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“I just told them, ‘Look at the highest flag,’ and that’s what we did.” —Carmelo Anthony, who led an inexperienced US men’s basketball team to a gold medal at the Rio Summer Olympics, referring to the moment the team took to the podium and the spot where the American flag was about to rise. AP

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“The Hillary people want this to all be about tone and temperament. We also want it to be about facts and figures.”—Donald Trump’s new campaign manager Kellyanne Conway, who insists the GOP presidential candidate is getting back on track, after a stretch of gaffes and falling poll numbers. AP

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Tuesday, August 23, 2016 Vol. 11 No. 318

House eyes 12 states under a federal govt

By Jovee Marie N. dela Cruz

@joveemarie

leader of the House of Representatives on Monday assured the public that all regions of the country will be equally represented in the discussions on the proposed Charter change (Cha-cha) leading to a federal form of government.

INSIDE

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OUT TODAY BusinessMirror

analysis, ideas and commentary from

E1 Tuesday, August 23, 2016

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ChEAtiNg DEAth

The New Science of Aging I

MAGINE a world in which getting fitted with a new heart, liver or set of kidneys, all grown from your own body cells, was as commonplace as knee and hip replacements are now. Imagine one in which you celebrated your 94th birthday by running a marathon with your school friends. Imagine, in other words, a world in which aging had been abolished.

wondering how to make the most of the next half-century. Retirement would become a more distant option for most, because pension funds would have to be enormous to support extended lifespans. To this end, the portfolio career would become the rule and education would have to change accordingly. People might go back to school in their 50s to learn how to do something completely different. The physical laborer would surely need a rest, the accountant might become a doctor and the lawyer a charity worker. Perhaps some would take long breaks between careers and party wildly, in the knowledge that medicine could offer them running repairs. Boredom, and the need for variety, would alter family life. How many will tie the knot in their 20s in the expectation of being with the same person 80 years later? The one-partner life, already on the decline, could become rare, replaced by a series of relationships, each as long as what many today would consider a decent marital stretch. As for reproduction, men’s testes presumably would work indefinitely and, though women’s ovaries are believed to be loaded with a finite number of eggs, technology surely would be able to create new ones. Those who wished to could thus continue to procreate for decades. That, and serial marriage, would make it difficult to keep track of who was related to whom. Families would start to look more like labyrinthine networks. In the world in which marriages do not last, women everywhere would be freer to divorce and aged patriarchs finally would lose their hold. Such speculation is fun, and mostly optimistic. The promise of a longer life, well lived, would round a person out. This vision of the future depends on one thing, however: that a long existence also is a healthy one. Humanity must avoid the trap fallen into by Tithonus, a mythical Trojan who was granted eternal life by the gods, but forgot also to ask for eternal youth. Eventually he withered into a cicada. The trap of Tithonus is sprung because bodies have evolved to be throwaway vessels for the carriage of genes from one generation to the next. Biologists have a phrase for it: the disposable soma. It explains not only general senescence, but also why dementia, cancer, cardiovascular problems, arthritis and many other things are guarded against in youth, but crammed into old age once reproduction is done with. These, too, must be treated if a long and healthy life is to become routine. Moreover, even a healthy brain may age badly. An organ evolved to accommodate 70 or 80 years of memories may be unable to cope when asked to store 150 years’ worth. Biological understanding is advancing apace, however. Greater longevity is within reach—even if actual immortality may not be as close, or as interesting, as some fantasists would like to believe. Be sure to draw up a long bucket list.

The number of deputy speakers at the House of Representatives who will represent the proposed 12 states of the Philippines under a federal form of government

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That world is not yet here, but a semblance of it might be one day. Senescence, the general dwindling of prowess experienced by all as time takes its toll, is coming under scrutiny from doctors and biologists. Suspending it is not yet in the cards, but slowing it probably is. Average lifespans have risen a great deal during the past century, but that was thanks to better food, better housing, improved public health and some medicines. The new increase would be brought about by specific anti-senescence drugs, some of which already may exist. This, optimists claim, will extend life for many people to today’s ceiling of 120 or so. That may be only the beginning, though. In the next phase not only average lifespans but maximum lifespans will rise. If a body part wears out, it will be repaired or replaced altogether. DNA will be optimized for long life. Add in anti-aging drugs, and centenarians will become commonplace. To this end, many hopeful repairmen are now setting up shop. Some of them want to upgrade worn-out tissues using stem cells, precursors to other sorts of cell. Such bio-renovation is the basis of an unproven, almost vampiric, treatment in vogue in some circles: transfusion into the old of the blood of the young. The business of growing organs from scratch also is proceeding. At the moment these “organoids” are small, imperfect and used mainly for drug testing, but that surely will change. Longevity is known to run in families, which suggests that particular varieties of genes prolong life. Some are investigating this, with the thought that modern gene-editing techniques might one day be used to make crucial, lifeextending tweaks to the DNA of those who need them. From an individual’s viewpoint, this all sounds desirable. For society as a whole, though, it will have profound effects. Most of them will be good, but not all of them. One concern is that long life will exacerbate existing social and economic problems. The most immediate challenge will be access to anti-senescence treatment. If longer life is expensive, who gets it first? Already income is one of the best predictors of lifespan. Widening the gap with treatments inaccessible to the poor might deepen divisions that already are straining democracies. Will older workers be discriminated against, as now, or will numbers give them the whip hand over the young? Will bosses hang on, stymying the careers of their underlings, or will they grow bored, quit and do something else entirely? Would all those old people cease to consider themselves elderly, retaining youthfully vigorous mental attitudes as well as physical ones, or instead would they make society more conservative, because old people tend to be? A reason for hoping that the elderly would turn out less hidebound is that life itself would be more a series of new beginnings than one single story. Midlife crises might be not so much about recapturing lost youth as about

Govt banks on highly paid cops, troops to clinch war for peace and order in PHL

BM Graphics: ED DaVaD

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Investments: Beyond high GDP growth rate The Entrepreneur Manny B. Villar

n last week’s column I said 2016 was a good start for the Philippine economy. Growth accelerated from 6.3 percent in the fourth quarter of 2015, to 6.8 percent in the first quarter of 2016 to 7.0 percent in the second quarter, for an average growth of 6.9 percent for the first half in terms of GDP. Continued on A10

Housing sector gets only ₧15.36-B budget for 2017

NONIE REYES

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rio olympics medal tally

1 United States 2 Great Britain 3 China 4 Russia 5 Germany 6 Japan 7 France 8 South Korea 9 Italy 10 Australia 11 Netherlands 12 Hungary 13 Brazil 14 Spain 15 Kenya 16 Jamaica 17 Croatia 18 Cuba 19 New Zealand 20 Canada 21 Uzbekistan 22 Kazakhstan 23 Colombia 69 Philippines

“This experience has been the dream of a lifetime for me.”—US gymnast and closing ceremony flag-bearer Simone Biles, who won five medals, four of them gold, in her first Olympics. AP

By Fil V. Elefante

@elefantefil

Part Two

HEN he said he will do it, expect that it will be done—no ifs or buts. This led to a groundswell of support for then-Davao City Mayor Rodrigo R. Duterte that catapulted him to the presidency. Now, as President, the public

PESO exchange rates n US 46.3890

expects him to make good on his promises. During the campaign, he vowed to raise salaries of soldiers and policemen to P50,000 a month within three years of becoming the country’s Chief Executive. However, turning this promise to reality will not be easy, especially when the matter is about military salaries.

Salaries, pensions

THE root of the difficulty for Mr. Duterte to deliver on his presidential campaign promise lies in one link: salaries for active military personnel and the pension for military retirees are directly tied together. The relationship between salaries and pension of military personnel is due to the automatic Continued on A2

@cuo_bm

ESPITE the “housing crisis,” the Duterte administration has further cut the government’s budget for housing and community-development projects and programs. Based on the proposed General Appropriations Act for 2017, the government has allocated only P15.363 billion to housing, or 0.46 percent of the proposed national budget for next year. This is lower than the P33.481 billion it allotted this year and the P29.063-billion allocation for 2015 under the previous administration. “Lumiit siya because of Supertyphoon Yolanda. Tapos na iyong Yolanda. Ang daming pera pa ng NHA [National Housing Authority], eh. Bigay nang bigay ng pera si Butch [former Budget Secretary Florencio B. Abad] doon,” Budget

Secretary Benjamin E. Diokno told the BusinessMirror on the sidelines of the 2017 budget committee hearing at the House of Representatives on Monday. Based on the housing budget, the Duterte administration has allocated P12.6 billion for theNHA to relocate informal settlers from danger zones and those affected by infrastructure projects. This is on top of the P1.7-billion provision for the Socialized Housing Finance Corp. and the National Home Mortgage Finance Corp. to aid in providing socialized housing. Earlier, Vice President Maria Leonor G. Robredo said the Philippines’s housing budget was the lowest in the Southeast Asian region. In a presentation, the Vice President, who is also Housing and Urban Development Coordinating Council (HUDCC) chairman, said the governSee “Housing,” A2

The National Housing Authority has a lot of funds. Former Budget Secretary Florencio B. Abad used to give it a lot of money.”—Diokno

n japan 0.4604 n UK 60.5980 n HK 5.9832 n CHINA 6.9710 n singapore 34.4285 n australia 35.2603 n EU 52.4799 n SAUDI arabia 12.3697

Source: BSP (22 August 2016 )

A2 Tuesday, August 23, 2016

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Govt banks on highly paid cops, troops to clinch war for peace and order in PHL Continued from A1

pension-hike provision in Presidential Decree (PD) 1638, otherwise known as the Armed Forces of the Philippines (AFP) Retirement Law of 1979. The automatic pension hike provision means any salary hike for active military personnel will lead to a corresponding increase in the military pension backlog.

Unintended consquences

THE Department of National Defense (DND) and the AFP had their hands full in meeting pension payments for military retirees after the mandated increase in the base pay of those in the active service was fully implemented in 2012. The salary increase that emanated from the Salary Standardization Law (SSL) signed by then- President Gloria MacapagalArroyo in 2008 was the cause of that unintended pension backlog. Fortunately, military personnel who retired after the implementation of the salary increase were not affected. Only those who had retired before the pay hike came into being bore the financial brunt of this problem. This onus was acknowledged by then National Defense Secretary Gilberto Teodoro Jr. in 2009 when he asked Congress to pass a law abolishing the Retirement Service Benefits System (RSBS) and to set up a system to return the contributions of RSBS members. Teodoro also suggested that military personnel could be enrolled as members of the Government Service Insurance System (GSIS). However, because military service is considered a hazardous occupation, financial and insurance experts warned that having soldiers as GSIS members

Housing. . .

Continued from A1

ment only spent an average of 1.135 percent, or P23 billion, of the national budget annually in the past six years. Robredo added that be-

could bloat the agency’s yearly expenses to the point the agency would no longer be financially viable. Rep. Leopoldo N. Bataoil of the Second District of Pangasinan has said in February he estimates that by year 2022, the total pension costs of the AFP will eventually surpass the salaries paid to its active personnel. “If this condition is allowed to persist, the government will eventually fail to provide adequate retirement pensions to the uniformed personnel.”

RSBS rationale

PENSION support to military personnel required a viable financial institution, the reason the RSBS was created in 1973 the first place. PD 361 gave it the mandate to provide a self-reliant funding scheme and continuous financial support to the AFP retirement system. Unfortunately, RSBS failed. Memorandum Order 90, which Aquino signed on April 8, 2016, said the Feliciano Commission Report established that the AFP-RSBS was “fundamentally flawed” and had not discharged its mandate. As early as 2006, it was already proposed that a new agency be formed to replace the RSBS. It was then National Defense Secretary Avelino J. Cruz Jr. who first raised the idea. The other suggestion involved retaining the RSBS and infusing it with new funds to make the agency viable again. The idea into pumping more funds met resistance. In 2009 Teodoro said the main stumbling block was that those who were currently in active military service would end up paying for those who will be retiring. The only way to get around this problem is for the government to provide the capital contribution to the pension plan for a number of years. Teodoro tween 2000 and 2014, the government only spent 0.12 percent of GDP for housing, the lowest among Asean countries. Robredo said in the 2016 budget, the government only accounted for 1.11 percent, or P33.38 billion, for the housing sector. This was only the second highest

said any government would find it difficult to meet such a huge financial outlay. For the next four years of the Arroyo administration, the matter was consigned to Congressional limbo without any action on the DND’s proposal and the other suggestions to avert the military pension problem. And then the Aquino administration entered the picture.

Growing shortfall

pension payment shortfalls was a shortterm solution at best because, in the long run, the shortfall would grow and the government would end up paying more. It was going to be a cycle difficult to break. As much as possible, pension payments and retirement benefits that were coming due would have to be directly incorporated in the General Appropriations Act. This can be seen clearly when the Aquino administration upped the DND budget by 81 percent, from P57.8 billion in 2010, to P104.7 billion in 2011. Mr. Aquino explained that much of the increase in the DND budget was meant to meet the required pension payments. Unfortunately, there was still the matter of the SSL, which kicked in in 2012. So the matter of creating a new agency exclusively for dealing with the matter of military pensions was resurrected. But there was resistance to this idea. The shadow of the failure of RSBS was felt. According to government reports, there were three main reasons RSBS failed: first, it had an inadequate starting capital; second, it was not run in the manner of GSIS or the Social Security System; third, the RSBS relied solely from contributions from soldiers, which were taken from their salaries. Neither the DND nor the AFP could contribute to the old RSBS pension plan. It was an insidious cycle that fed on itself with the RSBS bleeding financially to meet pension payments until it could no longer cope. The matter was compounded when the institution’s executives tied up the assets of the R SBS in what was l ater ter med as “questionable deals.” Writer’s note: Parts of this article originally appeared in several issues of the Philippines Graphic magazine from 2010 to 2014.

budget appropriation between 2008 and 2016. The highest was in 2014 when the government allocated P37.668 billion, or 1.66 percent, of the budget in that year. Solving the housing crisis also means resolving the growth in the number of informal-settler families (ISFs). There are

currently 1.4 million ISFs and 40 percent of them are residing in Metro Manila. Robredo said based on the 2011 NHA Survey, there are 584,425 ISFs living in Metro Manila. There are also 221,284 ISFs in Region 4-A, or Calabarzon, and 117,670 ISFs in Region 3 or Central Luzon.

Payment shortfalls

THE Aquino administration acknowledged the problem. “There will come a time when our budget may not be able to support the increasing number of pensioners,” thenNational Defense Secretary Voltaire T. Gazmin said in an interview shortly after the Aquino administration took over. “The government shoulders the complete pension payments of military retirees, especially after the AFP’s RSBS entered troubled financial waters.” The RSBS was created in 1973 with an initial seed money of P200 million ($1.351 million at $1=P6.7563 in 1973 average currency exchange rate). Under the Arroyo administration, the government resorted to asking for supplemental budgets to meet pension shortfalls. However, this was only possible because military pensions were lumped together with pensions of retirees from other government departments. At the beginning of the Aquino administration, a new set up was made. The AFP Finance Center became responsible for making sure pensions and benefits were paid on time. Under this set up, the DND could tap into its savings to meet pension payment shortfalls. HOWEVER, tapping into savings to meet

To be concluded

Federal govt. . . Continued from A1

Deputy Speaker Raneo E. Abu of Batangas told a news conference this was the reason the House has named 12 deputy speakers to represent the 12 Philippine states to be created when the country shifts to federalism. “These 12 deputy speakers were named in preparation for the Charter change and for the adoption of a federal form of government. We will regionalize the House of Representatives and these deputy speakers will lead [each region] in all talks and discussions regarding the proposed changes. They will also determine what studies are needed to be done,” Abu said. The leadership of the lower chamber is planning to change the country’s form of government from presidential to federal system via constituent assembly (Con-ass). “We need to classify all regions based on religion, attitude, customs and tradition to make the process easier,” Abu added. Last week the lower chamber has increased the number of its deputy speakers from five to 12 in preparation for the adoption of a federal form of government. These 12 deputy speakers are: Rep. Bai Sandra Sema of Maguindanao, Rep. Ferdinand Hernandez of North Cotabato, Lakas Rep. Gloria Macapagal-Arroyo of Pampanga, Nacionalista Party Rep. Pia S. Cayetano of Taguig, PDP-Laban Rep. Gwendolyn F. Garcia of Cebu, PDPLaban Rep. Mylene Garcia-Albano of Davao City, Party-list Rep. Sharon S. Garin of AAMBIS-OWA, Nacionalista Party Rep. Raneo E. Abu of Batangas, PDP-Laban Rep. Eric D. Singson of Ilocos Sur, National Unity Party Rep. Fredenil H. Castro of Capiz, Liberal Party Rep. Romero S. Quimbo of Marikina City and Nationalist People’s Coalition Rep. Mercedes K. Alvarez of Negros Occidental. Regions being eyed to become states under a federal form of government are Northern Luzon, Central Luzon, Metro Manila or National Capital Region, Southern Tagalog and Bicol region for Luzon. In the Visayas there are three—western, eastern and central Visayas. Four are being eyed in Mindanao— western, eastern, central and the Bangsamoro. House Majority Leader and PDP-Laban Rep. Rodolfo Fariñas of Ilocos Norte assured the public there’s no “inordinate fast-tracking” of Cha-cha under the Duterte administration. He said the lower chamber is only trying to divide and group themselves in line with the proposed federal states as a way of initially determining their political viability. “We will see, perhaps, we could try if its viable here in the House. We will divide ourselves into 12 Philippine states to see everything,” Fariñas said. For his part, Speaker Pantaleon D. Alvarez said he is confident that his fellow congressmen and the senators will uphold the interest of the Filipino people in changing the Constitution via Con-ass to tackle the proposed Chacha toward the adoption of a federal form of government. “I have faith in my fellow lawmakers in Congress and in the senators who were all elected into office by our people—I’ll start from that. And I also have faith in our President who was granted an overwhelming mandate by the Filipino people,” Alvarez said. To save an estimated P7 billion that would be used for the election of constitutional convention (Con-con) delegates, President Duterte said he prefers a Con-ass to tackle proposed charter changes. There are three modes of amending the Constitution: through Con-ass, Con-con, or people’s initiative. Under Con-ass, Congress, through its “constituent power,” constitutes itself into a body and would perform the task of amending the charter. Amending the Constitution via Con-con will require the election of delegates. Registered voters may also launch a petition to change the Constitution. It should be signed by 12 percent, or 6.6 million, of 54.4 million registered voters. At the same time, PDP-Laban Rep. Alfredo B. Benitez of Negros Occidental reiterated his proposal creating an advisory council composed of constitutional experts and leaders of various sectors that will set the parameters in amending the charter before Congress can convene itself into a Con-ass. Benitez, author of the resolution calling for Con-ass, said parameters should be set for Charter amendments prior to the convening of the assembly. “My proposal calls for the creation of a council of leaders or experts that will recommend the provisions of the 1987 Constitution that necessitate amendments. Charter change should not be open-ended, many provisions aren’t broke and need no fixing,” he said. Benitez added that the council can be appointed by the President or by Congress and it will be assigned to guide the Con-ass as to what provisions of the Constitution should be amended and recommend proposed amendments or new Charter provisions. “This scheme will allow the constituent assembly to complete its assigned task within the time period allotted by Congress. At the same time, only vital and urgent amendments will be considered,” he added. Meanwhile, the BusinessMirror, in partnership with the European Chamber of Commerce of the Philippines, will hold a forum today, August 23, dubbed “Federal Philippines Rising?,” at the Marriott Manila to discuss important aspects of a federal form of government, including its effects on business and investments. Benedikt Seemann, head of the Konrad Adenauer Foundation, will present “Case Study—Federal Republic of Germany”; Julian Payne, president of the Canadian Chamber of Commerce of the Philippines, will present “Case Study—Canada”; Laurent Le Godec, deputy head of Mission of the Embassy of France to the Philippines, will present “Case Study—France”; while former Senate President Aquilino Q. Pimentel Jr. will discuss “The Philippine Scenario.”The BusinessMirror columnist Teodoro Locsin Jr. will head the panel discussion.

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DBM cuts DOT’s budget for 2017 despite higher arrivals goal By Ma. Stella F. Arnaldo @Pulitika2010 Special to the BusinessMirror

HE Department of Tourism (DOT) is targeting to attract some 6.5 million in foreign visitor arrivals and 73.3 million domestic tourists in 2017. This developed even as the Department of Budget and Management (DBM) has reduced the DOT’s appropriations in 2017 by 26 percent to P2.23 billion, from the latter’s almost P3-billion budget this year. Of this amount, some P300 million will be allocated for a branding campaign program, a 74-percent cut from the P1.15 billion allocated this year. The DBM’s proposed National Expenditure Program (NEP) for 2017 also show no budgetary support for the Tourism Promotions Board (TPB), the marketing arm of the DOT, and responsible for selling the Philippines and its destinations to tourists here and abroad. A government corporation, the TPB was allocated a P500-million budget by the DBM, as well as a P1.64-billion Tourism Promotions Fund for 2016, as mandated by Republic Act (RA) 9353, or the Tourism Act of 2009. For 2017, the DOT aims to increase the tourism sector’s direct gross value-added by 9 percent to some P1.3 trillion, while adding 2 percent in the number of people employed in the sector, for a total of 5.3 million jobholders. Next year’s arrivals targets are up 10 percent from the projected 5.9 million in foreign tourists, and up 4 percent from the 70.5 million in domestic tourists in 2016. The Duterte administration earlier announced that the development of the tourism sector would be a priority program. Carlos G. Dominguez III, who had yet to be appointed finance secretary then, said “tourism will be one of the priorities in our rural-development program” and that “not only should tourism in the big cities be promoted, but also in the rural areas. The Philippines is a beautiful country, and we intend to leverage on this strength to boost economic growth.” (See, “Duterte wants Tetangco back on economic team,” in the BusinessMirror, May 14, 2016.) The Development Budget and Coordinating Committee presented to Congress on Monday the Duterte administration’s proposed expenditure program for 2017. National line agencies are expected to defend their budgets to select members of the House of Representatives starting this week. Asked about the reduced budget for DOT, Undersecretary for Tourism Development Benito Bengzon Jr. told the BusinessMirror: “The proposed budget of DOT for 2017 will only be formally presented to Congress [this] week. We will get a better indication of the allocation, as well as the programs to be approved after the presentation.” Special provisions in the DOT budget, however, include a P4.6-million Tourism Development Fund (TDF) to be used “for the development, promotion and marketing of tourism in the country,” which is provided in RA 9353. Said fund shall be sourced from accreditation, identification card, sticker and code fees. Although the amounts of the TDF vary every year depending on the DOT’s collections, agency insiders explained that the amount stated in the 2017 NEP “[is] most likely based on the accrued revenues from the accreditation fees the previous year/s.” Also, some P150 million is made available for DOT’s use, in the form of “trust receipts…sourced from the net profits of the merchandising operations of the Duty Free Philippines,” which shall be used for tourism-related projects and activities. Both special provisions and amounts were also made available to the DOT under the General Appropriations Act of 2016. Meanwhile, DOT attached agencies, such as Intramuros Administration (IA) and the National Parks Development Committee (NPDC), has a proposed budgetary allocation of P40.08 million and some P214 million for 2017, respectively. Under its 2017 performance targets, as stated in its proposed budget, the IA is supposed to increase by 16 percent, the number of sites conserved and restored in its area. The IA is also targeting a rise in the number of visitors to 954,000, from the projected 640,000 visitors in 2016. The IA’s budget was a drastic cut from its P443-million allocation this year, with some P400 million largely funding the resettlement of the urban-poor communities out of the district. Only the NPDC has a proposed higher budget for 2017, up 2.4 percent from P209.2 million this year. It is targeting to attract some 11.7 million visitors in 2017, from the 9.32 million recorded in 2012. Including the IA and NPDC allocations, the total proposed budget of the DOT for 2017 is P2.46 billion, down 32 percent from this year’s total allocation of P3.62 billion.

Tuesday, August 23, 2016 A3

Lopez to check effects of aerial spraying on banana plantations By Jonathan L. Mayuga

@jonlmayuga

nvironment Secretary Regina Paz L. Lopez has vowed to look into the adverse effects of aerial spraying on banana plantations in Mindanao. The move is in response to complaints on the alleged adverse impact of aerial spraying of pesticides to human health and the environment. According to the Department of Agriculture (DA), banana is the leading fruit grown in the Philippines and a consistent top dollar earner. Persistent infestation by pests and diseases continue to threaten to wipe out the $1.14-billion banana export industry. Aerial spraying of pesticides is a common practice in banana plantations, owing to its fast application and efficacy. It also covers more areas than ground spraying. However, the practice is strongly opposed because it poses various risks to people and the environment. The Mamamayan Ayaw sa Aerial Spraying (MAAS), a network of non-governmental organizations (NGOs) and individuals who oppose the practice, said they would appeal anew to the Department of Environment and Natural Resources (DENR) chief for compassion in behalf of those severely affected by the practice. Mary Ann V. Fuertes, executive director of Interface Development Interventions Inc. and one of the organizers of MAAS, said they would seek an audience with Lopez to present their case against the use of aerial spraying of pesticides. MAAS has been campaigning to ban aerial spraying, particularly in Davao City and other parts of Mindanao, for the protection of people in affected communities against

3.2 km

The average range of area reached by chemicals during aerial spraying as studies cited

chemical poisoning. The group is pushing for the passage of a measure that would effectively ban aerial spraying as a method of applying chemicals and similar substances on agricultural crops in the Philippines. Thousands of farmers continue to suffer the effects of what opponents of the method described as “poisonous rain” every time agricultural companies spray pesticides using aircraft. Agricultural companies running cavendish banana plantations practice aerial spraying to eliminate the Sigatoka fungus. It allows the companies to spray more areas of plantation in less time. “Aerial spraying showers down poison indiscriminately from the sky, hitting not only the target pests, but also anything, human or nonhuman, within the range of the toxic fallout,” Fuertes said. The group cited studies that toxic drift reaches 3.2 kilometers on the average. Farming communities complain that the practice makes them suffer various ailments, from skin infections to respiratory

illnesses, nausea, blindness and a host of other ailments, including goiter, neuro-developmental delays in children and various forms of cancer. They said people’s water resources get sprayed and contaminated. Livestock, as well as other crops, like lanzones, coconut and durian trees, die, the group claimed. Instead of aerial spraying, MAAS is urging agricultural companies to use various ground-spraying methods, such as truckmounted or manual spraying. Ground spraying, they said, would at least lessen the toxic drift and protect more people and the environment from pesticide contamination. During the recent Mindanao Environmental Summit, Lopez committed to use the power of her office to stop aerial spraying of pesticide and assured NGO leaders of action on their petition. “I am against anything where people suffer. It is the government’s duty to safeguard people’s welfare. And I am committed to this,” Lopez told the BusinessMirror in a text message. Lopez expressed concern over the health and well-being of affected banana-plantation workers and their families, as well. “I am concerned about the complaints of communities about the effect on their health,” she said. Lopez sought the help of members of the media and other stakeholders to provide the DENR with more details about effects on aerial spraying in communities near banana plantations. An environmental advocate, Lopez said she is willing to meet with concerned stakeholders to talk about the issue and how it affects the environment and cause suffering to people in the communities. She said she would ask Senior Environment Undersecretary Leo L. Jasareno, her designated point man for mining and environmental management, for appropriate action. Incidentally, just last week, the Supreme Court (SC) has struck down the

Davao City ordinance banning aerial spraying of pesticides. The measure was passed during the term of then-mayor and now President Duterte. The SC decision favored the Pilipino Banana Growers and Exporters Association Inc. (PBGEA) to declare the Davao City Ordinance 0309-07, series of 2007, invalid. The SC ruled the ordinance “unconstitutional.” Section 5 of the ordinance bans aerial spraying three months after the ordinance took effect on March 23, 2007. The SC decision said the ordinance violated the equal-protection clause in the Constitution when it prohibited aerial spraying regardless of the substance or the level of concentration of the chemicals to be applied and imposed the 30-meter buffer zone in all agricultural lands in Davao City regardless of the size of landholdings. The SC order also pointed out that the ordinance violated the rights of banana growers. According to Fuertes, the SC decision said the three months transition time is oppressive on the part of the plantation owners. However, she argued that at the deliberation in the Regional Trial Court (RTC) in Davao City, no less than the expert witness of PBGEA testified that shifting to ground spraying is possible and can be immediately done. Fuertes said laws, including Presidential Decree 1144, which created the Fertilizer and Pesticide Authority (FPA), needs to be revisited, because it appears the law and FPA appear to be a “toothless tiger” when it comes to regulating fertilizer and pesticide application in agriculture. “In so many dialogues with FPA, they said their mandate is so limited—review of registration application of pesticide and fertilizer manufacturers/distributors wanting to sell the chemicals in the Philippines,” she lamented. She noted that it was only during the height of the MAAS campaign that they came up with a guideline on aerial spraying.

DBCC bares tax-increase proposal for ‘unhealthy’ foods, oil products By David Cagahastian @davecaga

he Development Budget Coordinating Council (DBCC) has proposed to eliminate certain exemptions from the value-added tax (VAT), and impose higher taxes on sugar products, fatty foods and petroleum products to make up for the estimated P173.8 billion in foregone revenues from the planned lowering of the income-tax rates. At a briefing for the House of Representatives, Finance Secretary Carlos G. Dominguez III said the foregone revenues from the proposed lowering of income-tax rates for individual taxpayers and corporate taxpayers are estimated at P139 billion and P34.8 billion, respectively. To make up for these estimated foregone revenues, Dominguez said all exemptions from VAT

₧10 per liter

The amount of excise tax to be imposed on petroleum products, from the current P4.35, as part of the administration’s plan to make up for the P173.8 billion in foregone revenues after lower incometax rates should be repealed, except for goods and services, which relate to food in its original state, medical services and education. He said certain zero-rated VAT transactions from which claims for input VAT credit arise will also be eliminated. Finance Undersecretary Gil S. Beltran said the estimated revenue gain from eliminating most of the VAT exemptions will

already generate some P163 billion in revenues. “Our VAT rate is 12 percent and, yet, our collection from VAT only amounts to 4.2 percent our GDP,” Dominguez told the House of Representatives’s Committee on Appropriations. Another P18 billion in revenues is expected from the imposition of higher taxes on sugar products and fatty foods, which, according to Dominguez, will be akin to “sin” taxes, because these products contribute to unhealthy lifestyles among Filipinos. The government also intends to more than double the excise tax on petroleum products from the current P4.35 per liter to P10 per liter. This increase is expected to bring additional revenues of P178 billion. Dominguez said the P4.35 per liter excise tax on petroleum products is the rate of the excise tax

since 1997, and if such rate was indexed to the inflation that has crept in, the rate should already be at P10 per liter. He said it would be timely to raise the excise tax on petroleum products, while the world prices of oil continues to lag behind. Other proposed revenue sources are the imposition of additional tax on fatty foods, such as junk food for additional P20 billion in revenues, and the rationalization of fiscal incentives for additional P33.8 billion. Dominguez pointed out that the Duterte administration is not proposing new taxes to make up for the revenue shortfall expected with the proposed lowering of income-tax rates and the higher expenditures on infrastructure. Rep. Edcel Lagman of Albay, representing the minority during the committee hearing, pointed

out that the removal of certain exemptions from VAT would actually be an imposition of a new tax, which is contrary to the campaign promises of President Duterte. Among the VAT exemptions that could be repealed are those transactions relating to the sale or importation of fertilizers, seeds, seedlings and fingerlings; services rendered by regional headquarters of multinational corporations for their affiliates in the Asia-Pacific region; gross receipts from lending activities of multipurpose cooperatives; sale of real properties below P3 million, including condominium units; sale or lease of passenger cargo vessels and aircraft, including parts thereof; and services of banks, nonbank financial intermediaries performing quasibanking functions and other nonbank financial intermediaries.

Tourism marketing expert Enerio III retires after 36 years

OURISM marketing expert Domingo Ramon C. Enerio III has retired from the government after three decades of public service in various capacities addressing the tourism development of the country. Monday was Enerio’s last day as chief operating officer of the Tourism Promotions Board (TPB), an attached agency of the Department of Tourism (DOT) tasked with marketing the Philippines here and abroad. In a text message to the BusinessMirror, Enerio confirmed his retirement and said: “Thirty-six years na, time for a change.” A political science graduate from the University of the Philippines, Enerio had also served the DOT and its attached agencies, such as the Philippine Convention Bureau and Philippine Convention and Visitors Corp. He had also been tourism attaché for London, Frankfurt, Paris and Tokyo. In a message he posted on Facebook, Enerio explained his retirement: “I feel it is now

the right time for me to move on and explore opportunities in the private sector. While I will, hopefully, not be too far away from the tourism scene, and continue to involve myself in tourism marketing and promotions work, I also look forward to the free time resulting from retirement, and give myself a chance to focus on so-called apostolic duties and chores.” He added that his departure from TPB “will allow the new leadership to form its own marketing teams that will optimistically propel Philippine tourism to the next level. Toward this end, I encourage all to continue giving your unwavering support and cooperation to the DOT and the TPB, so that the vision of a stronger Philippine economy can be achieved through tourism.” DOT insiders said Tourism Secretary Wanda Corazon T. Teo has recommended lawyer Falconi V. Millar as COO of the TPB. Millar was legal counsel of the National Association of

Independent Travel Agencies Philippines Inc., which Teo had recently headed, before her appointment as Cabinet secretary. Sources close to President Duterte said, however, there are about 22 other applicants for the TPB COO post. Enerio’s retirement comes at a time just as the Department of Budget and Management (DBM) cut out TPB’s budget for 2017. The TPB is a government-owned and –controlled corporation established under Republic Act (RA) 9353, otherwise known as the Tourism Act of 2009. Under said law, the DBM is supposed to allocate P500 million to the TPB annually. This year, aside from the mandated allocation, the TPB has a P1.64-billion Tourism Promotions Fund, also provided by the law. (See related story above.) Government sources said the DBM didn’t allot any budget for the TPB in 2017 because it will have “a lot of ending balances (i.e., unspent funds) from 2016. The TPB will just have to

liquidate these since the DBM hasn’t remitted in full the agency’s allocations anyway.” The TPB will just have to “bank on the remittances from Duty Free Philippines and from Pagcor [Philippine Amusement and Gaming Corp.]” to fund its projects in 2017, the same sources added. Under RA 9353, the TPB is entitled to a 25-percent share of 50 percent of what Pagcor remits to the national government. The TPB has been at the forefront of the “It’s More Fun in the Philippines” brand campaign of the DOT, and has actively participated in major international travel and tourism expos, such as ITB Berlin, the World Travel Market in London. It also helped organize the annual Madrid Fusion Manila, MTV Music Evolution and the recent World Street Food Congress. It implemented the Visit Philippines Year 2015 and the Visit Philippines Again 2016 campaigns, as well as hosted the Asean Tourism Forum 2016. Ma. Stella F. Arnaldo

news@businessmirror.com.ph

AseanTuesday BusinessMirror

‘More baht gains may hurt Thai recovery’

hailand’s central bank is concerned further appreciation of the baht will hurt exporters and damage the nation’s economic recovery. The currency advanced to the strongest level in 13 months last week, as overseas investors boosted their holdings of the country’s stocks and bonds this year. Exports have contracted in 16 of the past 18 months, prompting Prime Minister Prayuth Chan-Ocha to increase spending to counter the slump. The currency has also rallied, as investor confidence was bolstered by the peaceful approval of a new constitution in an August 7 referendum. “To date, the appreciation of the baht might have dampened the cash flows of Thai exporters,” Bank of Thailand Assistant Governor of Financial Markets Chantavarn Sucharitakul, said in an e-mail interview. “Further strength in the baht might also derail the recovery of the Thai economy—a concern which the Bank of Thailand has to monitor closely.” The baht was at 34.72 per dollar as of 10:35 a.m. in Bangkok, having gained 3.8 percent this year. It appreciated to 34.50 on August 19, the strongest since July 2015. Funds based overseas boosted their holdings of the nation’s stocks and bonds by $13.3 billion this year, according to exchange data. Emerging-market currencies, including the baht, have rallied on optimism

that global central banks will keep monetary policy accommodative to support growth. “Given that the inflows are externally driven, the reversal process is inevitable and the best that a recipient economy can do is to ensure that it is resilient and sufficiently well balanced to be able to absorb shocks, emanating from both sides be they inflows and outflows,” Chantavarn said. Thailand’s economy grew more in the second quarter than analysts predicted, expanding 3.5 percent from a year earlier, the National Economic and Social Development Board said last week. The authorities are resorting first to “verbal intervention” to restrain excessive appreciation of the baht, said Charlie Lay, a currency analyst at Commerzbank AG in Singapore. Another option is to relax foreignexchange regulations further to encourage capital outflows, he said. The central bank in July allowed investors with assets greater than 100 million baht ($2.9 million) to invest in securities and derivatives overseas without going through a Thai intermediary. “The bottom line is they’ll probably want to keep the Thai baht stable on a relative basis against its major trading partners,” Lay said. The currency will weaken to 35.4 per dollar by year-end, according to the median estimate in a Bloomberg survey. Bloomberg News

Editor: Max V. de Leon • Tuesday, August 23, 2016 A5

Indonesia weighs dins of tax dodgers vs threat to investing

ucipto Hidayat’s poultry |house started with just five chickens. Thirteen years later, the Indonesian farmer has more than 14,000 egg-laying hens, yet has had to put plans to double his farm’s production on hold.

Instead, he needs to save money to cover previous omissions in paying his taxes, in order to take advantage of a government-amnesty program, aimed at increasing the number of Indonesians who pay up. Just 900,000 of 255 million residents submitted a tax return in 2014. The government plan seeks to get more to do so now, paying a penalty rate of 2 percent to 10 percent. “When I expand my business, that should count as building my country, the same as when I pay my taxes,” Hidayat, 36, said by phone from his farm on the outskirts of Singkawang, Kalimantan. “It’s not that I disagree with the tax amnesty, but right now it just feels like taking money from our left pocket and putting it in our right pocket.” His plight underscores Finance Minister Sri Mulyani Indrawati’s

delicate balancing act: She wants to boost tax revenue, while encouraging local businesses to invest and spur economic growth. The government estimates the amnesty will bring in as much as 165 trillion rupiah ($12.5 billion) of revenue from local and foreign sources. Some 83 percent of assets submitted to the program since it started in July is from onshore, including from small- to mediumsized companies, like Hidayat’s farm.

She’s back

The return in July of Indrawati, 53, who built an image as a tough reformer when she served as finance minister six years ago, was lauded as a boost to Indonesia’s plan to crack down on tax avoidance. But this time, she’s choosing a softer approach to managing the nation’s finances,

saying that restoring confidence on the budget is her main priority and pledging to earn the people’s trust in the government. “From the government point of view, the most important is you want to get the confidence back and the response from the private sector,” she said. “First, of course, you’re just making sure your policies aren’t going to hamper them.” Indrawati will focus on drafting clear policies while improving collectors’ conduct, including by ensuring taxpayers don’t experience “harassment by government officials,” she said. During her previous tenure as finance minister, she began a corruption investigation into the tax office.

Fairly upheld

“After the amnesty, the tax rules must be upheld fairly for everyone,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta, the nation’s-largest lender by market value. “The system shouldn’t be complicated, as that can create multiple interpretations and give room for unscrupulous tax officers.” The finance ministry will balance its target to raise tax inflows with fiscal incentives and tax holidays for businesses, Indrawati said in a speech last week in Jakarta. The

government this year lifted its taxrevenue target to 13.3 percent of GDP from about 11 percent. Southeast Asia’s largest economy has expanded by about 5 percent for the past 10 quarters, struggling to pick up toward President Joko Widodo’s 7-percent target. That goal is becoming less achievable as his administration plans further spending cuts, a move that last week prompted the central bank to lower this year’s growth estimates from as high as 5.4 percent previously to a range, from 4.9 percent to 5.3 percent.

Big spender

Government spending remains Indonesia’s primary growth driver, jumping 36.2 percent in the second quarter from the previous period. That compares with just 1.28 percent growth in household consumption, which accounts for more than half of the nation’s GDP. “Not compromising on infrastructure is so important,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. Indonesia needs to ensure “taxpayers see the link between higher revenue funding government expenditures that lead to a strengthening of the economy and lowering of business costs, instead of more leakages and corruption.” Bloomberg News

The W

Business

A6 Tuesday, August 23, 2016 • Editor: Lyn Resurreccion

briefs

U.K. unemployment fell in run-up to Brexit vote

LONDON—The number of unemployed people in Britain dropped in the three months through June, though not enough to bring down the jobless rate from 4.9 percent, its lowest level since 2005. The Office for National Statistics said on Wednesday 52,000 fewer people were unemployed than the previous quarter and 207,000 less than a year earlier. Average pay was 2.4 percent higher than a year earlier. That’s more than inflation, which is running at 0.6 percent. Most of the period fell before Britain’s June 23 vote to leave the European Union, which has sent uncertainty rippling through the economy. Analyst Howard Archer of IHS Global Insight said, “It remains likely that softening economic activity and heightened uncertainty will take a toll on the labor market in the coming months.” AP

Lack of drugs is obstacle for Nevada death penalty

LAS VEGAS—Nevada officials face yet another obstacle in carrying out the death penalty if they needed to do so. One of the two drugs that make up a cocktail in the lethal injection has expired, and the pharmaceutical company that produces it refuses on principle to give the state any more. The lack of drugs is another hurdle for a state that hasn’t had a working execution chamber since 2011. A new chamber is under construction in Ely at a cost of $858,000 and should be ready on November 1. There are 80 people on the state’s death row, but none have exhausted their appeals. Nevada hasn’t had an execution since 2006. Officials with the Nevada Department of Corrections say they’re putting out requests for companies willing to supply lethal injection drugs. AP

France’s ex-econ chief will run for president

PARIS—France’s former economy minister, who fell out with President François Hollande, has announced he will be a candidate for president next year. Socialist Arnaud Montebourg, 53, said in a speech on Sunday Hollande’s record “is indefensible.” Hollande has not said whether he will stand for reelection. Montebourg, Hollande’s minister from 2012 to 2014, lost his portfolio amid feuding over economic policy, because he denounced German-style austerity as the wrong medicine to foster growth. “The European Union is in the situation of a bankrupt business that needs a reform to be saved,” Montebourg said on Sunday. As minister, he introduced a measure to broaden the government’s authority to intervene when foreign companies want to buy firms the state considers vital, including in the sectors of transport, health and communications. AP

Ex-aide to NY Gov. Cuomo among 5 killed in crash

MANORVILLE, New York—A driver lost control and struck two other vehicles on a major Long Island roadway on Sunday, and the police said a former aide to New York Gov. Andrew Cuomo and four other people, including a 10-year-old boy, were killed and six others were injured. Among those killed was Scott Martella, 29, of Northport, a communications director for Suffolk County Executive Steve Bellone and a former aide to Cuomo. The accident happened around 9:30 a.m. on Sunday on the Long Island Expressway, near Manorville. The police said the driver of an eastbound Subaru Outback, Carmelo Pinales, 26, of Hicksville, apparently lost control of his vehicle, crossed the grassy median, went airborne and struck. AP

South Korean protesters stage a rally demanding to stop the joint military exercises of Ulchi Freedom Guardian, between the US and South Korea near US Embassy in Seoul, South Korea, on Monday. AP/Ahn Young-joon

S. Korea, US start drills despite N. Korea’s nuclear-strike threat

EOUL, South Korea—South Korea and the United States began annual military drills on Monday, despite North Korea’s threat of nuclear strikes in response to the exercises that it calls an invasion rehearsal.

75,000 The total number of American troops and South Korean soldiers involved in the military training

Such fiery rhetoric by Pyongyang is not unusual. But the latest warning comes at a time of more tension following the defection of a senior North Korean diplomat and a US plan to place a high-tech defense missile system in South Korea. The North’s military said in a statement on Monday it will turn Seoul and Washington into “a heap

of ashes through a Korean-style preemptive nuclear strike” if they show any signs of aggression toward the North’s territory. The North’s “first-strike” units are ready to mount retaliatory attacks on South Korean and US forces involved in the drills, according to the statement, carried by Pyongyang’s state media. South Korea’s Unification Ministry expressed “strong” regret over the North’s warning, saying the drills with the US are defensive in nature. Seoul and Washington have repeatedly said they have no intentions of invading Pyongyang. The Ulchi Freedom Guardian drills that began on Monday for a 12-day run are largely computersimulated war games. The training involves 25,000 American troops and 50,000 South Korean

Britain’s Labour Party likely to keep its leader

ONDON—Voting begins this week in the contest to be leader of Britain’s main opposition Labour Party, with Jeremy Corbyn the clear favorite to keep his job, even though he’s lost the backing of most Labour members of Parliament. Labour has been in turmoil since Corbyn, who espouses a traditional socialist platform, surprisingly won the leadership in September 2015. The crisis deepened after June’s referendum on leaving the European Union (EU), with pro-EU Labour lawmakers accusing Corbyn of not campaigning effectively to keep Britain in the bloc. Most of his shadow Cabinet resigned, and then he lost a confidence vote among Labour MPs before being challenged by his former work and pensions Spokesman Owen Smith. A Corbyn win would raise the possibility the party might split. Smith got a boost on Sunday w it h t he bac k ing of L ondon Mayor Sadiq K han, the most powerful Labour politician to hold elected office.

Corbyn is “extremely unlikely” to lead Labour back to power, Khan wrote in the Observer newspaper. “Jeremy’s personal ratings are the worst of any opposition leader on record—and the Labour Party is suffering badly as a result,” the mayor said. “I am afraid we simply cannot afford to go on like this.” Hundreds of thousands of party members and registered supporters will receive e-mail or postal ballots starting on Monday. The vote ends on September 21, with the result expected to be announced three days later. The expansion of the party base with new predominantly left-wing members and supporters attracted by Corbyn has left it increasingly at odds with centrist Labour lawmakers. Some members of Parliament have complained about abuse on social media. Jess Phillips, who represents a district in Birmingham in the West Midlands, has suggested she may quit Labour and sit as an independent if Corbyn is reelected. The crisis in Labour is the worst since the early 1980s, when it was

also riven by splits between left and right. At that time, four leading centrists broke away to set up the Social Democratic Party with some initial electoral success. The Sunday Times newspaper reported that opponents of Corbyn are planning to set up a rebel group in Parliament to coordinate defiance of the leader from within the party as an alternative to a breakaway if he is reelected. Before the start of voting, Corbyn announced proposals to switch more power from Parliament to local councils and regions, and to replace the unelected House of Lords with an elected second chamber. He also proposed increasing workers’ rights and giving unions more power to negotiate pay deals with employers. “I am determined to democratize our country from the ground up and give people a real say in their communities and workplaces,” Corbyn said in an e-mailed statement. “That has to change—so that the country works in the interests of the millions, and not just the millionaires.” Bloomberg News/TNS

soldiers, according to the US and South Korean militaries. The drills come just days after Seoul announced that Thae Yong Ho, No. 2 at the North’s embassy in London, had recently defected to South Korea because he was disillusioned with the North’s leadership. Pyongyang’s state media called him “human scum” and a criminal who had been ordered home for a series of alleged criminal acts, including sexually assaulting a minor. South Korea’s President Park Geun-hye said on Monday there were signs of “serious cracks” in the North’s ruling elite class after defections of key figures she didn’t identity. Park told a security meeting that Pyongyang could carry out

cyber attacks or other provocations on South Korea to divert public attention away from such domestic problems. Many analysts said Thae’s defection was an embarrassment to the North Korean government of leader Kim Jong Un, but would not weaken the unity of the country’s elite class. North Korea has already boosted its war rhetoric because of the planned deployment of the US Terminal High-Altitude Area Defense system in South Korea, which Washington and Seoul says is needed because of the increasing North Korean threats. About 28,500 US troops are in South Korea to help deter potential aggression from North Korea, a legacy of the 1950-1953 Korean War that ended with armistice, not a peace treaty. AP

China stages live firing drills in Tonkin Gulf amid dispute tensions

EI J I NG — C h i n a’s coa st guard launched live-firing exercises in the Tonkin Gulf on Monday, the latest in a series of military drills that come amid renewed tensions among disputants to territory in the South China Sea. The Maritime Safety Administration said ships and boats were barred from the area between its southern island province of Hainan and the northern coast of Vietnam from Monday to Wednesday. China’s nav y and air force have held a series of drills in surrounding waters since an international arbitration panel issued a ruling last month invalidating China’s claim to virtually the entire South China Sea. China angrily rejected the ruling and said it would begin flying regular air patrols over the strategic waterway while continuing to develop

airstrips, harbors and other infrastructure of military value on man-made islands it controls in the disputed Spratly group. On Sunday China said its planes and ships held war games in the Sea of Japan last week, during which it deployed its latest-generation frigate. Beijing didn’t say who the latest military drills were targeting or why the Sea of Japan was chosen as the location. However, China has grown increasingly assertive over its claim to a chain of uninhabited islands controlled by Japan, recently dispatching more than a dozen coast guard vessels to the area as Chinese fishing vessels swarmed the surrounding waters. China also plans joint naval exercises with Russia in the South China Sea next month in a move criticized by the US as harming regional stability. AP

World

sMirror

www.businessmirror.com.ph | Tuesday, August 23, 2016

Europe plans for life after Brexit

he Italian aircraft-carrier Giuseppe Garibaldi usually patrols the Mediterranean as the flagship of the European mission to save shipwrecked refugees. On Monday it will host the leaders of Germany, France and Italy as they try to ensure the European Union (EU) doesn’t founder in the aftermath of Brexit. The meeting of Angela Merkel, Francois Hollande and Matteo Renzi off the coast of Naples will be rich in symbolism. The Garibaldi is named after the general who helped unify the Italian state in the 19th century, and today it is tackling one of the greatest challenges to the European project in migration. Before they are helicoptered aboard from the island of Ventotene, the leaders will visit the grave of Altiero Spinelli, an antifascist who helped draft a 1941 manifesto calling for a federal Europe. Spinelli wrote on cigarette papers smuggled out of a prison camp on Ventotene while interned during World War II and later became an EU commissioner. The talks between Europe’s present-day leaders will focus on both the future vision of Europe and immediate challenges, such as Brexit, economic growth, terrorism and the political turmoil in Turkey, as well as migration. The three heads of government will hold a news conference and then have dinner on board the Garibaldi.

Merkel whirlwind

For Merkel, the meeting marks the start of a whirlwind week of diplomacy. Criss-crossing Europe, she will talk to another 13 leaders between Wednesday and Saturday as she canvases opinion before more concrete discussions at a summit of 27 memberstates in Bratislava next month. That event is planned to discuss a path forward for the EU without Britain. “She wants to have as broad a discussion as possible with as many of the actors involved,” Merkel ’s spokesman, Stef fen Seibert, said on Friday. The German chancellor has had to balance her international efforts with domestic concerns

ahead of state elections in Mecklenburg-Western Pomerania on September 4. Merkel’s approval rating has dec lined since she welcomed about a million refugees to Germany last year. European officials are concerned the EU’s deal with Turkey to stem migrant f lows through Greece may be in jeopardy following the failed coup attempt last month.

Budget divisions

As ever, relaunching the EU economy may be a divisive topic. Italy wants European governments to do more to boost economic growth and is anticipating resistance from Germany, though French officials are expecting to find a budget formula that can keep both their counter parts happy without bending the rules. “We seek a different, more expansionary economic policy at the European level,” Sandro Gozi, Renzi’s junior minister for European affairs, said in an interview. “On this there is agreement with the French. There is work to be done with the Germans.” Gozi also called for “a Schengen of security and defense” to allow EU states to reinforce their cooperation as they do in the Schengen open-border area. European nation states are seeking new ways to collaborate to bind the bloc more tightly together following the UK’s decision to leave. French officials say there may be few developments on Brexit itself because EU members are waiting for the UK to start the formal process. Talks may begin in earnest in the early part of next year, with British Prime Minister Theresa May triggering Article 50, the exit mechanism, by April, two UK officials said last week. Swedish Prime Minister Stefan Loefven on Sunday urged the UK not to introduce dramatic cuts to corporate taxes in the run up to Brexit. In an interview posted on her party’s web site on Thursday, Merkel said she regretted the “irreversible” Brexit decision. “Now we have to negotiate according to our own interests,” she added. Bloomberg News

Trump ‘wrestling’ with how to deport 11 million people

ides to Donald Trump suggested on Sunday that the Republican presidential nominee might be reconsidering his campaign promise to round up and deport 11 million people who are in the United States illegally. His new campaign manager, Kellyanne Conway, was asked on CNN’s State of the Union if Trump still wants a “deportation force” to remove everyone in the country illegally. “To be determined,” she said. Trump is “wrestling” with how to remove those in the country illegally, Sen. Jeff Sessions, Republican-Alabama, an adviser to Trump on immigration matters, said on CBS’s Face the Nation. The aides’ comments appeared to be the latest sign that Trump’s newly insta l led management team may be trying to broaden his appeal to stem his steady fall in the polls with less than three months until Election Day. Trump has never explained how he intended to find, detain and deport millions of people, many of whom have built businesses and started families in the US, or how he would pay for it even if it passed judicial scrutiny. He has compared his proposal to “Operation Wetback,” a controversial program carried out in 1954 under President Dwight D. Eisenhower. More than 1 million people were apprehended, most ly f rom border areas in Texas and California, and sent back to Mexico.

Any easing of Trump’s hardline stance on immigration— which a lso includes building a wall along the border with Mexico and temporarily bann i n g Mu s l i m i m m i g r a nt s — could alienate some of his most ardent supporters. After a year of using harsh rhetoric against Latinos, such as calling Mexican migrants rapists and repeatedly attacking a federal judge as unfair because his family was from Mexico, polls show he faces intense opposition among Latinos. His campaign, thus, has moved in recent days to soften his edges and to try to shift attention past the turmoil caused by the shakeup of his top management team last week. In Charlotte, North Carolina, Trump announced “regret” that some of his heated comments—he didn’t say which—may have caused personal pain. In Fredericksburg, Virginia, he said the Republican Party must “do better” to reach out to African American voters. And in New York City on Saturday, Trump told his campaign’s newly named Latino advisory council that he wants to find a “humane and efficient” solution to deal with illegal immigration. He “did not make a firm commitment” to the group on how deportations would work, Sessions said. Trump is expected to speak about immig ration polic y on Thursday in Colorado. Conway said he will be more specific on his immigration plan “as the weeks unfold.” TNS

People cross a street in Tokyo. AP/Koji Sasahara

Worst decline since quake

Trouble looms for Japan earnings

fter first-quarter earnings in Japan wrapped up this month with the steepest plunge since 2011, the prospect for an increase in annual profits is about to get even dimmer. Expect a round of corporate earnings downgrades in September, said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities. Trends that slammed profit in the first quarter—a stronger yen, negative interest rates and slumping China growth—haven’t reversed. At stake is a second straight year of earnings decline that cou ld bur y Pr ime Minister Shinzo Abe’s push for companies to boost capital spending and raise wages to spur economic growth. “A lot of companies may be lowering their forecasts in September,” Fujito said. A slower recovery in the US economy than some had expected is also weakening the outlook for Japan’s carmakers and other exporters, he said. As of the end of the first-quarter earnings-reporting season in mid-August, Japan’s biggest companies were projecting aggregate net income of about ¥16.2 trillion ($162 billion) for the year ending March, a 7-percent gain from the ¥15 trillion the same firms reported for the previous 12 months. The estimate is based on projections by almost

17 percent The decline in percentage of aggregate operating income in the June quarter, the biggest quarterly decline since 2011 200 companies on the benchmark Nikkei 225 Stock Average, compiled by Bloomberg. Analyst forecasts also show expectations for a gain. One catch: Most of the forecasts were made months before the first-quarter results were in. With negative interest rates grinding away bank profits and a stronger yen bearing down on carmakers, aggregate operating income plummeted 17 percent in the June quarter, the biggest quarterly decline since 2011. That’s the year an earthquake in Fukushima and subsequent tsunami caused the yen to gain and stocks to drop. The five biggest diversified lenders alone reported a combined ¥372 billion drop. That’s more than double the combined

operating income of Sony Corp., Panasonic Cor p., Nikon Cor p., Casio Computer Co. and Pioneer Cor p. Meanwhile, the six biggest carmakers reported a ¥130 billion decline, the next-largest decline by segment. Some of the biggest Japanese names have already acknowledged a worsening outlook. Toyota Motor Corp., Canon Inc., Shiseido Co. and Fast Retailing Co. are among the companies that slashed their profit outlook for this year, citing the effect of a stronger currency on overseas earnings. The Japanese currency has appreciated 2.5 percent against the dollar since the end of the fiscal first quarter in June. That’s in addition to a 17-percent surge between the beginning of the year and June 30. Nor are banks expected to help make up for manufacturers’ declines. “I don’t think there could be any chance for banks to improve their profitability,” said Nana Otsuki, chief analyst at Monex Group Inc., a Tokyo-based online securities firm. Negative interest rates, part of the Bank of Japan’s effort to stymie deflation, will continue to constrain banks’ margins, she said. There is another reason to believe projections calling for an annual gain don’t broadly ref lect Japan Inc.’s prospects. All the forecast increase can be accounted for by Toshiba Corp.’s rebound f rom an accounting scandal that led to a ¥460-billion net loss last fiscal year, combined with the reversals of annual deficits at three large

trading companies hurt by declines in prices for commodities, such as oil and steel.

Bull case

Still, some see the Japanese currency reversing course and providing some relief for earnings. Naoki Murakami, a strategist at AllianceBernstein Japan Ltd., said the yen may yet begin to weaken versus the dollar on the likelihood of an interest rate increase by the Federal Reserve (the Fed). “My view is for the dollar to strengthen against the yen from here, riding on the likelihood of a rate hike by the Fed, which will lead to a recovery in export earnings,” Murakami said. Yen drops have been a reliable tailwind for Japan Inc. over the past three years, helping to power an equities rally. Yet, even when exchange rates pushed profit to record levels—as they did in fiscal 2015—many companies hesitated to follow Abe’s exhortations to raise wages and capital spending to spark the economy out of its decades-long funk. The first-quarter profit plunge this year underscores that such reluctance was probably warranted, as the yen also rises. “Current yen levels are very challenging compared to what they were last year during the September quarter,” said Shingo Ide, chief equity strategist at NLI Research Institute in Tokyo. “If the yen continues to trade near the 100 level to the dollar toward the end of October, companies will be forced to lower their outlooks.” Bloomberg News

Canada eyes relaxing rules to attract Chinese investment

anada may consider relaxing its foreign-investment rules—including steps to open up to state-owned enterprises in China—in a bid to attract more capital and spur economic growth, Finance Minister Bill Morneau said. Morneau spoke to reporters on Sunday in Sudbury, Ontario, at a Cabinet meeting ahead of the Group of 20 (G-20) leaders’ summit in China in early September. He and Prime Minister Justin Trudeau will attend, along with other senior Canadian officials. A sked about rev iew ing restrictions on the ability of state-

owned enterprises, such as those in China to acquire Canadian oil assets, Morneau didn’t rule out such changes. He said his government expects to discuss with its Chinese counterparts how to spur more investment in Canada. “We will express a continued interest in having a renewed relationship with China. In that regard, we’ll be talking about how we can work together,” Morneau said. “Those questions will be things that we’ll talk about, and our view will be that we’ll try and find ways that we can continue to encourage investment in our country.” Former Prime Minister Stephen

Harper, whose Conservative Party was beaten by Trudeau’s Liberals in 2015, approved the $15.1-billion sale of oil and gas company Nexen Inc. to China’s Cnooc Ltd. in 2012. At the same time, he introduced a measure that the government in the future would only allow a state-owned enterprise to acquire an oil sands company under “exceptional circumstances.” Trudeau and Morneau will lead the Canadian delegation on an official visit to China, leaving later this month on a trip that also takes in the September 4 and 5 G-20 Leaders’ Summit in Hangzhou. Trudeau has said he aims to “promote greater

dialogue” between the countries, while G-20 leaders will focus on ways to spur global growth. “Our goal will be to be communicating to the world why they should be investing in Canada,” Morneau said on Sunday. “We see Canada as a real beacon for investment globally, a country with low political risk, a highly skilled work force, and that’s something we want to communicate to G-20 countries.” Canada’s economy has struggled recently with low growth triggered in large part by slumping oil prices that have sapped investment and employment in its once-booming energy sector. Bloomberg News

Tuesday, August 23, 2016 • Editor: Lyn Resurreccion

The World

Central Baghdad clears site of deadly mall bombing

AGHDAD—Traffic began to file through central Baghdad’s busy Karradah Street on Sunday for the first time in nearly two months. After the July 3 attack that killed close to 300 people, the street was sealed off and within days the shells of the charred buildings around the scene of the blast were covered in death notices. For weeks after the attack, grieving families and loved ones gathered at the site to light candles in the evenings, others marched in protests. Local Baghdad authorities began to sweep all of that away on Saturday after a group of local officials visited the site. By Sunday morning the streets were almost entirely cleared. “Today we must return to our normal lives and work,” said Silwan Walid, a 29-year-old perfume-shop owner, who works on the street. Walid said watching construction equipment haul off broken glass and charred debris gave him hope for the future. “Now we feel like life can return to normal again and we can go back to providing our families

with a decent living,” he said, referring to his shop that has been unable to reopen while the site was blocked off. Three teenage boys walking by the site remembered a friend killed in the blast. He was working at one of the clothing stores in Laith mall. They said they don’t want to forget their friend, but seeing the bombed-out buildings in the middle of their neighborhood every day has made it more difficult to move on. “I don’t want to see these shops [like this],” Yousef Omar, a 13-year-old student, said, “when I see this destruction, it brings back my sadness like new.” A team of engineers at the site said the reconstruction project would take at least four months. One of the most difficult aspects will be determining which buildings can be restored and which will need to be completely demolished, said Saleh al-Obeidi, one of the engineers. The Karrada disaster put the Iraqi government under intense pressure, both to improve security in the capital and to reign in rampant corruption. AP

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Child bomber in Turkey: Use of children not an isolated case

EIRUT—The suicide attacker who detonated his explosives amid an outdoor Kurdish wedding party in southeastern Turkey, killing at least 51 people, was an Islamic State (IS) group child as young as 12 years old.

The extremist group has a history of using children as weapons, sending them to t hei r deat h st rapped with explosives and putting them on front lines in Iraq and Syria. The group maintains an army of child soldiers, which it calls “cubs of the caliphate,” and seeks to reeducate children at IS-run schools, indoctrinating them with

the group’s own radical version of Islam and exposing them to violent acts, including beheadings, as part of a concerted effort to build a new generation of militants. IS v ideos have show n boys killing IS opponents t hrough behead ings a nd shootings. But the practice is not restricted to IS and has been used by other militant groups. Here’s a look at some:

Islamic State group

The group has deployed child suicide bombers to stage attacks in both Iraq and Syria. Among the most deadly attacks was a bombing at a youth soccer game at a stadium south of Baghdad on March 25. A bomber—believed be a teenager— detonated his explosives as officials were handing out trophies to players after the tournament, killing 29 and wounding 60. IS claimed responsibility and released a photo of the attacker, in which he appears to be no more than 16 years old. Nearly half of those killed were also children, participating in the soccer game or cheering from the stands. The United Nation’s children’s agency, United Nations Children’s Fund (Unicef), said in a recent report that thousands of children have been abducted in Iraq. Girls, the group says, are at greatest risk of being sold into sexual slavery, while boys are often forced into becoming combatants or suicide bombers.

Boko Haram

Human-rights groups and Unicef report a dramatic increase in Boko Haram’s use of children as suicide bombers. In a report earlier this year, Unicef said one in five suicide attacks claimed by the militant group across Nigeria, Cameroon and Chad are now carried out by children. In Nigeria Human Rights Watch said since Boko Haram began its attacks in 2009, it has recruited hundreds, and possibly thousands, of youngsters and used dozens, mostly girls, as suicide bombers.

Al-Qaeda

The global terror network has a history of recruiting children and training them to be suicide bombers. The leader of al-Qaeda in Iraq, Abu Musab al-Zarqawi, used teenagers as suicide bombers to fight the American occupation in Iraq before he was killed in a US airstrike in 2006. Al-Qaeda in Iraq eventually developed into what today is IS.

Radical Palestinian groups

H amas, Islamic Jihad and other militant groups run summer camps that seek to indoctrinate Palestinian children with violent anti-Israel ideologies. These groups have not sent young children on suicide missions, though during the second Palestinian uprising in the early 2000s, several Palestinians as young as 16 carried out suicide bombings. In the current, months-long wave of violence, dozens of Palestinian teenagers have carried out or been accused of carrying out stabbing attacks on Israelis, with the youngest perpetrator just 11 years old. The attackers are believed to have acted individually and were not sent by organized groups.

Yemen

In Yemen, home to one of the world’s most heavily armed civilian population, boys often learn how to handle weapons at an early age. In the country’s current conflict, irregular forces from both the pro-government and rebel sides have incorporated teenagers into their ranks. AP

Venezuela’s military stronger during crisis B

OGOTA, Colombia—Venezuela’s opposition has promised to hold a huge demonstration in the capital on September 1, demanding a presidential recall during a deep political and economic crisis that has many going hungry and emotions on edge. One question looms: Will the military allow the protest? “We’re betting that it will be the largest gathering in the country’s history, and the armed forces are going to have to choose,” said opposition deputy Armando Armas. “Are they really on the side of the people and the constitution?” No one knows for sure whether the military will stand by as people are bused into Caracas to exercise their right to peaceful dissent. But many Venezuelans fear the armed forces are likely to close ranks around the administration and do their best to keep the protesters from turning into a meaningful mass. The military has many reasons to support President Nicolas Maduro, including duty, prestige and perks. They have their own food-distribution systems, so they don’t have to suffer through the daylong lines that average citizens face. And they also have their own hospitals—presumably ones that aren’t lacking medicine and supplies. Analysts say the military’s privileges and future are so tied to the ruling United Socialist Party of Venezuela that they’ve lost their primary function as defenders of the Constitution. The military has so much power, and so many economic and political interests, that “we’re living in a barracks nation,” said Luis Alberto Butto, director of the Latin American Center for Security Studies at Simon Bolivar University in Caracas. Eleven of the country’s 20 rulingparty governors are ex-military, and 12 Cabinet positions are also in the hands of either active or retired military officers. The military owns television stations, cargo companies, insurance firms, import-export enterprises and other businesses. “The military is a preponderant force, politically, economically and in the corporate world, and they’re out to defend their interests,” Butto said.

“Under these circumstances, democracy is something of a myth, a symbol. It’s not real. And that’s Venezuela’s reality right now.” Since Hugo Chavez, a former tank commander, won the presidency in 1999 and brought his colleagues with him, the military’s star has risen. When Maduro—a former bus driver and union organizer—succeeded Chavez’s successor in 2013, many wondered what would happen to the military’s power. Maduro himself, in December, talked about the need to “demilitarize” the administration. That never happened. Maduro last month appointed Gen. Vladimir Padrino Lopez, the defense minister, to run the “Sovereign Supply Mission,” which has the task of ending the country’s food and medicine shortages. In addition, he ordered all the other ministries be “absolute subordinates” to Padrino’s new office. By making Padrino responsible for the country’s most sensitive issue—the lack of food and medicine—it puts the military on the hook for the protests arising from the problem. There are also darker reasons for the military to support the status quo. For years, there have been rumors and allegations that the armed forces are deeply involved in the drug trade, contraband and black market currency sales. This month, Gen. Nestor Reverol, the former head of Venezuela’s counternarcotics agency, was indicted by federal prosecutors in New York on charges of trafficking drugs to the United States. The next day, Maduro named him interior minister. On Tuesday Venezuela sentenced 10 people, including three national guard members, to 22 years in prison for their roles in shipping 3,000 pounds of cocaine to Europe on an Air France flight in 2012. In a sense, the rot is understandable, said Jose Antonio Colina, a former army lieutenant who is a vocal government critic living in Miami. A captain in the army makes about $33 a month, he said. “A military salary won’t even buy you food, so they’ve had to rely on these networks of corruption,” he said. TNS

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Tuesday, August 23, 2016

‘Well-timed’ Opec talk forces oil bears into record reversal

he Organization of Petroleum Exporting Countries (Opec) has done it again. Talk of a potential deal to freeze output helped push oil close to $50 a barrel and prompted money managers to cut bets on falling prices by the most ever.

West Texas Intermediate (WTI), the US benchmark, went from a bear to a bull market in less than three weeks. Opec is on course to agree to a production freeze because its biggest members are pumping flat-out, said Chakib Khelil, the group’s former president. Saudi Energy Minister Khalid Al-Falih said the talks might lead to action to stabilize the market. “This is all courtesy of some very well-timed comments from the Saudi oil minister,” said John Kilduff, partner at Again Capital Llc., a New York hedge fund focused on energy. “They’ve been successful over the last year in jawboning the market, and this is the latest example.” Hedge funds trimmed their

$50

The price of a barrel of oil was pushed close to this level after talk of a potential deal to freeze output short position in WTI by 56,907 futures and options during the week ended on August 16, the most in data going back to 2006, accord ing to the Commod it y Futures Trading Commission. Futures rose 8.9 percent to

$46.58 a barrel in the report week and traded at $47.82 at 7:04 a.m. in London on Monday. WTI is up more than 20 percent from its August 2 low, meeting the common definition of a bull market. “This was a very short market so we were bound to get some covering,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. “You probably won’t hear a lot from Opec with prices up here, but if we get down to where we were a few weeks ago, we can expect to hear more.”

Informal talks

The Opec plans to hold informal talks to discuss the market at the International Energy Forum next month in Algiers. Russian Energy Minister Alexander Novak said that the nation was open to discussing a freeze. Talks to implement a production freeze collapsed in April when Saudi Arabia said it wouldn’t take part without Iranian participation. Iran was restoring exports after sanctions over its nuclear program were lifted in January. Saudi Arabia, Iran, Iraq and nonmember Russia are producing at, or close to, maximum capacity, Khelil

said in a Bloomberg Television interview on August 17. Saudi Arabia told Opec that its production rose to an all-time high of 10.67 million barrels a day in July, according to a report from the group.

Ample stockpiles

Declining crude and gasoline stockpiles in the US also bolstered the market last week. Crude supplies dropped by 2.51 million barrels as of August 12, Energy I n for m at ion A d m i n i st rat ion data show. Gasoline inventories slipped 2.72 million barrels during the period. Stockpiles of both crude and gasoline remain at the highest seasonal levels in decades even after the declines. “ There’s a high level of uncertainty right now, so fairly small news can move the market a lot,” said Michael Lynch, president of Strategic Energ y and Economic Research in Winchester, Massachusetts. “It still remains the case that we have a huge sur plus of supply and aren’t going to see it disappear anytime soon.” Money managers’ short position in WTI dropped to 163,232 futures and options. Longs, or bets on rising prices, increased 0.1 percent, while net longs ad-

vanced 56 percent, the most since July 2010. In other markets, net-bearish bets on gasoline climbed 54 percent to 1,970 contracts. Gasoline futures rose 5.7 percent in the report week. Net-long wagers on US ultra low sulfur diesel increased more than fivefold to 10,835 contracts. Futures advanced 9.8 percent.

More rigs

A backlog of drilled but uncompleted wells, or DUCs, helps support the bearish case, said Ed Morse, head of commodities research at Citigroup Inc. in New York. There’s also been an upsurge in drilling as prices have climbed. US producers added oil rigs for an eighth week, the longest run since April 2014, according to Baker Hughes Inc. data on August 19. The EIA increased its domestic output forecast for 2017 to 8.31 million barrels a day from 8.2 million projected in July, according to its monthly Short-Term Energy Outlook released on August 10. “In the US, DUC completion and the drilling of new wells are changing the production outlook,” Morse said. “We might see US production rise next year instead of falling.” Bloomberg News

With GDP fading as econ gauge, hunt for a new yardstick is on

DP is so 20th centur y. The measure has risen f rom humble beg innings during the Great Depression to be an essential gauge for governments and central banks the world over. Long-term investors allocate capital based on its findings; traders buy and sell stocks, bonds, currencies and commodities in the blink of an eye after readings flash on their screens. One such closely watched report comes this Friday, when the US releases its revised estimate of second-quarter GDP. Problem is—whether compiled by production, income or expenditure approaches—GDP is increasingly struggling to keep up with the pace of economic change. In an age where $10 can buy one compact disc or a month of unlimited music streaming, it’s getting tougher to put a price on economic output. And as an aggregate measure that ignores distribution effects, GDP has masked rising inequalities that helped fuel anti-establishment politicians like Donald Trump or the backlash that contributed to Brexit. So as governments in the rich world and emerging markets alike struggle to reproduce the growth rates and productivity leaps of previous decades, a more urgent search is under way to make the economic yardstick fit for purpose. “GDP is easy to criticize, but rather difficult to replace,” said Paul Sheard, chief economist at S&P Global in New York. “If governments are managing the economy based on this metric, then there’s merit to saying we should take a broader measure.” That search is binding such disparate endeavors, as a stocks brokerage in Mumbai and a statistics conference in Dresden, Germany. T he former, A mbit Capital, has created its own consumption index based on vehicle sales and electricity use as a hedge on India’s official growth numbers. That reflects a skepticism evident elsewhere that existing methods can’t consistently measure even traditional parts of the economy, and GDP is so

framework, while the European Commission has had a project for almost a decade to look beyond traditional GDP measures. I n d i a ’s o u t g o i n g c e n t r a l bank chief Raghuram Rajan has warned of the difficulty in measuring growth in the face of aging populations. GDP numbers there have come under scrutiny since a new methodology last year showed a booming economy outpacing China. Ruchir Sharma, head of emerging markets and chief global strategist at Morgan Stanley Investment Management, says such readings demonstrate “incompetence because the statistics bureau there is applying a new methodology not having tested it well.”

Koreans reluctant to get married and have babies

outh Koreans are likely to have fewer weddings and babies this year than ever before, part of a demographic shift that risks hobbling the nation’s economy. The number of marriages and births recorded during the first five months of 2016 hit the lowest levels for the same period in any year since the nation’s statistics office started compiling monthly data in 2000. The figures underscore the challenge facing the government, which over the past decade has poured 80 trillion won ($72 billion) into efforts to reverse the falling birthrate. Prime Minister Hwang Kyo Ahn said this month that the country faces a crisis that threatens to limit long-term economic growth. Many young South Koreans say they can’t afford to get married or have children. They cite housing costs as one of the biggest obstacles. R e cord-low i nte rest r ates meant to spur economic growth have fueled a property boom that has priced many of them out of the market. Meanwhile, the unemployment rate among those 15 years old to 29 years old is 9.2 percent—more than double the national average. “Previous policies were focused on getting married women to have more babies, but a more fundamental problem could be that young people without jobs are finding it difficult to get married,” said Yoo Jin Sung, a Seoul-based research fellow at the Korea Economic Research Institute. “Youth unemployment is raising the age at which people get married and have their first babies, which can affect the total number of babies they plan to have.” Women also say South Korea’s corporate culture makes life challenging for working mothers, leaving many reluctant to get married and have children. Reversing the demographic tide is becoming more urgent. The countr y will pass two unwelcome milestones next year: its work force will begin shrinking a nd people aged 65 a nd older will outnumber those 14 and below. Without successful government action, the economy’s potential growth rate will fall to 2 percent between 2026 and 2030, from about 2.7 percent now, the Hyundai Research Institute estimates. Bloomberg News

New measures A man collects recyclable materials on the streets of Beijing. The United Nations’s intellectual property organization says China has joined the world’s top 25 most innovative economies for the first time. AP/Ng Han Guan

subject to large revisions as to be of little use in making snap investment decisions.

Wrong focus

That concern is coupled with the worry that statisticians are measuring the wrong things. This week, the International Association for Research in Income and Wealth meets in Germany, with a schedule dominated by papers probing questions of income equality, technological change and living standards—fields not easily read in GDP releases. “The single focus on GDP or GDP growth in many policy discussions is misleading,” Olivier Blanchard, a former International Monetary Fund (IMF) chief economist who’s now a senior fellow at the Peterson Institute for Inter nationa l Economics, wrote this month. “Distribution effects, or distortions that affect the composition rather than the size of output, or effects of current policies on future rather than current output, may be as important for welfare as effects on current GDP.” Blanchard’s exhibit 1: the increasing discussions around inequality in America. Exhibit 2:

China’s shift from investment toward consumption.

Wrong measurement

Adding to concerns over GDP and its relevance are widening revisions that threaten to send policy makers and investors off in the wrong direction. Data are being revised more often and by larger margins, according to a July note from UBS Group AG Global Chief Economist Paul Donovan and analyst Sophie Constable.That matters because the initial number that moves markets “is nearly always wrong,” they wrote. Given that asset-price swings feed back to the broader economy, “central banks should be very, very wary of overemphasizing markets in their policy deliberations.” In the US last week, Federal Reserve Bank of Atlanta President Dennis Lockhart questioned whether official data that showed growth of just 1.2 percent in the three months through June represented a true reflection of activity on the ground. “If you look beyond the troubling headline GDP growth number for the second quarter and study real final sales, a more consistent

picture of economic momentum emerges,” he said. In Japan a new analysis by the central bank found that, rather than contracting in 2014, the economy actually enjoyed robust growth. The contradiction between the government’s data comes as the Bank of Japan steps up its efforts to get better readings, such as by starting its own consumption index. Governor Haruhiko Kuroda has called for better numbers.

Global theme

In the UK an independent review in March by former Bank of England policy-maker Charles Bean recommended a transformation of the nation’s data. “We need to take economic statistics back to the future, or we risk missing out an important part of the modern economy from official figures,” Bean said in a press statement accompanying the report’s release in March. It’s a similar stor y around the world. Yves Mersch, a board member of the European Central Bank, warned of the impact of technological change in a February speech. The New Zealand government has a well-being

To get a better read, Edinburghbased Stewart Investors is seeking research on the flaws of GDP accounting in Asia and to examine possible alternatives. “Current ‘macro’ research from investment banks focuses solely on very flawed accounting techniques to ‘measure’ GDP,” the investment firm wrote on its web site. “This is becoming increasingly important with the rise of factors, such as extreme levels of environmental degradation, obesity levels that are approaching medical definitions of epidemics, etc.”

Technological change

The scale of change is fueling the debate over whether activity on the ground is being accurately captured. One example: payments that were once made over the counter have now transitioned online, beyond the scope of traditional retail-sales indicators. An Organisation for Economic Co-operation and Development report in June found that, while GDP metrics should be able to adapt to the digitizing economy, many challenges remain. The report’s authors, Nadim Ahmad and Paul Schreyer, estimated that Airbnb Inc. has a market value close to that of Hilton Worldwide Holdings Inc., yet the impact of Airbnb rentals on GDP is harder to quantify. Bloomberg News

China grapples with hidden unemployment

racks are starting to show in China’s labor market as struggling industrial firms leave millions of workers in flux. While official jobless numbers haven’t budged, the underemployment rate has jumped to more than 5 percent from near zero in 2010, according to Bai Peiwei, an economics professor at Xiamen University. Bai estimates the rate may be 10 percent in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave. Many state-owned firms battling overcapacity favor putting workers in a holding pattern to avoid mass layoffs that risk fueling social unrest. While that helps airbrush the appearance of duress, it also slows the shift of workers to services jobs, where labor demand remains more solid in China’s shifting economy. “Underemployment in overcapacity industries is a drag on the potential improvement of productivity in China, which will lead to a softening wage trend,” said Grace Ng, a senior China economist at JPMorgan Chase and Co. in Hong Kong. “It would exert pressure on private consumption demand and, in turn, affect the overall rebalancing of the economy.” Bloomberg News

A10 Tuesday, August 23, 2016 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

Public lives and private matters

T is a question that has been around since the earliest days of ancient Greek democracy. What is the philosophical and practical connection between public life in contrast to private life?

We would all agree that every individual, no matter their position or status, is entitled to privacy. This is one of those situations that the lowest among us should not benefit from anonymity any more than the biggest public figure. Yet, even legally, a person defined as a public figure does give up some of the rights to privacy whether they want to or not. Legally, your medical records are private. Yet, a prospective employer does have the right to conduct a basic health examination, as well as a drug-usage test. More so, an elected official has the obligation to disclose any medical conditions that might affect their ability to serve in office. We would not necessarily expect to have to reveal our financials to a respective employer. However, if that job was a position of financial responsibility within a company, then it might be appropriate or even necessary for an employer to know an applicant’s financial situation. Nonetheless, when it comes to other behaviors of a public government official—particularly ethical standards—things become blurry. We all want to elect and appoint to government offices those individuals who are honest and ethical. Therefore, does the public have the right to know if a person was expelled or even suspended for a time from school for cheating on an exam? Would it only matter if this was a pattern of behavior or only a one-time occurrence? Do we have the right to know that the candidate made a mistake and then corrected his or her behavior? Can a politician be ethical in public if he or she is unethical in private? To many of the ancient Greek philosophers, a person could not possess one of the cardinal virtues—prudence, temperance, courage and justice—without possessing them all. How could a person who cannot control his or her food appetite be just or prudent? Can a politician who cheats on a spouse be trusted with the public’s business? Then comes an interesting ethics idea that is thrown around a lot. Why should we expect, or even want, a political leader to be a “role model” if that person has been given the position to get a particular job done? We might want a cook to be particularly hygienic and clean, but does that matter in the person who repairs your automobile? Maybe the public does not have the right to the “private lives” of politicians. But there has to be some standard and threshold for full disclosure and maybe we can find this in our own interpersonal relationships. Perhaps, the one trait that is the most damaging in a person is their hypocrisy when they say one thing and do another.

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THE Entrepreneur Continued from A1

or the whole year, a 6.5-percent growth should not be too difficult to achieve, because the country’s growth drivers remain strong, such as remittances from overseas Filipinos, the business-process outsourcing industry, tourism industry, as well as the low-inflation and low-interest environment. We had also posted growth rates of higher than 7 percent in the past, but much of that has been attributed to consumer spending instead of investments, which are what we need to generate long-term employment. Beyond the higher GDP numbers, I am pleased to note that investments are gaining a bigger share in the country’s economic gains. As early as 2014, Standard Chartered Bank noted in a published report that investment growth contributed 1.5 percentage point to GDP growth during a seven-quarter period, and emerged as a secondary growth driver for the Philippines. The Philippines, according to the bank, would benefit from the movement of foreign investors from China, where labor costs are

rising, to lower labor-cost countries in Southeast Asia, including the Philippines. During a press briefing in July, First Metro Investment Corp. also said private investment would be an additional growth engine for the economy. We are seeing a good inflow of foreign direct investments (FDI), which are used to build or expand factories and other industries. Based on the latest report from the Bangko Sentral ng Pilipinas (BSP), net inflows of FDI totaled $3.9 billion for the first five months of 2016, more than double the $1.6 billion registered in the same period last year. The amount includes $1.4 billion in net equity capital (more than threefold higher than the $440

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million received last year), which were channeled mainly to manufacturing, real estate, wholesale and retail trade, and electricity, gas, steam and air-conditioning activities. Investments in factories and other long-term economic activities are measured in terms of fixed capital formation, which refers to the construction or expansion of factories, purchase of transport equipment, tools, machinery for production and office equipment. During the second quarter of 2016, investments in fixed capital formation increased by 27.2 percent compared to 12.7 percent in the same quarter last year, according to the Philippine Statistics Authority (PSA). Investments in capital formation for durable equipment increased to its highest growth of 42.8 percent in the second quarter of 2016,

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We are seeing a good inflow of foreign direct investments, which are used to build or expand factories and other industries. Based on the latest report from the Bangko Sentral ng Pilipinas, net inflows of foreign direct investments totaled $3.9 billion for the first five months of 2016, more than double the $1.6 billion registered in the same period last year.

John Mangun

OUTSIDE THE BOX

ife was a lot simpler and maybe even more dependable back in the day. You had your Sun God or maybe a Moon God too, if yours was a really sophisticated society. Prayers worked most of the time to keep the world humming along and if things didn’t go as planned, then a vestal virgin or two thrown into the nearest volcano would probably do the trick. While our faith in the ability of human sacrifice to move the cosmos in our direction is not as strong as it used to be, that does not stop us from looking for formulas that we can depend on so we can plan our future. This is particularly true for the stock market. Would you like a formula for the stock market that has been accurate 86 percent of the time for the last 84 years? If stocks go up during the last three months before an election, the incumbent party almost always

keeps the White House. Of course, it did not work here in the Philippines with the Philippine Stock Exchange composite index (PSEi) up about 7 percent in the three months prior to the May 9th election of President Duterte and the loss of Liberal Party candidate Secretary Mar Roxas. But maybe we can depend on something even more rooted in history, maybe like the Ghost Month. The Ghost Month is supposed to bring slower trading and a drop in stock prices. This year average

We really can’t depend on the ghosts to give us our stock-market predictions and the ancient Visayan goddess of volcanoes—Lalahon— is probably not interested in human sacrifices anymore. Much better if we watch the money flow to figure out whether prices are going higher or lower.

daily trading volume has been a little higher than the normal for the past two months. But, statistically speaking, does the Ghost Month mean anything for stock prices on the local market? Calculating by the Lunar calendar, and from data covering 1987 to 2015, the PSEi was down 16 out of 29 times (or 55 percent of the time) during the Ghost Month, with an average loss of 2.2 percent. Sad to say, but 55 percent is statistically random, about the same as a coin toss even for the ghosts. Granted a 2.2-percent average loss could be significant. But with the randomness of the 55 percent, it is nothing that you can bet the house on. This year the PSEi is

compared with 13.8 percent last year. In its report on the economy for the second quarter of 2016, the PSA noted that increased investments were registered in 18 out of 20 types of fixed-asset investments. These include road vehicles, 65.0 percent from 15.2 percent last year; other electrical machinery and apparatus, 51.3 percent from negative 0.2 percent; metal working machineries, 379.1 percent from negative 16.5 percent; other miscellaneous durable equipment, 28.6 percent from 9.5 percent; and other special industrial machineries, 31.3 percent from 20.2 percent. Investments posted the highest contribution to GDP growth in the second quarter of 2016 at 5.8 percent, compared with 1.6 percent from government consumption and 4.9 percent from household consumption. The contribution from investments consisted of 5.7 percent from fixed capital formation and 0.1 percent from change in inventories. Contribution from net exports was at a negative 6.5 percent. Accelerating growth should be a continuing pursuit, but increasing the share of investment, which is the key to spreading the benefits of economic gains to all sectors of the population, should be an accompanying goal. For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.

down 0.22 percent with 10 days left in the Ghost Month. Now, here is something else that the “Ghost Monthers” seem to fail to mention. If it’s basically a 50/50 proposition that the PSEi is going to be up or down and the average drop is 2.2 percent, then you also have to have occurrences of the PSEi being up for the month. Like in 2009 and 2010, the PSEi was 3 percent and 4 percent higher, respectively. So how do we get an average 2.2 percent down? For example, in 2013 the PSEi dropped 8.5 percent during the Ghost Month. We really can’t depend on the ghosts to give us our stock-market predictions and the ancient Visayan goddess of volcanoes—Lalahon—is probably not interested in human sacrifices anymore. Much better if we watch the money flow to figure out whether prices are going higher or lower. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

opinion@businessmirror.com.ph

Opinion

Ninoy Aquino: Demystified

Hidilyn’s triumph

BusinessMirror

Cecilio T. Arillo

database

HE man on your P500 banknote—wearing large spectacles, with his hair carefully brushed on one side, his closed fist resting just below his lips where a smile seems to have died—how well do you know him?

Those who feel and think they know Benigno “Ninoy” Aquino Jr. spoke kindly of him as a man who had ideals, a man who trained his sights toward greatness and a man who wanted to be president and the unifying leader of his country. His critics, on the other hand, denounced him for being a tool of the Americans in reducing further the Philippines’s genuine desire to enjoy real self-reliance. He had also been chastised as a maverick, an ambitious man who tended to forget his scruples. At this stage in our nation’s fictionalized history, former President Ferdinand E. Marcos is commonly perceived to be a villain, while Ninoy is worshipped as a national hero. History, however, is not static. For instance, many of the heroes of yesteryears, like Mao Tse-tung, Che Guevara, V ladimir Ilyich Lenin and Saddam Hussein have been stripped of their perfection; unflattering but vital facts about them, previously suppressed in the names of national security and ideological infallibility, have been declassified and incorporated into their updated biographies, revealing their cruelty, errors and foibles. Even popes have not always been held sacred; Pope John who reigned in 1415 was convicted for various scandalous acts, including adultery, incest and sodomy. Similarly, Ninoy deserves demystification. For decades, little-known facts about him have been surfacing, but have not been given attention by those who prefer to remember him almost like a messiah during his lifetime and as a certified martyr upon his assassination. In every person, there is some measure of bigotry, a refusal to consider new truths that do not conform to one’s values and beliefs. Thus, have the myths about Ninoy that survived and grown at the expense of truth and those whom he is offered to as a role model. The people deserve to know all the truth about Ninoy; not just facts selected to keep his image incredibly flawless or consistently heroic. All heroes (and pseudo-heroes) have their failings and dark secrets, and Ninoy definitely has his share. The book, A Country Imperiled— Tragic Lessons of Distorted History, that I wrote and published by Amazon, one of the World’s largest publishing houses, attempts to objectively delve into Ninoy’s involvement in the shaping of our story as a people, motivated singularly by the purpose of proclaiming the truth. The Truth and Justice Foundation (TJF) accurately recounted historical events as discussed in the book with enough care so as not to distort reality.

‘Bloody’ August 21

This date, every year, continues to evoke mixed emotions in the Filipino mind. Now declared as a national holiday known as “Ninoy Aquino Day,” August 21 was mainly remembered for the death of former Sen. Aquino Jr., as he was shot dead at the tarmac of old Manila International Airport upon returning from his self-imposed exile in 1983. A few years back in 1971, August 21 also tainted the country’s history with bloodshed, as the bombing of the Liberal Party’s Miting de Avance in Plaza Miranda claimed nine lives and injured a hundred others, including many prominent Liberal Party politicians. Year after year, rallies are held to

The people deserve to know all the truth about Ninoy; not just facts selected to keep his image incredibly flawless or consistently heroic. All heroes (and pseudoheroes) have their failings and dark secrets, and Ninoy definitely has his share. commemorate these events, and to perpetuate indignation against the late President Marcos, the convenient scapegoat for both of these violent incidents. Yet, other than Marcos, the common denominator in these events was Ninoy himself. His core roles in the historical unfolding of these incidents make August 21 a memorable and significant date in our history.

Hero or villain?

There are facts strongly indicating that Ninoy knew in advance of communist leader Jose Maria Sison’s plot to bomb Plaza Miranda in 1971, and went along with it. Ninoy survived, without a scratch, to tell another tale. Many intriguing facts really do point to Ninoy’s knowledge about, and of the circumstances leading to, the Plaza Miranda bombing. One of these was that Ninoy personally called on some of his party mates not to attend their party’s important preelection rally. Another is that he was seen at the Jai Alai gaming complex (a convenient cover or alibi?) at the very time that the rally was going on. This was apart from another social function that he allegedly attended during this very same period. In the ensuing period, former communist ranking leaders Reuben Guevarra, Ariel Almendral and Victor Corpus exposed the involvement of Sison in the bombing, bringing forth damning evidence that the Communist Party of the Philippines-New People’s Army, and not Marcos, was the perpetrator of this dastardly act that was called by some observers as “the most shocking political crime the country had ever seen.” The Senate’s Blue Ribbon Committee in 1988 investigated the bombing incident following the Guevara-Almendral-Corpus exposé, but halfway into the inquiry the Senate suddenly became quiet. In 1989, however, then-Senate President Jovito R. Salonga, who lost one of his eyes in the bombing and had more than a hundred grenade shrapnels in his body, ordered the reopening of the Senate inquiry after telling colleagues that President Marcos was not behind the bombing. Sometime in July 1998, Salonga reiterated this same conclusion before a rally in Malate, Manila, conducted by the Marcos Loyalists in front of the Saint Paul’s College—that President Marcos had nothing to do with the Plaza Miranda bombing incident, thus, corroborating the statements of his own contemporaries who also sustained serious wounds and other forms of injuries during the bombing incident. Curiously, the murder of Aquino, exactly 33 years ago last Sunday, remains unsolved notwithstanding the fact that his wife Corazon and son, Benigno S. Aquino III, became presidents with vast powers to solve the crime. To reach the writer, e-mail cecilio.arillo@ gmail.com.

Edgardo J. Angara

idilyn Diaz brought signal honor to the Philippines when she ended the country’s 20-year Olympic medal drought by winning the silver medal in the women’s 53-kilogram weightlifting category.

Her victory is a historic sports moment for the country, as she is the first Filipina to win an Olympic medal and the first Olympian from Mindanao to ever do so, being born and raised in Zamboanga City. Hers is an inspiring story—that of a country girl armed only by her grit and ambition, unaided by family wealth (as hers has none), unsupported by a community who’s unaware, and ignored by a

sport-neutral government. Hidilyn’s interest in weightlifting was piqued when she first saw her cousin lifting weights in 2002. Left to her own devices, she started training in a makeshift gym in her hometown. She pursued her Olympic ambitions tirelessly, while acting as her family’s main breadwinner. In other countries with a nurturing culture, Hidilyn’s potential would have been identified early on,

Tuesday, August 23, 2016 A11

then cultivated and supported. Her story contrasts greatly with that of Joseph Schooling—the Singaporean swimmer who earned his country’s first gold medal by besting American swimming legend Michael Phelps in the 100-meter men’s butterfly event. Joseph’s parents told the media that he demonstrated exceptional swimming skill early on. When the Singapore Swimming Association closed its Centre of Excellence (COE) in 2009, they decided to enroll their son in a school in Florida, US, for its swimming program. They would end up devoting $1 million of their money to finance this move. Eventually, Joseph started receiving around $66,000 (S$90,000) a year as a Sports Excellence scholar under the Singapore gover nment. And on top of these advantages, Joseph was cared for and cheered on by a Filpina yaya named Yolly Pascual. That Hidilyn triumphed without

any support comparable to what Joseph received makes her trip to Rio all the more inspiring. She is rightly rewarded with the various accolades and incentives. She is also the first national athlete to receive the higher incentives—up to P5 million—mandated under Republic Act 10699, sponsored by Sen. Sonny M. Angara in the 16th Congress. A more fitting tribute to her victory, however, would be for the nation—government and the private sector in tandem—to ramp up grassroots sports development, identify possible Olympians in their youth and start investing in their sustained training, conditioning and nutrition. Hidilyn said she aims to start training for the Tokyo 2020 Olympics. The country should start supporting her now, and all the other national athletes who share her Olympic ambitions and potential.

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

This road project will help solve Metro traffic Ernesto M. Hilario

ABOUT TOWN

f two heads are better than one, as the saying goes, it doesn’t necessarily follow that two roads are better than one. In this particular case, one road is better than two.

We’re talking about the planned North Luzon Expressway-South Luzon Expressway (Nlex-Slex) Connector Road, a major infrastructure project that should really be implemented soon to address the horrible traffic congestion in Metro Manila. The connector road was approved by the National Economic and Development Authority (Neda) under the Public-Private Partnership (PPP) Program of the Aquino administration in 2013 as an unsolicited project by the Metro Pacific Tollways Development Corp. (MPTDC). The firm offered to build the connector road for P23.2 billion, inclusive of rightof-way costs. The road itself would cost P15.7 billion to build. Both Socioeconomic Planning Secretary Ernesto M. Pernia and Public Works Secretary Mark A. Villar consider the connector road among the priority infrastructure projects of the Duterte administration to help alleviate Metro Manila’s traffic woes. The connector-road project consists of an elevated four-lane, 8-kilometer expressway starting at Nlex Segment 10 at C-3 or Fifth Avenue in

Caloocan City and connecting to the Slex, through Stage 3 of the Metro Manila Skyway System Project (Skyway 3) in Manila. The project will have at least two interchanges and two toll plazas. If started soon, the target completion is 2022, the year President Duterte leaves office. The project would be a big boost in decongesting Metro Manila’s worsening traffic gridlock. Once completed, it will reduce travel time from Nlex to Slex from two hours to only 15 to 20 minutes. Traveling from Clark in Pampanga to Calamba in Laguna would also be cut down from about three hours to only one hour and 40 minutes. These reduced travel times would result in better access to the three Ninoy Aquino International Airport (Naia) terminals and the Clark International Airport (CIA) in Pampanga. The Nlex-Slex connector road would also provide freight trucks with an alternative 24/7 route, which will resolve truck-ban problems and ease port congestion, because shippers would now be encouraged to reroute their cargo

from the congested North Harbor to the ports in Batangas City and the Subic Freeport. Some 35,000 motorists are expected to benefit from the project, according to the Department of Public Works and Highways. The cost of transporting goods from North and Central Luzon to Metro Manila will also be drastically reduced once the project is in place. As a result, we can expect more investors to come in because it would enhance connectivity between international airports and seaports, including the Subic Freeport by way of the Nlex-Subic-Clark-Tarlac Expressway route, the Batangas Port via Slex, and the CIA to the Naia. This, in turn, will improve linkages between the key growth areas of Metro Manila, Central Luzon, North Luzon and the Clark-Subic corridor. But the connector-road project has encountered numerous delays since MPTDC first submitted it as an unsolicited proposal to the Aquino administration in 2010. Metro Pacific Tollways Corp. (MPTC) President Rodrigo Franco remains optimistic, however, that civil works on the project could start in 2018 and the entire road completed in three to four years, or before President Duterte steps down in 2022. The Nlex-Slex connector-road project provides Transportation Secretary Arthur P. Tugade the answer to his problem of how to solve Metro Manila’s traffic gridlock. If the project pushes through as scheduled, then he wouldn’t have to be “kicked out of office” for being “useless,” as he himself declared in a recent

India’s not-so-new central banker By Mihir Sharma BloombergView

he Indian government’s decision to elevate a well-respected deputy governor at the Reserve Bank of India (RBI) to become the country’s next central banker is, frankly, a bit of a relief. The naming of Urjit Patel comes after months of quite unnecessary drama—first over whether current RBI chief Raghuram Rajan and the government were getting along, then whether Rajan would be granted an extension, next whether he would quit in irritation and finally, over who would replace him. There’s a more important reason for relief, as well: Choosing Patel suggests that the government supports, or at least is content, to continue with Rajan’s policies at the RBI, some of which Patel helped to develop and implement. Patel led the team that worked out how to implement inflation targeting in India: It was on the basis of his report that the RBI and the government agreed earlier this year that consumer price inflation would henceforth be the central bank’s sole target. Rajan and the government often disagreed over monetary policy. The RBI chief was, in particular, criticized by lawmakers for keeping Indian interest rates “too

high”— a suggestion he’s quite sharply dismissed. There was every reason to fear the government might seek out a more pliable successor. But even though Prime Minister Narendra Modi probably wouldn’t have settled on Patel if he didn’t think Rajan’s deputy would at least listen to arguments in favor of lower interest rates, expectations of speedy cuts should probably be abandoned. Patel himself produced the target of 4-percent consumer price inflation—consumer price index currently tops 6 percent—so it might not be easy for him to abandon it. Why Patel, then? Naturally, he’s more than qualified for the job, but so were many of the other candidates whose names were doing the rounds. The need to stress continuity—especially given the dismayed reaction to Rajan’s departure—might have something to do with it. The next governor will also have to make the case for the RBI’s decisions without Rajan’s “rockstar” influence over the media, so it helps that Patel has built relationships in multiple fields. The policy world will be comfortable with him: He’s worked at the International Monetary Fund, the Indian Finance Ministry and at the Brookings Institution. Finance knows him: He’s been on the board of the

commodity exchange MCX and served as an executive director at India’s bestknown infrastructure finance company, IDFC. Unlike Rajan, the private sector is familiar with Patel, too: He’s been an adviser at Boston Consulting Group and worked for India’s largest conglomerate, Reliance Industries Ltd. And perhaps, most important as far as Modi is concerned, Patel’s from a Gujarati-speaking background and was for years a director at Gujarat’s state-controlled natural gas company GSPC, often called Modi’s favorite public-sector firm. Indeed, Patel is such a natural fit for the job, it’s puzzling that naming him took so long. The delay is another reminder that the process of choosing an RBI governor—or, for that matter, granting him the conventional two-year extension that Rajan didn’t receive— should be institutionalized, rather than left up to the finance minister and the prime minister with minimal outside consultation and input. Some have argued that Modi should have complete liberty to pick members of his economic team as he sees fit. But the monetary authority isn’t part of the prime minister’s team. After all, national leaders like to spend money, while an inflationfocused central bank isn’t supposed to

media interview. The project fits the proponent, the MPTDC to a T, as its mother company, the Metro Pacific Investments Corp. (MPIC), is the largest toll-road operator in the country, operating 63 percent of the country’s 320 kilometers of toll roads. MPIC is a leading toll-road operator not only in the Philippines, but in the rest of Asia, as well. MPIC, through MPTC, has completed an investment of 1.95 trillion Vietnamese dong (about P4.1 billion) in CII Bridges and Roads Investment Joint Stock Company (CII B&R) in Vietnam. CII B&R has eight toll-road and bridge projects spanning 123 kilometers combined in Vietnam. MPTC also owns a 29.45-percent stake in Don Muang Tollway Public Co. Ltd. in Thailand. The completion of the connector road would benefit the economy in a big way. It will address the worsening problem of congestion at the Port of Manila, which is believed to have cost foreign and local businesses over $500 million in combined losses last year, per the European Chamber of Commerce of the Philippines. We can avert losses of such magnitude if the government pushes through with the connector-road project before the last quarter of 2016. We can save billions of pesos daily, commuters would be more productive doing more work or spending more quality time with their families and loved ones rather than being mired in horrendous traffic.

E-mail: ernhil@yahoo.com.

make spending money easier. Promoting fiscal discipline will be one of Patel’s first tasks. In the early 2000s, when India passed landmark fiscal responsibility legislation, Patel—in collaboration with Willem Buiter, now at Citigroup—wrote a paper that was generally gloomy about its prospects. “Fiscal virtue,” they argued in 2006, “cannot be legislated. It has to be implemented and enforced.” Patel now has the chance to put those words into action. The other big task for the new RBI governor is to complete Rajan’s unfinished agenda of forcing India’s stateowned banks to be more efficient and transparent. In that same 2006 paper, Patel and Buiter had harsh words for India’s “lazy” banking sector: “Banks in India have curtailed their credit creation role and have, if anything, intensified their role of predominantly being passive conduits for resources rather than active risk-management intermediaries that offer appropriately priced capital to firms.” They also highlighted the systemic risk to the banking system that lax regulation was causing—well in advance of the banking near-crisis that India faces today. Like Rajan, who made his name predicting the 2008 housing crash, Patel deserves some credit for prophecy.

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2323 | 8:30 a.m.-12 nn |nn Marriott Manila August 2016 || 8:30 a.m.-12 || Marriott Manila 23August August2016 2016 8:30 a.m.-12 nn Marriott Manila

7:30-9:00 7:30-9:00 a.m. a.m. registration registration && Breakfast Breakfast 9:00-9:10 a.m. Welcome BBusiness 9:00-9:10 a.m. Welcome and and opening opening remarks remarks usinessM Mirror irror/eccP /eccP 7:30-9:00 a.m. registration & breakfast 7:30-9:00 a.m. registration & Breakfast 23 August 2016 | 8:30 a.m.-12 nn | Marriott Manila 7:30-9:00 a.m. registration & Breakfast 9:10-9:30 a.m. Keynote address Rep. Pantaleon 23 August 2016 | 8:30 a.m.-12 nn | Marriott Manila 9:10-9:30 a.m. Keynote address Rep. Pantaleon D. D. Alvarez Alvarez Opening 9:00-9:10 Remarks a.m. 9:00-9:10 a.m. Welcome and opening remarks B usiness M irror /eccP Bruce Winton Welcome and 9:00-9:10 a.m. Welcome and opening remarks B Opening 9:00-9:10 Remarks a.m. usiness M irror /eccP Bruce Winton Welcome and speaker of the house 9:00-9:10 a.m welcome and opening remarks Bruce Winton speaker of the house of of PROGRAM General Manager 9:10-9:30 Pantaleon D. Alvarez 9:00-9:10 a.m. GeneralRep. manager General Manager 9:10-9:30 a.m. Keynote address address Rep. Pantaleon D. Alvarez 9:00-9:10 a.m. a.m. Keynote representatives representatives marriottspeaker hotel manila 7:30-9:00 a.m. && Breakfast Marriott Manila of the house 7:30-9:00 a.m. registration registration Breakfast Marriott Hotel Manilaof ofHotel the Seemann house of 9:30-9:45 Benedikt 9:30-9:45 a.m. a.m. case case study—Federal study—Federal republic republic of of Germany Germany Benedikt Seemann M irror /ECCP Businessspeaker B usiness M irror /ECCP 9:00-9:10 usiness irror /eccP usinessM M irror /ECCP representatives 9:00-9:10 a.m. a.m. Welcome Welcome and and opening opening remarks remarks Brepresentatives usiness M irror /eccP head head 9:10-9:30 a.m. Keynote address Rep. Pantaleon D. 9:10-9:30 Keynote address republic Speaker Pantaleon D. Alvarez 9:30-9:45 study—Federal Benedikt Seemann 9:10-9:30a.m. a.m. case Keynote address Rep. Pantaleon D. Alvarez Alvarez 9:30-9:45 case study—Federal republic of of Germany Germany Benedikt Seemann Konrad adenauer Konrad adenauer Foundation Foundation Bruce Winton speaker of the house of Deputyhead Speaker Ferdinand Bruce Winton speaker of the house ofL. Hernandez head 9:45-10:00 a.m. case study—canada Julian Payne 9:45-10:00 a.m. case study—canada Julian Payne General Manager representatives General Manager Foundation Konrad adenauer representatives Konrad adenauer Foundation President President Marriott Hotel Manila Marriott Hotel Manila 9:30-9:45 a.m. study—Federal republic of Germany Benedikt Seemann 9:45-10:00 a.m. case study—canada Julian Payne 9:30-9:45 a.m. study—Federal republic of Germany Benedikt Seemann 9:45-10:00a.m. a.m. case study—canada Julian Paynechamber canadian of 9:30-10:00 case study—Federal republic canadian chamber Benedikt Seemann BBusiness usinessM Mirror irror/ECCP /ECCP of head head of Germany President head President commerce commerce of of the the Philippines Philippines Konrad adenauer Foundation Konrad canadian adenauer Foundation chamber of Konrad adenauer Foundation canadian chamber of 10:00-10:15 a.m. case study—France Laurent Le Godec 10:00-10:15 a.m. case study—France Laurent Le Godec 9:45-10:00 a.m. study—canada Julian Payne of the Philippines 9:45-10:00a.m. a.m. case case study—canada Julian Payne commerce the of Philippines 9:45-10:00 case study—canada deputy mission Julian commerce Payne deputyofhead head of mission President 10:00-10:15 a.m. case study—France Laurent Le Godec president President 10:00-10:15 a.m. case study—France Laurent Le Godec embassy of France embassyofof France to to the the canadian chamber canadian chamber of deputy head of mission canadian chamber of deputy head of mission Philippines commerce of the philippines Philippines commerce the Philippines embassy of to commerce ofFrance the Philippines embassy ofof France to the the Jr. 10:15-10:30 a.m. the Philippine Aquilino Q. 10:15-10:30 a.m. case thestudy—France Philippine scenario scenario Aquilino Q. Pimentel Pimentel Jr. 10:00 a.m.-10:15 a.m. Laurent Le Godec 10:00-10:15 a.m. case study—France Laurent Le Godec Philippines 10:00-10:15 a.m. case study—France Laurent Le Godec Philippines Former senate President Former senate President deputydeputy head ofhead mission of 10:15-10:30 a.m. the Philippine scenario Q. Jr. deputy oftomission mission 10:15-10:30 a.m.a.m. Philippine scenario Aquilino Q. Pimentel Pimentel Jr. embassyAquilino ofRep. the head France the 10:30-10:45 Philippine scenario Alfredo B. 10:30-10:45 a.m.thethe the Philippine scenario Rep. Alfredo B. Benitez Benitez embassy of France to the philippines Former senate President embassy of France to the Former senate President house of house of representatives representatives Philippines 10:30-10:45 a.m. the Philippine scenario Rep. Alfredo B. Benitez Philippines 10:30-10:45 a.m. the Philippine scenario Rep. Alfredo B. 10:30-11:30 a.m. Panel discussion/open Forum Teodoro L. Jr. 10:15-10:45 a.m. a.m. the philippine scenario Forum Aquilino Q.Teodoro Pimentel Jr.Benitez 10:30-11:30 Panel discussion/open L. Locsin Locsin Jr. 10:15-10:30 a.m. the Philippine scenario Aquilino Q. Pimentel of representatives 10:15-10:30 a.m. the Philippine scenario Aquilino Q. Pimentel Jr. Former house senate president house of representativesJr. Former senate President 10:30-11:30 a.m. Panel discussion/open Forum Teodoro L. Locsin Jr. Sen. Vicente Sotto III Jr. President For contact or e-mail Julie.coronado@eccp.com 10:30-11:30 a.m. Panel discussion/open Forum at Teodoro L. Locsin For inquiries/registration, inquiries/registration, contact Julie Julie Coronado Coronado at 845-1324 845-1324 orFormer e-mailC.senate Julie.coronado@eccp.com majorityRep. leader 10:30-10:45 Alfredo 10:30-10:45 a.m. a.m. the the Philippine Philippine scenario scenario Rep. Alfredo B. B. Benitez Benitez house of representatives Rep. Alfredo B. Benitez For inquiries/registration, contact Julie Coronado at 845-1324 or e-mail Julie.coronado@eccp.com houseJulie.coronado@eccp.com of representatives For inquiries/registration, contact Julie Coronado at 845-1324 or e-mail house ofTeodoro representatives 10:30-11:30 10:30-11:30 a.m. a.m. Panel Panel discussion/open discussion/open Forum Forum Teodoro L. L. Locsin Locsin Jr. Jr. 10:45-11:30 a.m.

panel discussion/open Forum

Teodoro L. Locsin Jr.

For For inquiries/registration, inquiries/registration, contact contact Julie Julie Coronado Coronado at at 845-1324 845-1324 or or e-mail e-mail Julie.coronado@eccp.com Julie.coronado@eccp.com

For iquiries/registration, contact Julie Coronado at 845-1324 or e-mail Julie.coronado@eccp.com

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