing gives me goosebumps. Given this situation, one rightly feels it is the end of the world or like hell on earth. This is an awful feeling that one, hopefully, never experiences and that is why every Filipino must know and put into practice the habit of setting aside money for unforeseen events. One must come up with what we call an emergency fund, also known as contingency fund, where you set aside a specific amount of money and entrust this to a financial intermediary as savings and as a shield against such events as layoffs, accidents and diseases. How do we intrinsically build an emergency fund? You may have heard of a thousand advices but most are BandAid approaches that eventually proved as acts of nonfeasance. Now what I am going to share with you is not a miracle solution, or rocket science, or even a best-selling product, but more about reflection and, hopefully, to influence your behavior. In building the fund, the process of establishing a compelling purpose is paramount and is actually the first thing

Earl Pagatpat

personal finance that you should do. This should serve as your foundation to give you a good head start and a strong finish. Having a purpose is like building a personal commitment or being steadfast to the concept of an emergency fund. To further visualize this, an example would be building an emergency fund for the purpose of covering expenses for both mild and ghastly medical issues that are not covered by your insurance. I am pretty sure that no one would want to die early or pass on the burden to someone else—at least if you are not hypocrite or you are in your right state of mind. In line with this, it should keep you motivated to religiously set aside something for the fund. Now, after setting your purpose, next is knowing or validating whether this is a need or a want. Remember, the nature of an emergency fund is to safeguard and mitigate all of your means to live where in the absence of such would incapacitate you or put an end to your life. The reason behind identifying whether such is a need or a want is to keep your brain cognizant of the importance on the fund you are building. By nature, humans prioritize and keep what is important and sometimes go the extra mile

funds, revealed downward performances that the lender attributed to narrowed market opportunities and slowed government lending “The lack of prevailing market opportunities, however, caused the non interest income to slip by 15 percent to P1.18 billion, from P1.39 billion. Treasury gains [also] declined by 27 percent to P427.04 million,” UCPB said. However, UCPB fairly managed its expenses with unchanged operation costs at 9 percent. Despite the less impressive figures, UCPB sees the expansive loan portfolio and deposits as the bank’s catapult to positive growth and targets in the second half of the year. “Our performance for the first six months of the year reinforces our optimism that we will be able to hit our target for the year,” Macadaeg said. Kathryn Jose

just to preserve it. This should keep you disciplined and motivated. The tendency for building a fund with a purpose but satisfies a want is the high probability of corrosion on interest which would eventually again result to dereliction. After building these two supporting pillars that stimulate intrinsic mindset, you can now go to the technical side where you need to identify how much money you need to raise. At this stage, a lot of forecasts should be made. But one thing you can do to make your estimates more reasonable and logical is to compare it with the market. Like in our previous example on medical issues, you need to do some research with hospitals, clinics, or other medicalservice providers in your area to know the costs and do the numbers. This would serve as your benchmark and, at the same time, your target on the fund you are building. You might be wondering why this was more on the behavioral aspect and almost none on the cognitive side. The reason is, we human beings naturally hesitate when it comes to finances. Without strong will power, we easily fall back no matter how rich our technical knowledge of finance. Earl Pagatpat is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 63rd RFP program this July. To inquire, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.

www.businessmirror.com.ph • Editor: Lyn Resurreccion

The World BusinessMirror

Tuesday, August 8, 2017

Oil trades near $49 before Opec talks on output-cut compliance

Maersk Triple-E ship arrives in Hong Kong Bloomberg

Globalization thrives in Asia as export revival buoys growth

or all the talk of globalization’s retreat amid the mercantilist rhetoric of Donald J. Trump, it’s proving to be a very different story in Asia. Exports are resurgent as, governments are pursuing free-trade deals and, rather than bringing jobs back home, American automakers are planning new facilities in China. That early-2017 angst over potential for a trade war is now turning into recognition. There’s been something of a trade bonanza as the global economy’s strongest synchronized upswing in seven years drives demand for Asianmade goods. But can it last? US-China tensions are mounting again: from accusations of intellectual-property theft to a global steel glut to North Korea’s nuclear saber-rattling. And with China’s economy expected to slow after a bumper first half and demand from the US and Europe unlikely to increase significantly, weaker global trade is on the horizon, according to Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. For those who prefer to see a glass half full, leading indicators of trade—manufacturing export orders and shipping rates—remain high, and global growth in the next few years is forecast to remain robust. And while the threat of a trade war remains just a tweet away, so far the Trump administration has proven far more reticent to take on China than campaign rhetoric implied. “Clearly you don’t have geoeconomics looking anything like geopolitics,” said Parag Khanna, a senior research fellow in the Center on Asia and Globalization at the Lee Kuan Yew School of Public Policy at the National University of Singapore. “Globalization is advancing very strongly and trade

within Asia is certainly growing very strongly.”

Virtuous circle

That’s brought about a virtuous economic circle: Taiwan’s trade surplus hit a record high, Vietnam’s exports surged, Japan’s overseas shipments expanded for seven straight quarters, South Korea’s shipments jumped 20 percent in July and China’s exports in yuan terms climbed 15 percent in the first half from the same period a year earlier. Former World Bank President Robert Zoellick pointed out on Monday that this is the first year in some time that all of the Group of 20 nations are likely to be expanding, while noting there’s some nervousness about whether the US will take more protectionist steps. “ The overall economic conditions are one where people are feeling better, and the broadbased nature of the world economy’s growth gives people some comfort,” Zoellick said in an interview with Bloomberg Television. “But geopolitical issues like North Korea or, frankly, how the US conducts itself, those are risks.” Chinese trade figures due on Tuesday are expected to show exports rose 11 percent in dollar terms from a year earlier in July, according to survey of economist as of late-Friday, continuing a robust run for shipments from the world’s biggest trading nation. And structural changes have also been taking shape that set up future trade ties. The European Union and Japan last month announced they had endorsed

11%

The estimated expected rise in exports of Chinese in dollar terms from a year earlier in July a preliminary free-trade agreement that would eliminate 99 percent of tariffs between the bloc and the world’s third-largest economy.

Ford, Tesla

Ford Motor Co. in June canceled plans to build its Focus in Mexico and announced the car would be assembled in China instead. The model—the first made-in-China vehicle for American buyers— may become the Asian nation’s biggest automotive export ever. Tesla Inc. also has its eyes on China. The electric-car firm is close to an agreement with the city of Shanghai to make vehicles in China for the first time. The International Monetary Fund last month noted the world economy is relying less than expected on the US and the UK, and more on China, Japan, the euro zone and Canada. But plenty could go wrong. US officials are gearing up to investigate China over what the administration perceives to be violations of intellectual property—a charge Beijing rebuffed last Thursday. Ministry of Commerce Spokesman Gao Feng said China pays “high attention” to intellectual property and wants to maintain good cooperation with the US. Trump clearly wants to do something about America’s trade shortfall with China. The complication: a lot of products the US imports from China—televisions, computers, smart phones and the like—are made by western companies, said David Dollar,

a senior fellow at the Brookings Institution in Washington. “They start with value added from the US, they get some parts and components from Japan, South Korea or Taiwan, they’re assembled in China,” he said in a podcast. “So it may sound very smart: We’re going to put a 45-percent tariff on Chinese products to teach them a lesson, but, actually, we’ll end up hurting a lot of our own firms and workers and be hurting allies, such as those Asian countries.” Another weakness on pure economic grounds is that much of the export recovery reflects a wider rebound in commodity prices, putting a gloss on the overall figure. A maturing cycle of smartphone upgrades that has fueled demand for Chinese purchases of electronics components will also impact. Then there’s the prospect of further interest-rate hikes by the US Federal Reserve, which could weigh on demand.

Baton passed

As the US under Trump has retreated into America First rhetoric, China has championed the benefits of globalization and pushed a policy to expand its economic might in the region. It has pursued trade agreements and infrastructure investment—via its Belt and Road initiative—in neighboring countries, and is importing a wider mix of goods than commodities to meet the needs of its burgeoning middle class. “East Asia is turning into fortress Asia, a nexus of intraregional trade with markets that are replacing the major markets of western Europe and the US,” said Edith Terry, author of How Asia Got Rich: Japan, China and the Asian Miracle. “As Chinese manufacturing becomes more sophisticated, supply chains link China, Southeast Asia, Japan and Korea, and are less vulnerable to demand shocks elsewhere.” Bloomberg News

Indonesia economy grows less than expected on spending curbs

ndonesia’s economy expanded slower than economists estimated in the second quarter of 2017, as public spending fell. Highlights of the GDP Report: GDP rose 5.01 percent from a year earlier, according to data released by the statistics bureau in Jakarta on Monday; economists predicted growth of 5.08 percent. First-quarter growth was 5.01 percent and previously reported data show GDP rose 4 percent from the previous three months; economists expected 4.07-percent gain. President Joko Widodo has undertaken

a major infrastructure program to bolster an economy that’s growing slower than neighbors, including the Philippines and Malaysia. But a budget deficit approaching the 3-percent legal limit has forced the state to curb expenditures. While the government has revised its 2017 growth forecast up a notch to 5.2 percent, Southeast Asia’s biggest economy is still falling short of the 7 percent Widodo targeted when he came into office almost three years ago. Bank Indonesia signaled last Friday it may return to an easing bias to support economic

growth after cutting rates six times last year. The central bank recently loosened rules on the amount of money banks must hold in reserves. There’s yet to be a “significant acceleration” in Indonesia’s economic growth and unlikely to be much improvement in the second half of the year, said Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore. “The recovery is ongoing, just at a slower pace than we have previously expected,” he said, adding that it would have implications for Bank Indonesia’s policy stance for the rest of the year.

“Looking ahead, we see little prospects of a sustained recovery,” Gareth Leather at Capital Economics Ltd. in London said. “The prices of Indonesia’s main commodity exports— namely coal and palm oil—have dropped a bit since the start of the year. Our forecast is for these commodity prices to ease further over the coming months, which suggests the recovery in export values will start to tail off.” Government spending fell 1.9 percent compared to the same quarter last year. Investment rose 5.35 percent compared to the same quarter a year earlier. Bloomberg News

il traded near $49 a barrel before representatives of Organization of Petroleum Exporting Countries (Opec) nations meet with their allies to discuss why some of them are falling behind in pledges to reduce production. Futures fell 0.2 percent in New York after climbing 1.1 percent last Friday. The two-day meeting in Abu Dhabi starting on Monday and cochaired by Kuwait and Russia will examine why some participants in the deal to collectively reduce global supply aren’t fully implementing their cuts. The number of US drill rigs targeting crude fell by one last week, according to Baker Hughes Inc. Oil in New York was unable to hold its first advance above $50 a barrel since May as signs of rising global supply eroded optimism that output curbs by the Opec and its partners are rebalancing the market. Compliance to cuts fell to 86 percent in July, the lowest level since January, according to a Bloomberg survey. “The big players are going to remain compliant, or at least say they are,” said Ric Spooner, an analyst at CMC Markets in Sydney. “Markets continue to assess the overall demand, supply and inventory situation as it unfolds. The likely range for oil at the moment

is the mid-$40s to the low $50s.” West Texas Intermediate (WTI) for September delivery was at $49.46 a barrel on the New York Mercantile Exchange, down 12 cents, at 7:46 p.m. in Hong Kong. Total volume traded was about 9 percent below the 100-day average. Prices added 55 cents to $49.58 last Friday, trimming the weekly loss to 0.3 percent. Brent for October settlement dropped 12 cents to $52.30 a barrel on the Londonbased ICE Futures Europe exchange. Prices rose 41 cents to $52.42 last Friday, reducing the weekly decline to 0.2 percent. The global benchmark crude traded at a premium of $2.69 to October WTI. Saudi Arabia said last month that it planned to increase pressure on nations that didn’t comply with their pledged cuts. Compliance by members from the Opec slid to 78 percent in June, compared with 82 percent from its 10 non-Opec partners, according to the International Energy Agency. US drillers reduced the number of rigs to 765, according to data last Friday from Baker Hughes. That’s the second drop in three weeks. Libya’s Sharara oil field, the nations’ biggest, stopped production after a workers’ protest, according to a person familiar with the situation. Bloomberg News

North Korean Foreign Minister Ri Yong Ho Bloomberg

N. Korea vows harsh revenge against fresh UN sanctions

EOUL, South Korea—North Korea vowed on Monday to bolster its nuclear arsenal and launch “thousands-fold” revenge against the US to respond to tough UN sanctions imposed after its intercontinental ballistic missile (ICBM) launches. The North’s warning came two days after the UN Security Council unanimously approved new sanctions to punish the North, including a ban on coal and other exports worth over $1 billion. US Ambassador Nikki Haley called the US-drafted resolution “the single largest economic sanctions package ever leveled against” North Korea. In a statement carried by state media, the North Korean government said the sanctions were a “violent infringement of its sovereignty” that was caused by a “heinous US plot to isolate and stifle” North Korea. It said the UN sanctions will never force the country to negotiate over its nuclear program or to give up its push to strengthen its nuclear capability. The North said it will take “action of justice” but didn’t elaborate. North Korea test-launched two ICBMs last month as part of its efforts to possess a longrange missile capable of striking anywhere in the mainland US. Both missiles were fired at highly lofted angles and analysts say the weapons are capable of reaching parts of the US if fired at a normal, flattened trajectory. The centerpiece of the UN sanctions is a ban on North Korea exports of coal, iron, lead and seafood products—and a ban on all countries importing these products, estimated to be worth over $1 billion in hard currency. According to a Security Council diplomat, coal has been North Korea’s largest export, earning $1.2 billion last year, which was then restricted by the Security Council in November to a maximum $400 million. This year, Pyongyang was estimated to earn $251 million from iron and iron-ore exports; $113 million from lead and lead-ore exports; and $295 million from fish and seafood exports, the diplomat said. The council diplomat was not authorized to speak publicly and insisted on anonymity. Meanwhile, diplomats in Asia renewed efforts to get North Korea to resume dialogue over its nuclear weapons program after the United Nations Security Council slapped Kim Jong Un’s regime with the most severe sanctions yet. South Korean Foreign Minister Kang Kyung-wha briefly spoke with North Korean

counterpart Ri Yong Ho last Sunday at a regional security meeting in the Philippines, the Yonhap News Agency reported. Kang urged Ri to respond as soon as possible to South Korean President Moon Jae-in’s offer to resume talks between the two countries, Yonhap said, citing an unidentified foreign ministry official from Seoul. Ri, who previously said he wouldn’t speak with Kang, said the offer “lacks sincerity,” according to the unnamed official. South Korea’s foreign ministry didn’t immediately respond on Monday to a request for comment. The brief conversation came as the UN Security Council imposed new sanctions on North Korea that would ban exports of coal, iron, lead and seafood. The sanctions followed Pyongyang’s test of two ICBM last month that could target the US. “It’s a positive but very small step, and can at least help the two Koreas exchange some views on the current state of affairs,” Kim Jin-ho, a professor of political science at Dankook University in South Korea, said of the meeting between foreign ministers. “North Korea would use the talk as a bargaining chip with the US, as their goal is to have dialogue with Washington, not Seoul.” In a phone call on Monday, Moon told his US counterpart Donald J. Trump that North Korean issues must be resolved peacefully and diplomatically, and countries needed to show Pyongyang that the door to dialogue was open if North Korea gave up its nuclear weapons and missile programs, according to a Moon spokesman. Secretary of State Rex Tillerson, who is attending the same security forum in Manila, said on Monday that the best signal North Korea could give that it’s ready for talks with the US was to halt missile launches, the Associated Press reported. “We’re not going to give someone a specific number of days or weeks,”Tillerson said. “This is really about the spirit of these talks.” Joint discussions between six nations— China, Japan, North Korea, South Korea, Russia and the US—collapsed in 2009. Chinese Foreign Minister Wang Yi told reporters in Manila that Beijing wanted North and South Korea to repair their relationship and praised what he described as Moon’s “positive” overtures. He noted that that North Korea has ruled out Moon’s suggestions for renewed military and humanitarian exchanges. AP and Bloomberg News

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Tuesday, August 8, 2017

Editor: Lyn Resurreccion • www.businessmirror.com.ph

Electric-car boom drives rush to mining’s $90-B hub

scramble by the lithium market’s biggest players to tie up supply of the hightech metal is gathering pace in the 170-year-old heartland of Australia’s $90-billion mining industry. Rising Chinese demand for lithium-ion batteries needed for electric vehicles and energy storage is driving significant price gains and an asset boom in Australia, already the world’s largest lithium producer. The fast-developing hub is drawing investment and deals from global producers, as well as chemical-to-battery manufacturers in China, the top consumer. Western Australia has four operations in production and three more major projects being advanced to begin output. Major players are likely to continue to scope for deals in the state to secure supply for the next 20 or 30 years, according to consultant Benchmark Mineral Intelligence. “There are serious companies investing and people are starting to lock up the biggest, long-life resources. The question is—who’s next?” Simon Moores, managing director of Benchmark Mineral, said by phone from London. Though on a smaller scale, “it’s a land grab, like in the petroleum industry when BP, Shell and others rounded on the Middle East in the 1960s and 1970s,” he said. Greenbushes in Western Australia, the world’s biggest hardrock lithium mine, is being expanded to more than double annual capacity, Talison Lithium, a joint venture between China’s Tianqi Lithium Corp. and North Carolina’s Albemarle Corp., said in an e-mail. The site, first mined for tin from about 1888, already accounts for about 30 percent of global lithium production, according to Australia’s government. Tianqi is also

30%

The percentage of global lithium production of Greenbushes in Western Australia, the world’s biggest hard-rock lithium mine planning about A$717 million ($578 million) of processing-plant expansions. Jiangxi Ganfeng Lithium Co., which has interests in projects in countries including Ireland and Argentina, holds about 43 percent of Australia’s Mount Marion operation and in May agreed a supply and investment pact with Pilbara Minerals Ltd. for a mine development. Battery maker Shaanxi J&R Optimum Energy Co. in July struck an agreement for future output from Altura Mining Ltd.’s project. “It’s the most significant expansion in lithium supply ever, and we are still undershooting demand,” said Chris Reed, CEO of Neometals Ltd., a partner with Ganfeng and Mineral Resources in the Mount Marion operation. Reed is scheduled to speak on Wednesday at the close of the three-day Diggers and Dealers mining forum in Kalgoorlie, Western Australia. Soc. Quimica and Minera (SQM) de Chile SA, the world’s secondlargest lithium supplier, in July made a first move outside South America to invest about $110 million for 50 percent of Kidman

Lithium-ion batteries in Eliiy Power Co. plant in Japan Bloomberg

Resources Ltd.’s Mount Holland project in Western Australia, aiming to enter production by at least 2021. The project would add to SQM’s expansion into Argentina. Prices of lithium carbonate, the primary base-chemical produced by the industry, more than doubled in the five years to 2016, according to UBS Group AG. The material advanced about 5 percent to average $14,250 a metric ton in July from the previous month, even as Australian exports rise, according to Benchmark Mineral. “We don’t see any price fall in the next three years,” Benchmark’s Moores said. “When you look at all the battery plants being built and the plans for EVs, even if only about 25 percent of those are realized, we’re still going to be short of lithium. It’s a unique once-ina-generation situation.” Chinese companies plan battery factories with capacity to pump out

about 120 gigawatt-hours a year by 2021, more than three times the proposed volume of Tesla Inc.’s Gigafactory in Nevada, according to Bloomberg New Energy Finance. About 55 percent of global lithiumion battery production is already based in China, compared with 10 percent in the US By 2021, China’s share is forecast to grow to 65 percent, according to the forecasts. Electric cars will outsell fossil fuel-powered vehicles within two decades as battery prices plunge, Bloomberg New Energy Finance estimates. Mineral Resources Ltd. and Galaxy Resources Ltd. are Australian producers that this year began new shipments of lithium concentrate to China, while project developers, including Pilbara Minerals, are targeting exports from 2018. The project pipeline is cementing Australia as a dominant player, UBS said in a June report.

Suppliers of lithium products are likely to be joined in the chase to secure Australian materials by end-users, including car manufacturers, Pilbara CEO Ken Brinsden told reporters on Monday on the forum’s sidelines. “The next catalyst for the industry as a whole is when the big battery makers and even auto-makers start to look to get a position in lithium raw materials,” he said. “It’s starting to dawn on them that there could be a supply-chain issue.” Perth-based Mineral Resources is a touchstone for the shift from old-to-new industry in Western Australia, as this fiscal year the iron ore producer will earn more from lithium than the steelmaking ingredient, according to Deutsche Bank AG, which has a buy rating on the stock. It also sees Albemarle and Orocobre Ltd. as among the best global lithium prospects.

Lithium’s current $2.5-billion market is a fraction of the $86 billion a year seaborne iron-ore trade and some miners have eschewed opportunities to add projects. Fortescue Metals Group Ltd. last December agreed the sale of a lithiumexploration portfolio. BHP Billiton Ltd. argues it’s poised to benefit most from electric-vehicle growth through copper demand. Australia will face competition from lithium projects in Canada, Chile and Argentina, according to UBS. New lithium production and a potential addition of cobalt output and graphite projects— two other metals experiencing rapid demand growth from the batter y sector—promise to add to mining exports from Australia. The value of mined exports is forecast at A$113.7 billion ($89.6 billion) in the year to next June 30, according to its government. Bloomberg News

Paris aims to beat Frankfurt Under Trump, coal mining gets new life on US lands in race for Brexit bank jobs

inance Minister Bruno Le Maire said Paris will beat Frankfurt to become the European Union’s main fin a nc i a l center a f ter Br it a i n leaves, even as he acknowledged that the French capital is playing catch-up. “We will take the difficult decisions, we will lower French taxes, we will make our country more attractive,” Le Maire said in a television interview in his office in eastern Paris, overlooking the River Seine. “We will win the race.” Since the UK voted last year to abandon the EU, France has been fighting with Germany and Ireland to grab a part of the financial industry that plans to relocate out of London. But stiff rules on firing workers, high and volatile taxes have marred French efforts—it’s only five years since François Hollande came to power declaring that financiers were his enemies and slapped on a 75-percent rate for top earners. As a result, Frankfurt has already won about twice as many relocation commitments from major banks as Paris has seen. Le Maire announced late last month that he’ll scrap a tax on financial transactions next year, saying it was a deterrent to banks considering a move to Paris. President Emmanuel Macron has also pledged to gradually cut the corporate-tax rate to 25 percent by the end of his term in 2022, from its current level of

33 percent. The government is also boosting funding for more bi ling ua l schools to ma ke it easier for expatriates to adapt to French life. Paris is hoping to lure 20,000 jobs from the UK as firms seek EU locations to secure continued market access to the bloc, according to Paris Europlace, France’s main financial lobby group. France is also bidding to make Paris the new home of the European Banking Authority, arguing that it can offer stability and continuity. HSBC, which has a French retail bank, has said it may relocate as many as 1,000 traders to the French capital, while banks, including Standard Chartered Plc. and Nomura Holdings Inc., have picked Frankfurt. Deutsche Bank AG is preparing to move large parts of the trading and investment-banking assets it currently books in London also to Frankfurt, its hometown. Paris ranks 29th on the ranking of Global Financial Centres Index by Z/ Yen Group Ltd., just above Casablanca and behind Munich. London tops the list, followed by New York and Singapore. “Many banks, many investors, should be aware that France is changing,” Le Maire said, citing Paris Saint Germain’s world record signing of Brazilian soccer star Neymar this week. “ Tomorrow, France will be the place to be. Not just for Mr. Neymar, but for all investors.” Bloomberg News

ECKER, Montana—The Trump administration is wading into one of the oldest and most contentious debates in the West by encouraging more coal mining on lands owned by the federal government—part of an aggressive push to both invigorate the struggling US coal industry and more broadly exploit commercial opportunities on public lands. The intervention has roiled conservationists and many Democrats, exposing deep divisions about how best to manage the 643 million acres of federally owned land—most of which is in the West—an area more than six times the size of California. Not since the so-called Sagebrush Rebellion during the Reagan administration have companies and individuals with economic interests in the lands, mining companies among them, held such a strong upper hand. Clouds of dust blew across the horizon one recent summer evening as a crane taller than the Statue of Liberty ripped apart walls of a canyon dug deep into the public lands here in the Powder River Basin, the nation’s most productive coal-mining region. The mine pushes right up against a reservoir, exposing the kind of conflicts and concerns the new approach has spurred. “If we don’t have good water, we can’t do anything,” said Art Hayes, a cattle rancher who worries that more mining would foul a supply that generations of ranchers have relied upon. During the Obama administration, the Interior Department seized on the issue of climate

Terry Meyers at a rally for public lands in Whitefish, Montana, on June 27. The Trump administration is encouraging more coal mining on lands owned by the federal government— part of an aggressive push to invigorate the struggling industry and to more broadly exploit commercial opportunities on public lands. Tim Goessman/The New York Times

change and temporarily banned new coal leases on public lands as it examined the consequences for the environment. The Obama administration also drew protests from major mining companies by ordering them to pay higher royalties to the government. President Donald J. Trump, along with roundly questioning climate change, has moved quickly to wipe out those measures with the support of coal companies and other commercial interests. Separately, Trump’s Interior Department is drawing up plans to reduce wilderness and historic areas that are now protected as national monuments, creating even more opportunities for profit. Richard Reavey, the head of government relations for Cloud Peak Energy, which operates a strip mine here that sends coal to the Midwest and increasingly to coal-burning power plants in

Asia, said Trump’s change of course was meant to correct wrongs of the past. The Obama administration, he said, had become intent on killing the coal industry, and had used federal lands as a cudgel to restrict exports. The only current avenues of growth, given the shutdown of so many coal-burning power plants in the US, are markets overseas. “Their goal, in collusion with the environmentalists, was to drive us out of the export business,” Reavey said. Even with the moves so far, the prospect of coal companies operating in a big way on federal land— and for any major job growth—is dim, in part because environmentalists have blocked construction of a coal export terminal, and there is limited capacity at the port the companies use in Vancouver. Competition from other global suppliers offering coal to Asian

power plants is also intense. But at least for now, coal production and exports are rising in the Powder River Basin after a major decline last year. Opponents of the Trump administration’s direction have already gone to court. New Mexico and California sued in April to undo the rollback in royalties that coal mines pay, while ranchers, like Hayes and the Cheyenne tribe, joined a lawsuit in March challenging the repeal of a year-old moratorium on federal coal leasing. “If we hand over control of these lands to a narrow range of special interests, we lose an iconic part of the country—and the West’s identity,” said Chris Saeger, executive director of the Montana-based environmental group Western Values Project, referring to coal mining and oil and gas drilling that the Interior Department is moving to rapidly expand. Trump’s point man is Ryan Zinke, a native Montanan who rode a horse to work on his first day as head of the Interior Department. A former Republican congressman and member of the Navy SEALs, Zinke oversees the national park system, as well as the Bureau of Land Management, which controls 250 million acres nationwide, parts of which are used to produce oil, gas, coal, lumber and hay. In late June, Zinke visited Whitefish, Montana, to attend a meeting of Western governors, where he vowed to find a balance between extracting commodities from federal lands and protecting them. New York Times News Service

news@businessmirror.com.ph • Editor: Lyn Resurreccion

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Tuesday, August 8, 2017

Prosecutors seek 12-year jail term for Samsung heir

rosecutors demanded a 12year jail term for Jay Y. Lee, accusing the billionaire vice chairman of Samsung Electronics Co. of bribing a presidential confidante to increase his control over the world’s biggest maker of smartphones and memory chips. Lee has been in detention since February and is the highest-profile business figure drawn into a scandal that led to the ouster of President Park Geun-hye. The 49-year-old Lee has denied all charges, arguing he did not even know who the confidante was until after Samsung executives bought horses for an agency run to benefit her equestrian daughter. “We have an opportunity to establish the rule of law,” special prosecutor Park Young-soo said. “The defendants have colluded with power to seek personal interests, turning their backs on people’s wish to shed light on the truth behind the scandal.” Lee has overseen South Korea’s biggest conglomerate since 2014 when his father, Lee Kun-hee, suffered a heart attack. In 2015 the group pushed through a merger between two of its units, giving the heir fresh shares in Samsung C&T Corp., a major shareholder in Samsung Electronics. The deal, which was opposed by investor Paul Elliott Singer, gained approval after it got backing from the government-run National Pension Service. Lee said in testimony last week that his executives pushed the merger and that he never sought to unseat his hospitalized father as chairman of Samsung Electronics. Prosecutors have alleged Lee knew about Park’s confidante, Choi Soon-sil, and used that knowledge to plot a succession path that would ensure his control over Samsung without having to pay billions of dollars in inheritance taxes.

Park, who has been detained on charges of corruption and abuse of power, has denied seeking bribes for her friend. Both Park and Choi have refused to testify at Lee’s trial. Lee is scheduled to be released in late August unless he’s convicted and receives a prison sentence. In the Korean judicial system, prosecutors demand a sentence before a verdict. A panel of three judges will decide Lee’s verdict and no jury has been involved in Lee’s case. During Lee’s absence, Samsung has released the Galaxy S8 smartphone to rebound from its Note 7 recall last year and posted a record profit on the back of its semiconductor sales. Lee, princeling of South Korea’s richest family and its biggest company, choked up during his final remarks, saying his ordeal was unjust but he had reflected during his six months in jail and realized that the bigger Samsung became, “the stricter and higher the expectations from the public and the society”, a pool report from Monday’s hearing said. “Whether it was for my personal profit or for myself, I have never asked the president for any favors,” he told the court. In his remarks wrapping up the trial, Special Prosecutor Park Young-soo said Samsung’s alleged bribery was typical of the corrupt and cozy ties between the South Korea’s government and big businesses. Such dealings once helped fuel the country’s rapid industrialization but now increasingly are viewed as illegal and unfair. Park also accused Samsung of-

Bridal gowns and engagement dresses are displayed in a small shop in the Zaatari camp for Syrian refugees in northern Jordan. A new study based on Jordanian census figures shows that child marriages are up sharply among Syrian refugee girls in the kingdom, and that 44 percent of Syrian females getting married in 2015 were minors. AP/Reem Saad

More Syrian child brides in Jordan amid poverty and uncertainty Lee Jae-yong (center), vice chairman of Samsung Electronics Co., arrives for his trial at the Seoul Central District Court in Seoul, South Korea, on August 7. South Korean prosecutors recommended imprisoning a billionaire Samsung heir for 12 years on Monday, asking the court to convict him of bribery and other crimes in a national corruption scandal. AP/Ahn Young-joon, Pool

$38M

The alleged amount of bribes Samsung’s Jay Y. Lee has offered to four entities said to be controlled by a friend of then-President Park Geun-hye ficials of lying in their testimonies to protect Lee. In past cases, South Korean courts have often given suspended prison terms to members of the founding families of the chaebol, the big, family-controlled businesses that dominate South Korea’s economy. In some cases, presidents have pardoned them, citing their contributions to the national economy. But recent rulings on white-collar crimes have shown less leniency. If convicted, Lee may be the first in his family to serve a prison term. Lee was indicted in February on charges that included offering $38 million in bribes to four entities controlled by a friend of thenPresident Park Geun-hye, including

a company in Germany set up to support equestrian training for the daughter of one of Park’s friends, Choi Soon-sil. Samsung’s lawyers do not contest having donated a large sum of money to the entities controlled by Choi. They disagreed with the prosecutors about the nature of the funds and insisted that at the time the donations were made Samsung was unaware that Choi controlled them. Prosecutors also are seeking heavy penalties for four other former Samsung executives who had belonged to a once-powerful corporate strategy office that handled such activities. Prosecutors are seeing a 10-year sentence for Lee’s mentor Choi Geesung, a former vice chairman at Samsung Electronics. They requested seven- to 10-year terms for three other former Samsung executives. Separately, South Korean police officials confirmed on Monday that they are investigating Lee’s father, who is ill in the hospital, on allegations of embezzlement and a tax-law violation. Police officials raided the office that oversaw interior decorating of the elder Lee’s private house in central Seoul. Bloomberg News and AP

Venezuelans watch the military for signs of fraying loyalty

AR ACAS, Venezuela—As Venezuela’s political crisis spins further out of control, many are looking to the military to see if its once-unflinching loyalty to the socialist revolution might be fraying. Last Sunday morning Venezuelans awoke to news that a small group of armed men tried to take over a major military base in the central city of Valencia after a long-mutinous national guard captain appeared in a video calling for rebellion. The government said what it described as a “terrorist attack” led mostly by civilians dressed in fatigues and deserted officers, not active troops, was quickly put down and seven people were arrested. It wasn’t clear how much support existed for the so-called Operation David, but dozens of civilians startled by the sound of gunfire poured into the streets singing Venezuela’s national anthem to back the rebels. Many people wonder whether the tension-filled incident could foreshadow a bigger uprising to come from a military with a long history of rebellion and whose troops—like many Venezuelans—are increasingly caught up in the nation’s economic and political crisis. Analysts say that such a scenario is unlikely for now. While signs of disgruntlement are growing as security forces come under a barrage of rocks and Molo-

Venezuela militia members pose for a photo next to images of Venezuelan independence hero Simon Bolivar (left) and late President Hugo Chavez outside the National Assembly in Caracas, Venezuela. A loyalist assembly will rewrite the country’s constitution and hold powers that override all other government branches. AP/Ariana Cubillos

tov cocktails during almost-daily anti-Maduro protests, soldiers also fear persecution under an opposition government. In addition, they face risks that any plans for a secret uprising would be found out. “They feel trapped,” said former army Gen. Hebert Garcia Plaza, a former Maduro minister. Since seeking exile in Washington in 2015 following accusations of corruption by Maduro, he has emerged as a soughtafter filter of information for journalists, the opposition and, increasingly he says, distraught soldiers. “There’s lots of unease, but they can’t provoke a political change without a clear horizon of what comes after Maduro,” Garcia Plaza said.

Venezuela’s military accumulated unmatched power and privilege in the past two decades of socialist rule, and Maduro has been increasingly relying on the armed forces as his own grip on power weakens. Last week, with the support of top generals, he plowed forward with a plan to seat an all-powerful assembly mandated with rewriting the constitution. Political opponents and dozens of foreign governments consider it an illegitimate powergrab that will strip Venezuela of its last vestiges of democracy. The opposition is urging the military to switch loyalties and pressure Maduro to cede to its demands, including freeing hundreds of political

prisoners and setting a timetable for presidential elections. But many in the military, especially higher-ranking officers, have already hitched their fate to the revolution. Following a 2002 coup, then-President Hugo Chavez, himself a former tank commander, carried out a deep purge of the military and promoted loyal officers to top positions in the government. Maduro has expanded the military’s political power even further, giving them control of key sectors of the economy, such as food importation. He also rewarded soldiers with pay raises and bonuses that are the envy of civilians struggling amid triple-digit inflation and widespread shortages. Even before the ballots were counted in the July 30 election for the constitutional assembly, Defense Minister Gen. Vladimir Padrino Lopez went in front of the cameras accompanied by the top military brass to celebrate the results as a defeat for imperialism. Despite the outward loyalty, some cracks began to appear even before Sunday’s attack. At least 106 members of the armed forces, some of them junior officers, have been jailed for alleged crimes, such as rebellion and treason since protests began in April, according to the lists provided by an army official on the condition of anonymity for fear of reprisal. AP

AFRAQ, Jordan—Married at 15 and divorced at 16, a Syrian teen says she regrets having said yes to a handsome suitor—a stranger who turned into an abusive husband. Yet, the reasons that transformed her into a child bride have become more prevalent among Syrians who live in Jordanian exile because of a six-year-old civil war back home. More families marry off daughters to ease the financial burden or say marriage is the way to protect the “honor” of girls seen as vulnerable outside their homeland. Figures from Jordan’s population census document the long suspected increase for the first time. In 2015 brides between the ages of 13 and 17 made up almost 44 percent of all Syrian females in Jordan getting married that year, compared to 33 percent in 2010. With Syrians expected to remain in exile for years, it’s a harmful trend for refugees and their overburdened host country, UN and Jordanian officials say. More Syrian girls will lose out on education, since most child brides drop out of school. They typically marry fellow Syrians who are just a few years older, often without a steady job—a constellation that helps perpetuate poverty. And they will likely have more children than those who marry as adults, driving up Jordan’s fertility rate. “This means we will have more people, more than the government of Jordan can afford,” said Maysoon alZoabi, secretary-general of Jordan’s Higher Population Council. The figures on early marriage were drawn from Jordan’s November 2015 census and compiled in a new study. The census counted 9.5 million people living in Jordan, including 2.9 million non-Jordanians. Among the foreigners were 1.265 million Syrians—or double the number of refugees registered in the kingdom since the outbreak of the Syria conflict in 2011. The other Syrians include migrant laborers who came before the war, and those who never registered as refugees. The figures on early marriage include all Syrians in Jordan, not just registered refugees. Many came from southern Syria’s culturally conservative countryside, where even before the conflict girls typically married in their teens. Still, the study shows a higher rate of early marriage among Syrians in exile than in their homeland. The teen divorcee fled Syria’s Daraa province in 2012, along with her parents and four siblings. The family eventually settled in a small town in the northern Mafraq province. The parents and the teen, now 17, spoke on condition of anonymity because of the stigma of divorce. They said they wanted to speak out, nonetheless, in hopes of helping others avoid the same mistake. Child brides are traditionally shielded from outsiders, and the family provided a rare glimpse at what drives early marriage. “When we came here, our lives were disrupted,” said the teen’s mother, sitting on a floor cushion in

the living room of their small rented home. “If we had remained in Syria, I would not have allowed her to get married this young.” The family scrapes by on small cash stipends and food vouchers from UN aid agencies, along with the father’s below-minimum-wage income as a laborer. Worse, the family feels adrift. T he parents, fear f u l their children would be harassed, especially the girls, did not enroll them in local schools, typically overcrowded to accommodate large numbers of Syrians. In such a setting—girls sitting at home without a seeming purpose— the push to have them get married becomes stronger. An older sister of the teen also married as a minor. The mother said she often feels regret about her daughter having been robbed of her childhood. The younger girl spent most of her time at home, brooding. She had no girlfriends since she didn’t go to school and was only allowed to leave the house with her mother, in line with traditions. In any case, there was nothing to do in the small desert town. Two years ago a young Syrian man asked for the teen’s hand, after introductions had been made by a gobetween. The intermediary talked up the stranger, saying he had job prospects and could afford his own apartment. The teen, 15 at the time, accepted. “I was bored and sad,” she said. “I wanted to get married.” The parents said the young man seemed immature, but that their daughter insisted. The wedding took place a month later, and the bride wore a white dress. The marriage contract was sealed by a Syrian lawyer, not a Jordanian religious court judge, meaning it was not officially recognized in Jordan. Local law sets the minimum age of marriage for girls at 18, though Jordanian judges often allow exceptions for brides between the ages of 15 and 17. In 2015 11.6 percent of Jordanian females who married that year were minors, compared to 9.6 percent in 2010, indicating a slight rise that al-Zoubi believes is caused in part to Jordanians being influenced by Syrian customs. After marriage, the Syrian teen moved to a different town with her husband, and his promises quickly evaporated. The couple moved in with his extended clan, and the teen turned into a maid, according to her parents. The teen said her unemployed husband beat her. Despite the abuse, she said she wanted to stay in the marriage, fearful of the shame of divorce. Her father eventually insisted on divorce to extract her from what he felt was a harmful situation. After returning home, the teen briefly attended an informal education and children’s support program called Makani that is run by the UN child welfare agency and other aid groups at centers across Jordan. She started making friends, but stayed away again when a new group of students signed up. AP

A10 Tuesday, August 8, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

To drill or not to drill

usinessman Manuel V. Pangilinan is not worried about proceeding with his gas-exploration project in the Recto Bank of the West Philippine Sea. Relations between China and the Philippines have improved under the Duterte administration, he observes. He thinks it’s time the government allows the resumption of drilling and exploration activities suspended in 2015 in areas subject to territorial disputes between the two countries. Recto Bank, also called Reed Bank in international maps, is covered by Service Contract (SC) 72, an exploration permit the government had awarded to Philex Petroleum Corp., Pangilinan’s group. But granting the government does lift its exploration ban in the area, can Pangilinan and company proceed without any fear of possible harassment by China, which is also claiming Recto Bank by virtue of its “nine-dash line” theory? Previous administrations have said there should be no problem since the area is clearly within Philippine territory, but drilling for oil and gas in these waters will always be easier said than done. Even if the Permanent Court of Arbitration in The Hague invalidated China’s claim over most of the South China Sea last year, that ruling means nothing to the Chinese government. Where there is an abundance of energy sources there will always be disputes. The Recto Bank gas deposits are believed to be thrice the size of the Malampaya natural-gas reserves off Palawan province. The Philippines has an estimated 98.54 billion cubic meters of proven natural-gas reserves, according to the CIA World Factbook cited by an Oxford Business Group article in 2011. Our country may also be sitting on huge reserves of oil. A US Energy Information Administration report estimated proven and undiscovered oil reserves in the South China Sea could range from 28 billion barrels to as much as 213 billion barrels of oil. The number could exceed every other country’s proven oil reserves—except those of Venezuela and Saudi Arabia, according to the BP Statistical Review. Again, can the Philippines tap these energy resources without reigniting political tensions with China? That is the main problem. These offshore energy blocks are sitting on a powder keg. For instance, the 15 offshore territories that the Philippines had offered for exploration include two areas—areas 3 and 4, about 80 kilometer northwest of Palawan province— that China claims as part of its sovereign territory, even though they are well within our country’s 200-mile continental shelf, which under the United Nations Convention of The Law of the Sea (Unclos) is Philippine territory. Vietnam, Brunei Darussalam, Malaysia, Indonesia and Taiwan have also long claimed sovereignty over partly overlapping areas of the South China Sea. We can always say this or that area is without a doubt Philippine territory, but will China agree? Will other countries? China has been asserting its territorial claims more aggressively because it is in dire need of resources, like oil, minerals and metals, to continuously supply its economic growth, not to mention fish, lots of fish, to feed its people. The Spratly Islands are believed to hold vast energy reserves and bounteous fishing grounds that would be strategically vital to China’s economic interest. China had previously protested the Philippine government’s plans to explore oil and gas in the Spratlys at every turn. It protested Malacañang’s bidding out rights to explore oil and gas in the 15 offshore territories. It frequently shoos away our fishermen, civilian and even military vessels while they are plying our own territorial waters. Xinhua News Agency in a story in 2012 said China National Offshore Oil Corp. (CNOOC), China’s state-owned oil and gas firm, had already started drilling near the disputed shoal even amid an ongoing standoff with the Philippines. Indeed, if relations between the Philippines and China are moving in positive directions then perhaps a joint venture with CNOOC is possible, just to ease political tensions or bypass cloudy sovereignty issues. The energy department said about 50 foreign investors, including some of the world’s largest oil companies, have expressed interest in exploring for oil and gas in the Philippines, half of them in the new areas also being claimed by China. We do agree with Pangilinan. We must find a way to settle geopolitical issues and determine, once and for all, if there is really gas or oil or both in these waters.

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Manny B. Villar

THE Entrepreneur Continued from A1

he extent and seriousness of the illegal-drug problem came to surface when President Duterte launched a massive antiillegal drug campaign. The results of the campaign showed why the Chief Executive was so aggressive in fighting illegal drugs, which he cited as one of the country’s major problems even during the campaign for the May 2016 elections. Between June 2016 and July 2017, more than P18 billion worth of illegal drugs, including P12 billion worth of methamphetamine, commonly known as shabu, were seized by law-enforcement agencies. These include 605 kilograms of high-grade methamphetamine worth P6 billion, which were seized in May following a tip from the Chinese government.

During the same period, the Philippine Drug Enforcement Agency (PDEA) dismantled nine clandestine shabu laboratories (some inside high-end subdivisions and others disguised as livestock farms). Law-enforcement agencies also arrested more than 90,000 people, including more than 300 government officials and employees, who were involved in the illegal-drug trade.

Between June 2016 and July 2017, more than P18 billion worth of illegal drugs, including P12 billion worth of methamphetamine, commonly known as shabu, were seized by law-enforcement agencies. These include 605 kilograms of high-grade methamphetamine worth P6 billion, which were seized in May following a tip from the Chinese government. The anti-illegal drug campaign also includes clearing of villages through the joint efforts of local government units, the police and the PDEA. By the end of June 2017, or a year after Duterte assumed office, the PDEA declared a total of 3,677 barangays as drug-free. In the first week of June, Batanes was declared as the country’s first drugfree province. In a statement issued on June 30, the PDEA said the Inter-Agency Committee on Anti-Illegal Drugs, chaired by the PDEA, expects to clear 5,272 barangays before the end of 2017.

Don’t wear the wrong boots

T. Anthony C. Cabangon

Editor in Chief

Senior Editors

An unrelenting war on drugs

John Mangun

OUTSIDE THE BOX

en years is a relatively short amount of time. All of us can probably remember where we were living, what our job was and what the significant events were in our lives 10 years ago. But it is also a long enough period for remarkable changes to occur.

A person goes from being a fetus to have developed into more or less what kind of person he or she will be for the rest of our lives within 10 years. World War II officially started on September 1, 1939, and ended six years later on September 2, 1945. US President John F. Kennedy said in a speech, “We choose to go to the Moon in this decade” on September 12, 1962. Neil Armstrong said, “One giant leap for mankind” from the surface of the moon on July 20, 1969. Yet, had you fallen into a deep sleep on the day before the beginning of those events and awoken the day after they climaxed, you might well think that nothing had changed when, in fact, everything had changed.

If you want to mark the beginning of the global financial crisis, October 9, 2007, might be a good day as that is the day the Dow Jones Industrial Average peaked before falling 50 percent. Here again a deep sleep during the past nearly-10 years might lead you to believe that nothing has changed. Everything has changed. But some people, many people, do not realize that yet. Winston Churchill wrote in one of his books for the series The Second World War that “it is a joke in Britain to say that the War Office is always preparing for the last war”. When the US began sending massive amount of troops to the Vietnam War, they were wearing combat boots designed for the terrain, forests and climate of northern Europe. Soldiers had

When the US began sending massive amount of troops to the Vietnam War, they were wearing combat boots designed for the terrain, forests, and climate of northern Europe. Soldiers had debilitating fungus infections because the leather boots did not breathe in the hot, damp conditions of Vietnam. In the financial and equity markets, most are still wearing the “wrong boots”.

debilitating fungus infections because the leather boots did not breathe in the hot, damp conditions of Vietnam. In the financial and equity markets, most are still wearing the “wrong boots” even after 10 years. A well-respected icon of the Philippine stock market recently wrote that on January 25, investors celebrated as the Dow Jones Industrial Index (DJIA) hit the 20,000 level for the first time. He went on to say why the markets would continue much higher based on “strong earnings” and good US economic data. But all of that analysis is based on fighting the last war. Since the Dow breached 20,000 and is now 10 percent higher at

At this pace, ridding the country of illegal drugs in the next four years “is very much doable”, PDEA Director General Isidro S. Lapeña was quoted as saying in a news report. The pace of the war on drugs will not slow down, based on Duterte’s statements during his second State of the Nation Address on July 24. He said the “fight will be unremitting as it will be unrelenting”. The President’s determination to eliminate the illegal-drug problem is fueled by his commitment to protect Filipino families and the youth of the land. He pointed out that illegal drugs “weaken the social fabric and deter foreign investments from pouring in”. The drug problem is still with us, but it is encouraging to hear people saying it is now safer to walk the streets at night. That, I think, is the best proof that the campaign against illegal drugs is working, for the benefit of ordinary Filipinos. For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.

22,000, 50 percent of that last 2,000 points is attributable only to the upward move of 10 of the 30 Dow component issues. Since July 24, the DJIA has gained about 3 percent. The broader S&P 500 share index is absolutely flat. This is the first time that has happened in 90-year history of the S&P 500. The same is occurring in other stock markets. Hong Kong’s Hang Seng index is up 25 percent in 2017. Twenty-five percent of that move belongs exclusively to Tencent Holdings. Seven of the index’s 49 stocks account for 70 percent of the advance. One final thought. “VIX” is a stock market index to show implied volatility; the “fear index”. Trading volatility on the S&P 500 is at 50-year lows, the market being so incredibly stable, healthy and safe. During the last 6,000 trading days (since the early 1990s), the VIX Index closed below 10 on 26 occasions. Sixteen out of those 26 “below-10” closes occurred in the last three months. In other words, the current US stock market has never been a safer investment...if you have been asleep for the past 10 years. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

Opinion BusinessMirror

opinion@businessmirror.com.ph

The big powers look set to seriously talk again

Premixed cement cartel ready for delivery? Ernesto M. Hilario

ABOUT TOWN

Ricardo Saludo

DIPLOMASIA

on’t look now, but some meaningful discussion might ring out at the Asean Regional Forum (ARF). Little more than posturing usually happens at ARF, the Asean’s annual security meeting among its foreign ministers and those of America, Australia, Canada, China, India, Japan, New Zealand, North and South Korea, Russia and the European Union. But it just might.

What may prod the unexpected to happen, ironically, are some aggressive moves by the US, which normally would spur not dialogue and compromise, but even tougher tit for tat. After all, why should Moscow be in a talking mood after Washington just fired a new volley of sanctions over alleged Russian meddling in the US elections last November? And Beijing never likes negotiating under duress, as it may with the Americans probing supposedly unfair Chinese trade practices. Plus even more sanctions, this time from the UN against North Korea and companies elsewhere—mostly in China—doing business with Pyongyang. And there’s that US carrier battle group near the Korean Peninsula, plus antimissile batteries on a Seoul golf course, ready for any wayward swings of Pyongyang’s clubs.

Where talk isn’t cheap

Now, diplomatic talk isn’t cheap, with governments setting conditions before they even speak a word. Thus, Washington has demanded that Pyongyang stop testing missiles before they start talking. North Korea’s envoy to India recently offered talks, but sans preconditions. In Manila, however, after the UN sanctions, Chinese Foreign Minister Wang Yi allowed that the trade restrictions were an appropriate response to North Korean missile launches. He then urged Pyongyang to cease rocketry and begin diplomacy; so did US Secretary of State Rex Tillerson. Beijing, too, had set conditions for negotiations, particularly on the Code of Conduct (COC) within disputed waters, which is supposed to replace the current nonbinding Declaration on Conduct of 2002 with Asean. Chinese demands were even more stringent, though largely unspoken. Before finally agreeing to the framework for COC talks, China waited till the Philippines ended its hostility and, far more important, halted the implementation of its Enhanced Defense Cooperation Agreement (Edca) with Washington. With US forces no longer garrisoning the archipelago and using its bases under the 2014 Edca, China agreed to the framework for talks on the Code. Another key factor was the People’s Liberation Army’s (PLA) construction of military-capable facilities on reclaimed islands in the disputed Spratlys. Now, it is to the PLA’s advantage to negotiate restrictions on future defense buildups in the South China Sea. As for Russia, the latest exchange

of sanctions with America, including the forced reduction of US diplomatic officials and staff to the same number as their Russian counterparts in the US, countered somewhat the impression that Moscow was being forced to the bargaining table by Washington’s pressure. Tillerson said that the US would respond on September 1 to Moscow’s expulsion of American diplomats. But America’s foreign affairs chief also said Russia showed “some willingness” to discuss Ukraine, where Moscow’s 2014 takeover of the Crimean Peninsula and support for pro-Russia separatists, including the alleged infiltration of Russian troops, led to the mass of Western sanctions against the regime of President Vladimir Putin. In all these instances, the road ahead forks, one way leading to more confrontation and no official talking, and the other toward less discord and some open dialogue. There will be voices at home, abroad and in media screaming, some “Fight!” and some “Talk!” And with so much flag waving, air punching and even saber rattling going nowhere, most powers, if not all, might just be in the mood to talk and listen.

hen the Department of Trade and Industry (DTI) issued earlier this year an administrative order requiring pure-cement importers to obtain an Import Commodity Clearance (ICC) on top of the Product Safety mark but exempting the big cement manufacturers-cum-importers, they probably did not anticipate that this would kick up a firestorm of protests from the small importers, who are now fighting for their very survival, amid the dire prospect of being pushed out of the industry by the giants. The DTI asserts that Department Administrative Order (DAO) 07-02 (later amended by DAO 07-05) is intended to protect consumers by ensuring that only high-quality cement enters the country. But the pure importers—as distinguished from the big local manufacturers who also import cement— have decried DAO 07-02/05 as unjust and discriminatory, since it would allow the giant manufacturers-importers to monopolize the cement industry and thereby take full control of the lucrative construction projects under the Duterte administration’s “Build, Build, Build” infrastructure program. The small importers insist that there is no proliferation of substandard imported cement in the domestic market, as they and the big manufacturers-importers get their supply from the same sources abroad. Hence, the quality of imported ce-

New York Times News Service

resident Donald J. Trump is the reigning king of American victimhood. He is unceasingly pained, injured, aggrieved. The primaries were unfair. The debates were unfair. The general election was unfair. “No politician in history—and I say this with great surety—has been treated worse or more unfairly,” he laments. People refuse to reach past his flaws—which are legion!—and pat him on the back. People refuse to praise his minimal effort and minimal efficacy.

They refuse to ignore that the legend he created about himself is a lie. People’s insistence on truth and honest appraisal is so annoying. It’s all so terribly unfair. It is in this near perfect state of perpetual aggrievement that Trump gives voice to a faction of America that also feels aggrieved. Trump won because he whines. He whines in a way that makes the weak feel less vulnerable and more vicious. He makes feeling sorry for himself feel like fighting back. In this way he was a perfect reflection of the new Whiny Right. Trump is its instrument, articulation and embodiment. He’s not so much representative of it but of an idea—the waning power of whiteness, privilege, patriarchy, access

E-mail: ernhil@yahoo.com.

To reach the writer, e-mail cecilio.arillo@ gmail.com.

Trump is their death rattle: That unsettling sound a body makes when death nears. But, Trump’s whining is not some clever Machiavellian tactic, precisely tuned for these times. Trump’s whining is genuine. He pretends to be ferocious, but is actually embarrassingly fragile. His bravado is all illusion. The lion is a coward. And, he licks his wounds until they are raw. Now, pour into this hollow man Steve Bannon’s toxic, apocalyptic nationalism and his professed mission— “deconstruction of the administrative state”—and you get a perfect storm of extreme orthodoxy and extreme insecurity. Trump becomes a tool of those in

possession of legacy power in this country—and those who feel that power is their rightful inheritance—who are pulling every possible lever to enshrine and cement that power. Suppressing the vote. Restricting immigration. Putting the brakes on cultural inclusion. Make America great again. Turn back the clock to a time when privileges of whiteness were supreme and unassailable, misogyny was simply viewed as an extension of masculinity, women got back-alley abortions and worked for partial wages, coal was king and global warming was purely academic and trans people weren’t in our bathrooms or barracks. The good old days. Now the power of the presidency is

deployed in this pursuit. The only thing that holds the line against absolute calamity is the fact that Trump lacks focus and hates work. I have found that a close cousin of extreme caviling is sloth. As Newsweek puts on this week’s cover, he is a “Lazy Boy”. He may keep himself busy with things he considers to be work, but his definition of that word and mine do not seem to be in alignment. Twitter tantrums, obsessive television viewing, holding campaign-style rallies to feed his narcissistic need for adulation. Those things to me do not signal competence, but rather profound neurosis. True productivity leaves little space for this extreme protestation.

HE framers of the 1987 Constitution, alarmed by the Presidential Commission on Good Government’s (PCGG) transgressions, reacted and gave the PCGG until August 2, 1988, only to use its powers of sequestration and to file cases related to the recovery of the ill-gotten wealth before the Sandiganbayan and other judicial bodies.

and the cultural and economic surety that accrues to the possessors of such. Trump represents their emerging status of victims-in-their-own-minds. The way they see it, they are victims of coastal and urban liberals and the elite institutions—economic, education and entertainment—clustered there. They are victims of an economy evolving in ways, both technical and geographic, that cuts them out or leaves them behind. They are victims of immigration and shifting American demographics. They are victims of shifting, cultural mores. They are victims of Washington. No one speaks to these insecurities like the human manifestation of insecurity himself: Trump.

B. Valdepeñas Jr., Gerardo Sicat, Antonio M. Garcia; Jose S. Sandejas, Victor Macalincag, Jose Leviste, Ruben Ancheta, Lilia Bautista, Jaime Laya, former Speaker Jose de Venecia, Rep. Ronaldo B. Zamora of San Juan City, Antonio V. Martel, Rodolfo V. Martel, Enrique Martel, Alita Romualdez Martel, Vicente Chuidian, Senen Gabaldon, Benjamin Romualdez, Alfredo Romualdez, Potenciano Ilusorio, Modesto Enriquez and the late Gen. Fabian Ver. De Venecia, a principal defendant in Civil Case 0020, was dropped from the PCGG complaint after he wangled a compromise agreement with the Aquino government. Adolf Azcuna, a lawyer and also a defendant in one of the civil cases, ironically became one of former President Corazon C. Aquino’s chairmen in the PCGG.

database

Obviously under pressure by the constitutional deadline, the PCGG and the Office of the Solicitor General (OSG) filed with the Sandiganbayan 43 civil and 44 criminal cases against the Marcoses and more than 400 of their relatives, friends and cronies. Among the prominent codefendants of deposed President Ferdinand E. Marcos in the civil and criminal cases were Imelda R. Marcos and her children, Roberto Benedicto, the late Gliceria Tantoco, Bienvenido Tantoco, Rosendo Bondoc, Jose L. Africa, former Prime Minister Cesar Virata, Eduardo Cojuangco; Former Trade Minister Roberto Ongpin, former Philippine National Bank chairmen Panfilo Domingo and Placido Mapa Jr., Cesar Zalamea, Geronimo Velasco, Roman Cruz Jr., Jose Conrado Benitez, then-Senate President Edgardo Angara, Vicente

country’s poor-operating and political-risk environment limits the attractiveness of the fast-growing market.” It said “the construction market is dominated by family-controlled and politically linked conglomerates that pose a significant barrier against the entry of other companies.” In other words, there is a crying need to clip the wings of the emerging cartel in the cement industry. That’s precisely why the Philippine Competition Commission (PCC) has already included DAO 17-02/05 as one of the important documents in its ongoing probe of the cartellike behavior of certain local cement manufacturers-importers. The PCC considers the following as anticompetition: “Restricting competition as to price or components thereof or other terms of trade, abusing their dominant position by engaging in conduct that substantially prevent, restrict or lessen competition, imposing barriers to entry, or committing acts that prevent competitors from growing within the market.” In fact, small importers are saying, DAO 07-02/05 violates Articles 14 and 15 of the Philippine Competition Act, as it paves the way for the abuse of the dominant position of the giant cement manufacturers-importers. So what would happen to President Duterte’s “Build, Build, Build” infrastructure program if only a few giant manufacturers-importers acting as a cartel are able to dominate the cement industry? Your guess is as good as ours.

In fact, he signed the compromise agreement with De Venecia. Curiously, Azcuna later became a Supreme Court Justice. De Venecia ran for president in the 1998 elections but miserably lost to then-Vice President Joseph E. Estrada. Strangely, De Venecia’s codefendants—Virata, Laya, Mapa, Ongpin, Bondoc and Ancheta—remained then charged before the Sandiganbayan, triggering speculations that the Aquino administration had indeed maintained a double standard of justice during her term. In an effort to negate the PCGG abuses, Aquino announced to the world that her government had sequestered all the assets of the defendants and had demanded from them that the Filipino people be paid P2.2 trillion in moral and exemplary damages, a mind-boggling amount that was four times bigger than the P448-billion accumulated budget of Marcos in 20 years. “This is like raping the people and asking them to enjoy it,” an observer said. The announcement and the worldwide coverage by the unsuspecting media truly propelled Aquino to international fame and it even resulted in winning the prestigious Pulitzer Prize for Investigative Journalism by American journalist, Lewis Simon, of the San Jose Mercury News, who wrote a series of articles on the Marcos hidden wealth. What the media and the nation

Cecilio T. Arillo

America’s whiniest ‘victim’ By Charles M. Blow

ment is the same across the board. Moreover, the small importers are saying there have been no consumer complaints against the quality of imported cement. The local cement manufacturers, on the other hand, have been the subject of many consumer complaints and formal charges over substandard quality. The small importers are also asking these questions: How sure is the DTI that imports of the big cement manufacturers-importers are not substandard if they are not subjected to ICC procedures? Is being a big manufacturer enough to measure compliance with local and international standards? If the local manufacturers are confident that their imports are of good quality, why don’t they submit to a certification scheme? The small importers have challenged the big manufacturer-importers to join them in submitting

to preshipment tests. Preshipment testing, they say, has many advantages. First, these are conducted using international standards and, therefore, will facilitate ICC issuance without delay. Second, no importer would bring in substandard cement since these will not pass muster with contractors, such as the Department of Public Works and Highways and other endusers. Third, if the product fails the test, the importer can easily have it replaced as the letter of credit cannot be drawn without his approval. And four, preshipment testing will assure ample cement supply for the Duterte administration’s various infrastructure projects until 2022. The giant cement manufacturers have admitted they cannot meet the total demand for the vital construction material. They also say that it would take them two to three years to put up a cement plant. Given their undercapacity to meet market demand, the claim that the cement industry is threatened is an arrant nonsense. That the giant manufacturers are themselves also importing shows there is a huge demand for cement that they are unable to meet. The cement manufacturers boast of creating jobs in the country. But surely, this does not give them carte blanche authority to manipulate the supply and prices of the construction material vital to the government’s aggressive infrastructure program. The think-tank BMI Research noted in a recent report that while the Philippine construction industry has “the most favorable regulatory frameworks for private and foreign investments in Asia, in practice, the

PCGG’s transgressions alarming

The pluses of parley

SO, what was supposed to be a forum for much posturing, but little substantive discussion, may actually spawn many words of diplomatic significance, if not impact. In the most urgent issue for East Asia, North Korea was served notice by America and China to desist from more rocket launches, and resume talks. And the UN is getting more sanctions in place, banning exports thought to earn about $1 billion in precious hard currency. In a rare exchange between North and South Korean foreign ministers at the Asean meeting, Pyongyang’s man rejected the offer of talks from Seoul’s woman. But, at least, they actually talked. So did Tillerson and Russian Foreign Minister Sergei Lavrov, with the former stressing that, despite their nations’ differences over Ukraine and other issues, they still had major security concerns to talk about. As for Asean, its much-debated communiqué got delayed a bit over a tug of words on North Korea’s missiles and China’s island-building and military-capable facilities in disputed waters. By latest report, some tough language, pushed by Vietnam, did get into the joint statement. For sure, the words in Manila won’t please all who hear or read them. But words disdained are always far better than wounds sustained.

Tuesday, August 8, 2017 A11

did not know was that Aquino and her battery of advisers committed a serious and costly blunder: aside from assuming the liabilities of Marcos and his cronies, her government did not implead as defendants the corporations and other juridical assets when they filed in court the 43 civil cases. They merely listed these corporate assets and attached the list to the complaints. The PCGG, in effect, merely took administrative control of these assets through the powers of sequestration. Impleading them would have clarified the judicial issue of ownership and, thus, prevented the dissipation and disappearances of highly valuable assets. Meantime, the Edsa euphoria and the endless publicity on the plunder and downfall of the Marcos regime drew away the nation’s attention from the serious mistake. Worse, there was no effort on the part of the Aquino administration, the PCGG in particular, to correct this mistake, as the Sandiganbayan began lifting the writs of sequestration on some multibillion-peso corporations and other assets for failure to implead them before the constitutional deadline and other violations, such as the issuance of writs of sequestration on the signature of just one commissioner. To be continued

Global Eye

A12 Tuesday, August 8, 2017 • Editor: Angel Calso

BusinessMirror

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Why you may not need all those antibiotics By Brad Spellberg | University of Southern California

recent article in the British Medical Journal set off a bit of a firestorm with its claim that “the antibiotic course has had its day”. The authors challenged the very widespread belief that you should keep taking every last dose of antibiotic prescribed by your physician even after you feel better. This advice has long been claimed to be key to preventing antibiotic resistance. The challenge to that claim has sparked a backlash, with physicians and public health officials expressing concern about an overly complex message that could result in encouraging patients to go rogue and ignore their doctors’ prescriptions. All of this is a bit amusing to experts like me, who have been actively challenging this silly dogma for a long time, but without the recent media attention. So let me try to bring some clarity to the debate, which really isn’t that complex, so you understand what to do when your doctor gives you a prescription for antibiotics.

Why taking too much of an antibiotic is drug abuse

I’ll start with the bottom line first. It is absolutely false that continuing to take antibiotics after you feel

completely better will reduce the emergence of antibiotic resistance. Quite to the contrary, it will very likely promote the emergence of antibiotic resistance! How did we get to this point, with such a huge gulf between reality and dogma? And how could so much of the medical community have been so wrong for so long? Let’s make one thing explicitly clear. Historically, doctors and patients have both been pretty dreadful about using antibiotics appropriately. We’ve long prescribed antibiotics out of fear and habit, not science. Indeed, as far back as 1945, Alexander Fleming, the man who discovered penicillin in 1928, warned the public that people were taking penicillin to treat diseases not caused by bacteria, and that this unnecessary

use of penicillin was going to breed out antibiotic resistance. He warned that those who so abused penicillin would be “morally responsible” for the deaths that ensued from penicillin-resistant infections. He was right. The sad thing is, society never did listen. Recent data confirm that our use of antibiotics has gotten no better in the modern era. It has been estimated that 30 percent to 50 percent of antibiotic use in the US is unnecessary. In my opinion, those numbers are rather hilariously low. I would estimate that 75 percent or more of antibiotic use is unnecessary. You see, I, and experts like me, have a more stringent definition of when antibiotic use is appropriate or not, which includes giving too long a course of antibiotics to patients who need them. The truth is, we do not know how long a course of antibiotics is necessary to treat most types of infections. Even in the modern scientific era, the primary basis for the duration of most courses of antibiotics is a decree Constantine the Great issued in AD 321 that the week would consist of seven days. That’s why your doctor gives you seven or 14 days’ worth of antibiotics! If good old Constantine had decreed four days in a week, doctors would be prescribing antibiotics in four- or eight-day courses, rather than seven- or 14-day courses. I refer to seven- or 14-day antibiotic courses as “one or two Constantine units” to underscore the absurdity of the basis for these durations. But in the last two decades we actually have had dozens of clinical trials published demonstrating

that shorter courses of antibiotics are just as effective as longer courses (see table).

of the first descriptions of penicillin therapy for pneumonia (lung infection).

Antibiotics: Does the length of treatment matter? In a review of studies on four common infections, researchers saw no difference in outcomes for short or long courses of antibiotics. Disease

Short course studied (days)

Long course studied (days)

Result

Lung infection (pneumonia)

3 to 5

7 to 10

Equal

Kidney infection

5 to 7

10 to 14

Equal

Abdominal infections

Equal

Skin infections

5 to 6

10 to 14

Equal

The Conversation, CC-BY-ND Source: JAMA Internal Medicine

Furthermore, the shorter-course regimens led to lower rates of antibiotic resistance. Enter Dr. Louis Rice, chair of medicine at Brown University. Rice has long been an international leader in antibiotic use and resistance. Ten years ago, he gave a lecture at a national infection meeting in which he challenged physicians to move to evidenced-based, short-course antibiotic regimens. He then went a step further and became the first expert to publicly challenge the nonsense that continuing to take antibiotics after you feel better would somehow prevent the emergence of resistance. Rice is the man who first called out that the emperor had no clothes. He traced the origin of this incorrect myth back through time. He discovered that the myth appears to originate due to a general misunderstanding of the findings in an article published in 1945, one

This misunderstanding blossomed into the extremely pervasive, indeed erroneous, silly urban legend that continuing antibiotics beyond resolution of symptoms somehow helps reduce antibiotic resistance. Not only is there absolutely no evidence that taking antibiotics past when you feel better will reduce antibiotic resistance, it doesn’t even make sense. The fact is, the longer you take an antibiotic for, the greater the chance that antibiotic-resistant bacteria will emerge in your body and in the environment around you. There are some chronic infections, such as tuberculosis, where you do indeed have to take long courses of antibiotics, not to prevent resistance, but rather to cure the infection. But for most acute bacterial infections, short courses of antibiotics result in equivalent cure rates, and with less chance of causing the emergence of antibiotic resistance among the bacteria in and on your body.

The World Health Organization agrees that there is scant, if any, evidence for long courses of antibiotics, saying that “shorter treatments make more sense—they are more likely to be completed properly, have fewer side effects and also are likely to be cheaper”.

How to be antibiotic-smart

SO, what should we do about antibiotic courses? Medicine in the 21st century is a team sport. You and your physician need to be partners in decision-making. If you are sick and your doctor mentions antibiotics to you, the first thing you should say is, “Hey, doc, do I really need the antibiotic?” Doctors may otherwise prescribe an antibiotic even when you don’t need one, out of fear that you will be unhappy without the prescription. Flip the script on them. Help them to know that you’d prefer not to take the antibiotic unless it is really necessary. If your doctor says, “Yes, I believe you have a bacterial infection and you need the antibiotic,” the next question is, “Okay, can we treat for a short course?” Third, after you begin taking the antibiotics, if you feel much better before you complete the course, give your doctor a call and ask if you can safely stop therapy. So, the bottom line is, doctors should prescribe as short a course of antibiotics as possible to treat your bacterial infection. If you feel completely well before you finish that course, you should be encouraged to call your physician to discuss if it is safe to stop early. See, it’s not so complicated after all. AP

How Greece could escape debtors’ prison–if Europe opens the door By C. Randall Henning American University School of International Service

reece has acted out a European tragedy for more than seven years. But some signs suggest Greece may finally, in the words of its economy minister, be on the way to becoming a “normal country” again. Greece’s creditors have disbursed another chunk of funds as part of Greece’s current €86-billion ($100-billion) bailout, and the country recently tested the bond markets for the first time in three years, planning to borrow more from private investors soon. Some now believe Greece may soon follow fellow bailed-out countries Ireland and Portugal in their revivals. But despite the wave of optimism, Greece’s staggering amount of debt looms menacingly over the country’s economy and future. And the International Monetary Fund (IMF), while endorsing Athens’s reform program, is urging its fellow creditors to offer Greece much greater debt relief. In my recent book, Tangled Governance, I examined the financialrescue programs for euro-area countries, including three for Greece, and the conflicts over them. My own research supports the view that Greece needs to finally be released from debtors’ prison, but for political reasons more than the financial arithmetic at the core of the institutions’ debt analyses. And there’s a way to do that which makes the pain bearable for everyone and opens a path back to normalcy.

A great depression

Over the last seven years, we have witnessed many 11th-hour crisis meetings and last-minute rescues that, after much brinkmanship and grinding of teeth, each time seemed to narrowly avert the Greece’s ejection from the euro area. You’d be forgiven for becoming numb to the continual travails of a modestly sized country in the southeastern corner of Europe. That

would be a mistake: Greece’s tenuous position in the euro area weakens long-term confidence in European integration. Moreover, as a key North Atlantic Treaty Organization ally, located in a strategic corner of a volatile region, its economic and political stability are essential to European security. To stabilize its finances and avoid expulsion from the euro area, Greece has undertaken a wrenching series of government layoffs, budget and pension cuts and tax reforms, among other measures, at the insistence of the IMF, European Commission (EC) and European Central Bank, which together make up the so-called troika of public lenders to the beleaguered country. So far, the troika has lent Greece about €265 billion in three separate bailouts, with the latest one set to expire next summer. Separately, Greece managed to restructure its private-sector debt in 2012, reducing the amount it owed investors by about 53 percent. Despite all this, Greece still owes a total of about €320 billion in debt, and its economy has suffered the equivalent of the Great Depression in the US in the 1930s, having shrunk by a fourth. Unemployment is running at nearly 25 percent, and youth poverty, which soared during the crisis, remains near 36 percent. But now that the latest disbursement of funds has been agreed to, does that mean the worst is behind Greece?

Moment of truth

Sadly, no one should be confident that Greece’s recovery will become self-sustaining. It is particularly vulnerable to another European recession, whenever that might come. And with the end of the current bailout on the horizon, its creditors are sharply divided about what to do next. For the moment, they’re waiting for Germany’s national elections in September to come and go so that domestic politics don’t get in the way. Debt relief before then could have been costly at the polls for the

A way out of the impasse

A man speaks on his cell phone next to an index board at the reception hall of the Stock Exchange in Athens on July 25. Greece is poised to tap international bond markets for the first time in three years in a move the government hopes will signal the country is ready to emerge from its bailout era. AP

governing coalition. But once talks resume this fall, they are certain to be contentious. The euro members, which have put up the lion’s share of the loans so far, remain deeply reluctant to offer Greece more than minimal debt relief. The IMF, on the other hand, has argued forcefully that Greece’s debt won’t become sustainable without substantial relief. It suggests doing that by keeping interest rates at today’s lows, extending grace periods and allowing Greece to defer paying back its loans until decades past the current due date of 2060. Part of the problem is that the European creditors are holding onto a rather rosy scenario of how much Greece’s economy can be expected to grow beyond the nearterm recovery and, thus, generate enough tax revenue to pay off its debt in the long term. The EC expects Greece to grow 1.5 percent every year, on average, until 2030

To stabilize its finances and avoid expulsion from the euro area, Greece has undertaken a wrenching series of government layoffs, budget and pension cuts and tax reforms, among other measures, at the insistence of the International Monetary Fund, European Commission and European Central Bank, which together make up the so-called troika of public lenders to the beleaguered country. and 1.25 percent thereafter. The IMF, on the other hand, projects growth of just 1 percent a year beginning in 2022. While the difference may seem small, the cumulative effect on Greece’s ability to pay back its debt is decisive. The larger the economy, the smaller the relative size of the debt and interest payments, and the easier it will be to run budget surpluses to repay debt. If the EC is wrong, Greece will have a very hard time meeting its debt

payments in two or three decades without major relief. Ultimately, however, the ability and willingness of Greece to service its debt rests on political considerations, not economic ones, as does the question of debt relief. It looks like European creditors want to use the debt burden to keep Greece on a very short leash to prevent backsliding on economic reforms, albeit ones that are essential for the country to get back on its feet.

AS a long-term strategy, however, using debt as leverage over reform is doomed and will prevent Greece from a full recovery. There are two principal reasons for this: n Private investors will tend to avoid committing to projects in Greece as long as its debt remains so high that periodic renegotiation is likely. n More important, European dec i sion-m a k i ng t h roughout the euro crisis amply demonstrates that Greece’s creditors are hamstrung by their own domestic politics. That prevents them from pursuing the optimal course of action, even when the admittedly formidable political barriers in Greece have been overcome, and has contributed to many delays. A way out of this impasse, however, is to make the size of Greece’s debt payments contingent on growth outcomes. If Greece rebounds quickly and maintains high growth, debt relief can remain relatively modest. If Greece grows more slowly, as the IMF and others predict, then payments on the debt can be reduced and deferred automatically—without requiring creditors to come together and overcome domestic political hurdles every time. Eurozone finance ministers recently floated this as a possibility for Greece. Given the political constraints of the key players, as my analysis of the crisis suggests, it’s the best way forward, and proponents should fight for its robust adoption so that Greece’s debt payments are significantly reduced if growth proves to be weak. If Greece’s European creditors truly believe that their neighbor’s prospects are as rosy as they say— rather than a ploy to avoid granting relief now—then they should have little problem signing on to the new mechanism. This will also give investors confidence that Greece, in fact, is returning to “normal”, and they can commit to projects in the country. Finally, this will align the interests of everyone with those of the longsuffering Greek people. AP

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Tuesday, August 8, 2017 A13

Technology to beat China’s fake-food scourge

bowl of ice cream on a hot day in Shanghai gave American Mitchell Weinberg the worst bout of food poisoning he can recall. It also inspired the then-trade consultant to set up Inscatech—a global network of food spies.

In demand by multinational retailers and food producers, Inscatech and its agents scour supply chains around the world hunting for evidence of food-industry fraud and malpractice. In the eight years since he founded the New York-based firm, Weinberg, 52, says China continues to be a key growth area for fraudsters, as well as those developing technologies trying to counter them. “Statistically, we’re uncovering fraud about 70 percent of the time, but in China it’s very close to 100 percent,” he said. “It’s pervasive, it’s across food groups, and it’s anything you can possibly imagine.” While adulteration has been a bugbear of consumers since prehistoric wine was first diluted with saltwater, scandals in China over the past decade — from melamine-laced baby formula, to rat-meat dressed as lamb — have seen the planet’s largest food-producing and consuming nation become a hotbed of corrupted, counterfeit and contaminated food. Weinberg’s company is developing molecular markers and genetic fingerprints to help authenticate natural products and sort genuine foodstuffs from the fakes. Another approach companies are pursuing uses digital technology to track and record the provenance of food from farm to plate. “Consumers want to know where products are from,” said Shaun Rein, managing director of China Market Research Group, citing surveys the Shanghai-based consultancy conducted with consumers and supermarket operators.

the data,” said Weinberg, who recalls seeing everything in China from synthetic eggs to fake shrimp that still sizzle in a wok. “In most supply chains there is one or more ‘unreliable’ data provider. This means blockchain is likely useless for protecting against food fraud unless every piece of data is scrutinized to be accurate.” A months-long Bloomberg investigation into the global shrimp trade last year showed how unreliable documentation had fanned an illegal-transhipping scheme involving Chinese aquaculture exporters.

‘Business opportunity’ Services that help companies mitigate the reputational risk that food-fraud poses is a “big growth area”, according to Rein. “It’s a great business opportunity,” he said. “It’s going to be important not just as a China play, but as a global play, because Chinese food companies are becoming part of the whole global supply chain.” Some of the biggest food companies are backing technology that grew out of the anarchic world of crypto-currencies. It’s called blockchain, essentially a shared, cryptographically secure ledger of transactions. Wal-Mart Stores Inc., the world’s largest retailer, was one of the first to get on board, just completing a trial using blockchain technology to track pork in China, where it has more than 400 stores. The time taken to track the meat’s supply chain was cut from 26 hours to just seconds using blockchain, and the scope of the project is being widened to other products, said Frank Yiannas, WalMart’s vice president for food safety, in an interview last Thursday. Shanghai-based Zhong An Information and Technology Services Co. said in June it will use the technology to track chickens from the coop to the processing facility and on to the market or store.

Blockchain pilot

Alibaba Group Holding Ltd., too, sees the potential for the eightyear-old technology to provide greater product integrity across its

More transparent

Counterfeit liquor is tested at the Beijing administration for industry and commerce center in June 2007. Teh Eng Koon/AFP via Getty Images

platforms, which accounted for more than 75 percent of China’s online retail sales in 2015. The planned blockchain project will involve the Chinese e-commerce behemoth working with food suppliers in Australia and New Zealand, as well as Australia Post and auditors PricewaterhouseCoopers Llp. “Food fraud is a serious global issue,” said Maggie Zhou, managing director for Alibaba in Australia and New Zealand. “This project is the first step in creating a globally respected framework that protects the reputation of food merchants and gives consumers further confidence to purchase food online.” Fraud costs the global food industry as much as $40 billion annually, according to John Spink, director of Michigan State University’s Food Fraud Initiative. In China, where the 2008 melamine-milk crisis resulted in the death of at least six babies, it’s a hot-button issue compounded by the country’s growing appetite for higher quality food

and swelling middle class. A Pew Research Center study last year found 40 percent of Chinese view food safety as a “very big problem”, up from 12 percent in 2008.

Global concern

“This is not a Chinese issue—it’s a global issue,” said Yongguan Zhu, director general of the Institute of Urban Environment, part of the state-funded Chinese Academy of Sciences. “What we have to do is reinforce our regulations to improve the transparency of the administration, for example information sharing.” Zhu added blockchain could play an important role in improving traceability. Its database of records can be built like a chain and can’t be broken or reordered without disrupting the entire connection. China strengthened its foodsafety law in 2015 in response to the spate of scandals. Counterfeiters and food tamperers face tougher penalties, including jail time in some cases, and more than $800 million has been spent hiring more food-safety personnel and bolstering monitoring facilities,

according to an April report from the Paulson Institute, a Washington-based think tank. Last month Beijing emphasized to authorities the need to be upfront in disclosing food-safety issues. “Food fraud will always exist,” said Yongning Wu, chief scientist at the government-run China National Center For Food Safety Risk Assessment. While authorities in China have joined the global fight against the scourge, Wu doesn’t see the problem disappearing. “We can only develop technology to detect it,” he said. “However, fake-food producers will always update their technology to dodge inspections.”

Wily scammers

The wiliness of fraudsters is what makes Inscatech’s Weinberg less hopeful about blockchain. His firm mainly uses informants on the ground to sniff out where in the production process food fraud is taking place, and most of his work in China is with western companies that manufacture or source product there. “The problem is the data is only as reliable as the person providing

But blockchain is “light years” away from the system used by the global food industry today, which relies heavily on paper records, said Yiannas, Wal-Mart’s food-safety chief. By recording the identity of those who input data into the chain, the technology removes the anonymity that has helped food fraud to thrive, he added.

The role of humans in recording the supply chain will also diminish, said Yiannas. “More and more of these documents will eventually be captured in an automated way.” China’s Food and Drug Administration didn’t immediately respond to an e-mail requesting comment on the country’s food safety efforts. The challenges for China—“the factory of the world”—are especially vast because of its size, population, multilayered administrative divisions, and “the willingness of criminals to exploit every corner that they can in order to make money,” said Michael Ellis, who ran Interpol’s trafficking in illicit goods unit until October. At Interpol, Ellis, a former detective with Scotland Yard in London, was involved in “Opson,” an operation that led to the seizure of more than 10,000 tons and 1 million liters (264,000 gallons) of hazardous fakefood and drinks across more than 50 countries. Without a presence to fight it, food-fraud globally “will explode,” Ellis said. “It will just continue to grow, and who knows where it will lead.” Bloomberg News

Biggest Qatar bank seen weighing funding option amid spat with neighbors By Archana Narayanan & Dinesh Nair

atar National Bank (QNB) QPSC is considering options to raise financing, people familiar with the matter said, as an ongoing standoff with its Gulf neighbors threatens to weaken liquidity in the gas-rich country. The Middle East’s largest lender by assets held early discussions with international banks about the possibility of a private placement, bond sale or loan in the fourth quarter, said the people, asking not to be identified because the information is private. Final decisions haven’t been made and the bank may decide against a deal, the people said. There is no definite decision in this regard, a QNB spokesperson said. Qatari lenders are under pressure after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic relations and closed transport routes in June, accusing the nation of funding Islamist terrorism, a charge it denies.

Foreign deposits at Qatar’s banks may fall further after dropping the most in almost two years in June, as some Gulf lenders refuse to roll over holdings, people with knowledge of the matter said last week. “Finding reasonable financing options for QNB now has a signaling effect that it sends out to the market, namely it does not rely solely on Qatari Central Bank liquidity actions and can access various funding options in a difficult environment quite easily,” said Sergey Dergachev, who helps oversee about $14 billion in assets as a senior money manager at Union Investment Privatfonds GmbH in Frankfurt. “The window of opportunity to issue now is excellent because currently, there is less noise around the SaudiQatar dispute.” The bank’s expansion into Asia is helping QNB offset the impact of the Saudi-led spat, CEO Ali al-Kuwari said last month. QNB aims to cut the income generated from its domestic market to 50 percent by 2020, from about 63 percent currently, al-Kuwari added. Bloomberg News

Qatar National Bank QPSC BLOOMBERG

2nd Front Page BusinessMirror

A14 Tuesday, August 8, 2017

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PHL likely to import 580,050 MT of rice next year–NFA’s Aquino S ₧7B tate-run National Food Authority (NFA) has projected that it would need to import some 580,050 metric tons (MT) of rice next year to make sure its stockpile is sufficient throughout 2018. NFA Administrator Jayson Laureano Y. Aquino gave the estimate during his agency’s recent 2018 budget deliberation at the House of the Representatives, where he defended the need for a P7-billion subsidy for its buffer-stocking purposes. NFA Spokesman Marietta J. Ablaza told the BusinessMirror that the projected rice importation by the government in 2018 was calculated based on the food

agency’s mandated stockpile requirement and its target distribution next year. “The NFA is mandated to have 15 days inventory at any given time and 30 days at the start of July 1. At the same time, we want to fulfill our distribution target, so the 580,050 MT was based on our supply-and-demand [assessment],” Ablaza said in a recent interview. “So that’s our proposal for us to

complete our distribution target [next year].” However, Ablaza said the rice-importation scheme for the proposed 580,050 MT would depend on whatever the NFA Council would approve. “That depends on what the NFA Council approves, whether it is open-tender or [we] go back to government-to-government [scheme]. It will depend next year,” she said. Ablaza added that the proposed 580,050 MT of rice importation is on top of the NFA’s target palay procurement of 1.2 million MT next year. The food agency’s palayprocurement target next year is 433 percent more than the 255,000 MT it is eyeing to buy this year. Given the target palay procurement and rice importation, the NFA is eyeing to achieve a ricedistribution volume of 1.355 MMT next year, according to documents

The estimated subsidy needed by the National Food Authority for its 2018 buffer stock scheme

provided by the NFA. “1.2 million [MT] of palay is what we need to buy in order to fill our importation. We really have to work double time in order for us to achieve the target,” Ablaza said. “Palay is a better buffer stock than rice because we can store it longer and we can schedule the milling whenever we need to. Plus, we want to support our farmers.”

Congress vows to give DOT P1-B branding budget for 2018

the NFA should exert effort to source its buffer stock from local farmers,” Aquino said. “The farmers are expected to seek government support because of the impending influx of cheap rice from abroad resulting in low farm-gate prices.” Aquino estimated—based on a P18-per-kilogram pricing—that the NFA needs a budget of P21.6 billion to buy the 1.2 MMT palay from Filipino farmers next year. “The procured paddy will be converted into rice. After serving its purpose as buffer stock, it will be sold to NFA accredited outlets at P30 per kg to provide low-income consumers low-priced rice,” he said. “The proceeds of the sales will be used to augment the financial requirement for personnel services and maintenance and other operating expenses,” he added. Jasper Emmanuel Y. Arcalas

DELA ROSA SET TO REASSIGN ESPENIDO TO ‘NEXT TARGET’

By Ma. Stella F. Arnaldo

@akosistellaBM Special to the BusinessMirror

OTH houses of Congress have committed to give a P1-billion budget to the Department of Tourism (DOT) to support the agency’s Philippines branding campaign in 2018. In an interview with the BusinessMirror, Tourism Assistant Secretary for Public Affairs, Communications and Special Projects Frederick M. Alegre disclosed that the branding budget is on top of the annual budget allocated to the government agency for its operations. He also clarified that the branding budget will go to the DOT, not to its marketing arm, the Tourism Promotions Board (TPB). While he ack nowledged that this was still smaller than the promotion budgets of other Asian nations, “we’re excited about it. This will enable us to go to areas [outside the Philippines] to promote the country, and hold certain events to attract more tourists to come over,” he said. If the DOT’s budget is passed by both houses of Congress, the P1-billion branding budget of the DOT for 2018 amounts to just $19.84 million. Published reports have estimated Thailand’s annual tourism

In his presentation, Aquino said the NFA is mandated to provide support price to farmers to ensure their economic returns while providing low-income consumers with affordable rice in the market. “Having support price to farmers while providing affordable rice in the market are among the government’s social services that require subsidy,” he said. The NFA chief said the fivefold increment in their palay-procurement target next year is in line with President Duterte’s pronouncement to prioritize local Filipino rice farmers than imports. Aquino added that it is also the government’s planned support for the farmers with the expected impact of cheap rice from abroad should the quantitative restriction on the staple is scrapped next year. “The President pronounced that

national Scientist Alcala is PHL’s Biodiversity Hero Philippine National Scientist Dr. Angel Alcala (center), receives the Asean Biodiversity Heroes award, the first such recognition given by the Asean Centre of Biodiversity (ACB) to 10 Asean winners at ceremonies held at a hotel in Manila on Monday. With him are Philippine Environment Undersecretary Jonas Leones (from left); Vongthep Arthakaivalvatee, deputy secretary-general of Asean Socio-Cultural Community; ACB Executive Director Roberto Oliva; and Michael Bucki, Climate Change and Environment counsellor for Asean of the European Union. The others awarded together with Alcala, a former environment secretary, are Eyad Samhan of Brunei Darussalam, Sophea Chhin of Cambodia, Alex Waisimon of Indonesia, Nitsavanh Louangkhot Pravongviengkam of Lao PDR, Prof. Zakri Abdul Hamid of Malaysia, Dr. Maung Maung Kyi of Myanmar, Prof. Leo Tan Wee Hin of Singapore, Dr. Nonn Panitvong of Thailand and Dr. Dang Huy Huynh of Vietnam. Alysa Salen

By Rene Acosta

@reneacostaBM

hilippine National DELA ROSA: “We will Police (PNP) Chief Didetermine who is the next target, then rector General Ronald we can transfer him M. dela Rosa said on Mon[Espenido]. Just wait, day that controversial Chief we need to validate Insp. Jovie Espenido is now first as to where he can a sought-after official in be transferred.” the campaign against illegal drugs, with local officials asking for his assignment in their areas. Espenido is the chief of the Ozamiz City Police that led the operations last week, which resulted in the death of Ozamiz City Mayor Reynaldo Parojinog Sr. and 14 others, including other members of Parojinog’s family. Dela Rosa said he would not reassign the officer yet, despite calls from local officials for his reassignment in their areas. “We will determine who is the next target, then we can transfer him. Just wait, we need to validate first as to where he can be transferred,” dela Rosa said. “Many are requesting where he should be assigned but…we should finish Ozamiz first. There are many who are requesting for him,” he added. Espenido is among the awardee at tomorrow’s celebration for the anniversary of the police service. Dela Rosa said Espenido will be receiving a special award for his accomplishments under the PNP’s anti-illegal drugs campaign. The chief PNP, however, stressed that Espenido was already chosen even before the raid against the Parojinogs was conducted. “The Ozamiz incident is yet to happen when Espenido was chosen among the awardees for his accomplishments in the antidrugs operations in Albuera and Ozamiz. Drug activities in Ozamiz significantly dropped during his leadership of the Ozamiz City Police Station,” dela Rosa said. The PNP chief also called on the Parojinog camp to file its formal complaint following its claims that members of the raiding team See “Dela Rosa,” A2

See “Congress,” A2

Corruption is dead! Long live Corruption! Continued from A1

Here are some headlines in recent days which support the above statement: ■ SFO investigating Rio Tinto for suspected corruption: The UK Serious Fraud Office (SFO) is investigating the mining giant Rio Tinto for alleged corrupt business operations conducted by its employees and other associates in Guinea. ■ Corruption ring uncovered in project to upgrade Farrington station: Four men have been jailed for corruption in connection with a large contract to upgrade of London’s Farrington station. ■ Former Petrobras CEO arrested on corruption charges: Former Petrobras CEO, A ldemir

Bendine, was arrested for allegedly receiving large bribes from Odebrecht, the construction conglomerate embroiled in a longrunning graft probe. ■ Spain’s Prime Minister to appear as witness in corruption case: Mariano Rajoy will appear as witness in a large graft trial embroiling his conservative party, marking the first time ever a sitting prime minister in Spain is called to court. ■ Ex-Mex ican gover nor to stand trial: Ex-Mexican governor, Javier Duarte, accused of money laundering and organized crime among other charges has been ordered to stand trial. ■ German Car companies under investigation regarding cartel-

like behavior (and that after Dirty Diesel). The obvious question is: Why does corruption survive? Its survival depends upon four conditions: The first condition necessary for the emergence and reemergence of corruption is that there be rents associated with a government’s regulatory powers. The second condition requires that corrupt bureaucracies be somewhat independent within the remaining (if honest) administrative structure of the government. External controls of the bureaucracy— whether imposed by the remainder of the administrative system or by society at large—must be weak. The third condition requires the public institutions controlling

corruption be weak and ineffective. These institutions include civic groups that exert moral pressures, political parties and the media that could expose the wrongdoing, and the legal system that would have the authority to prosecute and punish the guilty (in the Philippines, the poor have to go to jail but the rich can easily get away or delay processes). The fourth condition is a lack of whistle-blower protection. It is obvious that strange deals between government and the private sector and private sector to private sector (price fixing, collusion in biddings, bribing technical and purchasing staff, etc.) will only become known if people inside those companies become whis-

tle-blowers. This is the reason the Integrity Initiative advocates the approval of bills that protect whistle-blowers in both Houses of Congress. Measures of economic and social development seem to correlate very strongly with a reduction in corruption, involving the type of legal system, colonial legacies and religion. While it is clear that the level of corruption in societies with well-developed political institutions is lower, it is difficult to establish the direction of causation. Does development (economic, political or social) cause corruption to decline or is development possible only when corruption declines? It’s time that companies and in-

dividuals sign the Integrity Pledge. Do it now and help creating the Integrity Nation we all want. And remember, Integrity starts with I—meaning You. Let me close by saying: You are the final authority. Not the government. Not the president. Not Mom or Dad. You. No community of philosophers, scientists, priests, academicians, politicians, or generals— no school, legislature, parliament, or court—can bear responsibility for your life, or your words, or your actions. This authority is yours and yours alone. You can neither get rid of it nor escape from it. Henry Schumacher is one of the vice presidents of the Integrity Initiative Inc.