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PHL preparing strong case for migrants in global pact 244M M @rectomercene

anila is now crafting its negotiating position for a global agreement on migration, hoping that the over 10 million overseas Filipinos could be provided ample protection in their host countries by this potentially legally binding compact.

The departments of Foreign Affairs (DFA) and Labor and Employment (DOLE) are conducting a series of workshops on the Global Compact on Migration (GCM). Negotiations

for the UN global compact will kick off in January next year. The Philippines’s contribution to the worldwide effort to protect 244 million migrants across the world

The estimated number of migrants globally, more than 10 million of them Filipinos

got under way last week at a hotel in Manila, where subsequent workshops will also be held. “The GCM aims to promote the welfare of migrant workers and their families, which has always been an advocacy of the Philippines,” DFA Spokesman Robespierre Bolivar said. Continued on A2

HOUSING BMReports SUPERBODY TO BRIDGE Climate change: Are we there yet? HOMES GAP By Jonathan L. Mayuga

By Cai U. Ordinario @cuo_bm

he creation of a Department of Housing and Urban Development (DHUD) will give Filipinos a better chance of fulfilling their dream of owning a home, according to the National Economic and Development Authority (Neda). The creation of the DHUD is now in the works, with the House Committee on Housing and Urban Development eyeing to approve today the enabling measure, which would ensure the availability and affordability of decent housing and basic services in the country. Neda Undersecretary for Planning and Policy Rosemarie G. Edillon told the BusinessMirror that the new housing agency could fast-track the attainment of the life Filipinos want, particularly See “Housing,” A2

@jonlmayuga

Part Two

N V IRONMEN TA L g roups said there is no doubt that climate change is starting to make its presence felt stronger and stronger every day. Chuck Backlagon of 350.org Asia told the BusinessMirror no less than the Intergovernmental Panel on Climate Change (IPCC) had already released more than five assessment reports that synthesized all existing published and peer-reviewed scientific literature around climate change. The conclusion: An overwhelming 97 percent of scientists agree that climate change is being caused by human greenhousegas emissions. The IPCC is a scientific and intergovernmental body under the United Nations. Citing various sources, including

PESO exchange rates n US 51.0500

This November 15, 2014, file photo shows makeshift houses and coconut trees toppled down after Supertyphoon Yolanda (international code name Haiyan) hit the Philippines in 2013. Chuck Backlagon of 350.org Asia said tropical storms like Yolanda are getting intense due to warmer ocean water temperatures. NONIE REYES

news reports, Backlagon said even an oil company knew about climate change’s impact in the 1970s and found out that action would impact the firm’s bottom line.

Studiostoks | Dreamstime.com

By Recto Mercene

“As a result, they joined an industry-wide attack on the truth, creating a false debate that prevented action for decades,” he said.

Corruption Enablers By Michael K. Raeuber

o understand corruption and its enablers, we must recognize what form of corruption we are confronted with, what allows it to thrive, what consequences it has and what measures have been successful in the past to control it. Corruption is about taking advantage against payment of cash or giving favors. In the worst form of corruption and if the element of advantage is not even present, it may also be called coercion, blackmail or extorsion. The one coming across is just paying up to receive what is due to him anyway. And the borders between the different types of corruption are hazy/fluid. So, l i ke t he heads of Hydra’s dragon, cor r uption presents itself in many shapes; although in the most common form it originates from either temptation or coercion to take advantage. Continued on A14

Continued on A2

n japan 0.4660 n UK 65.3491 n HK 6.5260 n CHINA 7.6606 n singapore 37.4871 n australia 40.3295 n EU 60.2441 n SAUDI arabia 13.6134

Source: BSP (25 August 2017 )

A2 Tuesday, August 29, 2017

Wage hike. . . Continued from A14

The RTWPB-NCR is assessing the demands of the Association of Minimum Wage Earners and Advocates Philippine Trade and General Workers Organization (AMWEA-PTGWO); the Associated Labor Unions (ALU); and the Trade Union Congress of the Philippines (TUCP). The TUCP is pushing for an across-the-board wage hike of P259, higher than the P184 demanded by the ALU and the P175 sought by the AMWEA-PTGWO. The deliberation is to be conducted by a seven-member committee comprised of two labor representatives, two employer representatives and three government officials. Angelita D. Senorin of the TUCP and lawyer Herman N. Pascua Jr. of the ALU will represent the workers, while lawyers Alberto R. Quimpo and Vicente Leogardo Jr. of the Employers Confederation of the Philippines will represent the employers. The government will be represented by Reynaldo R. Cancio of the Neda, Anacleto C. Blanco Jr. of the Department of Trade and Industry and Henry John S. Jalbuena of the Department of Labor and Employment. In a previous interview with the BusinessMirror, Labor Undersecretary Joel B. Maglunsod said the RTWPB-NCR should understand the gravity of its decision on the wage-hike proposals. “In my opinion, the wage board must approve a wage hike favorable to the demands of the labor groups,” Maglunsod said. “Our workers contribute to the expansion of Philippine economy, so let us not treat them like street scavengers begging for alms.”

Housing. . .

Continued from A1

in terms of owning a home. Based on the AmBisyon Natin 2040, some 61 percent of respondents indicated owning a mediumsized home as part of their definition of living a simple and comfortable life. “To the extent that it will facilitate the process of home ownership, then it will enable more Filipinos to achieve part of their ambisyon,” Edillon said. However, Edillon noted that the creation of a DHUD must be done in accordance with the principle of rightsizing the bureaucracy, which means some of the existing six Key Shelter Agencies (KSAs) could potentially be merged or removed to improve service delivery. “It will be done within the principle of rightsizing the government. In the short term, the problem is with respect to transition, unifying administration systems, etc.” Budget Secretary Benjamin E. Dio-

BMReports BusinessMirror

Climate change: Are we there yet? Continued from A1

“Now we know that [oil] companies have been taking actions to protect their infrastructure from climate change for decades—while fighting action to protect the rest of us.”

Hotter, wetter CURRENTLY, Baclagon said annual global average temperature is about 1° Celsius hotter than average and we’re already locked into at least another 0.5° C of warming. “It might not sound like a big increase in temperature, but it’s the difference between life and death for thousands of people,” he said. “Earth has always had natural cycles of warming and cooling, but not like we’re seeing now. The top 5 hottest years on record are 2016, 2015, 2014, 2013 and 2010.” Baclagon added there is a trend of everincreasing frequency and ever-intensifying tropical storms due to warmer ocean water temperatures is proof of climate change. He cited Typhoon Ondoy (international code name Ketsana), the second-most devastating tropical cyclone in the Pacific typhoon season with a damage of $1.09 billion and 747 fatalities. He noted also Supertyphoon Yolanda, the strongest typhoon to make landfall in history and left a path of death and destruction when it made landfall on November 8, 2013. Baclagon said droughts are also becoming longer and more extreme around the world. El Niño, which occurred from August 2015 to mid-2016, severely affected the Mindanao region. Hunger and poverty prompted farmers to stage protests and demand for government support.

kno said over the weekend that the proposal to create the DHUD is still in its early stages, and even if the House of Representatives approves it, a Senate version of the bill has to be passed for it to become a law. Diokno said, however, in terms of the budget for the housing sector, he still would not be able to tell how much it will be and how the reorganization will impact employees. Former Philippine Economic Society President Alvin Ang said the main economic benefit of creating a separate department of housing is the coordination of the KSAs. Ateneo de Manila University School of Social Sciences Fernando T. Aldaba added that, while the housing sector by itself has “great multiplier effects”, there is still no assurance how the DHUD will impact the housing backlog. “ The housing sec tor has great multiplier effects, but we still need to see if the new department will be able to energize the sector, such that the

Public fund

THE Philippines, through the Department of Finance and the CCC, established the People’s Survival Fund (PSF) to help climatevulnerable cities and communities reduce the risk of disasters. Created by Republic Act 10174 as an annual fund intended for local government units and accredited local and community organizations to implement climate change adaptation projects, the PSF aims to better equip vulnerable communities to deal with the impacts of climate change. The PSF supplements the annual appropriations allocated by relevant government agencies and local government units (LGUs) for various climate change-related programs and projects. The Philippine government programed at least P1 billion into the PSF, which will be sourced from the national budget. So far, the PSF Board has approved a P120-million adaptation pool for two Mindanao LGUs. The PSF Board is also continuously improving guidelines for submission and recently launched a P60-million project development support facility. The PSF will support the projects of the LGUs of Lanuza, Surigao del Sur, and Del Carmen, Surigao del Norte that aim to support the implementation of the respective local climate change adaptation plans of these local governments. According to the PSF Secretariat, the projects consider the climate risks in the localities. Both the LGUs of Lanuza and Del Carmen are in vulnerable areas where poverty may further worsen if no adaptation measures are undertaken.

housing backlog and new demand will be met,” Aldaba said. The issues surrounding the passage of the DHUD was among the reasons the House Committee on Housing deferred the proposal to reorganize the Social Housing Finance Corp. and the National Home Mortgage Finance Corp. There are proposed laws at the House of Representatives that aim to strengthen both agencies and make them more responsive to the housing finance needs of Filipinos. But in light of the proposed DHUD, House Committee Chairman Rep. Alfredo Benitez said it would be best to discuss the reorganization of the two agencies in the context of the DHUD. “We have to think about it well in the context of the pending creation of the Department of Housing, how will they harmonize functions with the Department. I feel that there are redundancies in the functions of the shelter agencies, sometimes they even overlap,” Benitez told the BusinessMirror.

The DOF and CCC, which acts as the PSF Board’s Secretariat, is encouraging LGUs to access the fund to boost their capacity to deal with climate change impacts.

Man-made phenomenon FOR his part, Rodne Galicha of the Climate Reality Project-Philippines, said that about half of the sun’s energy passes through Earth’s atmosphere to the surface. When sunlight enters the lower atmosphere, some energy is bounced back to space by clouds, ice and other reflective surfaces, and some energy warms Earth itself. The Climate Reality Project is founded by Nobel Laureate and former US Vice President Al Gore. Our mission is to catalyze a global solution to the climate crisis by making urgent action a necessity across every level of society, Galicha said. “Carbon dioxide concentrations have increased by 40 percent since pre-industrial times, mainly from fossil-fuel burning, and secondly from changes in how we use our land,” he said referring to agriculture and deforestation. Ironically, Galicha said many people assume that Earth is too vast to be harmed through human activity, or that the planet can recover quickly from environmental damage. “But the science is clear: when we burn dirty fuels like oil and coal, we are polluting our air and warming our planet. Carbon dioxide (CO2) and other greenhouse gases absorb more solar radiation and trap more heat in the atmosphere,” he said. Galicha said the Earth has continued to warm from the addition of more and more CO2 and other pollution from dirty energy sources into the atmosphere.

Based on the AmBisyon Natin 2040, most respondents said they choose to live in houses with large lots in cities. Some 73 percent said they wanted to live in a small house with a big lot, while 14 percent chose to live in big houses with small lots. Around 30 percent of respondents chose to live in big cities, like Manila, and another 30 percent chose to live in town centers in the province. Only 29 percent preferred to live in a small city in the province. The Neda said the AmBisyon Natin 2040 data were obtained from responses in 42 focus group discussions (FGDs) and 10,000 survey-respondents nationwide. The FGDs were conducted mainly among marginalized groups, including indigenous peoples while the survey was conducted across the ABCDE income groups. Benitez said his committee will discuss and then approve the consolidated bill creating the Department of Human Settlements and Urban Developmenton on Tuesday. The creation of a department of housing, together with the creation of a Department of Culture and Philippine Space Agency, is included to the agenda of the second Legislative-Executive Development Advisory Council meeting also on Tuesday. Benitez said the new housing department will be created through the consolidation of the Housing and Urban Development Coordinating Council and the Housing and Land Use Regulatory Board. “The Department of Human Settlements and Urban Development Act should focus on the needs of an individual rather than roof on his head, and ensure the proper urbanization of communities that will promote affordable and decent housing for every Filipino,” Benitez added. According to Benitez, the department shall act as the primary national government entity responsible for the management of housing, human settlement and urban development. He added that the agency shall be the sole and main planning and policymaking, regulatory, program coordination and performance-monitoring entity for all housing, human settlement and urban-development concerns, primarily focusing on the access to and the affordability of basic human needs.

With Jovee Marie N. dela Cruz

www.businessmirror.com.ph

PHL preparing strong case for migrants in global pact Continued from A1

Asked how overseas Filipino workers (OFW) will benefit from the compact, Bolivar said it was the Philippines that initiated several agreements with several receiving countries to have standard labor contracts, “which we feel would best protect the welfare of our migrant workers”. Included among these, Bolivar said, is the question of who should shoulder the cost of repatriation, who should shoulder the cost of insurance, minimum wages, minimum labor condition and the number of days off. The DFA official said these are the issues that the Philippine government wants to put on the table when negotiations for the GCM kick off in January 2018. He said what comes out would probably be the standard the world. “If we’re able to standardize, at least some minimum level of protection, for the rights of our migrant workers, that’s already a big thing.” “This is a UN global compact; all 190-plus members are expected to participate,” Bolivar added. As to whether the outcome would be legally binding, the DFA spokesman said: “That’s one thing we hope; of course, all the countries will abide by the commitments they made,” adding the issue of whether the outcome would be legally binding will have to be taken up during the course of negotiations. Bolivar noted that the compact has already adopted several ongoing international workshops, “what they call stock-taking exercises, which involves a series of one day of negotiation every week starting January 2018. And they hope to have a text by the time of the UN General Assembly by September next year.” He said the crafting of the Philippine position would involve a series of consultations, starting with concerned government agencies, followed by workshops for civil society and then the private sector for migrant workers’ groups. “And then, something to combine all the output of those workshops to come up with a position, which everybody can stand in,” he added. Asked if in September 2018, whether the output of each member-country would have been adopted by then, Bolivar said: “The term used is ‘aspirational goal’. They hope to have a text that countries can adopt by the UN general assembly, a year from now.”

‘Comprehensive pact’

Ambassador Evan P. Garcia, the Philippines’s permanent representative to the United Nations in Geneva, noted that the UN is seeking to come up with a globally recognized rules and norms that will cover all aspects of migration. “Also, we have a lot of stakes in global migration policies and the Philippines has been recognized for its leadership in the management of the entire migration cycle,” Garcia added. He said the negotiations would provide the Philippines a chance to explain what it is doing to benefit migrant workers and also learn from other countries “and maybe understand that we have a common global interest in assuring that migrants are properly treated as human beings”. Pointing to the members of the press, he said: “You’re all from news media and you know what’s happening in the world. There’s a lot of very poisonous language about migrants, the invectives and narratives have been darkened by the developments in many parts of the world,” he pointed out. According to Garcia, “This is something we find very unfortunate and has to be confronted and addressed in a global manner because it has a global impact.” He also said there is a need to bring to the fore the “realworld experiences” of Filipino migrant workers, and frontline lessons culled from the reports of Philippine ambassadors from the Middle East, considered the “frontline of migration”. “Of course. we have millions of kababayan [fellow Filipinos] outside of the Middle East but it’s in the Middle East where migration has tended to be the focus of attention,” Garcia said. Garcia said the compact is not a treaty since it is still “evolving”. “It is something that is evolving so its nature has not yet been determined. Its nature probably would be a framework wherein countries would signify their voluntary commitments.” He added, however, the degree of “bindingness” and the degree of accountability, would have to be tackled during the negotiations for the GCM. Asked what manner of migrant workers are covered, whether workers who return to the home country or those who permanently reside abroad, Garcia said the DFA focus are not only workers “but covers all aspects of migration, not just workers but family, the movement of unaccompanied children, and so on so forth”. “It is comprehensive. If the Philippines is going to participate, we have our own primary concerns, we also have to be concerned with the problems of others, of the intentional community. That’s what it’s going to be. As in all international organizations, we have all this give and take”, he said. On September 19, 2016, the United Nations General Assembly hosted a High-Level Summit in New York marking the first time world leaders, heads of state and government, came together with the aim of improving international cooperation and governance of migration and refugee issues. The summit and the resulting compact process show how important international migration issues have become on the international stage. States are showing a new willingness to cooperate with one another on migration policy. The compact could establish a framework and mechanisms for more and better mobility options, at lower cost and with greater security, respect for human rights and access to justice when rights are violated. In the New York Declaration, states included a list of 24 topics, issues or “elements”, that the compact might address, such as: “Effective protection of the human rights and fundamental freedoms of migrants, including women and children, regardless of their migratory status, and the specific needs of migrants in vulnerable situations”.

Economy

A4 Tuesday, August 29, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

DOF chief eyes lower tax in small airports By Rea Cu

@ReaCuBM

he Department of Finance (DOF) is mulling over the possibility of lowering or removing airport taxes in small airports, a move which the agency will help slash travel costs and boost the tourism sector of the country. According to Finance Secretary Carlos G. Dominguez III, the possibility of airports selling or leasing gates to airlines at different rates depending on the landing times is also being looked into, in lieu of imposing airport taxes. “I have asked the DOF representatives in the airports to tell them to consider this differential pricing, selling gates, rather than a fixed tax,” Dominguez said during a meeting with AirAsia Group CEO Tony Fernandes. Fernandes raised his proposal on the lowering of airport or departure tax within small airports pointing out that it will aid in realizing the AirAsia’s expansion plans in the country. Malaysia-based AirAsia has expressed interest in expanding its services in the Philippines to include flights from Davao City to key cities in China, Korea and Malaysia. During the meeting, Fernandes welcomed the finance chief’s proposal for airports to sell or lease gates as a viable alternative to the airport tax, adding that a massive opportunity is present in terms of expanding the tourism sector in the Philippines once the costs of air travel in coming into the country are made more affordable by budget airlines whose pricing will depend on how much they are charged for the use of airport terminals.

DOMINGUEZ: “I don’t like it. We will get a hard stand on that. I used to complain about that when I was in PAL. You cannot earn 50 percent above your salary for overtime pay.”

“There’s a big population here. There’s a good business here. We met some farmers who wish to send their cargoes directly to these places. And we are not worried about Marawi and all that because we think tourism is tourism. People want to come here at a right price,” Fernandes said. Dominguez said the government is bidding out the operations and maintenance for six airports in the Philippines, while the rehabilitation of others could be done through public-private partnerships (PPPs) in line with the discussion of privatizing airports. The finance chief, who was a former chairman of Philippine Airlines (PAL), assured Fernandes that he will take a hard stand against the proposal to charge airlines for the overtime pay of Customs personnel at the airports. “I don’t like it. We will get a hard stand on that. I used to complain about that when I was in PAL. You cannot earn 50 percent above your salary for overtime pay,” Dominguez said. Joint Circular 1 series of 2015 issued by the Civil Service Commission and the Department of Budget and Management sets a maximum overtime pay of 50 percent of the base salary of a government employee.

BusinessMirror

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Transco renews bid to tap Malampaya Fund to finance P60-B power projects

By Lenie Lectura

@llectura

he National Transmission Corp. (Transco) is proposing to tap the Malampaya Fund to undertake a number of transmission-line projects amounting to over P60 billion.

Transco President Melvin Matibag cited the following projects: the capital intensive Visayas-Mindanao interconnection project, which is estimated to cost as much as P52 billion; Bohol-Cebu interconnection project, P7.4 billion; and Antique to Mindoro interconnection project worth P2.6 billion. The state firm also expressed interest to complete the Panay-Negros interconnection project at a cost of P1.9 billion. “The direction of Transco right now is to do all the interconnection projects,” said Transco President Melvin Matibag, who assured that taxpayers won’t shoulder a single centavo. Instead, he proposed, to tap the Malampaya Fund currently pegged at P193 billion. However, Transco needs approval from Congress to utilize the Malampaya Fund because an existing Supreme Court (SC) order prohibits this. Tapping the Malamapaya Fund to finance the proposed interconnection projects would have to be in a form of legislation. “We’re coming out with a posi-

359

The number of signatures needed for the approval of permits for energy projects, which would take as little as 1,340 days involving 74 different agencies, according to Sen. Sherwin T. Gatchalian

tion that the government will do it, Congress to allocate budget from the Malampaya Fund,” said Matibag, who claimed that Congress “supports” his proposal. Matibag has the backing of Energy Secretary Alfonso G. Cusi, who also raised the issue during a recent budget hearing. “It is more logical for the government to develop the transmission facilities. The govern-

ment owns the transmission facilities, it makes sense for us to do it,” Matibag added. A formal position paper is being drafted and will be submitted to Congress soon. “In principle, even the secretary of finance agreed to it and the secretary [of energy] also. If government will undertake it, the cost would be cheaper by at least 20 percent to 30 percent,” Matibag said. Transco also proposed to undertake a redundancy the Visayas-Mindanao interconnection project. “I will not use submarine cable. There is a proposal to build a bridge connecting Mindanao and the Visayas. We can install the transmission cable via the proposed bridge from Leyte to Mindanao. It will be presented by the DPWH [Department of Public Works and Highways] to the president. We will be part of it,” Matibag said. He cited another advantage if Transco will undertake these projects. Matibag said permitting process for these projects would be concluded sooner as per issuance of Executive Order (EO) 30, which streamlines the permitting processes for big-ticket energy projects and mandates strict timeframes for government agencies to act on applications forwarded to their offices. EO 30, issued on June 30, states that concerned government agencies shall act upon applications for permits involving Energy Projects of National Significance (EPNS) not exceeding within a 30-day period. If no decision is made within the speci-

fied processing timeframe, the application is deemed approved by the concerned agency. “It is the policy of the State to ensure a continuous, adequate and economic supply of energy. Hence, an efficient and effective administrative process for energy projects of national significance should be developed in order to avoid unnecessary delays in the implementation of the Philippine Energy Plan [PEP],” the EO stated. Within the Department of Energy (DOE), permits for all energy projects are processed within 25 days. Securing a permit from the DOE, however, is only 10 percent of the entire permitting process. According to Sen. Sherwin T. Gatchalian, also the chairman of the Senate Commitee on Energy, it takes 1,340 days to secure a permit, 359 signatures needed for the permits to be signed, and involves 74 different agencies, including the DOE. In order for an energy project to be considered among the Energy Projects of National Significance (EPNS), power generation and transmission projects must have a capital investment of at least P3.5 billion, significant contribution to the country’s economic development, significant consequential economic impact, significant potential contribution to the country’s balance of payments, significant impact on the environment, complex technical processes and engineering designs, and significant infrastructure requirements.

Solon urges COA to speed up probe on ‘missing’ Ilocos Norte documents

PLAYTIME

Children play on top of culverts on the raoadside of Salvia Street, Saint Dominique Subdivision, Novaliches in Quezon City. The area has become their temporary playground while the culverts await rollout for road and drainage rehabilitation works. PNA/Oliver Marquez

High Court speaks for farmers in Batangas CARP case

he Supreme Court has ruled that the Comprehensive Agrarian Reform Program (CARP) covers all lands which are suitable for agricultural activities, and only those which are reclassified as commercial, residential or industrial by the local government as approved by the Housing and Land Use Regulatory Board (HLURB) before June 15, 1988, are excluded from the program. Hence, a farm lot is not among the exemptions as the High Court cited Rule V Section 18 (d) of the HLURB regulations defining farm lot subdivisions as “ planned community primarily for intensive agricultural activities and secondary for housing.” The High Court, in effect, permanently lifted the temporary restraining order it previously issued in 2010 and upheld the rights of farm beneficiaries over more than 70 hectares of property located in

Lipa City, Batangas, originally owned by Augusto Salas Jr. The decision was promulgated on March 29, 2017. In its 30-page decision in the case entitled “Heirs of Augusto Salas Jr. represented by Teresita Salas vs Marciano Cabungcal, et. al., GR 191545, the High Court, through Justice Marvic Leonen, ruled that “the general policy of Republic Act 6657 is to cover as many lands suitable for agricultural activities as may be allowed. Where there is doubt as to the intention of the local government in the area where the property is located, “the interpretation should be toward the declared intention of the law.” Concurring in the decision were Senior Associate Justice Antonio Carpio, chairman of the Second Division, and Associate Justices Francis Jardeleza, Jose Mendoza and Samuel Martires.

Marciano Cabungcal , one of the beneficiaries of the agrarian-reform program and leader of the farm group, shared that the decision of the Supreme Court is a clear manifestation that justice still prevails. “We thank the justices and the President for their wisdom and compassion. How can Salas take away our land after we have tilled it for generations, and CLOA [certificate of land ownership award] titles had been given to us more than 15 years ago, “ he said. Cofarmer leader Dominador Castillo said all the farmers and their families are very thankful to the Duterte administration as it has been the promise of the President that farm lots be distributed to the farmers. “Many of the beneficiaries have died from age and illness already, at least our children can study and have something of their own to start with,” Castillo said.

ep. Johnny T. Pimentel of the Second District of Surigao del Sur has called on the Commission on Audit (COA) to expedite its ongoing internal investigation into the “missing” original documents pertaining to questionable transactions approved by Ilocos Norte Gov. Imee R. Marcos on the purchase of 115 units of vehicles worth a combined P66.45 million to thwart a possible conspiracy between the provincial government and former COA officials. Pimentel raised the conspiracy angle after House Majority Leader Rodolfo C. Fariñas Sr. found out that retired COA auditor Rizalino Franco, who was then the supervising official when the irregular vehicle purchases were examined by the audit body, had been hired as a financial consultant by the Ilocos Norte provincial government for a fee of P20,000 a month. “Mr. Franco had, all along, been keeping this vital piece of information to himself. The House Committee on Good Government and Public Accountability has already conducted seven hearings on this issue, and Mr. Franco, who was always there, had not even bothered to inform the members that he is being paid by the provincial government of Ilocos Norte for over a year now as its consultant. His silence on this matter is highly suspicious,” said Pimentel, who is chairman of the House Committee on Good Government and Public Accountability. “I think it’s now time for the COA to update us on the results of its probe into the missing documents after its chairman, Michael Aguinaldo, told the House committee in the second hearing that his office was already conducting an internal probe into this mysterious disappearance,” he added. In the fifth public hearing, COA Regional Director Michael Bacani also confirmed that Aguinaldo had already ordered an investigation into the missing documents. The House good government panel has been investigating the alleged irregular cash advances made by Ilocos Norte to procure 40 multicabs worth P18.6 million, five second hand Hyundai buses costing P15.3 million and 70 mini trucks priced at P32.5 million in 2011 and 2012 using the province’s share of the proceeds from excise taxes collected from locally produced Virginia-type cigarettes. In the seventh and latest hearing conducted by the committee last week, Fariñas found out that four months after Franco’s retirement or starting August 1 last year, the former auditor was hired as a consultant by the Ilocos Norte provincial government to advise provincial of-

ficials on COA-related concerns. Fariñas had asked Franco, who was then the supervising auditor for Ilocos Norte, why he did not insist on including in the annual audit report the red flags on the vehicle purchases so that a proper investigation could have been made on these questionable transactions. Franco could only answer that he was then on his way to Ilocos Sur when the annual audit report for Ilocos Norte was being done. “Like Congressman Fariñas, we are also wondering why Mr. Franco, who was then supervising auditor at that time, did not include the adverse findings of auditor Cornelio Viernes who issued an audit observation memorandum [AOM] that point to several red flags on the transactions for the vehicle purchases,” Pimentel said. In the earlier hearings of the committee, Viernes said the use of cash advances to procure the vehicles was the reason he had prepared an AOM on the purchases made on the minitrucks and buses, “questioning management why it resorted to cash advances instead of regular check disbursement.” Viernes also told the committee that he had reported this concern to Franco. In the first hearing held on May 2, the committee members were surprised to learn that all the original documents pertaining to the cash advances for the purchase of the buses and mini trucks were missing from the storeroom of the COA in Ilocos Norte. Aguinaldo told the committee that only the documents relating to the checks on the cash advances for the minicabs, multitrucks and buses were missing. According to the COA’s AOM, the cash advances made to purchase the vehicles violated Sections 9, 45 and 46 of the COA circular, which stresses that: 1) all disbursements shall be made by check except otherwise provided; 2) cash payments shall be made only on duly approved payrolls/disbursement vouchers/liquidation vouchers out of regular cash advances or special cash advances; and, 3) regular cash advances are allowed only for salaries and wages, commutable allowances, honoraria and other similar payments to officials and employees, petty operating expenses, while special cash advances are allowed only on the explicit authority of the local government chief executive for confidential expenses and expenditures for the activities undertaken in the field when it is impractical to pay checks.

Banking&Finance

Tuesday, August 29, 2017 • Editor: Jun B. Vallecera

BusinessMirror

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Nomura as outlier, sees deposit reserves cut instead

By Bianca Cuaresma

@BcuaresmaBM

hile most economists forecast an interest-rate hike later this year and further back at some point in 2018, analysts at Nomura said the Bangko Sentral ng Pilipinas (BSP), under Governor Nestor A. Espenilla Jr., will likely next move to cut the banks’ deposit reserves instead.

In a recent paper, Nomura economists Euben Paracuelles and Lavanya Venkateswaran said that, while that they remain “comfortable” of the Central Bank’s current policy stance, they see the banks’ reserve requirement ratio (RRR) being cut later this year. The economists believe that a cut in RRR will be delivered within 2017, citing Espenilla’s “stronger bias” to lower the

reserve ratio than his predecessor, former Governor Amando M. Tetangco Jr., ever did. The RRR, or the required percentage of banks’ balances that must be kept at the central bank and currently pegged at 20 percent, is one of the highest in the region. Soon after assuming the office in July this year, Espenilla said one of the reforms he was looking at was the reduction of the 20-percent bank deposit reserves more in

keeping with international norms. Espenilla further said such reserves actually represent “inefficiency” in the financial system. In terms of monetary policy, the Nomura economists said the Monetary Board was seen keeping the policy rates frozen where they are this year and only adopt a cumulative 50 basis point hike in the second half next year. Nomura believes the BSP will wait until the second half next year before making appropriate policy adjustments when the so-called output gap will have been more positive and when inflation will have started to rise. The central bank has kept main policy rate at 3 percent, unchanged since the operational shift in monetary-policy system to an interest-rate corridor (IRC) framework in the second quarter last year. BSP officials earlier said the shift to IRC helped make possible for a cut in the banks’ deposit reserves given a level of liquidity in the system and their readiness to cut the deposit ratio at the appropriate time.

Continued growth seen even with IMF scale back

inance officials on Monday cited the continued optimism of the International Monetary Fund (IMF) on the country’s growth outlook no matter that the Washington-based institution recently scaled back Manila’s forecast expansion this year and next. Finance Secretary Carlos G. Dominguez III highlighted the IMF’s assessment of the Philippines when he met just last week with Luis Breuer, IMF chief of mission to the Philippines. In that meeting, Dominguez said the IMF remained “very optimistic” on the growth outlook of the Philippines owing to the country’s continued impressive economic performance. Breuer himself also credited the economic team and its role in sustaining the country’s growth momentum and, at the same time, commend the adoption of a Comprehensive Tax Reform Program (CTRP). “The Philippine economy is quite impressive. It is one of the most dynamic economies in the world,” Breuer said when he met with Dominguez and other members of the economic team.

Dominguez

Breuer noted that Asia is the lead global growth driver and that the Philippines stands out in the region. Only in April with the release of the World Economic Outlook report, the IMF said the Philippines’s GDP would expand by 6.8 percent this year and by 6.9 percent in 2018. Earlier this month, the IMF trimmed that forecast to 6.6 percent in 2017 and 6.8 percent in 2018 in part because local

No more non-EMV PSBank cards

hilippine Sav ings Ban k (PS Bank) clients have until end of the month to collect the more secure EMV chip-enabled debit, credit and automated teller machince (ATM) cards. By Friday, September 1, all non-EMV cards shall have been deactivated, the thrift bank arm of the Metrobank Group said. “All non-EMV PSBank cards can no longer be used beginning September 1, 2017. Clients should replace their nonEMV cards now at any PSBank branch. Replacement is free of charge,” it said in a statement. PSBa n k debit a nd prepa id c a rd account holders can simply visit any branch to get their card. They need to bring their old cards and one governmentissued valid ID. For PSBank Flexi account holders, their cards will be delivered via courier to their office address, while their PIN will be delivered separately via another courier to their home address. Flexi card holders can activate their card by ca lling PSBank ’s 24/7 Cus-

tomer Experience Hotline at (02)8458888 or by v isit ing t he nea rest PSBank branch. PSBank started issuing EMV chip-enabled cards as early as January 3, 2017. All its more than 600 ATMs are already EMV-ready. PSBank’s move to shift to EMV chipenabled cards is in line with the issuance of Bangko Sentral ng Pilipinas Circular 859, or the Europay Mastercard and Visa Implementation Guidelines. T he P S B a n k E M V c h i p - e n a b l e d cards have enhanced features for verifying transactions, minimize cases of card-present fraud incidents and identit y theft and g ive cardholders the peace of mind whenever they do card transactions.

Case clippings

By Justice S J Ranada Jr. TEMPORARY RESTRAINING ORDER–improper issuance It is grave error for the Court of Appeals to order the issuance of a temporary restraining order against the implementation of a cease and desist order and a closure order issued by a mayor, where the applicant has not made out a case of invalidity or irregularity strong enough to overcome the presumption of validity or regularity, nor established a clear legal right to the remedy sought. Cayabyab v. Dimson 10 Jul 2017

GR 223862 Perlas-Bernabe, J

output growth in the first quarter this year averaged only 6.4 percent. Dominguez said the IMF mission sought a meeting with the country’s economic managers to discuss the government’s priorities and challenges the country expects in the face of global uncertainties. “We are here to assess the Philippine economy and I would appreciate hearing your views on the economy and your priorities,” Breuer told Dominguez. Breuer reiterated the IMF’s support for the CTRP and offered its assistance in pursuing the reform initiatives. Tax reform and the government’s massive investments in infrastructure should yield even more positive results for the Philippine economy, according to Breuer. “Over all, we have a very positive impression of the Philippines, we would like to support the initiatives you have in your tax-reform [program],” he said. Dominguez replied by saying: “It’s very important that we start planning when things are good and get insurance so we are prepared when things will turn out bad.” Rea Cu

Take the long-haul view, wealth manager tells investors T

he Sun Life Asset Management Co. Inc. (Slamci) said so-called shortterm market volatilities provide opportunities for investors to increase their portfolio holdings and should not be feared. Sun Life of Canada (Philippines) Inc. (Sun Life) Chief Investments Officer Michael D. Enriquez also said the country’s growth story were to gain momentum and urged investors to adopt a long-term perspective when investing. “We expect the Philippine economy to continue its multiyear growth trajectory. This is underpinned by the strong domestic consumption reinforced by accelerated infrastructure and investments,” Enriquez said Slamci, as wealth manager, endeavors to continuously improve its 11 Sun Life Prosperity Funds and its other initiatives to make investing more accessible to Filipinos. It has launched its Bills Payment Facility in partnership with BDO to enable more clients to top up their investments, and announced it should soon launch the Sun Life Prosperity Dollar Starter Fund to cater to investors who aim to take a step from bank deposits to

investments or have a short-term need for dollar-denominated funds. “Slamci aims to help Filipinos achieve prosperity, and at the root of this mission is financial literacy, for it is only when they are wellinformed about money management and financial instruments that they can make the best choices in terms of growing their money,” Sun Life President Valerie N. Pama said. Earlier in the year, Slamci exceeded its target assets under management (AUM) for the year of only P53 billion by some P4 billion to P57 billion instead as more investors shifted to money market funds in the first four months. Accord ing to Pa ma, its AUM in 2016 a mou nted to on ly P4 8 bi l l ion but t hat t heir f irst- qu a r ter per for ma nce t h is yea r saw t he level c l imbing sw if t ly to more t ha n P56 bi l l ion a nd on to P57 bi l l ion by Apr i l. “For the first quarter, we reached P56-plus billion. I don’t remember exactly, but for April we’re P57 billion already so it’s a new high for the asset-management company,” Pama told financial reporters. She attributed the growth in AUM to the placement of its funds in bond funds and money market funds that investors prefer.

Five things I wish I knew before I started my first business

tarting a business can be tough, but I think nothing will ever be more difficult than putting up your very first venture. Without the advantage of experience, your tools are usually just textbook knowledge, observed wisdom and generous advice. So let me help you today by giving you one of those…generous advice. It was in 2004 when I registered my first business—a computer network gaming station in Makati. Unfortunately, after almost a year, me and my partners decided to close it down. Our reasons are not important, but the lessons I learned from that small venture are certainly something worth sharing today. Here are five things I wish I knew before I started that very first business: Your business plan can become obsolete fast. Read any business book and they’ll tell you that a business plan is essential when starting a business. What many people tend to skip or miss reading is the part written in the end that you may have to ditch your business plan along the way. I was one of those people. Don’t get me wrong, having a business plan before starting is important. It is your road map to success. But understand that unexpected things are bound to happen and you will need to adjust your business plan, or make a new one at worst. When the map becomes irrelevant or unworkable, don’t hesitate to find alternative routes that will get you to your destination. Self-employment is a necessary initial cost. I learned from a book the difference between the self-employed and the business owner. One works for the business, while the other lets the

Fitz Gerard Villafuerte

personal finance business work for him. I wanted to be the business owner. But I learned later on that one cannot be a business owner without being self-employed first. Businesses are like children, you have to nurture and take care of them until they become independent. Good employees are really hard to find. I thought since a lot of people are unemployed, then it will be easy to find someone to work for you. I was partly right. What I didn’t know was that it will not be easy to find someone who will do a good job. People working in HR will agree—a person’s resume cannot guarantee his work ethics. And from experience, even those who shine in their interview can be quite sloppy at work. So again, take some time to work on your business so you’ll know exactly what it demands from a person. This will help you screen applicants better, and you’ll be able to hire the right people fit for the job. Marketing is essential in every business—big and small. My first business was just a rented space in a small barangay. Being the first and only computer gaming shop in the area, I was confident that I wouldn’t need to do marketing and advertising after the

grand opening. “It’s just a small and simple business,” I thought. But then I learned that some of “my kids” are going somewhere across town because there’s a new shop that’s cheaper but with faster computers. Relying simply on walk-in customers and word of mouth can be risky. And when business is good, expect competition to appear. A continuous marketing campaign will not only allow you to reach new customers, but it will also establish your brand and keep the trust and loyalty of your clientele. It’s more than just about the money. My primary reason for starting my first business was because I wanted passive income. And one of the reasons we decided to close it down was because it wasn’t making enough. Ironically, I also realized that the best reason we closed down was because we were only after profits—we were in it for the wrong reason. It’s true that your business should make money, but more important, it should be able to take you closer to a noble goal. That’s why it’s important to have a mission and vision for the business. It’s a stronger motivation than income. Having that desire to help and provide a solution to a problem is the main force that drives successful entrepreneurs everywhere. Fitz Villafuerte is a registered financial planner of RFP Philippines. Learn more about personal f inancial planning at the 64th RFP program this September 2017. To inquire, e-mail info@ rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

The World BusinessMirror

www.businessmirror.com.ph

Tuesday, August 29, 2017

Disaster aid limited with ‘years’ of Harvey recovery seen

ven as the Federal Emergency Management Agency (Fema) is preparing for a years-long recovery from Hurricane Harvey, US disaster-relief funds probably won’t be sufficient, raising the prospect of a potential budget fight in Congress. The storm that slammed into Texas last Friday, which caused catastrophic flooding in Houston as it continued to dump rainfall on the state, is “a landmark event,” Fema Administrator Brock Long said. There are almost 5,000 people from the federal government on site in Texas and Louisiana, and the agency is “gearing up for the next couple of years,” Long said. “This is a storm that the United States has not seen yet,” Long said on CNN’s “State of the Union” program last Sunday. The severity of the storm is promising to put pressure on Congress to act because the total disaster-relief budget for the current and upcoming fiscal years are likely to fall short of what’s needed for Harvey alone. Past opposition to such funding increases could signal a budget fight among lawmakers who are facing deadlines at the end of September for putting a new spending plan in place and for raising the debt ceiling. The Fema disaster-relief fund had just $3.8 billion as of July 31, with most of that set to be spent by the end of September. The House has proposed adding $6.8 billion in the fiscal year that starts October 1.

Nearing Sandy

A report last Friday from CoreLogic estimated that Hurricane Harvey would cause $39.6 billion of damage alone to homes in its immediate path. That figure is closer to the aid package that Congress approved in early 2013 for the East Coast to recover from Superstorm Sandy, which topped $50 billion. Texas Republican Sens. Ted Cruz and John Cornyn voted against the final Sandy aid package. During that debate, they backed an amendment that would have cut domestic spending to pay for the emergency funding.

Cruz at the time said not all the funds were being allocated properly. Cornyn “voted for a Sandy aid package without the unrelated spending, which included things like repairing fisheries in the Pacific,” Cornyn Spokesman Drew Brandewie said. Both senators wrote to Texas Gov. Greg Abbott last Friday, urging him to expedite emergency funding for the state this time around. President Donald J. Trump last Friday approved Abbott’s request for a major disaster declaration, making federal assistance available to supplement state and local recovery efforts. Trump is expected to travel to Texas on Tuesday, the White House said. Trump and Vice President Mike Pence led a video teleconference with the Cabinet and senior administration members last Sunday to discuss ongoing federal support for response and recovery. The president “continued to stress his expectation that all departments and agencies stay fully committed to supporting the governors of Texas and Louisiana,” according to a readout provided by the White House.

500-year flood

The president also posted several Twitter messages last Saturday and Sunday lauding the cooperation between federal, state and local authorities and suggesting that the government was up to the challenge of dealing with the historic storm. “Wow - Now experts are calling #Harvey a once in 500 year flood!” Trump tweeted last Sunday. “We have an all out effort going, and going well!” In his appearance on CNN, Long also was asked whether the response to Harvey will be hampered by vacancies, including the lack of a permanent secretary of homeland security and two Fema deputy director nominees awaiting confirmation. “I don’t even have time to worry about it right now,” Long said. “We’re leaning forward, and we’re going to continue to support the state and local governments.” Bloomberg News

Trump: Canada and Mexico being ‘very difficult’ on Nafta

ASHINGTON—President Donald J. Trump is accusing Canada and Mexico of being “very difficult” at the negotiating table over the North American Free Trade Agreement (Nafta), and threatening anew to terminate the deal. Trump tweeted last Sunday morning that the Nafta is the “worst trade deal ever made.” Trump said at a rally last week in Phoenix that he would “end up probably terminating” Nafta “at some point.” The United States, Mexico and Canada began formal negotiations earlier this month to rework the 23-year-old trade pact that Trump blames for hundreds of thousands of lost US factory jobs. Trump is also taking to Twitter to press the need for his promised southern border wall, tweeting that Mexico will pay for it “through reimbursement/other.” Mexico has repeatedly said there’s no chance of that happening. Mexico’s foreign-relations ministr y responded to Trump’s comments last Sunday by reiterating that Mexico will never pay for a border wall and that it will not renegotiate Nafta via social media or the press. In a statement, the ministr y also emphasized that the violence generated by drug trafficking is a shared problem between Mexico and the US, which creates the demand for drugs. The second round of the Nafta renegotiation is scheduled to begin on Friday in Mexico City. Trump last Sunday renewed his pledge to make Mexico pay for the construction of a border wall between the US and Mexico, days after threatening to trigger a government shutdown if congressional Republicans don’t include funding as they tackle a spending bill due on September 30. And Mexico, just as

forcefully, said, “no chance.” Trump posted successive tweets last Sunday suggesting that the US may have to terminate the Nafta and repeating his oft-stated pledge during the campaign that the US would build a wall and Mexico would pay for it. “With Mexico being one of the highest crime nations in the world, we must have THE WALL,” Trump tweeted, adding that, “Mexico will pay for it through reimbursement/other.” The president did not elaborate on how Mexico would cover the cost. The White House, previously, has suggested that one possibility is a 20-percent tax on imports from Mexico. Mexico’s Foreign Ministry issued a news release that didn’t leave any question about the country’s response. “As the government of Mexico has always maintained, our country will not pay, in any way or under any circumstances, for a wall or physical barrier built on US territory along the Mexican border,” the release said. “This determination is not part of a Mexican negotiating strategy, but a principle of national sovereignty and dignity.” The release said violence and the trafficking of drugs and arms is a “shared responsibility,” and it even expressed “full solidarity with the people and government of the United States for the damages caused by Hurricane Harvey in Texas” with the offer of help from the Mexican government. Trump’s Twitter posts about Mexico were part of a series of early-morning tweets that also praised the disaster response to Harvey, promoted a book by a controversial sheriff in Wisconsin and plugged his own upcoming visit to Missouri and a trip he said he wants to make to Texas to view areas affected by the hurricane. AP and Bloomberg News

A family evacuates their Meyerland home in Houston on August 27. Rescuers answered hundreds of calls for help last Sunday as floodwaters from the remnants of Hurricane Harvey rose high enough to begin filling two-story homes, and authorities urged stranded families to seek refuge on their rooftops. Mark Mulligan/Houston Chronicle via AP

Rescuers plucked hundreds from floodwaters in Houston

OUSTON—Hurricane Harvey sent devastating floods pouring into the nation’s fourth-largest city last Sunday as rising water chased thousands of people to rooftops or higher ground and overwhelmed rescuers, who could not keep up with the constant calls for help. The incessant rain covered much of Houston in turbid, graygreen water and turned streets into rivers navigable only by boat. In a rescue effort that recalled the aftermath of Hurricane Katrina, helicopters landed near flooded freeways, airboats buzzed across submerged neighborhoods and high-water vehicles plowed through water-logged intersections. Some people managed with kayaks or canoes, or swam. Volunteers joined emergency teams to pull people from their homes or from the water, which was high enough in places to gush into second floors. The f looding from Har vey, which made landfall late Friday as a Category 4 hurricane and has lingered dropping heavy rain as a tropical storm, was so widespread that authorities had trouble pinpointing the worst areas. They urged people to get on top of their houses to avoid becoming trapped in attics and to wave sheets or towels to draw attention to their location. Residents living around the Addicks and Barker reservoirs designed to help prevent flooding in downtown Houston were warned last Sunday that a controlled release from both reservoirs would cause additional street flooding and could spill into homes. Rising water levels and continuing rain was putting pressure on the dams that could cause a failure without the release. Harris and Fort Bend county officials said last Sunday that residents around certain areas should be prepared for the influx of water that was scheduled to happen at Addicks around 2 a.m. on Monday and a day later at Barker. Officia ls war ned residents they should pack their cars last Sunday night and wait for daylight on Monday to leave. Meanwhile, officials in Fort Bend County, Houston’s southwestern suburbs, late Sunday issued widespread mandator y e vac u at ion orders a long t he

6.8M The number of people, or a quarter of the Texas population, who are affected by the floods brought by Hurricane Harvey

Bra zos R iver levee d istr icts. County officials were preparing for the river to reach major f lood stages late Sunday. County Judge Robert Herbert said at a news conference that National Weather Service (NWS) officials were predicting that the water could rise to 59 feet, three feet above 2016 records and what Herbert called an “800-year flood level.” Herbert said that amount of water would top the levees and carries a threat of levee failure. Judging from federal disaster declarations, the storm has, so far, affected about a quarter of the Texas population, or 6.8 million people in 18 counties. It was blamed for at least two deaths. As the water rose, the NWS issued another ominous forecast: Before the storm that arrived last Friday as a Category 4 hurricane is gone, some parts of Houston and its suburbs could get as much as 1.3 meters of rain. That would be the highest amount ever recorded in Texas. Some areas have already received about half that amount. Since last Thursday, South Houston recorded nearly 63 centimeters, and the suburbs of Santa Fe and Dayton got 69 centimeters. “The breadth and intensity of this rainfall is beyond anything experienced before,” the NWS said in a statement. Average rainfall totals will end up around 1 meter for Houston, weather-service meteorologist Patrick Burke said.

The director of the Federal Emergency Management Agency (Fema), Brock Long, predicted that the aftermath of the storm would require Fema’s involvement for years. “This disaster’s going to be a landmark event,” Long said. Rescuers had to give top priority to life-and-death situations, leaving many affected families to fend for themselves. And several hospitals in the Houston area were evacuated due to the rising waters. Tom Bartlett and Steven Craig pulled a rowboat on a rope through chest-deep water for a mile to rescue Bartlett’s mother from her home in west Houston. It took them 45 minutes to reach the house. Inside, the water was halfway up the walls. Marie Bartlett, 88, waited in her bedroom upstairs. “When I was younger, I used to wish I had a daughter, but I have the best son in the world,” she said. “In my 40 years here, I’ve never seen the water this high.” It was not clear how many people were plucked from the floodwaters. Up to 1,200 people had to be rescued in Galveston County alone, said Mark Henry, the county judge, the county’s top administrative post. Houston’s George R. Brown Convention Center was quickly opened as a shelter. It was also used as a shelter for Katrina refugees in 2005. Gillis Leho arrived there soaking wet. She said she awoke last Sunday to find her downstairs flooded. She tried to move some belongings upstairs, then grabbed her grandchildren. “When they told us the current was getting high, we had to bust a window to get out,” Leho added. William Cain sought shelter after water started coming inside his family’s apartment and they lost power. “I live in a lake where there was once dry land,” he said. Some people used inflatable beach toys, rubber rafts and even air mattresses to get through the water to safety. Others waded while carrying trash bags stuffed with their belongings and small animals in picnic coolers. Hou s t on M ay or Sy l v e s t e r Turner said authorities had received more than 2,000 calls for help, with more coming in. He urged drivers to stay off roads to avoid adding to the number of those stranded. “I don’t need to tell anyone this is a very, very serious and unprecedented storm,” Turner told a news conference. “We have several hundred structural-flooding reports.

We expect that number to rise pretty dramatically.” The deteriorating situation was bound to provoke questions about the conflicting advice given by the governor and Houston leaders before the hurricane. Gov. Greg Abbott urged people to flee from Harvey’s path, but the Houston mayor issued no evacuation orders and told everyone to stay home. The governor refused to point fingers last Sunday. “Now is not the time to second-guess the decisions that were made,” Abbott, a Republican, said at a news conference in Austin. “What’s important is that everybody work together to ensure that we are going to, first, save lives and, second, help people across the state rebuild.” The mayor, a Democrat, defended his decision, saying there was no way to know which parts of the city were most vulnerable. “If you think the situation right now is bad, and you give an order to evacuate, you are creating a nightmare,” Turner said, citing the risks of sending the city’s 2.3 million inhabitants onto the highways at the same time. Jesse Gonzalez, and his son, also named Jesse, used their boat to rescue people from a southeast Houston neighborhood. Asked what he had seen, the younger Gonzalez replied: “A lot of people walking and a lot of dogs swimming.” “It’s chest- to shoulder-deep out there in certain areas,” he told television station KTRK as the pair grabbed a gasoline can to refill their boat. The Coast Guard deployed five helicopters and asked for additional aircraft from New Orleans. The W hite House announced that President Donald J. Trump wou ld v isit Texas on Tuesday. He met last Sunday by teleconference w ith top administration officia ls to discuss federa l suppor t for response and recover y effor ts. The rescues unfolded a day after Harvey settled over the Texas coastline. The system weakened last Saturday to a tropical storm. Last Sunday it was virtually stationary, about 40 kilometers northwest of Victoria, Texas, with maximum sustained winds of about 72.42 kilometers per hour, the hurricane center said. Harvey was the fiercest hurricane to hit the US in 13 years and the strongest to strike Texas since 1961’s Hurricane Carla, the most powerful Texas hurricane on record. AP

Tuesday, August 29, 2017

The World BusinessMirror

Ex-Thai leader’s exile spurs debate: Is Thaksin era over?

he self-imposed exile of another popular Thai leader means the junta won’t need to deal with a high-profile prisoner. Yet, another question remains: Can Thaksin Shinawatra’s family finally be beaten at the polls? Thaksin and his allies have won every election dating back to 2001, only to have the military or courts help remove them from power. His sister, Yingluck Shinawatra, fled the country last week rather than face jail for a costly rice policy during her time as prime minister, which ended in 2014 weeks before a coup. One of her Cabinet ministers received a 42-year jail sentence. “End of Shinawatra Era,” declared a headline in the Bangkok Post after Yingluck reportedly fled to Dubai, with the story saying “the curtain has closed on the Shinawatra clan’s grip on Thai politics.” Other analysts aren’t so sure. “With no opportunity since 2014 to gauge her popularity, we just have to assume that Yingluck and her brother are as popular as ever and would win an election if it was held tomorrow,” said Nicholas Farrelly, associate dean of the Australian National University’s College of Asia and the Pacific in Canberra. Thailand has become increasingly polarized over the past decade as Thaksin’s opponents— backed by royalist judges, soldiers and bureaucrats—have undermined the will of voters. Deadly street protests, frequent changes of government and a stifling political climate have affected the country’s economy. Prime Minister Prayuth ChanOcha told reporters on Monday that a security team had been assigned to investigate how Yingluck fled the country. Deput y Pr ime Minister Prawit Wongsuwan added that authorities didn’t know which country Yingluck had f led to, and was right now unaware of any political asylum requests. “Yingluck ’s f leeling was unexpected,” Prawit said. “We’ve had police monitoring her house.”

The foreign direct investment, which is less than this percentage, accounted to Thailand among the 10-country Asean last year, down from 13 percent in 2013 before the last coup. Economic g row t h has l ag ged Indonesi a, M a l ay s i a , V i e t n a m a nd t he Ph i l ippines. Thailand’s benchmark Security and Exchange of Thailand index has climbed about 2 percent this year, one of the worst performers in Asia, weighed down in part by

a climb in bad loans. Bonds have proved a bigger draw for foreign investors, helping to make the baht the region’s top-performing currency in 2017. “Yingluck’s fleeing is considered a relief similar to when her brother Thaksin fled,” Warut Siwasariyanon, the head of research at Asia Wealth Securities Co. in Bangkok, said by phone. “Political parties and the military now will gear toward the goal of a general election in late 2018. So any political violence won’t be beneficial for both of them because it will force the election to be postponed.” Thaksin, a telecom tycoon who entered politics in the 1990s, endeared himself to millions of rural Thais with price support programs for rice and the implementation of cheap health care. His opponents accused him of corruption and challenging the power of the monarchy. He eventually fled to avoid a jail sentence for abuse of power, charges that he denied.

‘Thaksin thinks’

While Thaksin hasn’t stepped foot in Thailand since 2008, he’s maintained inf luence through his Pheu Thai party. In 2011 Yingluck became prime minister after the party campaigned with the slogan “Thaksin thinks, Pheu Thai does.” The parliament’s push for an amnesty bill that would allow Thaksin to return to Thailand triggered street protests that eventually prompted the military

to seize power. Yingluck faced up to a decade in jail if convicted of failing to curb losses from her government’s $26-billion rice-purchasing program for poor farmers. She has denied the charges and said the twoyear trial is politically motivated. The military government is doing what it can to ensure that it still has power over elected politicians no matter who wins. The constitution promulgated in April calls for a two-decade national strategy and may allow appointed soldiers, judges and bureaucrats in the upper house to overrule elected leaders in the House of Representatives. For mer Pr ime Minister Abhisit Vejjajiva, a longtime op ponent of T ha ksin, war ned in an inter view earlier this month that senators cou ld in theor y seek to block a par t y’s candidate for pr ime minister. T hat cou ld lead to a “tug of war” bet ween the t wo bodies after the election, he said. Past efforts to kill off Thaksin’s influence haven’t worked. Political bans, military takeovers, asset seizures and jail sentences have tended to boost sympathy for his allies, which are now in the Pheu Thai party. Yingluck’s exit “will do a lot of damage to national reconciliation,” said Florian Reinold, regional coordinator in Thailand for the Robert Bosch Foundation’s Lectureship in Asia scholarship program. “It will fuel Pheu Thai supporters’ anger.” Bloomberg News

he earliest gauges of how China’s economy has fared this month show diverging sentiment among businesses, though the outlook is underpinned by expectations that the expansion will remain broadly steady. Manufacturing activity tracked by satellites strengthened and confidence at smaller companies improved, according to private indicators for August. The outlook wasn’t as strong in gauges of sales managers and steel mills, which show conditions moderated. The readings follow official releases for July that showed an across-the-board cooling in factories, investment and consumption. Still, the world’s second-largest economy is holding up well ahead of a key Communist Party Congress later this year, with economists surveyed by Bloomberg projecting a second straight year of 6.7-percent growth. The first main official indicator for August, the manufacturing purchasing managers index, is due for release on Thursday. Economists project it edged down to 51.3 from 51.4 in July, a Bloomberg survey as of Monday shows. Readings above 50 signal improving conditions. Data released l ast Sund ay showed industrial firms maintained a profit surge, underscoring the economy’s resilience even amid slowing factory output and investment. Industrial profits increased 16.5 percent in July from a year earlier, versus the 19.1-percent pace a month earlier, the statistics bureau said. China Petroleum and Chemica l Cor p., t he world ’s big gest oi l ref iner, posted 40 - percent g row t h in f irst-ha lf prof it last Su nd ay a m id bet ter ea r nings f rom its c hem ica ls business. China Shenhua Energ y Co., the cou nt r y ’s big gest coa l m iner, s a id l ate Fr id ay t h at prof it more t ha n doubled in t he f irst ha l f on h igher f uel pr ices a nd sa les volu mes.

S ta n dard C h a r tered Plc.’s Small and Medium Enterprise (SMEs) Confidence Index rose to a four-month high of 57.4 in August, according to the bank’s survey of more than 500 companies. Investment appetite increased,

while three key subgauges tracking current performance, threemonth expectations and credit conditions all posted gains. “An improving outlook for demand bodes well for production,” economists Shen Lan and Ding Shuang wrote in the report on smaller companies. “While financial-market deleveraging has led to higher lending rates, we believe the authorities’ efforts to channel credit to real activity and maintain steady growth are likely to benefit SMEs eventually.”

Satellite view

M anufacturing picked up further in August, according to the China Satellite Manufacturing Index, which climbed to 51.2 from 50.4 in July. The gauge published by San Francisco-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.

Sales managers

Sentiment among sales managers edged down, according to a survey by London-based World Economics Ltd. The gauge declined to 52.4 in August from 52.8 last month, while a sub-index for prices charged rose to a 40-month high, underscoring the resilience in factory inflation. “The Chinese economy is maintaining its recent levels of momentum,” CEO Ed Jones wrote in a report. However, sales managers aren’t optimistic that business activity will improve in the coming months, and staffing levels showed no growth, he said.

Steel mills

The Standard and Poor’s (S&P) Global Platts China Steel Sentiment Index slipped to 50.75 this month from 55.32 in July. The gauge is based on a survey of 75 to 90 China-based market participants, including traders and steel mills. “Steel prices have risen so much recently that they feel this could deter appetite for purchasing,” Paul Bartholomew, a senior managing editor at S&P in Melbourne, wrote in a report. Still, mills and traders are enjoying high prices and strong margins, and are generally upbeat about market conditions, he said. Bloomberg News

Kuroda cautions: Japan can’t keep current growth rate

Supporters of Thailand’s former Prime Minister Yingluck Shinawatra display her images outside the Supreme Court after Yingluck failed to show up to hear a verdict in Bangkok, Thailand, on August 25. AP/Gemunu Amarasinghe

India graft still endemic 10 months after cash ban early 10 months after India’s unprecedented ban on high-value notes that was designed to tackle entrenched corruption, bribery continues to oil the wheels of business in Asia’s third-largest economy, according to a US risk-management firm that advises foreign investors. Gifting of land, houses, luxury watches and sponsoring expensive travel abroad are now the preferred bribes as tax authorities clamp down on high-value cash transactions. And for India’s vast shadow economy, estimated by McKinsey and Co. at a fourth of the $2-trillion economy, the cash ban has hardly made a dent. “Transparency, post demonetization, has marginally improved but I am not sure it has made a dent on corruption,” Tarun Bhatia, managing director at the Indian arm of Kroll Inc., said in an interview in Mumbai. “Of course, there

Early China data show diverging views, stable growth outlook

Smaller businesses

Investment falls

T h aila nd accou nted for less than 3 percent of foreign direct invest ment into t he 10 - cou ntr y A sean last year, dow n f rom 13 percent in 2013 —t he yea r

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

is use of more plastic money than before but I don’t think it is a case where black money is no longer there. It has handicapped but not fumigated the parallel economy.” Jagdish Thakkar, a spokesman in the Prime Minister’s office, didn’t return calls seeking comment. While the use of credit and debit cards and digital transactions has risen from prenote ban days, Indians mostly prefer cash for their daily transactions after limits for daily withdrawals were restored back to normal earlier this year. Besides, many Indians, especially in the vast hinterlands, lack a bank account or have limited access to technology or the Internet, making digital payments inconvenient. For four decades, New York-headquartered Kroll has helped clients make risk management decisions about people, assets, operations and security.

Their recent global survey showed companies worldwide are increasingly grappling with corruption and bribery challenges. “The majority believe the risk landscape is either not going to improve or actually get worse in 2017, their resources are insufficient to support their efforts, and they themselves may now be held personally liable for their organization’s compliance violations,” the report, titled Anti-Bribery and Corruption Benchmarking Report, said. For India, the biggest risk for foreign investors—apart from corruption—is how to exit the country and wind up a business with minimum fuss if things go awry, Bhatia said. They are also war y about shell companies, which are typically used to launder money, he said. While the government has uncovered about 300,000 shell entities and

recently introduced a bankruptcy code, the nation’s legal system is fraught with delays and inadequacies, making winding up a challenging task for companies. India is ranked a lowly 130 in the ease of doing business by the World Bank and Prime Minister Narendra Modi has made attempts to lift the country’s image as a more business-friendly destination in his trips abroad since taking office three years ago. And in a major reform, his government introduced a uniform goods and services tax across the country. Still, analysts believe more needs to be done. “Of course there are questions about the ease of doing business,” Bhatia said. “But an equally important question for prospective investors is ‘how easy is it to exit India if business plans don’t go according to plan?’” Bloomberg News

a n k o f J a p a n ( B OJ ) G ove r n o r Haruhiko Kuroda pledged to forge on with very accommodative monetary policy as he warned that his inflation target remains distant and the current pace of growth in the world’s third-largest economy looks unsustainable. S p e a k i n g i n a n i nte r v i e w w i t h Bloomberg in Jackson Hole, Wyoming, Kuroda also said the BOJ’s yield-curve control program has been working quite well and that he doesn’t see a need to adjust it at present. He added that the BOJ may be able to control rates while buying fewer Japanese government bonds (JGB) and that the market is still “functioning quite well”. The BOJ chief, who joined Federal Reser ve Chairman Janet Yellen and European Central Bank President Mario Draghi at the mountain retreat for an annual gathering of monetary policymakers, is grappling with an economy that’s in its longest run of expansion in more than a decade but is still failing to generate significant wage gains and a healthy level of inflation. “I think 4-percent growth is excellent, but we don’t think 4-percent growth can be sustained. Around 2-percent growth is likely,” Kuroda told Bloomberg Television’s Kathleen Hays. “I think for some time we have to continue this ex tremely accommodative monetary policy.” While Yellen and Draghi are also contending with growth and inflation that

are somewhat out of sync, Kuroda views the problem in Japan as more serious. “The economic and price situation in the US is much, much better than the situation in Japan,” Kuroda said. He noted that Japanese businesses and labor unions still exhibit a “deflationary mind-set”, which is crimping price gains and has seen the BOJ delay the projected timing for reaching its 2-percent price target six times. “Kuroda is saying that he won’t respond to a pick-up in just one quarter,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official. “The economy is doing better than they noted in the outlook report in July and that could fuel debate within the BOJ that they might be able to raise their inflation forecasts. But he is containing this.” While wages have risen to some degree in Japan, firms haven’t had to raise prices, Kuroda said in the interview, citing companies investing heavily in labor-saving equipment and changing their business models to get by with fewer workers. On a positive note, Kuroda also pointed to a general increase in business investment in Japan. He said the BOJ’s purchases of exchange-traded funds (ETF), which were aimed at reducing risk premiums, had contributed to this. “So in that sense, it has been successful, but I don’t think at this stage we can expand this program,” he said of ETF purchases. Kuroda also defended the BOJ’s JGB buying. Bloomberg News

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

The World BusinessMirror

Tuesday, August 29, 2017

Myanmar clashes leave 96 dead

ANGKOK—Myanmar’s government and advocates for the country’s Muslim Rohingya ethnic minority traded charges last Sunday of killing civilians, burning down buildings and planting land mines as clashes began last week, when insurgents launched attacks against police posts continued.

An announcement posted online by the office of the country’s leader, State Counsellor Aung San Suu Kyi, said the death toll from the violence that started last Thursday night had reached 96, mostly alleged Rohingya attackers but also 12 security personnel. The announcement was the first by the government to list civilians among the dead—six people identified as Hindu said to have been killed by the insurgents. Myanmar is overwhelmingly Buddhist, but about 1 million Muslim Rohingya live in the northern part of Rakhine, the western state where the violence is taking place. Advocates for the Rohingya suggest many more civilians have died in army attacks on villages, but they have not given a total. They also say the attacks have caused villagers to flee to the mountains for shelter or to try to cross the border into Bangladesh. Senior Rakhine state officials who visited the troubled area said last Sunday evening that government forces were trying to restore peace. “We are trying our best to bring stability and now we can see the areas are stabilizing,” said Nyi Pu, the state’s chief minister. “But anything can happen at any time, so I can’t say what will happen.” Dr. Win Myat Aye, union minister of social welfare, relief and resettlement, said: “We are now focusing strongly on the security matters to make the area more

140K The number of people, predominantly Rohingya, who were driven from their homes to camps for the internally displaced in 2012

secure. And we are also we are increasing our military strength.” The two men spoke to reporters in the state capital, Sittwe, in the southern part of the state, far from the fighting. They also said the government was trying to protect members of international-aid organizations in the area, or evacuate them if they desired. The government has allowed only a limited number of foreign-aid organizations to work in northern Rakhine state, and due to long-standing communal tensions, some Buddhists resent their helping Rohingya. Witnesses and refugees on the Bangladesh border said last Sunday that the situation there was tense, with thousands of Rohingya trying to flee Myanmar but unable to leave. Witnesses said they heard the sound of gunshots. Bangladeshi villagers said they could see military helicopters hovering in the Myanmar sky.

Severa l hundred Rohing ya got stuck in a “no man’s land” at one border point in Bangladesh’s Bandarban district, barred from moving farther by Bangladeshi border guards. Lt. Col. Manzurul Hasan Khan of Border Guards Bangladesh said they cordoned off about 1,000 Rohingya after they attempted to enter Bangladesh. Still, more than 2,000 Rohingya entered Bangladesh overnight through two points at Teknaf in Cox’s Bazar district, said Jalal Ahmed, a local government official at the Kharangakhali border point. A Rohingya insurgent group, the Arakan Rohingya Salvation Army (Arsa) took responsibility for Thursday night’s attacks on more than 25 locations, saying they were in defense of Rohingya communities that had been brutalized by government forces. Suu Ky i ’s of f ice acc used t he insu rgents of “torc h ing pol ice out posts and monaster ies, k i l l i ng i n nocent people a nd pl a nt ing m ines.” Arsa, meanwhile, accused the army of using civilians as human shields. Clashes were continuing last

Sunday, with witnesses contacted by phone in the northern Rakhine town of Maungdaw saying they could hear gunshots. Independent confirmation of the situation is difficult because the government bars journalists from the area. Suu Kyi’s office issued an official warning to media on Sunday, saying “some media” have been referring to the group as “insurgents” instead of “terrorists.” Last Fr iday the gover nment declared A rsa a ter ror ist organi zat ion, whic h mea ns most cont ac t s w it h it a re i l lega l . Sund ay’s announcement spec if ica l ly sa id, “ We wa r n t he media to avoid w r iting in suppor t of the group.” The government refuses to recognize Rohingya as a legitimate native ethnic minorit y, ca l ling t hem Benga lis to ref lect the position that they are mostly illegal immigrants from neighboring Bangladesh. Most Rohingya are denied citizenship and its rights. The Rohingya have long faced severe discrimination and were the targets of violence in 2012 that killed hundreds and drove

about 140,000 people—predominantly Rohing ya—from their homes to camps for the internally displaced, where most remain. Suu Kyi has called Thursday’s attacks “a calculated attempt to undermine the efforts of those seeking to build peace and harmony in Rakhine state.” The attacks were also generally condemned by Western nations and rights groups, who also warned the government against violent retaliation. The clashes were deadlier than an attack by the militants on three border posts last October that killed nine policemen and set off months of brutal counterinsurgency operations by Myanmar security forces against Rohingya communities in Rakhine state. Human-rights groups accused the army of carrying out massive human-rights abuses, including killing, rape and burning down more t han 1,000 homes and other buildings. The army’s abuses fueled further resentment toward the government among the Muslim Rohingya. Arsa took advantage of the resentment by stepping up recruitment of members. AP

Pakistan premier: Trump’s Afghan plan poised to fail

nited States President Donald J. Trump’s strategy for the nation’s longestrunning war in Afghanistan will meet the same fate as the plans of his predecessors, according to Pakistan’s Prime Minister Shahid Khaqan Abbasi: Failure. “From day one we have been saying very clearly the military strategy in Afghanistan has not worked and it will not work,” Abbasi, who took over as premier three weeks ago, said in an interview last Saturday night in Karachi. There has to be a “political settlement,” he added, and it needs to be inclusive. “That’s the bottom line.” Abbasi said that, while his government supports the fight against terrorists it won’t let the war in Afghanistan, with which it shares a 2,500-kilometer border, spill into Pakistan. The stance of Abassi’s administration may complicate Trump’s plan for the region after he pledged more US troops for Afghanistan and called on Pakistan to stop providing a safe haven for terrorists. Failure by Trump to resolve the Afghan war risks even greater financial and human cost for the US, could leave it bogged down further in the conflict, and may become a further sore point for ties with China and Pakistan, with Trump already chiding Beijing for not doing enough to stop the turmoil. The war has cost the US about $714 billion and several thousand lives. US Secretary of State Rex Tillerson last Sunday said the new

strategy is intended to pressure the Taliban into negotiating with the Afghan government by “sending a message to the Taliban that we are not going anywhere.” “I think the president’s been clear that this is a dramatic shift in terms of the military strategy,” Tillerson said on the Fox News Sunday program. “The president was clear that he’s not setting any arbitrary timelines,” he said. “Our patience is not unlimited.”

Losing control

Afghanistan’s government is slowly losing its grip with the Taliban now controlling about 40 percent of the country, which US officials say couldn’t be possible without help from Pakistan’s military. That’s a charge the Asian nation disputes. “This is a classic dialogue of the deaf between Washington and Islamabad because neither agrees on what needs to be pursued but both make a sham of going together,” said Burzine Waghmar, a member of the Centre for the Study of Pakistan at the School of Oriental and African Studies in London. “US priorities are not the same as Pakistan,” which wants Afghanistan to stay dependent on it, he said. The US in previous offensives i n A fg h a n i st a n u sed d rones to attack alleged terrorists in Pakistan. North Atlantic Treaty Organization (Nato) troops have also used Pakistani ports and roads to move equipment

Trump expected to decide soon on fate of young immigrants

In this image made from video, residents displaced by violence wait in Buthidaung township in Rakhine State, Myanmar, on August 27. DVB via AP

Pakistan Prime Minister Shahid Khaqan Abbasi Bloomberg

into land-locked Afghanistan. “ We do not intend to a l low anybody to fight A fghanistan’s batt le on Pa k istan’s soil,” Abbasi said dur ing the inter v iew at the for mer home of the nation’s founder Muhammad A li Jinnah, while he was on a v isit to the nation’s commercia l capita l. “ W hatever has to happen in A fghanistan shou ld be happening in A fghanistan,” he said, adding Pa k istan doesn’t harbor ter ror ists.

China’s role

Abbasi was picked by the ruling party as prime minister this month after the nation’s top court disqualified predecessor Nawaz Sharif in July after a corruption probe.

Support from China will help Pakistan defy the US. In a statement late Sunday, Abbasi postponed the visit of a US delegation. Last week Pakistan’s military said it isn’t looking for US financial assistance and Shehbaz Sharif, Nawaz Sharif ’s younger brother and chief minister of Punjab province, called for the end of American aid. China, which is seeking to build its economic and strategic clout in South Asia, has more than $50 billion in planned infrastructure projects in Pakistan. With China’s role increasing, Pakistan’s forces have fewer incentives to stop covertly supporting insurgent groups that strike inside Afghanistan and India, while targeting outfits that threaten its own

domestic security, according to analysts. Pakistan’s military has been conducting its ow n offensive against terrorists with the latest operation in the Khyber tribal region starting last month after Islamic State’s presence increased across the border in Afghanistan. The Pakistani army earlier said it had cleared North Waziristan on the Afghanistan border, a region the US has called an “epicenter” of terrorism. More than 60,000 people have been killed while Pakistan’s economy has suffered a loss of about $120 billion from waging war at home against terrorists, according to the finance ministry. The nation is one of the largest hosts to refugees globally after Afghans fled across the border during decades of war. Pakistan has started returning refugees and plans to fence its border with Afghanistan to prevent the cross-border movement of militants. Abbasi said Pakistan is willing to work with all countries, inc lud ing Ind i a, f rom wh ic h Trump sought help to develop Afghanistan’s economy, to achieve regional stability. Still, he added the Afghan government should be “owning” the issue and dealing with the Taliban. “If they require our support, our support is available,” he said. “Our support is unconditional as far as terrorism is concerned.” Bloomberg News

ASHINGTON—After months of delays, President Donald J. Trump is expected to decide soon on the fate of young immigrants who were brought into the country illegally as children as he faces a looming court deadline and is digging in on appeals to his base. Advocates on both sides of the issue are bracing for the possibility that Trump will halt the issuance of new work permits under the Deferred Action for Childhood Arrivals (Daca) program, a move that would effectively phase out a program that gave hundreds of thousands of young people a reprieve from deportation and the ability to work legally in the US. The Trump administration faces a September 5 deadline from a group of Republican state lawmakers hoping to force the president’s hand. The White House, however, insisted last Sunday that it had no announcement on an issue the president has openly wrestled with for months. The deliberations come as Trump has been under fire for his response to a white supremacists’ protest in Charlottesville, Virginia. Trump further fanned the flames of racial tension on Friday when he pardoned Joe Arpaio, the former sheriff of Arizona’s Maricopa County, who had been found guilty of defying a judge’s order to stop racially profiling Latinos. The decision drew fury from Democrats and opposition from some Republicans, but was hailed by Trump’s most fervent base. Trump has wavered back and forth on his plans for Daca, which he slammed during his campaign as “illegal amnesty”. Since taking office, however, Trump has softened his stance on the issue, at one point telling The Associated Press that the affected young immigrants could “rest easy.” His administration, Trump said back in April, was “not after the dreamers, we are after the criminals.” All the while, the Department of Homeland Security has continued to grant two-year, renewable Daca work permits, to the dismay of immigration hard-liners. But now, Trump is under pressure to make a final call: His administration is facing a September 5 deadline set by a group of Republican state lawmakers, led by Texas Atty. Gen. Ken Paxton. The group, which successfully halted an Obama-era program that would have protected certain parents living in the country illegally, threatened to take on Daca if the administration does not rescind the order and stop issuing work permits by their deadline. “It’s forced him,” said Roy Beck, the executive director of NumbersUSA, which advocates for lower immigration. “Inertia’s great until something gets in your way and you have to either rev up the engines to go through the barrier or just stop.” Continuing to process work permits is one thing; defending a program Trump called illegal in court is another. And many, including Trump’s chief of staff John Kelly, the former head of DHS, believe that Daca is on dubious legal footing and would not stand up in court. The president has several options. He could order DHS to halt the issuance of new Daca work permits immediately—or at a future date—and perhaps call on Congress to come up with a legislative fix, as, Kelly has in the past. There have been conversations among lawmakers about ways to grandfather current Daca recipients, and such a measure could become part of the horse-trading over the budget and raising the debt ceiling when Congress returns from August recess. The administration could also continue issuing Daca work permits, trigging the Republican court challenge, and then choose not to defend the measure in court. Mark Krikorian, the executive director of the anti-immigration group Center for Immigration Studies, which also advocates a reduction in immigration, said he is in favor of allowing the affected immigrants to stay, but believes the administration should use their imperiled status as a bargaining tool to push other priorities, like new limits on legal immigration. “My fear is, and always has been, is that they’re going to give away Daca for peanuts,” he said, pointing to a deal that would only secure funding for Trump’s promised southern border wall in exchange for some sort of legal status for those covered by Daca. AP

A10 Tuesday, August 29, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

The next Kian could be your daughter or son

resident Duterte has said the police should uphold the rule of law in the fight versus lawlessness and in the war on drugs. In the case of the death of 17-year-old Kian Loyd de los Santos, who was shot in a police drug operation in Caloocan City, the President said the cops went out of line. He said: “What I reminded again the military and the police is that it should be in the performance of duty. That you are not allowed to kill a person who is kneeling down, begging for his life. That is murder.” Kian is just one of thousands of Filipinos killed in the administration’s war on drugs. Reports said more than 3,200 drug suspects have been shot to death by the police in this war, and more than 2,000 others have died in drug-related executions, usually conducted by masked, motorcycle-riding gunmen. Still, Kian’s death has stirred unprecedented public attention. Archbishop Socrates Villegas said church bells would ring every night for 15 minutes in his religious district in Pangasinan, to rouse a citizenry that has somewhat been inured to the executions and systematic abuses of the police. “Why are we no longer horrified by the sound of the gun and blood flowing on the sidewalks?” Villegas asked. “The country is in chaos. The officer who kills is rewarded and the slain get the blame. The corpses could no longer defend themselves from accusations that they ‘fought back’.” Filipinos are known as peace-loving people. But it is insulting, indeed, when our love for peace and our patience degenerate into apathy. If we don’t care what happens to the Kians of this country—boys who are allegedly shot by the police as they plead for their lives—then all is lost. How can we encourage young people to make sacrifices and help build a nation we can truly love and be proud of, to stay here in our country and not join the mass migration of professionals, if we cannot even protest, demonstrate and rebel against the kinds of police abuses that make abductions and killings like Kian’s de rigueur? If we cannot rage against such killings, then we would have succumbed to a dictatorship yet again. And the next Kian could be your son or daughter. It is but natural to fear violence, especially the state-sanctioned violence many have accused this administration of perpetuating. It is but natural to be afraid. It is very possible that by merely protesting, that by demanding certain answers, by demanding justice, we ourselves could be victimized by violence. Not everyone wants to be a hero. This is what the perpetrators of these human-rights abuses are counting on: Our silence and apathy. Be afraid, they warn. They ask: Who is going to stop us? How many of you are prepared to die for principles and rights in this country? Maybe a few, but certainly not the majority. There won’t certainly be a mass movement against abductions and killings, especially since the ones who go missing and are murdered are just a bunch of “drug addicts” and “pushers” anyway. This is what they are counting on. But let us also remember what our country fought against during the Marcos dictatorship, when thousands of freedom-loving Filipinos were executed, disappeared or died as a result of torture and other kinds of violence. Our democratic freedoms were not given to us on a silver plate. Remember the heroic defense made by those who refused to stand idly by while human rights were systematically trampled. Regardless of how imperfect our democracy is, we should be ashamed to surrender it so willingly today. If we continue to accept the human-rights abuses happening in this country, then that is what we are doing. We must make our leaders, the government and this administration accountable for these abuses. We must also hold ourselves accountable. We must get out of our comfort zones and demand the same justice and democratic freedoms so many Filipinos sacrificed their lives for in the past. Be it in the streets, in our churches, in our schools, in our workplaces or wherever. You can make yourself heard. Make a stand. Say it, shout it out: “I will not tolerate these killings any longer.”

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Manny B. Villar

THE Entrepreneur

Part One

Y fondness for traveling has been an important factor behind the success of my business in achieving the widest geographical reach when it comes to developing residential communities—Vista Land & Lifescapes is now present in 125 cities and municipalities in the Philippines. My trips abroad keep me abreast of developments in other lines of business, such as retail, and allow our operations to be up-to-date and on a par with international standards and practices. As an integrated property developer, Vista Land also develops and operates shopping malls, department stores, supermarkets and other retail establishments, as well as office space for the business-process outsourcing industry. In visiting other countries I also look for lessons from the changing trends in global trade, which I hope to relay to domestic industries, particularly those in the export sector. While I have returned to the private sector after more than two decades of public service as an elected official, I continue to pursue my personal advocacy to help my countrymen, including Filipino entrepreneurs. It was during a visit to a trade fair in Europe several years ago that

I learned that water was already an important export commodity. In the global markets, water is not simply H2O, and not just the crystal-clear fluid that comes out of the faucet. The exhibit booths for water products at that trade fair were a colorful display of drinking water in different colors and flavors. Philippine companies are now only catching up with this trend, which I discussed in this column a few years back, as an example of how we can, and should, diversify our products to increase exports. These came back to mind last week when I saw an article published by the World Bank on its web site. The article was written by Birgit Hansl, the bank’s lead economist and program leader for equitable growth, finance and institutions for the Philippines in East Asia and the Pacific Region. The article contains some observations that I think is important in boosting our exports and related to

what I discussed during my previous columns. The article, titled “The Philippines: Resurrecting Manufacturing in a Services Economy”—the country’s economy has been performing well, but trends in recent export performance could serve as early warning signs. Hansl cited these worrying trends, based on the World Bank’s Philippines Economic Update report, as follows: n The Philippines has become a supplier of intermediate goods to China, exposed to demand fluctuations, and has not penetrated new markets; n The Philippines has not diversified its exports basket, if only to move away from sophisticated products, with little domestic transformation; and n This move will make future upgrading and innovation more difficult, as illustrated by the low export survival rates, including for sophisticated products. For purposes of this discussion, I want to focus on export diversification, both in terms of the basket of products and the markets for Philippine exports. A German supermarket did something last week, which proved that even a highly developed economy needs diversification. In a story published online by Yahoo! News UK, Andy Wells reported that the Edeka Supermarket in Hamburg removed on August 19 all products from other countries, and temporarily sold only products made in Germany. As a result, most of the shelves in

September could bring a disaster

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

Online Editor Social Media Editor

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

A bigger role for exports as growth driver

John Mangun

OUTSIDE THE BOX

F you have been following the international news, then you are aware that over the weekend Hurricane Harvey—one of the strongest storms in recent memory—has devastated the state of Texas. Hardest-hit has been Houston, the fourth-largest US city, which lies some 50 miles from the Gulf of Mexico.

The storm has caused historic flooding with as much as 1.2 meters of rain in a region populated with some 6.5 million people. The comparison to the flooding of Metro Manila from Typhoon Ondoy in 2009 is accurate, not so much for the water but for the ability of the government to protect—or not protect—its citizens. Even as the rains continue to fall, there are deep questions as to why the city of Houston was not put under mandatory evacuation and the counter argument of how a mass evacuation might have created another disaster.

Further, the “blame game” of which government—local, state, or national— deserves the brunt of criticism starts even if people are still stranded. There is a high probability we will see a similar scenario unfold on the economic and financial front as September 2017 ends. Like a killer storm, we can see it coming. There are two critical but separate deadlines converging on September 29. The first is the absolute necessity of the US Congress to raise the debt ceiling to give the US Treasury the authority and ability to raise funds through selling government debt in order to pay the

bills of government. Going into October, the US the government will run out of money to cover all government operations. The problem is that Congress is not functional right now, having shown that it has been unable to agree on virtually anything. The second event coming is the approval of the government budget for the coming year. September 29 is the last business day of the fiscal year. Congress could either vote a budget or invoke a “continuing resolution” that keeps funding in place until a budget is eventually passed. These two situations are joined at the waist. A completed budget is useless without raising the debt ceiling; an increased debt ceiling provides funds but budget legislation still must be enacted to spend that money. Of course, “deadlines” for the government are flexible, just like its ethics. However, the situation may quickly become critical and potentially catastrophic because a government shutdown from not raising the debt ceiling and/or not having a budget could cause a liquidity freeze or an event where buying and selling is not possible. Government money has unfortunately become the lifeblood of the financial markets.

the supermarket were empty. The story quoted an Edeka spokesman as saying: “Edeka stands for diversity, and we produce a wide range of food in our assortment, which is produced in the different regions of Germany. But it is together with products from other countries that we create the unique diversity that our customers value.” While the supermarket’s move was aimed against the growing racism in Europe, I believe it also showed the importance of diversification, even in trade. Consumers in foreign markets look for wide choices in products, including those imported from other countries. In the Philippines a simple trip to the groceries or the nearby supermarkets will show foreign products competing with Filipino producers even on items that are traditionally made here. Mothers used to buy the ground meat of the coconut from the local market, and squeezed it at home to make coconut milk or gata. It is now more convenient to buy canned coconut milk produced by local companies, but other Asian countries are also exporting different brands of the same product to the Philippines. Even the nata de coco, which many believed was a Filipino invention, is now produced in other countries and competes with local brands. Sometimes, foreign brands of these two products even dominate the homemade items. To be concluded For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.

Part of the reason the US stock market is up nearly 10 percent this year is the anticipation of both tax reduction and increased government spending. Tax reform is currently dead and the debate over a debt-ceiling increase could be prolonged. Both of these—debt ceiling and budget—are political as much as they are economic issues. The US political system right now is broken. If the debt ceiling is not raised, the public and private bond market will lose liquidity and freeze. When one market goes into a coma, the demand for liquidity moves to another sector—like the stock market—and then that sector shuts down. If you cannot get your money out of the debt market due to a lack of liquidity, then you try to get funds from the stock market. Prices fall, buyers walk away. Without buyers, liquidity vanishes and prices fall further. October has traditionally been a dangerous month for the financial markets. Let’s hope 2017 is not one for the record books.

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

Opinion BusinessMirror

opinion@businessmirror.com.ph

The Reform the Armed Forces Movement

Breaking her silence Atty. Lorna Patajo-Kapunan

legally speaking

Cecilio T. Arillo

database Part Three

Operation Twiggy

AVY Capt. Proceso Maligalig, Naval Operations assistant chief, was in his office at 4:30 that afternoon when he received a call from Lt. (jg) Alex Pama of the defense ministry. “Sir, our tennis game is postponed until tomorrow. Okay?” “Okay!” Maligalig said. “Postponed” was the key word— the signal to activate “Operation Twiggy,” the contingency plan for the reformists in the Navy. Maligalig called Navy Capt. Carlito Cunanan, Naval Operating Forces deputy chief, in his quarters at Sangley Point, Cavite. He was not there. Neither was his wife. It was in Cubao, Quezon City, where Cunanan and his wife were visiting with a friend that Captain Cunanan received a call from his younger brother, Army Col. Thelmo Cunanan, Minister Enrile’s intelligence officer. He was told to watch TV and listen to Radio Veritas at 6:30 p.m. While waiting for the telecast, Carlito telephoned Navy Capt. Carlos Agustin at the office of Ambassador Benjamin “Kokoy” Romualdez at Aguado, across Malacañan Palace. He told Agustin of his brother Thelmo’s desire that they work for the Enrile-Ramos camp. Agustin, the defense attaché in Washington, was in Manila and had helped coordinate the activities of American officials who had been in town to observe the elections. Agustin agreed. He and Lt. Commander Normando D. Naval, another reformist in the Navy, immediately organized an intelligence task force together with retired Navy Capts. Victor L. Mamon, Buenaventura B. Desquitado and Lt. (jg) Renan Suarez. They contacted their friends and classmates in the military, including Col. Plaridel M. Abaya, RUC 3 deputy chief. Abaya had a heartening sidebar report on how the reformists neutralized the 5th Army Division and the RUC 3 command, preventing them from sending reinforcements to the loyalist camp of President Ferdinand E. Marcos and his Armed Forces chief of staff, General Fabian Ver. The task force made periodic assessments of the situation, which they distributed to friends in the US defense attaché’s office and the Central Intelligence Agency station, headed by Norbert Garett. The reports carefully detailed the snowballing support the Enrile-Ramos cause was generating from the Armed Forces of the Philippines officer corps, as well as from the rank and file, buttressed by actual accounts of the defections, which were slowly but surely sapping the strength of the Marcos-Ver war machine, these assessments no doubt contributed to the strengthening of the US government’s resolve to “persuade” Marcos to leave the country. When Minister Enrile moved to Camp Crame to join General Ramos, Col. Antonio Samonte and Navy Capt. Warlino Sadiarin, both reformist officers holding key positions in the Armed Forces Intelligence Service, remained at ISAFP headquarters in Camp Aguinaldo from where they carefully monitored the activities of loyalist forces through their agents. Their reports provided the Enrile-Ramos camp with accurate assessments of the situation in Fort Bonifacio, Malacañang and the regional commands. Carlito made a few more calls after instructing his men at the Naval Operating Forces headquarters to go on full red alert and be ready to join Enrile. Then he called Commodore Tagumpay Jardiniano, his chief,

The reports carefully detailed the snowballing support the EnrileRamos cause was generating from the AFP officer corps, as well as from the rank and file, buttressed by actual accounts of the defections, which were slowly but surely sapping the strength of the Marcos-Ver war machine. to tell him that he was joining the minister and that some officers in his command had already defected. Jardiniano told Carlito he was joining them, too, but asked that it be kept a secret in the meantime for security reasons. Carlito relayed the good news to Minister Enrile through his younger brother. Rear Admiral Brillante Ochoco, Navy flag officer in command, was unaware of what was going on in his command. He was in Malacañang most of the time and only after midnight of Sunday did he know that 85 percent of the Navy was already on the Enrile-Ramos side. By Monday morning, shortly before dawn, two Navy ships were at the mouth of the Pasig River, their guns pointed at the Palace. Two other ships, anchored off the Rizal Park, had their guns also directed at the Malacañang Park, which is adjacent to the headquarters of the Presidential Security Command. At the War Room in Camp Crame, Enrile and Ramos wondered why the Air Force had not yet responded to their call for support. Honasan and Lt. Col. Tito Legaspi had the good news. “We have talked to the Air Force people, and they are just waiting for the right time to fly their choppers to us,” they told the minister. They also reported that Col. Antonio F. Sotelo, the 15th Strike Wing commander, had assured Col. Hector Tarrazona he would be joining along with Maj. Charles Hotchkiss, commander of the 20thSquadron of the 15th Strike Wing. “How about the fighter pilots at Basa Air Base?” Ramos asked. “They are with us, Sir!” Legaspi replied. He said Maj. Francisco P. Baula Jr., the squadron commander of the 5th Fighter Wing, would be coming in with two of his pilots, 1LTs. Nestor A. Genuino Jr. and Noe P. Linsangan. After their meeting with Enrile and Ramos, the two officers conferred with Colonel Kapunan in another room. They asked Kapunan to activate contingency plans for Villamor Air Base and Basa Air Base in case the pilots had a last-minute change of heart. The contingency operations, which they had rehearsed for weeks, called for the capture of the two bases with the use of 12 commando teams from the PC Special Action Force under Lt. Col. Rey Velasco and Colonel Kapunan. The commando teams, each with four men, would sneak into the camps simultaneously with the aid of reformist officers inside and seize all the helicopters and jet fighters, to be flown outside the bases by RAM pilots. The PC Training Command under Col. Bayani Fabic would then secure the perimeters of the two bases. To be continued To reach the writer, e-mail cecilio.arillo@ gmail.com.

Conclusion

. Things became worse in November 2016 when he cut-off any and all support for me and our children. He stopped contributing for expenses of the children apart from their tuition. These include condominium dues, transportation expense, utilities (water and electricity), salaries of our household staff, medicine for our youngest child and other extra-curricular activities of our children. To point again, the discrepancy of Respondent’s monthly salary compared to mine is very substantial. My monthly income could not fully sustain our family’s monthly expenses, which Respondent traditionally paid for. 17. Respondent’s deliberate act of refusing to pay for our family expenses, that are supposed to be his financial responsibilities, has caused me severe anxiety and emotional anguish, most especially because it has been affecting all my children. For one, our youngest son has growth deficiency that requires him to take shots daily, which each costs around P75,000 per 27 days. 18. Another, our children know for a fact that we earn more than enough for all their needs. However, their father’s frugality continues to make them feel lacking since they are not able to buy the things that they need. My children would come to me and ask why we could not afford certain materials or items when our financial position would show that we are more than capable of buying such materials or items. 19. There was one instance where my son needed a schoolbag since his current schoolbag was already dilapidated. When he asked Respondent to buy him a new bag, he said he would gladly buy him a new one. The schoolyear went by, but Respondent did not buy the new bag he promised. I took it upon myself to save money to buy him a new schoolbag instead. 20. As a mother of four boys, it is my duty to provide for them not only their basic needs but also of a

comfortable life, one which they had been accustom to experiencing, and on which is reasonable, given the amount of money my husband makes on a monthly basis. Currently, I earn money from my part-time job and consultancy, which earns me just enough income on a monthly basis. That is why, the simple fact that I had and continue to have to find ways and means to pay for all of our family’s expenses has been causing me sever mental and emotional suffering. 21. Apart from the financial deprivation of my husband, his sexual infidelities and depraved activities with other men and women has added to the mental and emotional anguish that I have been experiencing. Add to this the fact that my eldest son knows and hears stories of Respondent having a girlfriend, which is frightening to me because such depravity is completely opposite to how we raised them. 22. At first, I would disregard his side comments and opinions regarding how men looked. I thought to myself that maybe he was just really opinionated about this topic. However, when I accidentally stumbled upon reliable information and stories about Respondent and his sexual dealings and orientation, that was the only time where all the clues made sense and when my mental and emotional anguish heightened.

Tuesday, August 29, 2017 A11

23. In 2016 I discovered from Respondent’s documents, which were stored in our house, that he owned a number of condominium units in One Shangri-la, Mandaluyong City. Upon confronting him regarding this matter, he admitted ownership over the units; and after probing question, he also admitted that he uses the units for sexual activities with other people. 24. The anguish magnified upon inspection of the aforementioned units. Inside one of the units, I noticed a huge mirror in front of the bed, likened to a motel room, along with my desk from my ancestral home. Apart from this, I found a whip, which he used during his sexual performances, along with a bag of condoms. 25. Everything turned from bad to worse when I found several e-mails and messages from Respondent communicating with men and younger women with sexual contents and insinuations. When I finally connected the dots, this is when I truly felt the pain and anguish as his wife for over 17 years. 26. All of these facts and circumstances have contributed to my mental and emotional suffering for the past few months. These activities are voluntary acts, which he knowingly does for the purpose of making me suffer. 27. According to my counsel, these acts of causing mental and emotional anguish to me by Respondent constitute a violation of Republic Act (RA) 9262. 28. On the other hand, economic abuse is described in Section 3 (D) of RA 9262: “D. “Economic abuse” refers to acts that make or attempt to make a woman financially dependent, which includes, but is not limited to xxx withdrawal of financial support xxx. 29. In this case, Respondent purposely withheld and controlled the financial support for me and the family in order to cause me mental or emotional suffering. Respondent knew that I do not have a stable and continuous flow of income and utilized this fact to force me to patch things up with him and be financially dependent on him. Respondent

knew that finances were my weakness as I had always been financially dependent on him and my mother. Thus, now that he has cut off any and all support, I am left to fend for myself for me and my kids. 30. His psychological violence also came in the form of his sexual admissions to me. As his legal wife and the mother of his children, the knowledge of him having sexual relations with other men and women definitely cause me severe anxiety and disgust. 31. In addition, Respondent always made it a point to emphasize and gloat about all his connections in the government. He made sure I knew the fact that he knew powerful people from the Judiciary, Legislative and Executive branch. He even explained to me during one of our heated arguments that I was so naïve for not knowing that cases in this country could be bought. He explained that both prosecutors and judges can easily be paid off in order to rule in your favor. 32. He also made it a point to show me how powerful he was given his current position in the government. Aside from name dropping people he knew, he would make sure I knew the things he does and the privileges he had given his position. He even told me that if I filed a case against him, that the prosecutors and judges would not take me seriously. 33. All the blustering and gloating were apparently psychological shots on me in order to make me feel completely powerless and afraid to fight back or do anything against him. The distress it brought me to really affected my emotional state. 34. Hence, all of Respondent’s actions, taken together, show that Respondent clearly violated RA 9262 for causing me mental and emotional anguish. 35. This criminal complaint is without prejudice to all other criminal, civil, administrative complaints I can file against Respondent. I have in my possession other pieces of evidence to prove the true character of the Respondent but chose to reveal them at the proper time and venue. For the sake of her children, Patricia is breaking her silence!

America’s getting more tolerant and haters hate it Albert R. Hunt

BLOOMBERG

ure, there were a lot of haters in Charlottesville. That shouldn’t obscure some better news, which is that the United States is becoming a more accepting and tolerant nation. Unlike President Donald J. Trump, most citizens don’t equivocate when asked their opinion of the hate groups that descended on Virginia two weeks ago. One of the most interesting changes over the years is in attitudes toward interracial marriage. In 1968, a year after interracial marriage was given constitutional protection, 73 percent of the public opposed these unions, including one-third of African-Americans. Only 20 percent approved of them. By 2013, the last year Gallup’s pollsters asked the question, attitudes had dramatically reversed: 87 percent of poll respondents approved of interracial marriage and only 11 were opposed. According to the Pew Research Center, 7 percent of Americans consider themselves multiracial. This is an accelerating trend embraced by young people. While most multiracial people say they’ve been targets of racial slurs or jokes, almost none think their status is a liability. One in five, the Pew survey finds, say it’s an advantage, while three-quarters say it has made no difference in their daily lives or career. The Pew Center’s conclusion: Multiracial Americans “are at the cutting edge of social and demographic changes in the US—young,

There’s still too much crime, too much illicit-drug use, too many fractured families and still too much bigotry. Blacks and whites see racial progress in depressingly different terms. But the country’s social fabric is nevertheless healthier than it was a decade or two ago. So are its social attitudes. The hatemongers of Charlottesville are a despicable fringe. proud, tolerant and growing at a rate three times as fast as the population as a whole.” Same-sex marriage is also widely accepted—just a few years after even liberal Democratic politicians, like Barack Obama and Hillary Clinton, put themselves on record as opponents. White nationalists like Trump’s deposed White House aide Steve Bannon contend that Americans yearn for the bygone age when intolerance was the norm. No doubt some of them do. Bannon grew up in

Crowd of antiracist and antifascist protesters in Charlottesville, Virginia. Chip Somodevilla/Getty Images

Virginia, a state that massively resisted school integration in the 1950s; he was a teenager there in 1967 when the Supreme Court unanimously overturned the state law barring interracial marriage in its famous Loving v. Virginia decision. But changing attitudes accompany changing realities. One way to measure social change is to look at the Index of Leading Cultural Indicators, a statistical overview of social indicators, like crime, the family, youth behavior, popular culture and religion, launched by the conservative commentator Bill Bennett in 1994. After soaring for decades, many key indicators of social decay started to fall in the first years of the 21st century. Violent crime, abortion and divorce, for example, began trending downward. So did out-ofwedlock births. Credit for the latter should be given to educational efforts in the public sector and to private groups, like the National Campaign to Prevent Teen and Unplanned

Pregnancies. Carol Hogue, a maternal and child-health specialist at Emory University, says women are engaging in “better use of contraceptives”, adding: “If all couples used a combination of condoms with an IUD or combined oral contraceptive, there would be fewer maternal deaths, 80 percent fewer unintended pregnancies and about 150,000 fewer abortions.” Today, rates of crime and divorce have fallen to levels unseen since the 1970s. By 2014, the abortion rate had dropped to the lowest level since the Supreme Court made abortion a constitutional right in 1973. There’s still too much crime, too much illicit-drug use, too many fractured families and still too much bigotry. Blacks and whites see racial progress in depressingly different terms. A rising death rate among middle-aged white Americans, reflecting increases in alcoholism, drug abuse and suicide amid the decline of middle-class jobs, is also cause for profound concern.

Global Eye

A12 Tuesday, August 29, 2017 • Editor: Angel Calso

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Banking against the new age of nuclear terror

By Tobin Harshaw | Bloomberg News

rguably, nuclear weapons are now a greater threat to the US and the world than at any time since the end of the Cold War.

Actually, it’s not even arguable: North Korea is showering the Pacific with nuclear-capable missiles; South Korea and Japan may, in turn, pursue their own programs; President Donald J. Trump is again talking of ripping up the Iran nuclear pact; the Tehran regime is illegally testing its own ballistic arsenal; nuclear-armed Pakistan’s increasingly volatile politics raise a threat to India and beyond; Russia’s Vladimir Putin is eyeing a Sovietstyle buildup; China is building nuclear-capable submarines; and there is always the worry that terrorist groups might get their hands on enough radiological material to craft a “dirty bomb”. Yet, here’s some good news: On Tuesday the International Atomic Energy Agency (IAEA) will officially open the world’s first “bank” for enriched nuclear fuel in Kazakhstan. The LEU facility is an important option for countries that want the benefits of peaceful nuclear energy, without the significant costs of uranium enrichment and without the risks of proliferation. Low-enriched uranium is needed for peaceful reactors, and the bank says it will provide an assured international supply of nuclear fuel on a nondiscriminatory, nonpolitical basis in the event of a supply disruption. While many nations and groups —including the European Union, Norway, the United Arab Emirates, Kazakhstan and Kuwait—deserve credit for the bank’s creation, special mention goes to two great Americans: former Sen. Sam Nunn of Georgia, and a fellow from Nebraska more familiar to Bloomberg readers for his success in other fields: Warren Buffett. Buffett put up an initial $50 million for the bank, which other donors matched two-for-one. Nunn, who for decades was Congress’s leading light on military issues, is the founder, along with Ted Turner, of the Nuclear Threat Initiative (NTI), a nonprofit group that has done much of the legwork on efforts to keep nuclear material out of the hands of terrorists. (Take a moment to check out its

Nuclear Security Index, an interactive graphic on global risks of theft and sabotage involving fissile materials.) Another great American, Ernest Moniz, a longtime nuclear scientist at the Massachusetts Institute of Technology who most recently served as President Barack Obama’s secretary of energy, is now the CEO of NTI. (He has also won the coveted “Best Hair at the State of the Union” award from USA Today.) Before Moniz headed off to Central Asia for the big event, we had a wide-ranging chat about the most pressing global threats related to nuclear threats. Here is an edited version of the interview: Tobin Harshaw: We are going to talk primarily about your new project, the LEU bank, and its role in global nonproliferation. But I think it might help first if we give readers a quick briefing on the role of the Energy Department in the US nuclear weapons program. In a nutshell: When did that start, what does it encompass and why doesn’t the Pentagon have the entire program under its control? Ernest Moniz: The history of Department of Energy has two threads, one of which goes back to the Manhattan Project during World War II and then the now-defunct Atomic Energy Commission and eventually the Department of Energy (DOE). The challenges in nuclear security evolved, and as the Cold War ended, there was a new focus on the security and safety of weapons and nuclear material globally. The DOE’s role involved reducing threats, as well as maintaining the US military deterrent. Sustaining the stockpile is not in the Pentagon because its stewardship is a science and technology job suited to DOE National Laboratories. The second major thread came in 1970s, with the oil embargoes and other energy crises. That led to the official creation of the department in 1977, which took in offices from elsewhere, such as the Interior Department, while new regulatory structures were established.

Careful where you put that. Ecell/Getty Images

So what is the full extent of the department’s role in terms of the nuclear deterrent? Today about 62 percent of the DOE’s annual spending is considered part of the national security budget. Including cleanup costs, this is about $18.5 billion, of which nuclear security is over $12 billion. This involves maintaining the stockpile —making sure the deterrent is safe, secure and reliable without having to do any testing, which is very important—and securing and eliminating nuclear weapons-usable materials across the world. The department also has a shared responsibility with the Navy to provide the propulsion for nuclear-powered aircraft carriers and submarines. I want to bring up a paradox: Even as the US hopes to tamp down on the spread of nukes around the world, the Pentagon has started a $1-trillion modernization of its arsenal. This was initiated under President Obama, who famously won a Nobel Peace Prize for efforts to rid the world of nuclear weapons. As a former member of his administration, can you explain why the modernization is necessary? They are quite different issues. I don’t like to call it a “modernization program”, because it implies in some minds that this is a whole brand-new arsenal. For the DOE, this is really about upgrading the facilities and doing life-extension programs for the weapons without having to do any tests. For the military, it’s about

improving the delivery systems, not new nuclear bombs. It is expensive, and the Energy Department cost is expected to be about $80 billion over decades. But as secretary of energy, I had a hard time accepting our workers going into 50- to 60-year-old buildings doing high-hazard work. There are tremendous safety issues. Even now, we won’t be able to adequately replace the uranium facility at Oak Ridge, Tennessee, until 2025. We fully support and endorse working toward the vision of a world without nuclear weapons, and we want to continue the lowering of their profile in our national security posture. But no serious person feels we can reach that goal in less than decades. As long as they are our fundamental deterrent, we have to make sure they are safe and reliable and that the work force is in a safe environment. OK, let’s move on to the new project. Give us a brief explanation of the LEU bank, and how it can help in trying to keep a lid on global proliferation and keep nuclear material from getting in the wrong hands. The issue, particularly as nuclear power emerges in different countries that have not had it, is the security of the fuel supply. And that is where the bank comes in. The IAEA owns the bank, and any country in good standing on its nonproliferation agreements is eligible to use the material in the bank for its energy program if there is a breakdown in

the commercial supply chain. This gives nations no reason to pursue a concerning—and economically nonsensical—development of indigenous enrichment capacity. Where will it come from? The IAEA is going out for proposals, and countries will make bids. Under the schedule, we hope to have all the material in hand by the end of the year. It will come from commercial fuel suppliers or consortia. Kazakhstan is hosting the bank and has been an enormously positive influence on nonproliferation efforts worldwide since its independence from the Soviet Union. So the big worry is that, otherwise, nations would start enriching on their own? It’s that there could be a lot of claims from these countries that they need their own enrichment programs because of insecure supplies. With the availability of the bank, and the clearly bad economics of developing an enrichment program for a small nuclear program, it would be an obvious concern now if a country went ahead anyway. The question they will face is: Why are you doing this? What are some of the nations with nascent energy programs the bank is geared to? For example, Mexico has a very small program. The UAE is now building South Korean reactors. The Russians are selling to Eastern Europe and elsewhere. And now in the Middle East, there are at least nominal agreements with Egypt, Saudi Arabia and Turkey for building Russian reactors. The Russians would prefer to be the sole fuel suppliers for those plants going forward, but a country could be concerned if it’s tied to just one supplier, which is where the fuel bank comes in—as a backup should there be any cutoff in supply. Congratulations, then, on the bank, and on NTI’s other efforts to lower future threats. Now let’s talk about current concerns. First, how much does the idea of terrorists getting their hands on a weapon or a so-called dirty bomb worry you? There is a special risk of terrorists and dirty bombs. Indeed, it’s another area where NTI focuses, because it’s not only a question of power and weapons: There is also a very large use of radioisotopes in medicine, industrial work, oil and gas. These radioisotopes could be very dangerous in the wrong hands. One of the areas NTI has been working on with success is to

encourage governments—especially mayors and governors—to work toward the replacement of cesium-137, which is used for blood irradiation and other treatments, with x-rays, which do not provide this sort of risk. The costs of replacing the cesium sources with x-rays are reasonable once you consider you don’t need the type of security you need to ensure the radioisotopes stay where they are. You may have seen the stories about when ISIS had control of Mosul, which had a substantial cobalt-60 source that could have been used for a dirty bomb. Perhaps, they didn’t know how to handle it. Some counties in Europe have moved to eliminate these materials, and we should do so, as well. You were a big supporter of the Iran nuclear deal. At its second anniversary, have things turned out as you hoped? They have, in the sense that the IAEA continues to provide the data that indicate full compliance. That is where I hoped we would be and are. But we are not there in terms of a lot of the political discussion, particularly in terms of the possibility of Trump withdrawing, which would be a very bad decision. It would ironically isolate the United States. Because as long as Iran complies, the Europeans and others will continue to deal with Iran, but it will have justification for wriggling out of one or more of the stipulations. Last, before you rush to the holiday hot spot of Astana, Kazakhstan, let’s briefly talk North Korea. The consensus among experts seems to be that we will just have to live in a world where Kim Jong Un has nukes. Do you agree? Well I think certainly a lot of the language being used today is not helpful. But I think we cannot let go of the vision of a denuclearized peninsula, just as we cannot give up on the vision of a denuclearized world. Going back to 1990s, I do not believe we have addressed the North Korea situation in a broad enough way—that is, I don’t think we can have security and stability there unless we address in a serious way the legitimate security concerns of North and South Korea, China and Japan. And also the Russian and US postures. At its core, we need to broaden discussion beyond nukes to the full security discussion of those four neighbors. Until there is stability and a feeling of full trust there of all the regional parties, progress on denuclearization will be difficult at best.

Samsung punishment may ease political pressure for other chaebol By Bruce Einhorn & Sohee Kim Bloomberg News

hough the downfall of the man heading Samsung Group, South Korea’s most powerful conglomerate, may seem an ominous omen for the country’s family-run business empires, the jailing of billionaire Jay Y. Lee could end up offering some relief to chaebol dynasties. That’s because Lee, who on Friday received one of the harshest sentences ever handed to a chaebol leader, could serve the role of sacrificial lamb. During the past year, South Koreans have expressed outrage about the scandals that exposed the family-run groups, which dominate the nation’s business landscape, and their cozy ties with the government. That anger helped Moon Jae-in, an outspoken critic of the conglomerates, sweep into the presidency in May. But Moon has yet to follow through on his anti-chaebol promises, focusing instead on more immediate concerns such as North Korea’s weapons program and US President Donald J. Trump’s proclamations to rejig a five-year-old trade deal between the two countries. Now, the Korean president isn’t likely to make swift reform of the conglomerates a top priority, said Celeste Arrington, an assistant professor of political science and international affairs at the George Washington University, who described

the issue as “off the front burner” following the conviction. “It will certainly ease some of the pressure,” she said. “Moon Jae-in seems focused on the broader set of ambitious political, economic and social reforms that need to happen.” End to collusion? Moon’s office said it hopes the ruling will help bring an end to collusion between big business and the government. The Korea Chamber of Commerce and Industry and the Federation of Korean Industries—the lobbying groups of the chaebol—declined to comment on the verdict. Despite some skeptics, many in Korea expressed optimism that the ruling, which broke away from the tendency by the country’s courts to hand down suspended sentences to big business, will give Moon the momentum to push ahead with his scrutiny of the chaebol. “I think the government will push chaebol reform even harder, if economic conditions improve,” said Bruce Lee, CEO of Zebra Investment Management. “Clearly, there was a signal to the market that the chaebol has to be changed now.” For Samsung, Lee’s five-year jail sentence threatens to prolong the vacuum atop one of the world’s biggest companies because his father, who’s been the group patriarch for three decades, remains incapacitated after suffering a heart attack in 2014. Controlled by the

Lee family through a web of cross shareholdings, Samsung is South Korea’s biggest conglomerate, comprised of more than 60 units selling everything from smartphones to life insurance, cargo ships and clothes. Its listed units have a market capitalization of more than $390 billion. Still, the Lee family’s absence hasn’t spooked investors as the group’s most-prominent company, Samsung Electronics Co., posted record earnings and saw its shares climb to a record high last month. The younger Lee is vice chairman but spent the past six months in custody awaiting trial. As to the chaebol, they weren’t always demonized. During the reign of President Park Chung-hee in the 1960s and 1970s, they were lionized for spearheading the rapid economic rise of a country that was poorer than North Korea. But as a decades-long, debt-fueled expansion caught up with the conglomerates, they started falling out of favor. The implosion of giants, such as Daewoo Group, prompted the International Monetary Fund to say family-run groups were largely responsible for the nation’s 1997 to 1999 economic crisis. Since then, the staunchest critics of the chaebol were shareholder activists, who argued that chaebol families were running their businesses, which account for the bulk of South Korea’s stock market, through an opaque maze of cross shareholdings and putting their interests ahead of those of minority shareholders.

No favors

LEE

Korea discount Investors agreed, making shares of large South Korean companies trade at lower earnings multiples than their global peers—a phenomenon labeled the “Korea discount”. South Korea’s Kospi trades at nine times estimated earnings, the lowest among major Asian benchmark stock indexes and half the level the Nasdaq trades at. The chaebol’s biggest thorns included two academics, Jang Ha-sung and Kim Sang-jo, who often stormed into annual general meetings of companies, such as Samsung Electronics, to complain about governance lapses—sometimes stringing out meetings for more than 13 hours before being dragged out by security guards.

Today, Jang is Moon’s chief policy maker and Kim is the top chaebol cop as head of the Fair Trade Commission. Though Kim has focused on fighting unfair business practices among retailers and fast-food chains, he’s also called on the Chung family’s Hyundai Motor Group to eliminate cross shareholdings, publicly urging the conglomerate to overhaul its ownership structure. Moon, a former human-rights lawyer, also has shown a willingness to depart from conventional deference to the chaebol. On the August 15 National Liberation Day holiday, the new left-leaning president skipped the custom of pardoning business executives convicted of white-collar crimes. In the past, many of those executives—including the senior Lee—were from the chaebol.

Moon wants the chaebol to pay more taxes, too, with the finance ministry announcing plans on August 2 to raise the nominal tax rate on big corporations to 25 percent, compared with the current 22 percent. The government also wants to cut tax credits for spending on factories and research by the largest companies. “This government is clearly trying to level the playing field and change business practices to not give those large corporations any special favors,’’ said Tami Overby, senior vice president for Asia at the US Chamber of Commerce and president of the Washington-based US-Korea Business Council. Special favors are what landed Jay Y. Lee in jail and got President Park Geunhye, the daughter of former leader Park Chung-hee, impeached. Lee’s conviction for graft, embezzlement and perjury was the latest development in an influencepeddling scandal that led to the ouster of Park, who’s now standing trial for bribery—charges both she and Lee denied. Lee will appeal. Yet, Moon may not have enough political capital to get his tax plan through parliament. His Democratic Party only controls 40 percent of seats in the National Assembly, though he did achieve a major victory last month when lawmakers approved an 11.2-trillion-won ($9.9-billion) supplementary budget to stimulate economic growth and job creation.

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Africa’s biggest company sees e-commerce growth closing $32-billion value gap By Loni Prinsloo | Bloomberg

aspers Ltd. CEO Bob Van Dijk said five years of heavy e-commerce investments are bearing fruit, which should prove to investors that the assets are worth more than they think. Van Dijk is seeking to show shareholders that Africa’s largest company by market value has more to offer than just its well-timed investment in Chinese Internet giant Tencent Holdings Ltd. Cape Town-based Naspers has ridden the coattails of the WeChat creator to be the best performer on Johannesburg’s FTSE/JSE Africa Top 40 Index this year with a 50percent rise. The catch is that the market values the 33-percent stake in the Shenzhenbased company at almost $32 billion more than Naspers as a whole. Outflows of South African capital since late-2015 have contributed to the widening disparity, according to Van Dijk. He said the value gap will start to close as Naspers’s classified-advertising division, which includes Russia’s Avito, turns profitable in the current fiscal year. The services unit of payment business PayU is close to breaking even, and Polish ecommerce platform eMAG is starting to benefit from a large customer base. The companies are part of Naspers’s ecommerce unit, which recorded a loss of $682 million for the 12 months that ended in March, leaving out interest, tax, depreciation and amortization. “We are excited about a business like eMAG turning profitable,” Van Dijk said in an interview last Friday. “That will be a catalyst to recognizing the value of our other assets.” Naspers has, for years, scoured the world looking for another early-stage technology company that will eventually replicate the success of Tencent, in which it invested $32 million 16 years ago. The company has since put money into a wide range of assets, including Russia’s Mail.Ru Group Ltd. and Indian travel agency MakeMyTrip. It sold Polish online auction site Allegro for $3.25 billion last year. Van Dijk’s main priority in the short term will be on expanding Naspers’ companies to reach broader audiences and using technology to improve customers’ experience. “We have a big team that looks at using artificial intelligence in our classified platforms to eliminate spam ads, for instance,” Van Dijk said. Earlier at the company’s annual meeting in Cape Town, Chairman Koos Bekker

Tuesday, August 29, 2017 A13

How to deal with a $759 million lottery jackpot

Naspers has, for years, scoured the world looking for another early-stage technology company that will eventually replicate the success of Tencent, in which it invested $32 million 16 years ago. Brent Lewin/Bloomberg countered criticism that Naspers relies too heavily on its $132-billion stake in Tencent. He reminded investors that they would have been a lot poorer if he’d given in to similar pressure to sell the holding years ago. The shares have risen more than sixfold in the past five years, closing last Friday at HK$328.40, as Tencent’s services have become an integral part of Chinese life. “Five years ago there was also a lot of unhappiness,” Bekker told shareholders. “If we had sold then, you would have gotten HK$45, now you get HK$325. We are not married to the share, but, at this point in time, it’s paying shareholders.” Bekker said that the assumption that Tencent is making money and Naspers’s other ventures are lossmaking was “illiterate”, since profitability doesn’t accurately capture the value of the businesses. He said the biggest Internet companies grow faster in both China and the US and that the argument for breaking up technology companies is flawed. “Amazon, for instance, has made losses at times,” Bekker said. “The link between short-term profitability and value is simply not there.” The debate over Naspers’s nonTencent assets has spilled over into the discussion over the African company’s executive compensation. A llan Gray Ltd., holder of a 2.3-percent stake, said earlier this week that the remuneration paid to top executives, including Van Dijk, isn’t aligned to the performance of the underlying business, excluding Tencent. The CEO was paid $2.2 million in the year through March, an increase of 32 percent, and awarded $10.4 million in long-term share options. In that time, Naspers made a trading loss of $379 million when Tencent’s contribution is stripped out.

By Barry Ritholtz | Bloomberg View

AST Wednesday night, Chicopee, Massachusetts, resident Mavis Wanczyk won the $759-million Powerball jackpot. Her first act was to call into work to say she wouldn’t be coming in the next day. Or ever again. Before she starts celebrating beating those 292.2 million-to-1 odds, there are a few things Wanczyk needs to consider about her good fortune. If she learns these lessons quickly, then she and her heirs will be much happier and more satisfied with their lives. n Lottery winnings are not what they seem. Let’s start with that $759-million prize. Wanczyk, like most lottery winners, decided to take a lump sum rather than equal annual payments for 30 years. Her lump sum comes out to about $480 million, or $336 million after taxes. That’s still a huge amount of money. Often, taking annual payments is

safer. There’s no guarantee that you will invest the lump sum wisely, and the annual payments reduce the likelihood that you’ll squander the money as so many lottery winners have in the past. n Be wary of strangers, acquaintances and distant relatives. Lots of people come out of the woodwork after something like this is publicized; avoid all of the long-lost high-school friends and distant relatives who seem to have suddenly recalled how close the two of you are. If you make any promises to these folks, you could find yourself spending time and money defending yourself in court against the ones

who turn out to be parasites. Get an unlisted phone number, move into a hotel two towns over for a few weeks where no one can find you and sort things out. n Get some help. Inexperience is dangerous; most lottery winners, like many highly paid athletes, have little background managing big sums of money. It’s a daunting responsibility that can overwhelm one’s better judgment. Find some trustworthy people, including a good lawyer, accountant and financial adviser. Ask the smartest wealthy people you know who they use for each. Speak to at least three people from each profession, or more, until you find someone you trust and are comfortable with. Oh, and never give power of attorney to anyone, ever. n Just say “no”. Learn to say “I have a person who handles that.” This isn’t Shark Tank; you are not an angel investor or venture capitalist. Instead of wasting time and money on every wacky investment idea your second cousin has, you can have someone else send a polite letter on official stationery explaining why “we have to pass on this, as it does not meet our long-term financial goals, but thank you for thinking of us”.

n Create a budget. Develop a long-term budget establishing what you are going to buy in the short term (real estate, cars, boats and other toys) and what you are going to live on. It doesn’t have to be etched in stone, but it shouldn’t be too easy to ignore. n Think long term. At the very least, you will need to think about taxes and estate planning. That’s why you built that team of professionals. You also need to think about your personal security and safety. There are some nuts out there. n Money is a tool; what do you want to accomplish with it? This may be the hardest thing about sudden wealth. Do you have a favorite charity or cause you support? Are there children or other relatives you want to help? You may end up establishing a charitable foundation so that any wealth transfers are done in the most costand tax-efficient way. n Invest intelligently. You want a simple and inexpensive plan to help you achieve your goals. The right portfolio mix should reflect those objectives. In a high-tax state like Massachusetts, a municipalbond portfolio will generate income that’s exempt from federal and state taxes. Based on a return of 2 percent to 3 percent, that could still cover a very lavish lifestyle. The traditional 60-percent stocks and 40-percent bonds should yield an annual return of 5 percent to 6 percent on average. If you are putting money away for future generations or some philanthropic endeavor, then a more aggressive mix of 70-30 or even 80-20 will generate higher returns, but with greater risk and more volatility. n Learn from lottery history. A windfall seems like it should bring happiness, but, too often, more money can mean more problems. The record of sad life outcomes for lottery winners is long and dreary. So you are now wildly wealthy. You beat very long odds to get rich; see if you can do it again and stay rich.

Tencent’s hit game ‘Honour of Kings’ spurs black market for virtual mercenaries By Lulu Yilun Chen | Bloomberg

ast week, Huang Zhibin was a 30-yearold Shenzhen business owner slaying foes into the wee hours. Then he became a bloodthirsty university student from Hong Kong, and later a 25-year-old officelady-turned-online-warrior in Beijing. Welcome to a less visible world within Tencent’s mobile smash “Honour of Kings”, where professional doppelgangers get paid to help newbies climb both social and gaming ladders. The hack-and-slash blockbuster that’s fueled Tencent Holdings Ltd.’s $400-billion market valuation is spurring a thriving underground market for battle-tested coaches who help acolytes up the rankings. Ready-made accounts go for as much as $1,000 apiece. Alternatively, they can take over a social-media profile to sow carnage in someone else’s name and save them the hours of work needed to increase an avatar’s ranking. Honour of Kings has rekindled a black market for player aids—some say cheats—that’s been around since before World of Warcraft popularized the possibility of trading money for character prowess. With more than 200 million players hooked, the world’s topgrossing iOS mobile game in July has gone mainstream and in turn fostered something of a class system. Moms, students and office workers suss out their colleagues’ and friends’ ratings by linking their accounts to WeChat, Tencent’s messaging behemoth that permeates life in China. On Honour of Kings, it’s become a race to impress—and many will pay for status. “These people have busy daytime jobs, and not all of them have the skills, but no

one wants to be laughed at,” said 26-year-old Huang, who has helped almost 200 people boost their rankings in less than a year. By day, Huang works as a high-speed rail mechanic in the coastal province of Fujian. By night, he charges a one-time fee of about 2,000 yuan ($299) to help newbies gain a coveted “Supreme King” label within a week. “Now you have office workers, businessmen, who want to sway their acquaintances,” said Huang, who can make 10,000 yuan ($1,500) a month—more than double his regular salary. Honour of Kings, created in-house by Tencent, is expected to generate as much as $3 billion in revenue this year. An adaptation of the better-known League of Legends, players typically whack their way in teams of five through a battle arena against real opponents. Its mainstream cachet is such that female players outnumber males, unheardof for the genre. The game itself is free to download and play, with Tencent getting revenue from users paying to upgrade their powers. The risk is that instead of buying from Tencent to gain a new amulet or avatar for the upper hand in battles, that money flows to the black market, said Jelle Kooistra, head of mobile at gaming consultant Newzoo. “I would strongly advise game developers that recognize these problems to clearly signal that account trading is not allowed,” Kooistra said. “If not, in-game spending can slowly drift away from official to nonofficial channels, particularly among those who spend the most.” Jane Yip, a spokesman for Tencent, didn’t respond to multiple messages requesting comment.

“Honour of Kings”

It’s unclear how large the underground market has grown, but log onto e-commerce sites like Alibaba’s Taobao and there are scores of shops offering similar services and commodities. With Tencent restricting playing time for children in response to official censure, enterprising merchants sell fake WeChat IDs for 40 yuan apiece. Even the game’s own official message board is rife with notices touting private lessons. When playing as himself, Huang is a topranked warrior who wades through arenas with ease. One of his earliest customers was Jewin Zhu, a 36-year-old Chinese property developer based in Sydney who spotted his ad on a forum. Zhu was stuck, unable to

master the “assassin” avatar he favored and feeling he needed it to maintain his social circle, since the game serves as an ice-breaker or bonding exercise for newly forged WeChat acquaintances. “The main reason I still play this game is purely for the purpose of social networking,” said Zhu, who owns at least six accounts so he has the appropriate ones to match his business contacts. “When you meet someone new, this is the easiest way to bridge a connection.” While the terms of service for Honour of Kings bans accounts suspected of employing hired guns, Tencent hasn’t taken any public action against these practices. Other publishers have, with Activision Blizzard Inc.

banning the trade in World of Warcraft accounts for fear of jeopardizing not just the user experience but their own pricing power, Kooistra said. That may have to change as Tencent prepares to debut its biggest in-house title in the US, a market dominated by powerhouses like Activision and where WeChat is largely nonexistent. While dominant on its home turf, the company has yet to demonstrate an ability to woo foreign audiences. Its biggest overseas hits—Riot Games Inc.’s League of Legends and Supercell Oy’s Clash of Clans among them —were acquired at a steep cost. Till then, Huang, an avid gamer since the fifth grade, is cleaning up. While some clients seek private tutoring, others want him to play on their behalf. The latter group willingly hand over their WeChat details so Huang can temporarily assume their identities. That’s no casual sacrifice: akin to Facebook, WeChat is the first resort for millions of people booking rides, ordering food or just looking up news, and comes with a digital wallet and entire contact list. But to many, it’s a small price to pay, and Huang says their private information is of no value or interest to him. For those worried about money stored on WeChat, Huang advises them to set up payment passwords so he can’t move their funds. He says he hasn’t encountered complaints so far. Indeed, Huang’s more worried about the competition, which is getting fiercer as the underground market grows. He’s had to lower his fees just to beat back rivals. “Too many people are offering the same service these days,” he complains. “That’s why word of mouth is very important.”

2nd Front Page BusinessMirror

A14 Tuesday, August 29, 2017

www.businessmirror.com.ph

Fiscal perks costing govt ₧300B annually, but benefits not certain T By Rea Cu

@ReaCuBM

he Department of Finance (DOF) revealed that the government is losing about P300 billion in income-tax holidays, value-added tax (VAT) exemptions and duties annually, based on its review of the data from the Tax Incentives and Management Transparency Act (Timta).

Finance Undersecretar y K a rl K end r ic k T. C hu a s a id t his is why a du a l system in i mp o s i n g c or p or at e i nc o me t a xes shou ld be el i m i n ated.

T his, he noted, causes inequ it y, a nd shou ld be add ressed in t he second pac k age of t he C ompre he n s i v e Ta x R e for m Prog ra m (C TR P), whic h a ims

CHUA: “We will find out in the next few months if all these P300 billion that we give actually come back in the form of more exports, more jobs, more countryside developments.”

to improve t he countr y’s corporate ta x at ion system. “So during Package 2, we will treat and collectively look into all these special taxes and privileges. We’d rather look at them together, not on a piecemeal basis, so it would be fair to everyone,” Chua said during the recent Economic Journalists Association of the Philippines forum. Based on the DOF’s review of the Timta data, the Philippine government gives away an estimated P300 billion on income-tax incentives,

VAT exemptions and other duties and taxes annually. “Well you know, what we know from the Timta data analysis is we give away at least P100 billion on income-tax incentives; P156 billion, if I remember correctly, on VAT incentives and exemptions; and a few more billions on duties. So, overall, P300 billion. This is every year,” he added. Chua said the DOF is working with the National Economic and Development Authority (Neda) to finalize the cost-and-benefit (CBA) analysis of the Timta data to further understand if the incentives bear a positive effect on the Philippine economy. “Now, we are working with the Neda because there is a CBA analysis as part of the Timta, so we have done the cost, we are working with the Neda on the benefits. We will find out in the

next few months if all these P300 billion that we give actually come back in the form of more exports, more jobs, more countryside developments,” he said. The second package of the CTRP, Chua assured, will be revenueneutral, since the package is more of an offsetting measure, adding that should there be revenues, it will be very little, and that it will stem from the plugging of leakages in the corporate income tax (CIT) system. “Zero [revenues] because it’s offsetting. What we recover is going to be used to reduce the corporate tax rate, so it will be balanced. It is neutral because we will get the additional revenue to lower the income tax rates for the corporates to be fair.” He added that an estimated P500 billion is collected by the government from CIT, noting

that every percentage reduction on the rate will yield losses at an estimated P20 billion. “We collect P500 billion, if I am not mistaken in CIT; P500 billion divided by 30 is what, P160 billion, so for every time we reduce the CIT rate by 1 percent, from 30 [percent] to 29 [percent], we lose around, let’s say, P20 billion. So we have to find P20 billion worth of incentives that will not be given; that’s the idea of offsetting,” he added. Earlier, the DOF bared that it is eyeing to submit the second package of the CTRP to Congress after budget-appropriation hearings are conducted, which is within the month of October. Package 2 aims to decrease corporate tax rates from 30 percent to 25 percent, while rationalizing and harmonizing fiscal incentives given to corporations.

No decision on NCR wage hike yet as board still assessing indicators By Elijah Felice E. Rosales

SALUTING THE UNKNOWN HEROES President Duterte leads the wreath-laying ceremony at the Tomb of the Unknown Soldier at the Libingan ng mga Bayani in Taguig City in commemoration of National Heroes’ Day. ALYSA SALEN

@alyasjah

etro Manila workers will have to wait longer before they could get their much-needed wage hike, as the Regional Tripartite Wages and Productivity Board-National Capital Region (RTWPB-NCR) deferred deliberations on the wage petitions filed by different labor groups in June. The region’s wage board earlier promised to release its decision this month, but Kim S. Lagcao, secretary of the RTWPB-NCR, said the members of the board need more time to assess crucial socioeconomic indicators. “We are still waiting for instructions from the board [on when to deliberate the wage-hike petitions]. Hopefully, we can con-

These socioeconomic indicators are so vital during the deliberations because of their movement.… Such is important to consider in determining the possible adjustment [of the wage hike].”—Lagcao duct it the soonest,” Lagcao told the BusinessMirror. Still, Lagcao added: “It is not safe to say [there was no progress because] the proposals, together with the socioeconomic indicators, will be taken into consideration during the deliberations.” Lagcao noted that the board is monitoring the movement of determinants of wage increase, such as the prices of basic commodities and inflation, to ensure it hands down a verdict that is just to both

Corruption Enablers

For coercion to work, the one forced to cough up money or favors has to be put in a disadvantage position from which he sees no other recourse but to pay up. For this version to work, enablers have to be deployed. Just as an example, while our new Customs Modernization Tariff Code has brought many improvements and reliefs, it is noteworthy that it has significantly increased reportorial requirements and armed itself with excessive fines for administrative lapses. So the delayed filing of a customs entry by just one day, which has no effect on the amount of taxes to be collected, is fined by confiscation of the goods by declaring them abandoned. For which, of course, there is a remedy luckily, i.e., the lifting of such abandonment, very often against a fee, not to the RP but for PR. There are many such examples across the multitudes of government offices we face day by day. An enabler can also be annoying. For example, a perfectly ideal location for a u-turn is disabled and prohibited to use, while the police

wait for offenders to fall into the trap. You may add to that the artificial rotondas by u-turns, for which perfectly functional road intersections have been blocked off. The worst part is it doesn’t only enable corruption but enhances traffic at the same time, causing inconvenience and great cost. Badly formulated laws that leave room for interpretation or the creation of opaque implementing rules and regulations are, likewise, corruption enablers. In these cases the culprits treat society’s assets as personal property to be used for personal gain. Forms of corruption differ from one another in terms of initiators between the government and private sector. In the private sector it is mostly induced by providing business opportunities against kickbacks, usually beneficial more often to the corruptee and corrupted companies and the employees on both sides. Business will probably be appalled to know how much money it pays unknowingly to its staff under these schemes, sometimes a multiple of the salaries on both sides of

the fence. And the cost of services and products, likewise, increase on both sides, to the disadvantage of the buying end user or consumer. The enabling of corruption flourishes too where accountability and transparency are weak and, as a result, somebody assumes a quasi monopoly power over a product or service having discretion to decide how much to receive. Often corruption enablers are prevalent and associated with a government’s regulatory powers being intertwined as being part and parcel of the business they should regulate. Bureaucracies perceived to be corrupt should be connected with the remaining (if honest) administrative structure of the government to create check-and-balance situations. External controls on bureaucracy—whether imposed by the remainder of the administrative system or by society at large —must be strenghtened. Otherwise, when some agents seem to get away with acts of corruption, the internal dynamics of a corrupt bureaucracy will motivate other bureaucrats to extend increased

effort on their illicit incomes. When public institutions that control corruption are weak and ineffective, corruption thrives. These institutions include civic groups that exert moral pressures, political parties and the media that can expose wrongdoings, and the legal system that should have the authority to prosecute and see to it that the guilty are punished. Cor r uption enablers are created by the authority of government entities to establish administrative regulations that will basically “force” affected parties to bribe in order to escape extreme delays or unnecessary documentary requirements. Corruption thrives by a lack of whistle-blower protection. It is obvious that strange deals between the government and the private sector, and private sector to private sector—for example, price fixing, collusion in biddings, bribing technical and purchasing staff—will only become known if somebody inside these organizations assumes the role of a whistle-blower. So, to fight corruption we— and that includes all of us—must

workers and employers. “ These socioeconomic indicators are so vital during the deliberations because of their movement, such as inf lation, [w h ic h] h a s i nc re a s e d f rom 3.1 percent to 3.8 percent, according to the Neda [National E conom ic a nd D e v e lo p me nt Authority]. Such is important to consider in determining the possible adjustment [of the wage hike],” Lagcao said. See “Wage hike,” A2

Continued from a1

reduce monopoly power, reduce discretion and increase accountability in many ways: Reducing monopoly power means to enable competition; in this context we are happy that the countr y has competition legislation in place and has the Philippine Competition Commission (PCC) to implement the law. However, the PCC must be allowed to do its job without court interferences, with the aim to remove monopolies/duopolies to properly address, reduce and finally eliminate corruption. Limiting discretion means clarifying the rules of the game and making them available to everyone. This includes putting government contracts and procurement plans online, creating online manuals as to what is required to obtain a permit, to build a house, to start a business and so forth. A good example is: To simplify the tax code, make it easier to understand and thereby reduce discretion of BIR employees. The best option would be to privatize both the Bureau of Customs and the BIR. En h a nc i n g a ccou nt a bi l it y

means many things and creative leaders in the government and the private sector use a remarkable variety of methods. One way is to improve the measurement of performance. Another method is listening and learning from business and from citizens. This includes mechanisms for public complaints, but goes beyond reporting of individual instances of abuse of corrupt systems. It is also increased by inviting outsiders to audit, monitor and evaluate. But let’s not forget the press, media should be an important medium of this objective. What about ethics and morality? Successful leaders in the government and private sector must set a good example. As mentioned above, the key to fight corruption are better systems that provide incentives for human beings to perform in the public interest. Corruption enablers themselves cost the economy immeasurable amounts. Disable the enablers! Michael Raeuber is the vice chairman of the Integrity Initiative Inc.