Businessmirror August 15, 2018

RICE TARIFF BILL hurdles 3RD AND FINAL READING By Jovee Marie N. dela Cruz @joveemarie

T

FILE PHOTO

HE House of Representatives on Tuesday endorsed for Senate approval House Bill (HB) 7735, or the proposed “Revised Agricultural Tariffication Act,” which would convert the quantitative restriction (QR) on rice into tariffs. With 200 affirmative votes, seven negative and two abstentions, the lawmakers passed on third and final reading the measure, which also seeks to put in place safety nets for Filipino rice producers and consumers. The bill will now be transmitted to the Senate for its own deliberations and approval. One of its most important provisions is the creation of the Rice Competitiveness Enhancement Fund (RCEP), which shall consist of all duties collected from rice imports. The fund will be used to help rice farmers become competitive. In his 2019 budget message to Congress, President Duterte is pushing for the passage of the rice tariffication bill, as it will help reduce the price of rice by P3.40 per kilogram. If implemented in the last quarter of this year, he said it could reduce headline inflation by about 0.20 percentage point, and an additional 0.60 percentage point in 2019. Under HB 7735, the Lower House has set the bound tariff rate for rice imports outside the minimum access volume (MAV) at 180 percent.

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

BusinessMirror

www.businessmirror.com.ph

A broader look at today’s business

n

Wednesday, August 15, 2018 Vol. 13 No. 305

Biz groups join budget fray, back Palace, DBM T

By Cai U. Ordinario @cuo_bm Bernadette D. Nicolas @BNicolasBM & Elijah Felice E. Rosales @alyasjah

WO of the Cabinet’s economic managers signaled on Tuesday the Executive will stick to its guns in pushing a cash-based budget for 2019 despite a standoff with Congress, as business groups weighed in on the matter, taking Malacañang’s side and warning of the perils of a reenacted appropriations law.

Budget Secretary Benjamin E. Diokno, reached by phone, said it’s the lawmakers who should persuade themselves to pass the proposed 2019 cash-based budget, having earlier approved the shift from an obligation-based budget as part of reforms. The unprecedented act of rejecting the President’s budget, in a bid to force the Executive to increase it, is fraught with risks for the economy’s growth and credit rating once the deficit widens, he said. See “Budget,” A2

SC nixes P25-B financial aid to shuttered Banco Filipino

Continued on A8

business news source of the year

P25.00 nationwide | 5 sections 24 pages | 7 days a week

Perspectives on international cooperation and governance of migration in all its dimensions

Teddy Locsin Jr.

free fire Opening statement delivered by Ambassador Teddy Locsin Jr., Permanent Representative of the Philippines to the United Nations, at the Global Compact on Migration Conference in the Philippines, August 14 and 15, preparatory to its formal adoption in Morocco in December 2018.

T

HE final text of the Global Compact on Migration (GCM) has a dedicated separate objective, Objective 23, on international cooperation and global partnerships for safe, orderly and regular migration. Other member-states found this objective superfluous. But the African Group noted the importance of an enhanced framework on international cooperation for a comprehensive response to irregular migration. This is welcome development to ensure that no one, no country, no region, is left behind or avoids the moral responsibility to address migration.

LGUs buck tax amnesty, decry intrusion on powers

@jrsanjuan1573

HE Supreme Court has upheld a ruling by the Court of Appeals barring the release of up to P25 billion in financial assistance and other regulatory reliefs to the defunct Banco Filipino Savings and Mortgage Bank. In a 26-page ruling penned by Associate Justice Marvic Leonen, the SC’s Third Division denied Banco Filipino’s petition seeking the implementation of the order issued by the Regional Trial Court in Makati City on October 28, 2010. The Makati RTC had enjoined the Bangko Sentral ng Pilipinas (BSP) and the Monetary Board from “employing acts inimical to the enforcement of Banco Filipino’s approved business plan” and from

2016 ejap journalism awards

Continued on A6

By Joel R. San Juan

T

The measure indicated that the Philippines will impose a bound tariff rate of 35 percent for rice from the Association of Southeast Asian Nations region, regardless of volume. Manila will also impose a 40-percent bound tariff most-favored nation (MFN) rate for in-quota rice imports from countries that do not belong to Asean. Once the bill is enacted into law, the country’s MAV for rice shall revert to its 2012 level of 350,000 metric tons, from the current 805,000 MT. The bill mandates the National Food Authority (NFA) as the sole authority that will undertake the direct importation of rice for the sole purpose of ensuring food security and maintaining sufficient national buffer stocks. The measure defines buffer stock as reserve equivalent to 15 days of national consumption requirement and maintained by the NFA at any given time to address calamities, and to stabilize prices. It authorizes the NFA to allocate import permits among certified and licensed importers for importation other than maintaining buffer stocks while mandating the agency to issue guidelines for the export of rice and corn by certified and licensed traders. The bill also empowers the President, when necessary, to adjust the applied rate; regulate rice exports, impose temporary regulations or restrictions on the volume of imports of rice; and enter into trade negotiations or renegotiations relating to the bound or maximum rates committed to or to be committed by the Philippines in relation to rice.

MIGRATION IN FOCUS The Department of Foreign Affairs is hosting a 2-day international conference on global migration governance, human rights and sustainable development, ahead of the adoption of the Global Compact on Safe, Orderly and Regular migration(GMC) in December. Foreign delegates posed for a photo opportunity with their hosts, led by Philippine Permanent Representative to the UN and other International Organizations in Geneva Evan P. Garcia; Philippine Permanent Representative to the UN in New York Teodoro L. Locsin Jr. (5th and 7th from left), and DFA Undersecretary for Migrant Workers Affairs Sarah Lou Y. Arriola (in blue). Story on page A8. NONIE REYES

BSP chief notes financial markets’ volatility, but says timing is key in intervention

A

S markets expect the Bangko Sentral ng Pilipinas (BSP) to intervene in the recent market volatilities, particularly in the foreign-exchange trade, Central

PESO exchange rates n US 53.3070

Bank Governor Nestor A. Espenilla Jr. said timing is key to market intervention in financial stability. In the Financial Stability Coordination Council’s (FSCC) quarterly

meeting on Tuesday, Espenilla recognized the increased volatility in financial markets due to local and international developments. See “ BSP,” A4

T

HE League of Provinces of the Philippines on Tuesd ay e x pressed opposition to Part B of the Tax Reform for Acceleration and Inclusion (TR A IN) law, which seeks to grant tax amnesty. At a hearing of the House Committee on Ways and Means, Angelica Sanchez, director for Policy Development of the League of Provinces of the Philippines, said the Local Government Code of 1991 and the 1987 Constitution already vested in local governments the power to impose local taxes. Local business tax amnesty and real property tax amnesty are part of Part B of Package 2 of the TRAIN, which seeks to grant amnesty on all unpaid internal revenue taxes while relaxing the bank secrecy law.

Under the bill, a Real Property Tax (RPT) Amnesty is granted to the following real property taxpayers as of December 31, 2017 and prior years: those who have undeclared real properties (40 percent of basic RPT); those who have unsettled real property taxes (50 percent of basic RPT); and those whose real properties are subject of public auctions by the local government units (60 percent of basic RPT). Also, the bill provides that any person may avail himself/herself of the Local Business Tax Amnesty granted under this proposal by filing with the appropriate LGU an application for the LBT Amnesty in accordance with the form prescribed by the IRR of this bill. Continued on A4

n japan 0.4815 n UK 68.0730 n HK 6.7912 n CHINA 7.7369 n singapore 38.7518 n australia 38.7435 n EU 60.8233 n SAUDI arabia 14.2144

Source: BSP (14 August 2018 )

News

BusinessMirror

A2 Wednesday, August 15, 2018

BOC, PDEA clash anew: Did seized lifters bear shabu trace?

T

By Jovee Marie N. dela Cruz

@joveemarie

HE Bureau of Customs (BOC) on Tuesday said the four magnetic lifters reported to have been used to conceal an estimated P6.8 billion worth of methamphetamine hydrochloride had tested negative for illegal drugs, the Philippine Drug Enforcement Agency (PDEA) maintained that the equipment had traces of shabu. At a hearing of the House Committee on Dangerous Drugs on the shabu smuggling in the country, Customs Commissioner Isidro S. Lapeña said the bureau, together with the Philippine National Police and PDEA, had conducted a swab testing for the presence of illegal drugs on the magnetic lifters, which yielded a negative result for the presence of illegal drugs. Lapeña said the allegation that illegal drugs are now circulating in the streets has no basis. “The four pieces of magnetic lifters, including the aluminum foils in the area, were swabbed and examined for [the] possible presence of shabu, but this yielded negative result for the pres-

ence of dangerous drugs,” Lapeña told lawmakers. “As government authorities, we have to be prudent in providing unverified information to the general public to allay further fear or confusion,” he added, apparently referring to remarks by the PDEA that because the shabu had been sneaked out under Customs’s very nose, so many kilos of shabu are now in the streets. Lapena insisted the shipment was tagged red, had been x-rayed and no derogatory information about it has been found. On August 10 PDEA Director General Aaron N. Aquino said that about 1 ton of shabu from Taiwan worth around P6.8 billion slipped

“As government authorities, we have to be prudent in providing unverified information to the general public to allay further fear or confusion.”—Lapeña

past the BOC and other law-enforcement authorities and could already be circulating around the country. Four magnetic lifters with traces of the illegal drug were discovered by anti-drug authorities at a warehouse in General Mariano Alvarez, Cavite, he said. Earlier last week, P4.3 billion worth of smuggled shabu was also seized at the Port of Manila.

Circumstantial evidence

Meanwhile, PDEA Deputy Director General Ruel Lasala maintained the claim of his agency that the lifters contained illegal drugs based on circumstantial evidence. “All circumstantial evidence we’ve gathered point [to the fact] that the metallic lifters contained drugs,” Lasala said. For his part, Surigao del Norte Rep. Robert Ace S.Barbers, chairman of the dangerous drugs committee, said while the BOC has started the cleansing process “the recent events show that no matter how serious we are, some unscrupulous individuals continue to undermine our efforts.” “I do not believe that the in-

cident happened w ithout the knowledge of and connivance with some corrupt bureau personnel. I hope too that this is not an offshoot of a misunderstanding between BOC and PDEA, if ever there is one, but I hope there is none,” said Barbers.

Pre-shipment checks

Meanwhile, Buhay Rep. Lito Atienza said only the compulsory pre-shipment inspection of imports at their country of origin can put an end to the large-scale smuggling of illegal drugs through the Manila International Container Terminal (MICT). “We are all for pre-shipment checks on imports. Only crooked traders and their rotten coddlers in government are resisting the procedure,” Atienza said. The PDEA had virtually accused corrupt BOC officials of collusion in the release of the shabu from Taiwan that was allegedly concealed in magnetic lifters used to handle materials, mainly scrap metal. “We’ve thrown everything at the problem of endemic Customs corruption. We’ve offered them rewards. We’ve provided them with all the equipment and technology to detect contraband. We’ve even assigned our toughest retired generals there,” Atienza said. “The BOC is simply beyond repair and redemption. Thus, the only solution left, short of abolishing the bureau altogether, is pre-shipment inspection,” he added.

Migration. . . Continued from A8

and protection of migrants. This was evidently consistent, she said, during the seven rounds of GCM intergovernmental negotiations, where the Philippine delegation made sure —that “proviso by proviso, objective by objective, and even word by word—that human rights and sustainable development are at the heart of the GCM.” “The Philippines has more than four decades of experience and lessons in the deployment of overseas workers —a large number of them household workers, who unfortunately have featured to be the most vulnerable in the group.” She said recent incidents involving Filipino domestic helpers have shed further light on their plight and suffering, “absent adequate protection and implementation of laws designed to ensure their security at their workplaces.” Ambassador Arriola, who revealed in a New York gathering that she once was a migrant worker who became a human rights lawyer, emphasized that the human rights of overseas workers “are not any percentage less than that of any other human being.” “Basic human rights are innate and should be afforded to all, especially those in potentially harmful, abusive, or less-than-conducive environments.” She said the Compact was shaped by experiences of the participating State delegations and by these experiences that“we would further share, and aspire to grow and move forward.” Although the GCM has documented a global migration governance framework, Arriola proposed “to keep it alive and meaningful to migrants.” She said migrants should be informed of what are being done for their welfare, as well as the ever-evolving actions by concerned agencies. “It is now up to the initiatives of States today and tomorrow to keep the wheels of GCM rolling.” She noted the Philippines is home to nearly 10 million Overseas Filipino Workers or OFWs. The Middle East alone has more than two million of them, “who in turn call many of the countries you represent, Excellencies, their second home,” she said, addressing the delegates from various countries.

www.businessmirror.com.ph

Budget. . .

Continued from A1

The Executive, meanwhile, has found an ally in the Senate, which Budget chief Diokno earlier described as at least “friendly” to the cash-based budget. Senate President Tito Sotto III confirmed Tuesday night that senators meeting in caucus agreed to back the cashbased budgeting in the 2019 national budget endorsed by Malacanang. Sotto said Senate subcommittees will resume their task of reviewing the budget bill but will focus on the proposed National Expenditure Program earlier submitted by the Executive. The Senate President, however, allayed concerns that passage of the budget bill will still encounter further delay in the Senate. “Delay? Maybe,” Sotto said, adding: “The ball is with the House of Representatives; we support the Executive’s budget proposal.” Diokno revealed the Department of Budget and Management (DBM) is also looking at the possibility of a re-enacted budget and later on filing a supplemental cash-based budget, sometime in mid2019, before a “friendlier” Congress. Diokno’s dismay over the lawmakers’ stance was echoed by Presidential Spokesman Harry Roque, who decried the “unprecedented” act of the House rejecting outright the President’s budget. “Why should I convince them [House members]? It’s the right thing to do. They should convince themselves,”Diokno said in a phone interview. Diokno added that the congressmen wanted to return the budget to them because the lawmakers wanted a higher budget, noting that 2019 is an election year. He said this intent by Congress to increase the budget was expressed during his meeting with Davao City 1st District Rep. Karlo Nograles, chairman of the House Committee on Appropriations, and Senate Finance Committee Chair Loren Legarda on Tuesday morning. Diokno said it is the congressmen who wanted the increase to happen. The House earlier suspended budget deliberations until further notice in line with its opposition to the cash-based budget system, which lawmakers said resulted in “budget cuts” in key agencies. However, Diokno said, it is “not acceptable” for the Development Budget Coordination Committee (DBCC) and to the President to increase the budget, aside from the fact that the Constitution is very clear that the Congress cannot increase the budget. “They want to increase the budget as submitted by the President, thereby, increasing the deficit above 3.2 percent of Gross Domestic Product,” Diokno, who is also the DBCC chairman, said in a message, noting that the scenario of Congress returning the President’s budget was unprecedented. “They wanted to return the budget so that we will be able to increase the deficit but that has never happened in the entire life of the Republic,” he said.

Neda’s stance Despite the House opposition, the National Economic and Development Authority (Neda) maintained the government is better off using a cash-based budget. In a cable television interview on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia said it would be disadvantageous to government if this year’s budget is re-enacted for next year. Pernia said a reenacted budget “will be more discretionary rather than rulesbased, well, for the President which is not good for Congress. So we should really try to avoid that and so they should just come around and accept cash-based budgeting,” Pernia said. Pernia pinned his hopes on the Senate of the Philippines, which he described as “more friendly” when it comes to cashbased budgeting. Earlier, Pernia said the proposed P3.757-trillion 2019 National Budget is crucial for the government’s Build, Build, Build program. Pernia said he supported the 2019 cash-based budget since Diokno presented it to the economic team.

Credit downgrade Diokno disclosed the International Monetary Fund had told them the country’s deficit next year should be 2.6 percent, but he said they stood firm and stuck to 3.2 percent so as not to constrict the momentum for the Build, Build, Build infrastructure program and government spending money for education, healthcare and social protection. That said, expanding the deficit any further by not adopting a more prudent cash-based budget for 2019 would have adverse results, he added. “We told them (Nograles) it won’t look good because it will have an implication to the international community because

for example, if you increase the deficit to 4 percent then it would look like you have a big deficit, then there will be loss of confidence which may lead to a [credit] downgrade and higher interest rates,” he said. If the Congress is not persuaded to support the proposed 2019 cash-based budget, Diokno said they are preparing as early as now for a re-enacted budget by reviewing the 2018 budget line by line, and identifying which projects will be completed and which will not be completed. But he said that if the budget is reenacted, they will definitely submit or a supplemental budget on the second half of 2019 under a “friendlier Congress.” “We will file definitely [a supplemental budget] if the budget is re-enacted. We will have huge savings and it would be such a waste if we won’t be able to use it so we will file for a supplemental [budget],” he said. Nonetheless, he clarified that this does not mean that the government is already sure that the budget will be re-enacted.

Palace-Congress ties in limbo With the impasse on the proposed budget, Malacañang admitted that the change in leadership “brought in a different kind of relationship” between the Legislative and Executive branches. “Let’s just say, with the budget being rejected by Congress, we don’t know what ties we have with the House now,” Presidential Spokesman Harry L. Roque, Jr. said in a briefing. “How else do you explain, Congress refusing to act on the President’s budget?” He added the House should be the one to explain the sudden outright rejection of the President’s budget. “So I think the President needs an explanation, very clear explanation on why people who may considers as his closest allies have rejected it outright.” Diokno earlier said he doesn’t understand why both houses of Congress changed their minds on cash-based budgeting, which he said is a necessary “revolutionary” shift to fast-track the completion of projects. At the House Appropriations Committee hearing with the DBCC, lawmakers earlier expressed concern over the “slashed budgets”of key agencies and that the proposed 2019 cash-based national budget at P3.757 trillion was P10 billion “lower” than the current P3.767 trillion General Appropriations Act for 2018.

Business leaders worried Philippine business leaders on Tuesday pressed lawmakers to adopt the cash-based budget, as they warned a reenacted appropriation might put government programs at risk. In interviews with the BusinessM irror, business executives said they oppose the possibility of a reenacted budget for next year, as lawmakers are now floating it as imminent. Budget hearings in both the House of Representatives and Senate have been suspended until further notice. “Normally we do not want [it], but worst [case] scenario is what [Budget Secretary Benjamin E.] Diokno said that it is okay, to live with, maybe so. We have no basis to know if a reenacted budget will work, but in principle we do not like a reenacted budget,” said Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., in a mix of English and Filipino. “It is like you budgeted for something, [but] you used it for another. The programs are different, the [target dates of ] completion are different, the continuation [of projects] are different, there might be a leakage,” Ortiz-Luis explained. George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry, asked lawmakers to adopt the P3.757-trillion cash-based budget proposed for next year, rejecting any notion of reenacting the General Appropriations Act (GAA) for 2018. He said legislators have a point in questioning what will happen to contracts whose payments are not immediate under a cash-based scheme. However, Barcelon urged them to consider the administration’s objective in pushing for this budget measure, which he said is to make spending more efficient and targeted. “On the point of the DBM [Department of Budget and Management] the drawdown of our budget at times is less than 20 percent to 25 percent. That is what I think the DBM wants to see: that you accomplish your plans, that you want to have this project and you have this money allocated, you use it,” Barcelon argued. “In my perspective legislators have to look at it [cash-based budget] and be enlightened. They do have valid points, but from the point of Secretary Diokno we want to get things moving and moving as per planned. The money is there. We cannot afford to utilize again the 2018 GAA,” he added.

The Nation BusinessMirror

www.businessmirror.com.ph

Editor: Vittorio V. Vitug • Wednesday, August 15, 2018 A3

Sabir to boost PHL’s maritime surveillance, monitoring capability

T

By Rene Acosta

@reneacostaBM

he Armed Forces of the Philippines (AFP) has further reinforced its monitoring capability by acquiring a Special Airborne Mission Installation and Response (Sabir) system from the United States that can be used for both military and civilian missions.

The system, which will be used primarily by the Air Force, was turned over to military officials at the Villamor Air Base on Tuesday, and is seen to lessen the country’s reliance on its allies of its overall monitoring of its maritime territory.

Defense Secretary Delfin N. Lorenzana, who graced the event along with US Ambassador to the Philippines Sung Kim, said the Sabir will be used to patrol the West Philippine Sea, the East Philippine Sea, the Philippine Rise and Sulu Sea.

“This is actually what I was telling you a while ago about the gap in our surveillance capabilities, so now we have it,” Lorenzana told reporters of the system, which can be fitted, especially onboard a C-130 aircraft. “Also, we can use this for surveying devastated areas by typhoons, before and after, so that we can assess the damages,” the defense secretary added. Lorenzana said the system, which is primarily designed for intelligence, surveillance and reconnaissance (ISR) operations, would complement the other assets that have already been acquired, especially from the US. “I don’t know if we will get some more of this, but this, I think, we only use this once in a while, maybe it’s not every day…because we have other assets like the drones, we have the caravan Cessna also and then we have the TC-90 of the Navy. Once

they have this equipment, then they can use for ISR,” he said. On the other hand, Kim said the new asset of the Armed Force should beef up both its internal security and territorial defense operations. “This is a very important development in improving the capability of the Philippine Air Force obviously in the maritime domain. This is a critical asset, but I think, it will also help in terms of counterterrorism, border patrols. So many different ways and, of course, maritime assistance, as well. So we are very proud to make this contribution to

the Philippine Air Force,” he said. Kim said the turnover of the system is part of the continuing effort of the US in helping the country modernize its military “in all sense,” including in the area of ISR. “There’s a critical need for good information always and so to be able to provide equipment like the Sabir is a very positive development,” he said. Lorenzana disclosed plans by the military to acquire more C-130 aircraft, with one of the planes solely dedicated to ISR operations with Sabir system. Meanwhile, Lorenzana refused

This is a very important development in improving the capability of the Philippine Air Force obviously in the maritime domain. This is a critical asset, but I think, it will also help in terms of counterterrorism, border patrols. So many different ways, and, of course, maritime assistance, as well. So we are very proud to make this contribution to the Philippine Air Force.”—Kim

Pampanga to reap benefit with HNP political alliance By Ashley Manabat Correspondent

T

he alliance of Hugpong ng Pagbabago (HNP) and Kambilan, the dominant political party of Pampanga, will serve the best interest of the province. This is the reason Pampanga leaders formed an alliance with the HNP, Pampanga Gov. Lilia G. Pineda stated during the signing of the agreement of alliance with the HNP on Monday in Parañaque City. “We are joining the alliance because we believe in the [unity] advocacy of HNP,” the lady governor said, adding that Pampanga, likewise, fully supports President Duterte’s program and leadership, notably with the approach of the forthcoming 2019 midterm polls. Pineda, likewise, lauded Duterte’s push for the creation of a department dedicated to disaster response and preparedness. Pampanga, being a disaster-prone province, stand to benefit from the proposal like the rest of the country, she said. “We need in Pampanga the disaster department that is being pushed by President Duterte, and this will benefit our country and the Filipinos,” she said. On Thursday the regional political party of Davao City Mayor Sara Z. Duterte signed an agreement of alliances with nine political parties. Three of the parties are major national political parties—the Nacionalista Party (NP) represented by Sen. Cynthia A. Villar and Ilocos Norte Gov. Imee Marcos, the National Unity Party (NUP) represented by Rep. Fredenil Castro and the Nationalist People’s Coalition (NPC) represented by former Rep. Mark Llandro L. Mendoza. The six local parties were Kambilan, the dominant political party in Pampanga, Serbisyo sa Bayan Party (SBP) of the National Capital Region, Alyansa Bol-anon Alang sa Kausaban of Bohol, Aggrupation of Party for Progress of Zamboanga del Norte, Ilocano Timpuyog or Nacionalista PartyIlocos Norte chapter, and the PaDayon Pilipino of Misamis Oriental. Led by Pineda, almost all local officials of Pampanga, including the mayors, except for a few, were pres-

ent during the event at The Blue Leaf Filipinas, City of Dreams despite the inclement weather last Monday. “We are also forming an alliance because we believe in the advocacy of HNP,” Pineda added. Pampanga Mayors’ League (PML) President Lubao Mayor Mylyn P. Cayabyab also expressed her support to the HNP and to President Duterte. This is our support to the programs of our President by this alliance with this party,” said the PML president. Marcos, for her part, said: “We are joining this because we believe that only President Duterte is capable of doing a big change in our country.” She also said the NP supports the federalism push of Duterte because “we see that the monolithic, hierarchical Metro Manila-based parties simply no longer have the clout or even the say so in many of the electoral contest… we have a more democratize, more millennial sort of organization, much more flattened out with each of the regions and provinces speaking for themselves,” Marcos stressed. For her part, Villar said the NP was the first party in forming alliance with President Duterte, as she underscored the importance in pursuing the programs under his leadership. Most of the local officials stayed until the end of the event, even if some of the Pampanga mayors had to rush back to their respective municipalities to deal with the flooding in their respective towns. Davao del Norte Gov. Anthony G. del Rosario, HNP secretary-general, said they formed the alliance primarily “to ensure support for President Duterte” and his programs, as well as support for eight HNP senatorial candidates in the coming midterm elections in 2019, among them Villar and Marcos. Del Rosario, however, refused to name the other candidates, saying they are still finalizing the list of senatorial candidates. Aside from Mayor Duterte and del Rosario, HNP stalwarts Gov. Claude P. Bautista of Davao Occidental, Gov. Nelson L. Dayanghirang of Davao Oriental and Gov. Jayvee Tyron L. Uy of Compostela Valley were also present during the event.

‘Land grabbers’ invade luxury Angeles City golf course, resort

A

Net check

A worker for an Internet service provider climbs a post to undertake repair and maintenance work on a fiber-optic box affected by weekend’s incessant rains and strong winds in Makati City. ALYSA SALEN

Group bewails govt failure to implement law vs commercial fishing in municipal waters By Jonathan L. Mayuga @jonlmayuga

A

nongovernment organization underscored on Tuesday the need to strictly enforce vessel monitoring mandated by the amended fisheries code to deter illegal commercial fishing activities in municipal waters. In a news statement, Liza Osorio of the Philippine Earth Justice Center said commercial fishing in municipal waters remains prevalent nationwide. The 15-kilometer municipal fishing grounds from the shoreline is exclusive for small fishers. Commercial fishing activities in these areas are banned under the law. She said the sheer size of coastal waters needed to be monitored by police and coast guard personnel, including local “Bantay-Dagat” patrols, made it impossible to monitor and stop illegal commercial fishing in municipal waters.

She said the only way to systematically and effectively do this is through the implementation of the vessel monitoring mechanism (VMM) under the Amended Fisheries Code. The provision of the law on VMM should have been implemented two years ago. The implementing rules and reg u lations of Republic Act 10654—amending RA 8550, or the Philippine Fisheries Code of 1998—signed on September 22, 2015, requires that VMM vessel monitoring technology be installed in all commercial fishing vessels of 3.1 gross tons and above. Under the Implementing regulations, and within one year from its effectivity, the Department of Agriculture-Bureau of Fisheries and Aquatic Resources an shall determine the appropriate vessel monitoring technology and the corresponding schedule to cover the vessels from 3.1 to 30 gross tonnage, upon consultation with stakeholders.

“Two years have passed, and we are still awaiting a policy or a circular from BFAR on the aforesaid rules,” said Osorio. A good example of commercial fishermen depriving their smalltime fishmen of their daily catch and livelihood in municipal waters is at the Tañon Strait, between Cebu and Negros islands. The Tañon Strait, which forms part of the Tañon Strait Protected Seascape, is supposed to be for the exclusive use of municipal fishermen, but commercial fishing vessels continue to raid this rich fishing ground. A total of 35 small fishermen associations belonging to the Tañon Strait Fisherfolks Federation recently urged BFAR Region 7 (Central Visayas) Director Nilo Katada to speed up the crafting and promulgation of the rules requiring all commercial vessels transiting and docking in Tañon Strait to install appropriate VMM device as required by RA 10654.

Water turbidity triggers service interruption in Metro Manila–Maynilad

‘D

irty’ water flowing out of the tap lately? Maynilad Water Services Inc. (Maynilad) on Tuesday explained that is because of the significant increase in the turbidity of the raw water coming from the Ipo Dam due to strong rains brought about by heavy southwest monsoon rains. Turbidity refers to increased sediment concentrations in raw water. The private water company for the

West Zone advises its customers to expect water service interruptions as it addresses the problem. Because of the increased turbidity, Maynilad announced that it was constrained to reduce the production of the La Mesa Treatment Plants, Maynilad said in public advisory emailed to the media. “Reducing our production will enable us to remove increased sediments from the raw water during

to confirm the report aired by British television BBC that the Chinese military stationed in the disputed South China Sea challenged the aircraft that also bear its crew. “We don’t know that, we don’t know if that is really true, we will get the transcript really to understand it because we don’t have [the official military report]. All we get is this BBC report, so we don’t give that too much credence actually,” he said. At the same time, the defense chief said the government will go ahead in constructing the beaching ramp in Pagasa Island this December, justifying that the ramp is needed in order to repair a facility in the island. “We need the beaching ramp because without that, we cannot bring in equipment, we cannot bring in the bulldozers, the graders, plus the materials to rebuild the runway,” he said.

treatment before the release of potable water to the distribution system. Because of this, some of our customers currently have low pressure to no water supply, and we are now deploying mobile water tankers to deliver potable water to these areas,” Maynilad said. Maynilad’s water production will be maintained at reduced levels because rains over the Ipo watershed continue to stir up sediments in the

raw water of the dam. “In our efforts to optimize the limited supply, we are constrained to implement service interruptions daily, until such time as the turbidity situation improves. Affected areas include some barangays in Bulacan, Caloocan, Malabon, Navotas, Valenzuela, Quezon City, Manila, Pasay, Parañaque, Las Piñas, Muntinlupa and Cavite,” the company said. The specific areas that may be

affected (as well as the duration of the service interruptions per area) will vary on a daily basis, depending on the level of turbidity in the raw water coming from Ipo Dam. Hence, all Maynilad customers in these areas are advised to store water when supply is available. “We will provide specific ‘water service availability’ schedule this afternoon. Updates will be provided regularly,” Maynilad said. Jonathan L. Mayuga

NGELES CITY—They arrived onboard a jeepney and a pickup truck and laid out a picnic blanket on the grass before plowing the field with a tractor and other farm implements. This could very well be a typical scene in some remote location somewhere in Central Luzon on a drizzling midday Thursday. But this is inside the sprawling and modern, championship golf course of the Royal Garden Golf and Country Club along the Clark Circumferential Road in Barangay Cutcut here. The men bore armed shovels and sickles as they plowed the empty field next to golf greens, mansions, resort, hotels, chapels, a clubhouse, a privately owned satellite communications radar, restaurants, including the popular convention center Grand Palazzo Royale and Ciocolo Coffee Shop. The men and women refused to make a comment or say anything other than: “Sabyan mu kang Apung Perto mikit-ikit naka mi keng DAR. [Tell Mr. Perto that we will just see each other at the DAR office],” apparently referring to the Department of Agrarian Reform. One of the men started sowing mongo seeds as soon as the land was plowed by the tractor, unmindful of this reporter who wanted to know what’s going on. Businessman Ruperto Cruz, owner of the 140-hectare property, described them as agaw-lupa, or land grabbers,” or just plain extortionists. The landowner said he has every document to prove that his property was acquired legally, including transfer certificate of titles, environmental clearance certificate, a DAR conversion, mayor’s permit and a business permit, among others. Cruz said he even has a favorable court resolution, which he secured after 18 years of litigation with some of the claimants. Cruz showed this reporter how they invaded the property by destroying the perimeter fence near hole number 12 on the golf course. A security guard of the subdivision said they came in through another area south of the perimeter fence of the subdivision which they also tore down. Policemen from the nearby Cuayan Police Station responded to the call, but were told by the invaders that it is beyond their jurisdiction since the area is considered part of neighboring Porac town. The police quickly coordinated with their counterparts in Porac, who monitored the incident and put it in the blotter. Ashley Manabat

A4 Wednesday, August 15, 2018 • Editor: Vittorio V. Vitug

Economy BusinessMirror

DOE, petro firms disagree on Euro 2 diesel fuel revival

T

By Lenie Lectura

@llectura

he reintroduction of Euro 2 diesel fuel at the pump is going to be a potential logistics nightmare for oil companies.

The Department of Energ y (DOE) has issued a memorandum order (MO) requiring oil companies to provide Euro 2 compliant automotive diesel oil to help reduce fuel prices. 
 Oil firms and other sectors, however, said the order runs counter to the Clean Air Act, which mandate the sale of Euro 4 fuels for passenger and commercial vehicles in the country starting 2017. “Pursuant to existing Philippine National Standards on Diesel Fuel Quality and in accordance with the provisions of Republic Act 8479, otherwise known as the Downstream Oil Deregulation Law, Republic Act 8749, otherwise known as the Philippine Clean Air Act and for the purpose of reducing the impact of rising petroleum prices in the world market, all industry players are hereby directed to provide at the retail level Euro 2-compliant automotive diesel oil as a fuel option for the transport and industrial customers,” the MO stated. 
 The Independent Philippine Petroleum Companies Association (IPPCA) said the reintroduction is “a big setback” in the quest for cleaner air as prescribed in the Clean Air Act, because this means going back to fuel with 10 times sulphur (500 ppm) vs the much cleaner, or 90-percent less

sulphur Euro 4 with only 50 ppm. “The announcement directing oil companies to make available again the 20-year Euro 2 compliant diesel caught us by surprise,” said IPPCA President Bong Suntay in a text message. “It will be a logistical nightmare for oil companies to make it available, as additional underground tanks will have to be constructed at retail outlets as we cannot co-mingle Euro 2 with Euro 4. It would also mean changing the fuel dispensers in the station in order to be able to accommodate Euro 2 diesel,” Suntay added. IPPCA has at least 16 members composed of the country’s leading independent oil players such as Eastern Petroleum Corp., Unioil Petroleum Philippines Inc., Seaoil Philippines, Flying V, City Oil, Pryce Gases and LPGMA, among others. The DOE, for its part, said higher sulphur content does not necessarily mean Euro 2 is dirtier than Euro 4, which has a lower sulphur content. “It doesn’t follow the Euro 2 is more pollutant than Euro 4.… The sulphur is not part of the emission

standard,” said DOE Undersecretary Felix William Fuentebella at a news conference on Tuesday afternoon. On logistics concern raised by IPCCA, Fuentebella said oil firms should come up with a strategy to address this. “That’s the good thing about competition. If they only have one tank for Euro 2 then they have to put up another tank for Euro 2. That’s where logistics competition will come into play. They should provide an option, otherwise motorists will gas up to a nearby competitor.” Based on studies, Fuentebella said the price difference between Euro 4 to Euro 2 is about P0.28 to P0.30 per liter. The DOE expects all oil firms to comply even if the memorandum order does not spell out the penalties for violators. He added that one oil company has committed to abide by the MO of the agency. Fuentebella did not reveal which oil firm will start selling Euro 2 diesel soon. “There’s no penalty. What we’re saying is if you don’t expand your menu, then consumers will not line up to buy from you. We are contributing as a sector on how best to address inflation…. From the point of view of consumers, P0.28 to P0.30 per liter is not negligible,” he added. Instead of reintroducing Euro 2 diesel, which may not be made available due to logistical concerns and minimal price reduction, IPPCA suggested the suspension of the implementation of the Biofuels law.

The announcement directing oil companies to make available again the 20-year Euro 2compliant diesel caught us by surprise. It will be a logistical nightmare for oil companies to make it available…”—Suntay

“This will be more effective, particularly the 10-percent ethanol blend on gasoline. With the Euro 4 standard already in effect, which is 10 times cleaner than Euro 2 standard, the use of ethanol and even biodiesel is no longer needed in achieving cleaner emissions from both gasoline and diesel,” Suntay said. Recent spikes and scarcity of table sugar can also be traced to the use of the same raw materials. “Sugar cane in ethanol production, which is given higher priority due to its mandatory blending to 10 percent of all gasoline products, commanding higher prices, but more expensive by as much as P4 for locally produced ethanol versus price of imported gasoline,” he added. Further, IPPCA said there is not much difference in international price between Euro 2 and Euro 4 diesel as refineries have also upgraded and shifted production to Euro 4 and 5 diesel. “Such upgrades in the refineries and lower demand from other countries had made Euro 2 diesel less available in the international market,” the group said.
 “It is also important to note that according to international traders, no country in the world who progressed to higher grade ever reverted back to lower grade,” IPPCA said. Laban Konsyumer Inc. is also opposed to the DOE order. “LKI does not agree on the Euro 2 directive. The DOE is more than two quarters delayed and sitting on the unbundling of prices of fuel products. That’s the fundamental and basic action to do. Consumers can know when prices are justified,” said LKI President Victor Dimagiba in a text message.

PHL has to ‘work harder’ to reach year-end GDP target–DOF exec By Rea Cu

A

@ReaCuBM

Department of Finance (DOF) official on Tuesday said the country has to ramp up capital formation or investment efforts by about 30 percent to 40 percent to be able to meet its gross domestic product (GDP) target of 7 percent to 8 percent by the end of the year. DOF Undersecretary Gil S. Beltran told financial reporters that investments for the second quarter of this year grew to 20.7 percent, coming from 12.4 percent in the first quarter, and also higher compared to the 7.6 percent recorded in the second quarter of 2017.

“We have to push capital formation further because during those years that we achieved a 7.7 [-percent] to 7.8-percent growth, we had a 30 [-percent] to 40-percent increase in capital formation. Right now, we are about 20 percent, so we will need to work harder,” Beltran, also the DOF’s chief economist, said. He further explained that the 30-percent to 40-percent growth can be met when both the private sector and the government strengthen their efforts in capital formation for the rest of the year. “It’s both public and private, but this time around the government is doing a lot,” Beltran pointed out.

Under investments, construction reached 12.9 percent in the second quarter of this year, which expanded compared to the first- quarter figure of 10 percent and last year’s 4.7 percent. Private investments for the same period reached 7.9-percent coming from 6.7 percent in the first quarter, and from 0.6 percent in the second quarter of 2017. Meanwhile, public investments for the second quarter contracted to 21 percent, from 24 percent in the first quarter, but posted higher compared to the 12.2 percent recorded in the second quarter of 2017. Last week the country registered

a GDP of 6 percent for the second quarter of the year, lower than the 6.6 percent recorded in the first quarter of the year, as well as that of the 6.7 percent recorded in second quarter of 2017, based on data from the Philippine Statistics Authority. The DOF pointed out that the economy took a breather in the second quarter as real GDP growth decelerated to 6 percent, from 6.6 percent in the first quarter, with the main drivers for the contraction being a slowdown in manufacturing to 5.6 percent, from 7.6 percent in the first quarter; as well as in agriculture to 0.2 percent, from 1.1 percent in the first quarter.

LGUs buck tax amnesty, decry intrusion on powers continued from a1 It added any business entity may enjoy the immunities and privileges of the LBT Amnesty under the proposal, upon the payment of LBT Amnesty tax at the rate of 40 percent of the basic local business tax due: Provided, that those with pending cases for unpaid, undeclared and under protest local business tax shall be subject to an amnesty rate of 50 percent. All the incremental revenues from these Real Property Tax and Local Business Tax would still go to LGUs. “We do really apologize that we cannot support these portions [parts of Part B of TRAIN law] especially as we have to go back to RA 7160 or the Local Government Code particularly section 132 on local taxing authority,” Sanchez told lawmakers. Under Section 132 of the Local Government Code, the power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the sanggunian of the local government unit concerned through an appropriate ordinance. “I do not think imposing a local tax amnesty would really answer the question. The problem of LGUs is that we only have one basic local tax and that’s the real-estate tax and what we are collecting from real-estate tax is not really that large, but that’s a dif-

ferent story,” Sanchez added. Nonetheless, she said the League of Provinces will keep its mind open and will study the proposal further. For his part, Iloilo Rep. Arthur D. Defensor Jr. noted that Congress has the power to amend the Local Government Code anytime. Meanwhile, House Committee on Ways and Means Chairman Dakila Carlo E. Cua of Quirino said the committee will conduct more consultations with local government officials. “We are offering our helping hand to help them administratively because if there are [account receivables that are piling up], this is one way of cleaning it up, so if they welcome the ideas we will proceed,” he said in an interview. “During our consultations with taxpayers, they said they welcome the idea of tax amnesty for local business and real-property taxes, so we are attempting to consider it. But we cannot do this unilaterally,” he added. While he respects the LGUs, Cua said the taxing power of the LGU is a devolved power from the state. “We’re not trying to encroach on their power but we are trying to see if there are workable solutions that may be beneficial both to the LGUs and the taxpayers. [And

under the bill] all the incremental revenues will go back to the LGUs,” he added.

Part B

Meanwhile, “Part B” will grant amnesty on all unpaid internal revenue taxes imposed by the national government for taxable year 2017 and prior years. According to Cua, this measure is needed as the Philippines has experienced poor tax collections in previous years. He said the proposal was designed to combat corruption, simplify taxation and improve tax collection. Aside from giving the government flexibility in collecting taxes and immediate revenues, Cua said the bill also seeks to expand the taxpayer base. Whether disputed and uncollected taxes are caused by erroneous assessment or by the fault of the taxpayer, the lawmaker said it is time to move forward, and provide taxpayers the opportunity to be responsible by offering them a clean slate. Finance Secretary Carlos G. Dominguez III has said the amnesty package covers two-thirds of what the government proposed under the first package of its Comprehensive Tax Reform Program (CTRP) of the Duterte administration. Jovee Marie N. dela Cruz

www.businessmirror.com.ph

Neda chief: Rush to federalism will disrupt growth momentum By Cai U. Ordinario

@cuo_bm

A

shift to federalism could derail the Duterte administration’s infrastructure projects and disrupt the Philippine economy’s growth momentum, according to the National Economic and Development Authority (Neda). In a televised interview on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia said the country can’t afford to rush into adopting a federal form of government. Pernia said shifting to a federal form of government will affect the government’s “Build, Build, Build” (BBB) program. Many of these projects can be completed under the current presidential form of government by the time President Duterte steps down from office. “We [the economic managers], including myself, do not oppose federalism. It may well be the ‘Holy Grail’ that we are aspiring for,” Pernia said. “But, you know, going to the Holy Grail takes time. You cannot rush your approach to the Holy Grail because you need to make a lot of preparations, and that’s essentially what we’re saying,” he added. Pernia said around 32 of the 75 flagship projects are already on track to be completed by 2022. Many of these projects are regionspecific or seek to promote interregional connectivity. Once completed, these projects will place regions and provinces at a better position to benefit from the gains that federalism offers. If there is a shift in the form of government, these projects may be negatively affected and not delivered on time. These are “economic externalties” that increase the financial costs of federalism. “If we complete our Build, Build, Build program, many of these regions will have been addressed in terms of infrastructure deficit, in terms of human capital deficit,” Pernia said. “These are the things we should do first, this is all we’re saying, and then we would be better prepared for federalism,” he added. Based on the initial estimate of the Neda, Pernia earlier said federalism will cost around P120 billion. But, Pernia said, this is a preliminary estimate and did not include the economic costs of federalism. Pernia said the financial cost is based on the needed expenditures for a larger number of public officials, particularly the 400

BSP . . . continued from a1

“Financial markets are extraordinarily volatile this year and the FSCC continuous to assess the possible impact to the Philippines of changing macro-financial conditions,” said Espenilla, who also chairs the FSCC. “The challenge is to intervene early enough so that systemic risks do not build up, but not too early that they derail our own growth momentum. We continue to be cognizant of this delicate balance, nurturing innovations and ideas while providing appropriate prudential oversight,” the governor added. As of last week, the Philippine currency is the third worst performer among Asian currencies this year. On Tuesday the peso weakened to 53.39 to a dollar, from the previous day’s 53.37 to a dollar. The total traded volume on Tuesday is slightly lower at $693 million, from the $786.4 million seen in the previous day, data from the Bankers Association of the Philippines (BAP) showed. Compared to last year, the peso averaged at 50.875 to a dollar in August 2017, about P3 weaker from its current level. Latest data from the BSP showed the country’s dollar reserves are already taking a hit due to the BSP’s foreign-exchange operations. Just last week, the Central Bank reported that the Philippines’s gross international reserves (GIR) slipped to $76.89 billion in July. The July GIR is lower than the $77.53 bil-

“We [the economic managers], including myself, do not oppose federalism. It may well be the ‘Holy Grail’ that we are aspiring for.” —Pernia

congressmen, 36 senators and hundreds of officials for regional assemblies, as well as courts. He added this will also include the construction of new buildings for this new system of government and more vehicles purchased for service of the different officials of the regional government. “It’s going to cost a lot more,” Pernia said. “[Because] that is just [the] financial cost. We are not even talking about the economic costs in terms of negative externalities on the economy.” Assuming that the draft federal constitution would be voted on today, Pernia said he will not vote in favor of it. Pernia said the draft constitution lacked analysis and basis, especially when it comes to the financial aspect of running the affairs of the government. He said it would help if there was an annex that provided the analysis for the financial and economic provisions in the draft. “The draft lacks analysis and data. It’s not data-driven, it’s not analysis-driven,” Pernia said. “On the financial aspects, on the economic aspects especially, there’s nothing, there’s nothing there. Its really just an assignment of revenue but not the expenditure responsibility, for example.” In July Pernia already said the economic team had a lot of misgivings regarding federalism and said transitioning to a federal form of government in the medium term could disrupt the country’s economic momentum. Pernia said the Neda recommended that the transition to federalism be done in no less than 15 years to ensure that the Philippine economy c a n m a x i m i ze it s g row t h momentum. The Constitutional Commission is proposing a threeyear transition, which will start soon after the new constitution is approved in the 2019 plebiscite.

lion level seen in the previous month and the $81.07 billion seen in July 2017. ING Bank Manila economist Joey Cuyegkeng said the recent action of the BSP—a 50-basis-point hike in its main policy rate— will likely soothe the winds in the foreignexchange market. Cuyegkeng, however, warned that the peso will still come under pressure not just from a widening trade and current account deficit but also from the tightening of other major central banks. “A trade dispute between the US and China could intensify and could open another period of weak emerging market currencies,” the economist added. Aside from financial market intervention, the FSCC also discussed proposals to strengthen long-term finance, enhance valuation practices for market instruments and broaden its communication initiatives in an effort to help sustain Philippine growth and in support of the infrastructure development initiatives of the government. The FSCC Executive Committee is composed of the principals and the most senior officers of the Bangko Sentral ng Pilipinas, the Department of Finance, the Bureau of the Treasury, the Insurance Commission, the Philippine Deposit Insurance Corp. and the Securities and Exchange Commission. Bianca Cuaresma

Editor: Angel R. Calso | www.businessmirror.com.ph

China blasts US military bill as interference in its affairs

B

EIJING—China on Tuesday blasted a US military spending bill that calls for development of plans to help selfruled Taiwan improve its defenses and warned of possible damage to cooperation in other areas. The Taiwan provision in the 2019 military budget authorization “is full of cold war thinking” and “interferes in China’s internal affairs,” said a Ministry of Defense statement. Beijing claims Taiwan, which split with the mainland in 1949, as part of its territory and has threatened to invade. Washington has no official relations with the island’s democratically elected government but is obliged by US law to see that it has the means necessary to defend itself. A separate Foreign Ministry statement called on Washington to “avoid damaging Chinese-US relations and cooperation in important areas.” It gave no details, but the two governments are working together on efforts to persuade North Korean leader Kim Jong Un to give up nuclearweapons development. The criticism adds to a series of US-Chinese conflicts over tariffs, Beijing’s claims to the South China Sea and other irritants that have soured relations between governments of the world’s two biggest economies. American lawmakers said the legislation signed Monday by President Donald J. Trump responds to concern about Beijing’s growing military strength and confrontational stance toward its neighbors. The measure also expands the jurisdiction of a US government security panel to screen foreign investments. That was proposed in response to concern Chinese corporate acquisitions might help Beijing obtain sensitive technologies and information. The legislation’s Taiwan provision “damages mutual trust” and “ruins the atmosphere” for military cooperation, said the Defense Ministry statement. AP

The World BusinessMirror

A5

Turkey’s collapse sinks emerging markets on new ‘Manic Monday’

T

urkey’s meltdown rippled across emerging markets, sending stocks and currencies to their lowest levels in at least a year. T he l ira led losses a mong global peers after the nation’s first steps to bolster the financial system were seen by some analysts as insufficient to protect markets. As President Recep Tay yip Erdogan lashed out at the United States, took higher rates off the table and said he wouldn’t accept an international bailout, traders pushed down Turkish assets in a selloff that spilled over to other developing countries. The rand ’s onemonth implied volatility soared by the most since December 2015, while the Argentine peso touched 30 per dollar.

“It’s another Manic Monday,” said Jordan Rochester, a currency strategist at Nomura International in London. “We go through the list of options they have to stop this: it involves rate hikes, getting the International Monetar y Fund involved and restor i ng m a rket conf idence in the lira. Unfortunately, all the components are going the other way.” Fear that the Turkish meltdow n w ill keep punishing emerging markets resurfaced on Monday as traders also grappled with tensions between the US and major economies, such as

Russia and China. Still, many analysts say there are few fundamental reasons to add the whole developing world to the same basket, as several countries have done their homework. That means: while the stress in Turkey may continue, its correlation to the rest of the asset class may decline soon. “EM has already seen a large selloff between April to July, and negative developments in Turkey will eventually be seen [along with Argentina] as isolated given their exceptional external imbalances compared to most EM countries,” JPMorgan analysts, including Luis Oganes and Jonny Goulden, wrote in note to clients. In fact, Argentina took emergency steps to stabilize its currency in the wake of an emerging-market rout caused by Turkey’s crisis, jacking up its already highest-in-the-world interest rate by 5 percentage points and out-

lining a plan to eliminate shortterm notes. Regardless of what happens to emerging-market currencies from here, most central banks aren’t likely to respond to the recent bout of weakness as inflation is low in most cases, according to Edward Glossop at Capital Economics in London. “There are a handful of central banks that are more jittery—Mexico, South Africa and Indonesia,” the economist wrote. “If we are right in thinking that currencies will stabilize over the next few weeks, policy-makers in Mexico and South Africa should refrain from raising interest rates at their upcoming meetings. Indonesia is the exception. With its next meeting scheduled for Wednesday, there is little time for the recent bout of turmoil to subside.” Turkey’s market turmoil didn’t just erase a July rebound in emerging-market stocks—it also

made them the cheapest since early-2016, before a two-year, 60-percent rally. At 10.8, the MSCI Emerging Markets Index’s 12-month blended forward priceto-estimated earnings ratio is now also below where it was after a selloff in the second quarter. W hile some analysts say they are happy to nibble at stocks, they aren’t really diving in. Equities in developing markets will likely remain turbulent w ith little sign of stability to lure bargain hunters despite Monday’s selloff, according to UBS Asset Management. “We see building value, but you have no visibility on when that value can be realized,” said Geoffrey Wong, head of global emerging markets and Asia Pacific equities at UBS Asset in Singapore. Investors can be forgiven for feeling wary, “given that we’ve got a 1-2-3-4-5-6 punch, not just a 1-2 punch.” Bloomberg News

Erdogan: Turkey will boycott US electronics A

NKARA, Turkey—Turkish President Recep Tay yip Erdogan says his country will boycott US-made electronic goods amid a diplomatic spat that has helped tr ig ger a Turk ish cur renc y cr isis. Showing no signs of backing down in a standoff with the US, Erdogan suggested that Turkey would stop procuring US-made iPhones and buy South Korean Samsung or Turkish-made Vestel instead. He said: “If they have the iPhone, there is Samsung elsewhere. We have Vestel.” It was unclear how Erdogan intended to enforce the boycott. Erdogan also renewed a call for Turks to convert their dollars into

the Turkish lira, to help strengthen the currency. The Turkish lira has nosedived in value in the past week over concerns about Erdogan’s economic policies and after the United States slapped sanctions on Turkey, angered by the continued detention of an American pastor. Turkey’s influential business groups have called on the government to implement tighter monetary policy to help overcome the country’s currency crisis. In a joint statement issued on Tuesday, the industr ia lists’ group TUSI A D and the Union o f C h a m b e r s a n d C o m mo d it y Exchanges a lso ca l led for diplomatic effor ts to resolve a

Turkey’s President Recep Tayyip Erdogan gestures as he delivers a speech to Turkish ambassadors at the Presidential Palace in Turkey on Monday. Erdogan says his country is under an economic “siege” that has nothing to do with its economic indicators. He insisted that Turkey’s economic dynamic remains strong and said the Turkish currency would soon settle “at the most reasonable level.” Pool Photo via AP

Car crash outside parliament in London treated as terrorism

L

ONDON—A car crashed into pedestrians and cyclists near the Houses of Parliament in London Tuesday and police arrested a man on suspicion of terrorism, heightening tensions in a city that has seen a string of vehicle-based terror attacks. Two people were taken to local hospitals, but authorities said the injuries aren’t believed to be life threatening. Armed police swooped into the area after the incident was reported at 7:37 a.m., arresting the car driver and cordoning off streets surrounding the heart of Britain’s government. The nearby Westminster subway station was closed, and police asked people to stay away from the area. “At this stage, we are treating this as a terrorist incident, and the [Metropolitan Police] Counter Terrorism Command is now leading the investigation,” the police said in a statement. A man in his late 20s was arrested at the scene on suspicion of terrorist offenses, police said. Images from Sky News and social media showed a man in a puffy black jacket who was surrounded by officers before being handcuffed and led away from a silver car. Eyewitnesses said the car was traveling at high speed when it hit several pedestrians and cyclists, then crashed into barriers outside the Houses of Parliament. Several suggested the incident was deliberate.

Wednesday, August 15, 2018

Beijing appeals to Washington for fairness under investment law

B

A police officer stands in front of a car that crashed into security barriers outside the Houses of Parliament to the right of a bus in London on Tuesday. London police say that a car has crashed into barriers outside the Houses of Parliament and that there are a number of injured pedestrians. AP/Alastair Grant

“ The car drove at speed into the barriers outside the House of Lords. There was a loud bang from the collision and a bit of smoke,” Ewelina Ochab told The Associated Press. “ The driver d id not get out. T he g u a rds started screaming to people to move away.” Jason Williams also saw a car moving at high speed. “It didn’t look like an accident,”

he said. “How do you do that by accident?” The same area was the site of a terror attack in March 2017, when Khalid Masood ploughed a car into crowds on Westminster Bridge, killing four people. Masood abandoned his car and then stabbed and killed a police officer before being shot dead in a courtyard outside Parliament. Less than three months later,

a van rammed into pedestrians on London Bridge before three men abandoned the vehicle and attacked weekend revelers in the nearby Borough Market. Eight people were killed and 48 injured in the attack. On June 19, 2017, a man drove a van into a crowd of worshippers leaving a mosque in north London, killing one man and injuring eight others. AP

spat w ith the US and improve rel at ions w it h t he Europea n Union, which is Turkey’s major trading par tner. The business groups also urged the drawing up of a road map to reduce inflation. The Turkish lira has nosedived against the dollar and other currencies in the past week, sparked by concerns over President Erdogan’s economic policies and a dispute with the US over the detention of an American pastor, who is on trial on espionage and terror-related charges. The state-run Anadolu Agenc y said the finance chief wou ld add ress hund red s of foreig n investors on T hursday. AP

EIJING—China appealed to Washington on Tuesday not to misuse security concerns to hamper business activity after President Donald J. Trump signed a law that expands the jurisdiction of an investment review panel. The law signed on Monday by Trump expands the authority of a government security panel to scrutinize foreign investments. It was prompted by complaints Chinese companies were taking advantage of gaps in US law and improperly obtaining technology and possibly sensitive information. “The United States should treat Chinese investors objectively and fairly and avoid making a national security review an obstacle to Chinese-US enterprises’ investment cooperation,” said a Commerce Ministry statement. Other governments, including Germany and Britain, also are uneasy about rising Chinese investment, the communist Beijing government’s behind-the-scenes role and acquisitions of technology that might have militar y uses or is seen as an important economic asset. The US security panel, known as CFIUS, reviews foreign acquisitions of American assets for possible security threats. Critics say legislation governing its powers, last updated a decade ago, was antiquated and failed to take into account tactics used by some Chinese companies.

The legislation signed by Trump expands CFIUS jurisdiction to cover entities that might own a minority stake in a company that makes a purchase. It also gives CFIUS authority to prevent loss of sensitive personal information. The legislation also gives CFIUS authority to initiate its own investigations instead of waiting for a buyer to seek approval. Lawmakers who proposed the legislation last year expressed concern that Chinese companies were using joint ventures with foreign companies or minority stakes in ventures to gain access to sensitive technology. Last month a proposed Chinese purchase of a German power company was blocked when a stateowned utility bought the company instead. German news reports said Berlin also planned to block a Chinese acquisition of an engineering company, but authorities said later that bid was withdrawn. Also last month, Britain’s government announced a proposal to expand its powers to block foreign acquisitions that pose security concerns. It would apply to deals in which a foreign buyer acquires as little as 25 percent of a company. Germany and other governments also complain their companies are barred from buying most Chinese assets at a time when China’s companies are in the midst of a multibillion-dollar global acquisition spree. AP

A6 Wednesday, August 15, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror

www.businessmirror.com.ph

editorial

Flip-flopping is killing PHL’s ‘whipping boy’

P

rior to 2008, the Philippines had little difficulty sourcing food from foreign markets to feed its growing population. This was evident in 1997 and 1998, when El Niño destroyed rice crops in many areas nationwide. The government effortlessly imported 2.2 million metric tons (MMT) of rice needed to meet national requirements. The country’s membership in the World Trade Organization (WTO) opened the eyes of the Philippine government to many possibilities regarding its food sources. The lowering of tariffs and reduction of other trade barriers made it easier for the country to just import its food requirements. The Philippines acceded to the WTO at a time when “climate change” was an alien concept for many bureaucrats. The relative ease with which the country was able to procure its food requirements abroad convinced a number of economists and policy-makers that resorting to imports would be cheaper than pouring money on the farm sector. Developing the sector would require huge resources given its numerous problems: low mechanization rate, farmers’ lack of access to affordable credit, limited number of irrigated farms, decline in productivity, and meager spending on research and development. Addressing these problems required more than lip service. It did not help that politicians wanted to have their cake and eat it, too. This was evident in the government’s rice policy, specifically the quantitative restriction (QR) on the staple. The government heeded the farmers’ clamor to retain the protection on rice for another 12 years. But there was no clear plan in place to help them prepare for the lifting of the import caps and the government continued to import whenever there was a shortfall in domestic production. The ills plaguing the sector reflect the government’s priorities in terms of spending. While the Department of Agriculture’s (DA) budget for 2018 breached P50 billion, the amount was way below the P213 billion it hoped to get. The volatility in the price of commodities, such as rice, in the international market in 2008 forced the government to increase the budget for agriculture in the succeeding years, but the amount given was still far from ideal. This helps explain why growth in the agriculture sector has remained stagnant for many years. The problem is that bureaucrats seem to have turned a blind eye on the fact that the farming sector is no longer an attractive proposition for investors. Just look at the number of banks that are willing to provide loans to farmers. Farming is a risky business in the Philippines, so lenders usually avoid it. This should have given the government the impetus to invest in agriculture and make it more attractive to the private sector. Simply pouring money on agriculture will not eliminate the ills plaguing the sector. Economic managers, including Budget Secretary Benjamin E. Diokno, have already announced that the government wants to encourage the planting of high-value crops. If this is the direction the Duterte administration wants to pursue for the agriculture sector, then it must do it with the same zeal it has exhibited in its war on drugs. Investing in human capital is a worthwhile endeavor but development would not be realized if people don’t have access to affordable food.

Perspectives on international cooperation and governance of migration in all its dimensions Teddy Locsin Jr.

Free fire Continued from A1

M

ember-States commit to support each other through enhanced international cooperation and to take joint action in addressing the challenges to countries attempting to follow the Global Compact. They commit to promote the mutually reinforcing connection between the Global Compact and international and legal policy frameworks by aligning the GCM with them, particularly the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda. The GCM encourages memberstates to improve collaboration in managing borders and in the treatment of people crossing them. It urges member-states to develop

bilateral, regional and multilateral frameworks, including readmission agreements. This is to ensure that the return and readmission of migrants to their own country is safe,

Holding Grab by the horns

Since 2005

BusinessMirror A broader look at today’s business

Atty. Johannes Benjamin R. Bernabe

Competition Matters

✝ Ambassador Antonio L. Cabangon Chua Founder Publisher Editor in Chief Associate Editor News Editor Senior Editors

T. Anthony C. Cabangon Lourdes M. Fernandez Jennifer A. Ng Vittorio V. Vitug Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos Dennis D. Estopace

Online Editor Social Media Editor

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes

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

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

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

www.businessmirror.com.ph

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

G

rab’s acquisition of Uber is a landmark case for the Philippine Competition Commission (PCC). It is the first transaction that the PCC reviewed motu proprio (i.e., on the PCC’s own initiative) and, with the August 10 decision, resulted in a conditional clearance. The conditions form part of a Commitment Decision and are based on a set of voluntary commitments that Grab submitted to address competition concerns raised by the PCC’s Mergers and Acquisitions Office. From where I sit, if not for the voluntary commitments, it is unlikely that the PCC would have cleared Grab’s acquisition. The PCC’s underlying premise for accepting Grab’s offer of commitments is two-pronged: first, to ensure that existing and prospective competitors of Grab in the ridehailing market are afforded a fair and reasonable opportunity to compete and expand their business; and second, to resolve complaints of increased prices, cancellation rates and unaccepted booking requests from the riding public. The first reason pertains to the core mandate of the PCC (i.e., promoting competition), while the second involves the agency’s corollary function of enhancing consumer welfare, particularly

in the face of a virtual monopoly in the ride-haling market. To ensure competition, the PCC, in its Commitment Decision, prohibits Grab from introducing any exclusivity provision in the company’s agreements with drivers and operators that would prevent multi-homing or otherwise result in exclusive affiliation with Grab. This includes the grant of incentives, which will likely have the effect of exclusive membership in or use of the Grab app by drivers or operators. Consumer welfare is addressed by requiring Grab to achieve specific price-related targets and service quality standards. To ensure its pricing behavior is not unreasonably different pre- and post-acquisition, Grab is constrained under the Commitment Decision to keep fares within a price level that does not deviate by more than 22 percentage points from where it was prior to the exit of Uber, using a statistical measure prescribed by the PCC.

The GCM encourages memberstates to improve collaboration in managing borders and in the treatment of people crossing them. It urges member-states to develop bilateral, regional and multilateral frameworks, including readmission agreements. This is to ensure that the return and readmission of migrants to their own country is safe, dignified and in full compliance with international human-rights law, including the rights of the child.

dignified and in full compliance with international human-rights law, including the rights of the child. This is not as abstract as it sounds; the newly minted Soviet Union rendered stateless millions of Russians; hence the creation of Nansen passports, a tremendous success.

Riders are, likewise, entitled to a receipt showing the breakdown of the fare they paid—what pertains to the minimum charge, the distance covered, the surge pricing and the running time (if applicable). Improvements in the quality of service are mandated under the PCC decision by compelling Grab to increase the acceptance rate for bookings requested by riders to 65 percent within the next 12 months. This represents a substantial increase from present acceptance rate levels, which have led to a great deal of frustration among the online ride-hailing public since the Grab-Uber transaction. An additional condition designed to augment acceptance rates is the removal of the “See Destination” feature among Grab drivers. Previously, this feature allowed drivers to discriminate and reject riders who they did not want to service. With the decision, the PCC now prohibits drivers, whose acceptance rates fall below the mandated rates, from seeing the destination of requested bookings. A complementary commitment made by Grab is the reduction of cancellation rates for rides booked and already accepted by its drivers. At the end of 12 months, this rate should be brought down to 5 percent. Further, response time to rider complaints is set at three hours for serious complaints, and six hours for all other complaints. Other commitments made by Grab relating to assistance to and the quality of its drivers, as well as addressing rider concerns, were also adopted by the

Cooperat ion on a l l le ve l s should complement the whole-ofgovernment/whole-of-society approach of the Global Compact. It should be noted that civil society and other stakeholders where consulted in the drafting, not least because civil society is often the first point of contact of migrants in transit and at their destinations—usually for tangible help when they have no one else to turn to, least of all governments hunting them down. This is a lack the GCM hopes to fill. In this panel, we hope to explore innovative ways to strengthen dialogue between origin, transit and destination countries; and enhance the participation of stakeholders in the Global Compact. Panelists are invited to present existing cooperation frameworks and concrete partnerships and initiatives between and among states and stakeholders.

PCC in its decision. All these commitments are valid for 12 months and will be subject to strict quarterly monitoring by the PCC and a designated third-party monitor. If it fails to comply with the foregoing targets or commitments, Grab shall be imposed a fine of up to P2 million. If after 12 months, the conditions for entry and expansion remain unchanged and unfavorable to competitors, the PCC will have to consider whether the commitment period should be extended or to evaluate measures consistent with Grab’s dominant market position. The commitments made by Grab were subject to intense negotiations with the PCC. The conditions may be tough, even difficult to comply with. For instance, fares for a significant portion of routes serviced by Grab drivers breach the deviation thresholds set under the decision. Moreover, the ability of Grab to service booking requests—reflected through acceptance rates—depends on having a sufficient number of drivers and operators, and yet the latter is influenced by Grab’s incentives, which are now subject to monitoring and evaluation by the PCC. No mistake about it, Grab definitely has its work cut out for it. Commissioner Bernabe served as adviser to the Senate and the House of Representatives in the drafting of, and deliberations on the Philippine Competition Act. A lawyer by profession, he was a senior fellow at the Geneva-based International Centre for Trade and Sustainable Development and served as the Philippines’s lead trade negotiator on select issues at the World Trade Organization, also in Geneva, Switzerland.

Opinion BusinessMirror

www.businessmirror.com.ph

Wednesday, August 15, 2018 A7

Tarrify rice, terrify cartels, Profiling global agricultural insurance Due to the government’s but strengthen farmers paramount interest in food Dennis B. Funa

INSURANCE FORUM

Michael Makabenta Alunan

on the contrary

A

s rice eats up a big chunk of a household’s budget due to inflation, importing cheaper rice slapped with tariffs may be the best instant solution to bring down prices and reduce corruption on rice imports. But the government must not stop here. It has to solve bigger problems like neutralizing cartels and helping farmers. On the economic law of comparative advantages, it makes no sense to aim for rice self-sufficiency when Thailand, Vietnam and Myanmar, naturally blest with Mekong River irrigation, can produce rice at P6 to P7/kilo against our P12/kilo production cost. Why produce if it’s cheaper to import? So the logic is to let the free market take over. Unable to produce enough anyway, let’s import cheap rice, but impose tariffs to equalize prices and prevent any import deluge that may dampen local rice prices and kill local producers. What is crucial is setting the right tariffs, given certain volumes and seasons. Free entry, but with countervailing tariffs, allows anyone to import, and will spare the government (i.e, the National Food Authority) of suspicions of corruption as it intervenes either as a direct importer or the grantor of import permits. n Overhaul NFA? Perhaps, it is high time to accept the grain of truth that the NFA is a born loser as it tends to buy high when farm prices are high, stores rice at the risk stocks rotting in its warehouses; then sells low when prices are high. Thus, it has accumulated debts of about P170 billion. On palay procurement, records show that its procurement from 2013 to 2017 was a mere 0.8 percent of total palay production, which is negligible to influence market prices. In fact, in the past year its farm support price of P17/kilo was ridiculously lower than farm prices of P18 to P21/kilo, which means farmers sell better to traders. n Why not entertain rice options. Another viable alternative for the NFA is to develop a financial instrument we can call a “rice option,” which is a form of term insurance with corresponding amounts granted to big farmer organizations and trader-millerwholesalers, contracted to deliver stocks at discounted prices when the NFA needs them for emergency, buffer stock management and price stabilization. The objective is for the NFA to ensure the availability of stocks for sale in the open market, because the slightest inkling people think there is a rice shortage, traders and consumers may start panicking and hoarding, thus triggering a shortage even when stocks are abundant.

n Boost agri by empowering farmers. We often blame nature’s wrath for agriculture’s dismal performance, but with technologies and planning we can minimize the effects of the yearly 21 typhoons. Farmers need to be empowered through cooperatives and equipped with trucks, postharvest facilities funded by long-tem credit. Farmers would want to produce more, which can mean more variety and cheaper prices. Unfortunately, traders and middlemen meddle with the farmer-consumer relationship. Thus, a trader given a choice between trucking 10 tons of vegetables a day and 100 tons a day but earning the same, a trader will logically choose 10 tons a day. A trader has no loyalty to production, and his master is profit or higher margins. Given a chance to earn more from imports, he won’t hesitate. In contrast, a farmer will go for 100 tons a day, which means 10 times more output, 10 times more jobs, 10 times more packing, 10 times more storage and 10 times more trucking. n Invest where it counts most. If investments in NFA only go to waste, better invest where it will count most by investing in farmer organizations, farm mechanization, logistics, technology transfers and education. This is how you beat the trade cartels. Farmers need to be organized and funded with concessional credit in direct tieups with new markets in urban centers. It is lamentable that with 310 small countryside banks closed from 2000 to June 2017 or 20 small banks closed every year, credit to agriculture has dropped. Sadly, the commercial banks replacing them do not lend much to farmers. Farmers—currently averaging 59 years old—are now recipients of dole outs like beggars, instead of dignified borrowers. I remember years back when the Federation of Benguet Farmers brought goods five times to Metro Manila only to be dumped by competing cartels, resulting in losses of about P100,000 each time. The government’s direct intervention may only amount to 5 percent in terms of impact to the agriculture sector. But with the right policies adopted, this will help the agriculture sector to perform better.

E-mail: mikealunan@yahoo.com

T

he 2017 global agricultural insurance premiums total about $30 billion to $35 billion. Around 45 percent of this or $15 billion is from North America; 38 percent or around $12 billion is from the Asia-Pacific region; 10 percent or $3 billion is from Europe; 7 percent or $2 billion from South America; and less than 1 percent or about $200 million from Africa. Roughly two-thirds of the global premium can be traced to only three countries: the United States with 35 percent or $11.7 billion; China with 20 percent or $6.7 billion; India with 12 percent or $3.8 billion. The rest of the world holds 33 percent or $10.8 billion. Agricultural insurance covers crops, livestock, forestry, fish farms, and even greenhouses. Crops may be grains, cereals, and other crops as well as fruits and vegetables. Livestock involves dairy cattle, hogs and beef. Forestry would include commercial forests for wood production such as eucalyptus and coniferous. Fish farm would include seabass, tuna, salmon and others. Note that crop insurance is but a segment of agricultural insurance. Crop insurance is the most developed subline of business of agricultural insurance, accounting for almost 90 percent of the total premium written worldwide. One example of a peril sought to be insured against for crop insurance is hail. Hail are pellets of frozen rain

T

he 1980s cyberpunk novels that predicted today’s Internet failed to conceive of anything as outlandish or contradictory as Bitcoin: A digital currency that’s spent nowhere, a commodity that’s used for nothing, and a libertarian dream that’s effectively run by elites. Now, after its 66-percent price drop from December highs, comes yet another fantastical plot twist. The Chinese company that makes most of the world’s Bitcoin-mining rigs— as well as a big pile of mining and crypto-trading profit—is thinking about a stock-market listing. The proceeds would be used to develop the kind of sophisticated hardware that would let it compete head-on with tech giants like Google in areas

way beyond Bitcoin. The firm in question is Bitmain. It is run by a 32-year-old billionaire—Jihan Wu—and has a business model that might make an antitrust regulator cancel their holiday leave. Bitmain designs and sells the powerful custom chips used to mine cryptocurrencies, but it makes money from mining, too. In Gold Rush parlance, it sells the pickaxes and owns and works

allowing participating producers to insure a certain percentage of historical crop production. It covers yield shortfall due to the peril insured. A single policy protects crops against all natural perils including adverse weather, fire, insects, disease, wildlife, earthquake, volcanic eruption and failure of irrigation water due to unavoidable causes. Due to the government’s paramount interest in food production, insurance premiums are generally subsidized in different countries. Other forms of support are also extended by governments. In China, for example, subsidies can go up to at least 80 percent of the premium. Other countries with direct premium subsidies include the US, Canada, Japan, Italy, Turkey, Mexico and Brazil. On the other hand, there are countries where no subsidies are given. These include Germany, Argentina, South Africa, Australia,

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.

India can’t afford to turn its back on free trade By Mihir Sharma Bloomberg Opinion

I

ndia’s state is a mirror of its noisy, messy democracy. It’s often hard to achieve even a modest internal consensus between government departments in New Delhi: Right now, the heads of several ministries are scrambling to find a common position on the Regional Comprehensive Economic Partnership, or RCEP—a giant trade deal that stitches together India, the Association of Southeast Asian Nations, Oceania, China, Japan and Korea. At the end of August, ministers from the 16 RCEP countries will meet in Singapore; India needs to work out a constructive stand by then. There’s a very real chance that, if New Delhi’s negotiators continue to be obstructionist, the other 15 countries will move ahead without India. For many here, that wouldn’t be a tragedy. And, frankly, even freetraders like myself see their point. India’s goods trade deficit with China appears unsustainable: It was $63 billion in 2017-2018, up from $51 billion in the previous financial year and $16 billion 10 years ago. That’s 60 percent of India’s overall trade deficit. As far as Indian policy-makers are concerned, much of what’s being imported is substandard or otherwise fair game for antidumping legislation. China’s the main target of Indian antidumping action, with 214 separate investigations opened

A $40-billion plan to cash out of Bitcoin By Lionel Laurent | Bloomberg Opinion

that fall in showers from cumulonimbus clouds. Hail can completely obliterate part of a field while leaving the rest virtually untouched, it is difficult to predict and it occurs suddenly. Most hailstorms last three to five minutes. In the United States hail usually accounts for about 6 percent of all crop losses in any given year. This occurs mostly in temperate climates (as opposed to tropical climates). Temperate climates span between the tropics and the polar regions of the Earth. Indeed, there are different perils for different parts of the world. Owing to different perils than can occur, one insurance coverage that was introduced in the 1980s is the Multi-Peril Crop Insurance (MPCI) in the United States. MPCI protects against crop yield losses by

production, insurance premiums are generally subsidized in different countries. Other forms of support are also extended by governments. In China, for example, subsidies can go up to at least 80 percent of the premium. Other countries with direct premium subsidies include the US, Canada, Japan, Italy, Turkey, Mexico and Brazil.

New Zealand and Sweden. One model worth looking into is the Thailand Model. In Thailand 16 insurers participate in an agricultural insurance program. It is made compulsory for loan borrowers, and it is distributed through the Bank for Agriculture and agriculture cooperatives. The program is managed by the Thai General Insurance Association. Premiums are also subsidized. In Spain a private insurance pool, called Agroseguro, was launched in 1978. Due to the scope of the coverage, agricultural insurance usually veers away from indemnity-based policies. These are insurance products that pay claims based on the actual loss incurred by the policy holder. Instead, index-based insurance products are preferred. Index-based agricultural insurance products pay out based on the value of an “index,” not on losses measured in the field. The index is a variable that is highly correlated with losses and that cannot be influenced by the insured. Indexes can include rainfall, temperature, regional yield, river levels, etc. For example, for regional yield for a particular crop, an index is created based on the expected regional yield. A threshold is created which is less than the index. The insurer indemnifies the insured party where the regional average yield is less than the threshold.

the mines. Its market share in the former is 80 percent; in the latter it’s 40 percent. Despite this year’s crypto plunge, Bitmain has earned plenty of money from all sides of the Bitcoin trade. It is so powerful that it was seen as a driving force behind the 2017 Bitcoin spin-off, Bitcoin Cash—which aimed to displace the original and created a backlash in the process. An IPO could value Bitmain at $40 billion, or 20 times this year’s unverified forecast earnings of $2 billion, according to the news site CoinDesk. That wouldn’t be far off the earnings multiples of established chip-makers Advanced Micro Devices Inc. and NVIDIA Corp., whose own share prices have been boosted by the popularity of their chips with

An India that retreats from the turnpike of world trade to the dirt road of autarky—to borrow a metaphor from one of those American-educated economists who’s been eased out of government—is one that will be poorer in both the medium and long term. If the government wants to reassure the world that India isn’t willing to put up with the dirt road, then it needs to find a way to be more positive about RCEP.

—and, even so, Indian legislators are worried that the measures are ineffective. India can also justly complain that the RCEP’s focus on reducing goods tariffs misses the point. First of all, services trade should be opened up simultaneously; greater freedom of movement for professionals—a major source of foreign currency for India, through remittances—must be part of that. Second, the real constraints on the growth of trade now are “behind the border”—nontariff barriers of one sort or another that, for example, make competing in the Chinese domestic market such a nightmare. Less justly, specific Indian sectors are panicked about competition. Steel—which is slowly recovering after years of pummeling thanks to Chinese overcapacity—is one of them. Dairy producers obsess about Australia and New Zealand. Manufacturers worry about everyone. But the validity (or otherwise) of Indian concerns is beside the point. The problem is that, at the moment, RCEP is the only game in town—and New Delhi runs the risk of being left on the sidelines. If India doesn’t have a more positive, forward-looking approach ready by the end of the month, then it must also abandon its ambition to infiltrate global supply chains. And that would be a disaster for a country that will shortly have both the world’s largest workforce and a mere 2-percent share of world trade.

How can India move forward? Most important, it mustn’t let China run away with the initiative. India is hardly the only country concerned about China’s overcapacity and its ability to dump goods wherever it pleases. A regional trade agreement that prevents countries from bringing fair, transparent and temporary antidumping actions is in nobody’s interest—a point India needs to make to countries like Japan. China has cleverly used regional and bilateral trade agreements to shortcut the World Trade Organization—just as the US has in the past. RCEP shouldn’t be one of them. If and only if the deal begins to build a new and equitable architecture for trade in Asia and the Pacific does it deserve to succeed. At the same time, India can’t afford to be the villain of the piece. The signaling would be awful; most observers would see such a move as

the final culmination of a turn away from the world under the current government. India has raised tariffs on 400 products over the past two years, which officials concede is a major departure from a generationlong trend toward greater openness. It has unilaterally scrapped investor protection treaties with almost 60 countries. Even the government’s choice of economic policy advisers reflects a new distrust of the world. The American-educated economists who defined the Modi government’s initial years have been eased out, not entirely gracefully. The government believes, perhaps, that India’s fragile status as the only mildly bright spot amid collapsing emerging markets means that it doesn’t need anything from the rest of the world. This is absurd. In fact, India needs more than ever. Investors are interested in India only because they think they can make money here. And they will make money only if Indians are more productive and have more to spend. An India that retreats from the turnpike of world trade to the dirt road of autarky—to borrow a metaphor from one of those American-educated economists who’s been eased out of government—is one that will be poorer in both the medium and long term. If the government wants to reassure the world that India isn’t willing to put up with the dirt road, then it needs to find a way to be more positive about RCEP.

the crypto crowd. Even assuming that the mooted Bitmain multiple and 2018 earnings figure are right, the bigger question would be how much profit it might expect to make in a future crypto market that’s far more stringently regulated. Potential investors would want to be reassured that the cratering Bitcoin price isn’t a harbinger of worse. Yet a falling market can enrich those who have it cornered. As my colleague Shuli Ren noted in June, Bitmain has slashed prices for its chips to shake out weaker rivals. Its profit margin is said to be about 50 percent, according to Fortune. Indeed, it would be a mistake to see this as a uniquely Bitcoin play. The most interesting part of

a Bitmain pitch might be its shift into non-crypto terrain. The company has been using its chip-design expertise to expand into artificial intelligence (AI), and company documents estimate this will make up 40 percent of its revenue in the next five years, according to CoinDesk. Wu told Fortune magazine in June that this business would be similar to Google’s AI-focused tensor processing units. Quite what the nationalists in the Donald Trump administration might think of a Chinese-owned cryptopowerhouse raising money to spend on advanced AI hardware and compete with Silicon Valley is anyone’s guess. Even if Bitmain is creating tech jobs in the US, and backed by US venture capital funds, it would prob-

ably be listed in Hong Kong. All of this is obviously very much still in the rumor and speculation category, including the listing itself. But what appears like a straightforward play on digital currencies, might in fact end up as an attempt by a leading Chinese entrepreneur to cash out of the Bitcoin craze and fund some leading-edge tech instead—ironic when you consider that China has been far stricter on crypto-trading than most Western nations. For investors still nursing losses from Bitcoin’s wild ride, the prospect of another tech moon-shot may seem a bit too soon. But maybe this could end up the first useful realworld thing to emerge from the Bitcoin bubble.

2nd Front Page BusinessMirror

A8 Wednesday, August 15, 2018

DOT tightens sponsorship rules after PTV-Bitag deal By Ma. Stella F. Arnaldo

N

@akosistellaBM Special to the BusinessMirror

O fashion shows. No beauty contests. These prohibitions are contained in the new financial sponsorship guidelines of the Department of Tourism (DOT), according to its Secretary Bernadette Fatima Romulo Puyat, who addressed the Senate Blue Ribbon Committee on Tuesday as it heard the controversial P120-million media placement contract between the agency and People’s Television Network Inc. (PTNI). The media placement had allegedly benefitted Bitag Media Unlimited Inc. (BMUI) owned by Ben Tulfo, younger brother of former DOT chief Wanda Corazon Tulfo-Teo, who signed the contract. Teo, who was also present at the hearing, however, said she didn’t know that Kilos Pronto, the TV show in which the DOT ads were placed, was produced by Bitag. Tulfo, for his part, insisted Bitag had a legal contract with PTNI, not DOT, and would not return the funds paid to his company for said ad placements. According to the Commission on Audit (COA), P114 million was already disbursed by the DOT to PTNI, a portion of which was paid to BMUI for the airing of tourism ads.

‘Safeguards for DOT funds’

In response to Sen. Risa Hontiveros’s questions on safeguards put in place at the DOT to prevent any future corrupt activities, Romulo Puyat said the agency said has put a cap of “P1 million only for tourismrelated events” and projects. Romulo Puyat added that for three-year projects, for instance, funding received by DOT would be downscaled such that, for the first year, the proponent would receive P1 million; P500,000 for the second year; then P200,000 for the last year. She revealed the COA, in encouraging the DOT to strengthen its internal financial controls, told them “not to include fashion shows and beauty pageants,” in their financial sponsorships.

“I don’t have time to watch TV. I am a very busy person. I was traveling a lot.”—Teo

Committee chairman Sen. Richard Gordon, for his part, scolded Teo for lack of due diligence, and PTNI officials, led by its president, Dino Antonio C. Apolonio, for placing the tourism ads in Kilos Pronto, “a TV show that is not even rating in its own station.” Recalling his days as DOT chief, he said tourism ads the agency placed were usually on TV networks and programs that had large media exposures. According to Gordon, PTV4 was fourth in ranking among TV networks, with only .06 percent exposure. Pressed by Gordon, Apolonio said no one pressured them to place the tourism ads in Kilos Pronto. But he also revealed that despite being a blocktimer, Bitag was was paid by PTNI some P71.61 million to place the tourism ads in Kilos Pronto. According to Gordon, the usual practice in the broadcasting industry is for blocktimers – TV shows that buy airtime from networks—to get their own advertisers. The lawmaker found it curious

that it was PTNI, which looked for advertisers for Bitag/Kilos Pronto.

Teo doesn’t watch TV

Apolonio added that the fee paid to Bitag was net of the latter’s “arrears,” or amounts Bitag failed to pay PTNI for airtime. Documents obtained by the BusinessMirror showed that PTNI Group Head for Programming/Airtime Management Ramon M. del Rosario wrote a proposal to Teo on February 6, 2017, “to formalize our partnership with the [DOT] through our television programs and services.” The state-owned broadcasting network offered “six minutes segments three times a week in their most watched daily program in our network…. Plus 3 minute or equivalent of (6) 30 seconds DOT spots is added within the program daily.” These included spots in the morning, noon, primetime, late night PTV4 newscasts, and on Kilos Pronto every Monday, Wednesday, and Friday. In her defense, Teo told lawmakers that she only knew that Bitag was owned by her brother Ben but didn’t know he produced Kilos Pronto. “I don’t have time to watch TV. I am a very busy person. I was traveling a lot,” she insisted. Teo resigned as DOT chief on May 7 due to the alleged anomalous media placement contract.

SC nixes ₧25-B financial aid to shuttered Banco Filipino Continued from A1

enforcing other regulatory measures that are intended to coerce

the bank in agreeing to withdraw its suits against the BSP and MB. The Makati RTC subsequently

granted Banco Filipino’s application for a writ of preliminary mandatory and preventive injunction,

and directed the BSP and MB to immediately implement the bank’s business plan by releasing its P25billion financial assistance package and other regulatory reliefs without delay. The Court, however, denied Banco Pilipino’s petition to reverse the CA ruling issued on July 28, 2011, on two grounds. First, the SC said Banco Filipino, being a closed bank under receivership, can only sue or be sued through its receiver, the Philippine Deposit Insurance Corp. (PDIC). The second ground, according to the Court, is that the BSP’s Monetary Board is a quasi-judicial agency and under the Rules of Court petitions for certiorari against a quasi-judicial agency are cognizable only by the Court of Appeals. The SC pointed out that under Republic Act No. 7653, when the Monetary Board finds a bank insolvent, it may “summarily and without need for prior hearing forbid the institution from doing business in the country and designate the PDIC as receiver of the banking institution.” As a trustee of the insolvent bank, the PDIC conserves and manages the assets of the bank to prevent their dissipation, which includes, the power to file and answer suits that threaten to dissipate the closed bank’s assets. “Petitioner’s suit concerned its Business Plan, a matter that could have affected the status of its insolvency. Philippine Deposit insurance Cor poration’s participation would have been necessary, as it had the duty to conserve the petitioner’s assets and to examine any possible liabilit y that petitioner might undertake under the Business Plan,” the SC explained. The Court did not give merit to Banco Filipino’s claim that it was not yet a closed bank at the time it filed the petition on April 10, 2012, since the CA found its closure to have been illegal. However, the SC said the CA

www.businessmirror.com.ph

‘Complex, multidimensional, ultimately positive’ migration focus of PHL confab on UN compact By Recto Mercene @rectomercene

T

HE hot button issue of “migration” must take front and center at the upcoming international meeting prior to the adoption of a global compact in Morocco, a top Philippine diplomat said on Tuesday. “We are a few months away from adopting a comprehensive document that will put migration where it rightfully belongs: ‘at the front and center of international discourse, deserving of its own instrument and secured of a place in our common history,’” Ambassador Evan P. Garcia, Permanent representative to the United Nations and Other International Organizations in Geneva, told a two-day conference in Manila on the draft Global Compact on Migration (GCM). Garcia said the product of this week’s gathering will be adopted in December in Morocco, “the first global instrument that will finally recognize the complex, multidimensional and ultimately positive force that migration exerts in our interconnected world.” He underscored that spotlighting this issue “is long overdue.” “Migration is as old as humanity, as certain as our collective aspirations, as difficult to deny as the exhortations of our identities and cultures,”he said at the opening session of the two-day Conference on the Future of Migration, on the context of the Global Compact on Migration.” The GCM will be the first, intergovernmental negotiated agreement, prepared under the auspices of the UN, to cover all dimensions of international migration in a holistic and comprehensive manner. In the New York Declaration for Refugees and Migrants, adopted in September 2016, the General Assembly decided to develop “a global compact for safe, orderly

decision was not yet final since the Monetary Board filed a timely motion for reconsideration. The SC added that the CA eventually came out with an amended decision in 2012 confirming BF’s status as a closed bank. “When banks become insolvent, depositors are secure in the knowledge that they can still recoup some part of their savings through Philippine Deposit Insurance Corporation. Thus, Philippine Deposit Insurance Corporation’s participation in all suits involving the insolvent bank is necessary and imbued with the public interest,” the SC said. Meanwhile, the Court said pursuant to Article XII, Section 20 of the Constitution, Congress constituted the BSP as an independent central monetary authority, vested with quasijudicial power which it exercises through the Monetary Board. “Bangko Sentral’s Monetary Board is a quasi-judicial agency. Its decisions, resolutions and orders are the decisions, resolutions and orders of a quasi-judicial agency. Any action filed against the Monetary Board is an action against a quasi-judicial agency,” the Court ruled. The SC added that the Rules of Court categorically provide that petitions for certiorari involving acts or omissions of a quasi judicial agency “shall be filed in and cognizable only by the Court of Appeals.” In its July 28, 2011 decision, the appellate court ordered the dismissal of Civil Case No. 10-1042 filed by Banco Filipino against the BSP and the MB, and which became the basis for RTC Judge Joselito C.

and regular migration.” The General Assembly will then hold an intergovernmental conference on international migration in 2018 with a view to adopting the global compact. According to refugees and migrants, “the global compact is a significant opportunity to improve the governance on migration, to address the challenges associated with today’s migration, and to strengthen the contribution of migrants and migration to sustainable development.”

‘Just a first step’ Ambassador Garcia said the GCM may be groundbreaking, “but it is also just the first step towards meaningful and sustainable global migration governance.” Through the cross-sectoral dialogue, Garcia hopes that the ideas arising from the thorough discussions on migration issues will “inspire, revolutionize and maybe even provoke” and “hopefully pierce the veil of resistance that stubbornly clings to some sectors.” He added, “We must not break this momentum. The withdrawal of some countries from the process and the temptation of cynicism prove that the counter-narrative is strong, as well.” Garcia said, “We cannot allow a bandwagon of hurtful rhetoric and complacency to push migration out of the central position it now holds in global discourse.” Asked for the significance of the gathering, Garcia said, “migration is a global issue that is important for the Philippines. The purpose of this event is to carry on the momentum attained in New York, where we approved the text on the GCM.” In the same ongoing conference on the GCM, Foreign Affairs Undersecretary Sarah Lou Y. Arriola remarked that the Philippines prides itself in being a global champion for the rights, welfare, See “Migration,” A2

Villarosa to order the release of the P25-billion financial assistance and other regulatory reliefs in favor of the bank. The CA said the RTC has no jurisdiction over the case filed by Banco Filipino assailing MB Resolution No. 1668. It noted that the bank filed the case before the Makati RTC on October 20, 2010, or after the SC had ruled that petitions for writs of certiorari, prohibition or mandamus under Rule 65 of the Revised Rules of Court against the acts and omissions of quasi-judicial agencies should be filed with the appellate court for procedural uniformity. Thus, the CA stressed, Banco Filipino’s contention that its case is likewise cognizable by the Makati RTC is “untenable.” It may be recalled that on December 4, 2009, the MB issued Resolution No. 1668 that granted Banco Filipino’s request for a P25-billion financial assistance and certain regulatory reliefs. However, it set several conditions for the assistance, particularly the withdrawal by Banco Filipino of all its cases filed against the BSP and the MB in connection with its 1985 closure -- that had been declared illegal and arbitrary by the Supreme Court. Banco Filipino refused to comply with the conditions stipulated in Resolution No. 1668. When the MB withheld the release of the financial assistance, Banco Filipino filed Civil Case No. 10-1042 which the Makati City RTC granted in favor of the bank, and directed the respondents BSP and MB to release the financial assistance intended for the petitioner.