Issuu on Google+

“The people of South Korea do not want to enter the new year with Park Geun-hye as president. There is only one way under our constitution to halt a term of a president and that’s an impeachment motion.”—Choo Mi-ae, leader of the main opposition Democratic Party, on their plans to impeach President Park Geun-hye, dismissing as a stalling tactic her offer to resign if parliament arranges a safe transfer of power. AP

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

“Chairman Price, a renowned physician, has earned a reputation for being a tireless problem solver and the go-to expert on health-care policy, making him the ideal choice to serve in this capacity. He is exceptionally qualified to shepherd our commitment to repeal and replace Obamacare and bring affordable and accessible health care to every American.”— President-elect Donald Trump, on his decision to pick Georgia Rep. Tom Price to oversee the nation’s health-care system, picking a fierce Obamacare critic who has championed efforts to privatize Medicare. AP

Fidel Castro will be remembered as “a great fighter for the idea that the poor have a right to live with dignity.”—South African President Jacob Zuma, praising Cuba under Castro, who died last Friday night at 90, for its record on education and health care, and its support for African independence struggles. AP

BusinessMirror A broader look at today’s business

www.businessmirror.com.ph

n

Thursday, December 1, 2016 Vol. 12 No. 50

MINDANAO ALREADY HAS EXCESS POWER, REST OF PHL NEXT

Electricity galore: From shortage to oversupply T  

By Lenie Lectura

2016 ejap journalism awards

business news source of the year

P25.00 nationwide | 4 sections 24 pages | 7 days a week

the broader look

a6-a7

@llectura

oward the end of the Aquino administration, the government was scrambling to avert a looming power crisis in Luzon, while Mindanao was already experiencing rotational brownouts. Now, power-industry stakeholders fear there could be an oversupply of power in the entire country starting 2020, given the many energy projects in the pipeline. 

CUSI: “Oversupply, in case there is one, will not be a problem.”

  This is a big concern among power-generation companies, since investments poured into the power plants need to be recovered See “Electricity,” A2

BPOs under Trump, Duterte: Waiting for the next big wave

GOVT NOT LIKELY TO COMPETE WITH EXISTING TELCOS By Lorenz S. Marasigan

CABARIOS: “The best option is… the government will pour in billions of pesos without competing with the private sector.”

@lorenzmarasigan

BONIFACIO DAY PROTEST Protesters, dressed as Filipino revolutionaries, symbolically destroy the mock epitaph of the late dictator Ferdinand E. Marcos during a rally near Malacañan Palace to protest the recent burial of Marcos at the Libingan ng mga Bayani on Wednesday. AP

DA told to suspend new import rules By Jasper Emmanuel Y. Arcalas

M

@jearcalas

eat processors urged t he D e p a r t me nt of Agriculture (DA) to put on hold the implementation of its new import rules, as delays in the release of permits could hike the price of canned goods. At the very least, the Philippine Association of Meat Processors Inc. (Pampi) said the DA should priori-

tize its members in the “revalidation” process to prevent delays in the release of import permits. Pampi Executive Director Francisco J. Buencamino said importers belonging to their group are now incurring losses, as their shipments have been held up in ports due to the delay in the release of new import permits. “Suspend [Memorandum Circular 5, Series of 2016] or get a clearance for Pampi members

PESO exchange rates n US 49.7770

Memorandum Circular 5 The directive issued by the DA that put in place new rules for importing animal and plant products who have no record of violations to be accommodated in the super-green lane, so there would be less inspection,” Buencamino told reporters in an interview on Tuesday.

Importers allowed access to the super-green lane by the Bureau of Customs (BOC) will get their customs clearance faster, and are exempt from document and

I

t doesn’t matter what option the government takes, what matters most is that the government invests in a network that will complement the existing infrastructure solely built by the private sector. Nationa l Telecommunications Commission (NTC) Deputy Commissioner Edgardo V. Cabarios said the government is currently discussing which of the three options for the National Broadband Plan will be adopted, but it is poised to opt for the second option, which is deemed as the most beneficial. “There are three options.

The first option will cost the government P20 billion to P30 billion. The second option is where the government spends around P80 billion to P100 billion. Third option, which might not be the best option, is to build a separate network directly competing with the private sector,” he said in an interview. Cabarios added, “In the long run, the best option is the See “Govt,” A2

See “DA,” A2

n japan 0.4441 n UK 61.7882 n HK 6.4174 n CHINA 7.2054 n singapore 34.9410 n australia 37.2083 n EU 52.8084 n SAUDI arabia 13.2767

Source: BSP (29 November 2016 )


BMReports BusinessMirror

A2 Thursday, December 1, 2016

www.businessmirror.com.ph

Electricity galore: From shortage to oversupply Continued from A1

as soon as possible. In Mindanao Abotiz Power Corp. said oversupply is already happening, with 1,000 megawatts (MW) more of additional capacity coming in. “The oversupply in Mindanao is happening now and will get worse next year. It is serious, it’s really huge,” AboitizPower President Antonio Moraza said. Mindanao has a peak requirement of about 1,300 MW to 1,400 MW. Moraza said supply is seen to “almost double” with the 1,000 MW from Alsons Power, SMC Power, FDC Misamis Corp. and Aboitiz. This new capacity adds to Mindanao’s installed capacity of 2,414 MW as of 2015, of which 2,044 MW are considered dependable. Luzon and the Visayas, Moraza said, are also at risk of experiencing oversupply.  “If plants that have announced and have started contracting are built, Luzon and the Visayas will also have increasing oversupply.  We’ve seen supply-anddemand projections for all three grids. The most serious oversupply in the medium term is Mindanao obviously,” the official pointed out.

disadvantages, if any, that may arise from the oversupply of power. “I just had a meeting in Mindanao. The generation companies there see that Mindanao already has excess power. The latest peak demand is 1,600 MW and Mindanao is now running at 2,800 MW of power supply, and another 1,000 MW more forthcoming up to late-2017; so they are saying that there could be excess capacity. But I asked this. Which is a better problem? Having a power shortage or excess in power?” Cusi pointed out. From the point of view of the consumers, having excess power supply is a “welcome development”. “It really depends on who is talking. The one selling power says there is oversupply. From the point of view of the regulators, we would like to have sufficient supply to encourage development in tourism, for instance. It is also good for the households. Manufacturing plants also need power. We have to factor all of those. Oversupply, in case there is one, will not be a problem,” Cusi said. “I don’t care where power is coming from as long as there is power. Beggars can’t be choosers.”

Welcome development

‘Too early’

Energy Secretar y A lfonso G. Cusi said he is aware of the situation. He, howe ver, dow npl aye d t he p os sible

Govt. . .

Continued from A1

second option, wherein the government will pour in billions of pesos without competing with the private sector. After all, the government’s infrastructure should be complementary with the existing. Anywhere in the world, the government is not a competitor. It is an enabler. It assists the development of the network to bring costs down.” Cabarios did not elaborate. “What’s important is the government invests,” he said. The National Broadband Plan will analyze existing and planned government and private sector deployment, and address supplyand-demand gaps by recommending policy and nonpolicy-related actions. The plan will also provide detailed physical targets and

DA. . .

Continued from A1

physical examination of regular importation and preclearance process availability. “Every container that is detained and held back, we incur about P4,500 per day per container for plug-in for refrigeration. But as for the total cost, we cannot say until we complete all of this updating,” he added. Buencamino said the additional costs incurred by importers due to delays in the delivery of raw materials to factories are usually passed on to Filipino consumers. “With every delay, our additional costs increase when it [imported meat products] should have been released already

AC Energy  Holdings Inc., the power arm of conglomerate Ayala Corp., said only when the planned power projects reached strategies to effect nationwide broadband deployment and widespread use. After crafting the plan, the government will pursue the construction of a National Broadband Network, which will include a mixture of several Internet-connectivity technologies, such as fixed line and mobile data, among others. The creation of such a network started during the time of then-President Gloria Macapagal-Arroyo, but was shelved due to corruption issues. The Philippines is one of the few countries in the region, where the government has yet to fully engage in telco infrastructure investments. Neighboring countries in the Asean have already started to implement national broadband plans, earmarking billions of dollars to develop a government-owned backbone for the information superhighway.

and processed,” Buencamino said. However, Pampi said it could not yet quantify the amount that consumers could shoulder due to the additional costs incurred by manufacturers. Buencamino met with Agriculture Secretary Emmanuel F. Piñol on Tuesday to discuss the new import rules and Pampi’s proposal.

Focus on CBWs

The Meat Importers and Traders Association (Mita) urged the DA to focus on customs bonded warehouses (CBWs) and undocumented importers rather than “highly regulated” and “compliant” ones if the government wants to stop smuggling. In a letter sent to Piñol, Mita President Jesus C. Cham said

financial closure can one tell if these would overlap with other projects scheduled for commercial operation. In other words, Francia said, it is still too early to predict an oversupply in any of the grids. “Currently, the power plants under construction are just enough to serve normal demand growth. Let’s see how many power plants get to financial close in the next 12 months,” Francia said. AC Energy is targeting another 1,000 MW of additional capacity from the current 1,000 MW already put in place along with partners. It will soon start construction of the 668-MW GN Power Dinginin Ltd. Co. coal plant in Bataan. Existing projects with partners include the 604-MW GN Power Mariveles, the 2x135-MW coal-fired power plant in Calaca, Batangas, under South Luzon Thermal Energy Corp., and the 4x135MW coal-fired power plant in Kauswagan, Lanao del Norte in Mindanao through GN Power Kauswagan Ltd. Co. AC Energy’s renewable-energy portfolio, meanwhile, includes the 52-MW Northwind Power Development Corp. in Bangui, Ilocos Norte, and the 81-MW wind farm in Pagudpud, Ilocos Norte, through its affiliate North Luzon Renewable Energy Corp., and the 18-MW Monte Solar Energy Inc. (Montesol) plant in Negros Oriental, a joint undertaking

In Thailand, for example, the government has invested $114 million to improve the Internet service or availability. The fund is part of Bangkok’s economic policy. The Vietnamese government, on the other hand, owns two of the three largest telecommunications companies in Ho Chi Minh City. Investments mainly come from the government. Malaysia has now spent a total of $4.5 billion over a 10-year period to lay fiber optic lines to every home in the country’s urban area. Other developing and developed economies are investing billions of dollars to improve Internet access in their countries. The Philippines is a laggard in Internet development in the region, data from Akamai Technologies showed. Filipinos, according to its report, endured an average broadband speed of 4.3 Mbps, which

smuggling occurs in the “illegal, opaque undocumented and noncompliant sectors” and possible leakages from the CBWs. “Hence, after years of barking up the wrong tree, it is high time for the DA to shift its focus away from the legal, formal, documented and compliant sector and look instead at CBWs and undocumented importers,” Cham said in the letter dated November 28, a copy of which was sent to reporters on Tuesday. “ To o mu c h t i m e s p e nt , looking over the shoulder of our sector is draining the dynamism and resources of all stakeholders, including the department itself,” he added. Cham said for every day that the

with Bronzeoak Clean Energy Inc.

Delay

Semirara Mining and Power Corp. Chairman Isidro Consunji said in a text message that oversupply is not possible if various regulatory approvals for these power projects are delayed. “In the end, timing is still crucial,” said Consunji whose coal plants are being scrutinized by the Department of Environment and Natural Resources. Coal plant owners now need to secure the go-ahead of the Climate Change Commission for their planned projects. Distribution utility giant Manila Electric Co. (Meralco) said a power plant with no approved power-supply agreement (PSA) “carries with it the risk potentially of stranded output or power.” “If these PSAs are not approved in a timely manner, there is a consequence that they get delayed in their buildup plans, then the anticipated surplus may not happen on anticipated calendar. In which case, there is a likelihood of [shortage],” Meralco Chairman Manuel V. Pangilinan said. PSAs, he said, are key to owners of the power projects. “It underpins their credit. So if there’s no approved PSA, I think it would be difficult to be spending money from starting the project and committing to build it.” He said oversupply of power does not is a 24-percent improvement, from 3.5 Mbps last quarter. When compared to the second quarter last year, the country’s average broadband speed improved by 37 percent. The only country behind the Philippines is India, while South Korea continued to be the Asia-Pacific nation with the fastest broadband connection with 27 Mbps. For wireless Internet, however, the Philippines ranked sixth in the second quarter report of the content delivery network player with an average speed of 8.5 Mbps for mobile, faring better against other developed economies, such as Singapore and Hong Kong. The digital-commerce industry in the Philippines is expected to balloon to more than $10 billion by 2025, and is forecast to even surpass its peers in Asia Pacific, all of which are expected to have an e-commerce market value of $5 billion each.

“revalidation” process of importation permits is delayed, importers like them incur losses that would be passed on the consumers. “Every additional day a reefer stays at port costs the importer P10,000, multiplied thousands of times over, which will ultimately be passed on to the consumer. Nonissuances of new clearances mean lost business opportunities,” he said. Cham said meat products imported by Mita members are “heavily regulated and under strict control and supervision.” “ The importer has already been accredited after undergoing stringent procedures by the DA and the BOC, which involves scrutiny of the importer’s credentials with the SEC [Securities Exchange Commission], the BIR [Bureau of Internal Revenue], the DTI [Department of Trade and Industry] and local governments,” he said. “The importer has secured [an import clearance] through an electronic, noncontact system duly established by the DA, thereby precluding possibility of graft,” Cham added. He sa id one of t he documents required for quarantine clearance at the port of entry is the International Health Certificate (IHC), which is issued by a competent authority of the exporting government. “IHC indicates that quantity and description of items that are loaded in a particular container and, hence, is equivalent to a preinspection certificate issued by the government of the exporting country,” Cham said. “IHC is an inviolable document which cannot be altered, changed or revised, thereby precluding the possibility of misdeclaration by the importer,” he added. Cham also said importers

pay the corresponding import duties or tariff based on the imposed reference price of the DA or the BOC. He added that the containers of imported products are sealed by the Bureau of Animal Industry at the port of entry and transported to an accredited cold-storage warehouse, where only an inspector of the National Meat Inspection Service is allowed to break the seal and supervise the unloading.

MC 5

The DA released on November 22 Memorandum Circular (MC) 5, which authorized the review of the validity of all sanitary and phytosanitary import clearances to curb smuggling, according to Piñol. MC 5 also ordered the creation of a group that would inspect all inbound shipments of agricultural goods and food before the BOC evaluates the tariffs for these shipments. Dubbed as the Agriculture and Fisheries Trade Facilitation Unit (AFTFU), it was created by the DA on Monday. Piñol assured consumers on Tuesday that the price and upply of holiday goods will be stable despite the more stringent trade measures the DA implemented recently. He also said importers who have inbound shipments of chilled or frozen products are being prioritized to avoid spoilage. However, Buencamino said the revalidation process of import permits took more than 24 hours, contrary to what Piñol promised earlier that the process would take less than a day. “That’s why we are forced to replug our shipments,” he said. Buencamino said holiday goods could become more expensive if the DA would drag its foot in completing the revalidation of the permits issued to legitimate importers.

exist now. “The thing is if the plants, including Meralco’s own plants that will be built, are carried out as scheduled, then there is potential that by 2021 there will be a surplus, the magnitude of which, we don’t know,” Pangilinan said. Mera lco’s power-generat ion ar m, MeralcoPowerGen (MGen), is involved in a number of power projects. With partners, MGen is scheduled to commission by the middle of 2019 a 455-MW coal plant in Muaban, Quezon. It is also finalizing all development works to enable to achieve financial close and commence construction of a 300-MW coal plant in Subic, Zambales. Construction of the first 600-MW coal plant in Atimonan, Quezon, is targeted by 2020, while the second 600 MW by early 2021. There is also a 700-MW coal plant in Calaca, Batangas, being eyed. Latest data from the Department of Energy showed that by 2020, the committed projects in Luzon could reach  4,101.375 MW, 1,687.94 MW for Mindanao and 471.58 MW for the Visayas. The data further showed that some 17,145.415 MW of indicative capacity are listed to come in by 2021 to 2022 across the three grids, with the bulk, or 11,607.505 MW, to be in Luzon. In the Visayas and Mindanao there are around 3,027.97 MW and 2,509.94 MW of indicative capacity, respectively.

ERC assures: No news blackout

T

he Energy Regulatory Commission (ERC) assured that there is no “gag order” in connection with the recent death of the of its Bids and Awards Committee (BAC). ERC Jose Vicente Salazar said all officials of the agency have been instructed to fully cooperate with the ongoing inquiry by the National Bureau of Investigation (NBI) and the Commission on Audit (COA) into allegations made by the late Director Jose Francisco Villa in a supposed suicide note. “They are also free to speak to news media when asked about the ERC project alluded to by Director Villa,” Salazar said. “What I have instructed them not to do is to defend the ERC against allegations at the expense of the reputation and memory of Director Villa.” Salazar added. “They are, however, free to answer questions and provide information both to the investigators and to the media on matters related to allegations against the ERC,” he underscored. Earlier, ERC Bids Committee Vice Teofilo G. Arbalate Jr. clarified that the “AVP project” supposedly referred to in the alleged Villa suicide note “was never awarded to any party and no contract has been signed in connection with it,” Arbalate explained that the “AVP project” is a proposed audio-visual material intended to help the ERC clarify its role in the power sector and how it performs its function. He pointed out that the ERC had initially allocated a budget of P300,000 for the project to cover both the creative and production requirements. “The project went through two biddings both of which failed,” Arbalate explained. Villa chaired both bidding processes. Salazar approved the resolutions declaring the failure of bidding based on the recommendation of Villa, Arbalate explained. Arbalate said the first bidding for the P300,000project failed because no bidder qualified. The Villa committee also recommended that the second bidding be declared a failure because his committee had not set a clear standard and criteria for determining the rating criteria. Arbalate said the creative director identified as Luis Morelos in the Villa letter did not participate in both biddings because he did not qualify. Salazar also earlier clarified that the Villa bids committee “has nothing to do with the bidding for contracts for power supply.” The Villa committee is concerned solely with the procurement of goods and services, including office supplies, Salazar said. The large contracts in the power sector, including power-supply agreements among power generators and distribution utilities go through bidding processes done by the private-industry players, he pointed out. The ERC has nothing to do with the bidding for those supply agreements, he said. The ERC’s role is to examine and determine the proposed rates at which the cost of the purchase of power supply is passed on to consumers, Salazar added. The Villa committee did not and never played a role in these processes, he said. Salazar said he has requested the NBI and the COA to speed up the investigation. He also assured the Senate Committee on Energy of full cooperation when it starts the proposed hearing on the allegations made by Villa.


news@businessmirror.com.ph

The Nation BusinessMirror

Legislators push construction of Subic-Manila coastal road

T

O decongest Metro Manila, leaders of the House of Representatives are supporting the construction of a 65-kilometer coastal highway from the Subic free port to Manila. Liberal Party Rep. Winston Castelo of Quezon City, chairman of the House Committee on Metro Manila Development; Party-list Rep. Rodel Batocabe of Ako Bicol and Liberal Party Rep. Ben Evardone of Eastern Samar said the construction of the 65-kilometer coastal highway will unclog the premier international shipping gateway in Manila. Earlier, Subic Bay Metropolitan Authority (SBMA) Chairman Martin Diño asked President Duterte to prioritize the new multimodal highway for rail cargo and vehicular traffic, linking the Subic and Manila ports by the shortest route possible, dovetails with the Freeport’s planned expansion of its Container Terminals 3 and 4 to increase its handling capacity to 1.2 million Twenty-Foot Equivalent Unit. “Any road development toward MM [Metro Manila] is welcome owing to the magnitude of the traffic problem. However, we should study further the best infrastructure available as the best alternative,” Castelo said. Batocabe, chairman of the House Special Committee on Climate Change, said the proposal is a big help to the development of provinces around the coastal highway. “I am 100-percent behind this proposal. However, let us start to lessen the centralization of economic

activities in Metro Manila and prioritize the dispersal of industries in the provinces. This process if we continue building structures going to Manila,” he said. Evardone, chairman of the House Committee on Bank and Financial Intermediaries, said the project will help decongest Metro Manila. “Any project addressing traffic should be supported,” he said. Diño, meanwhile, in a statement said he has also sought the help of Public Works Secretary Mark A. Villar to provide technical assistance for the proposed widening of the narrow Tipo Road, which links the free port to the Subic-Clark-Tarlac Expressway (SCTEx), into a four-lane highway and the construction of a new tunnel and bridge to accommodate the new lanes are also in his priority projects. He said these projects should be undertaken simultaneously in this “golden age of infrastructure” as the Philippines rides the momentum as the best-performing economy in the region. Also, considered a vital part of the new road network is the 17.273km bypass road for cargo trucks that would connect the free port terminals directly with the SCTex in Hermosa, Bataan, to provide easy transport for goods and services at the export processing zones in the area and in nearby towns in Pampanga, he said. “Our goal is to connect Subic to Manila and the economic zones in Luzon,” Diño said. Jovee Marie N. dela Cruz

Editor: Dionisio L. Pelayo • Thursday, December 1, 2016 A3

New BuCor chief sets cleanup of NBP

N

By Joel R. San Juan

@jrsanjuan1573

EWLY appointed Bureau of Corrections (BuCor) Director Benjamin de los Santos has vowed to focus on the modernization of the controversy-laden New Bilibid Prison (NBP) and, at the same time, institute reforms to address corruption and illegal drug activities inside the national penitentiary.

De los Santos, a retired police general who served at the Criminal Investigation and Detection Group, made the promise after taking his oath of office before Justice Secretary Vitaliano N. Aguirre II on Tuesday afternoon. “I hope to clean it [NBP] up and, if necessary, exert drastic measures.... Rest assured that we will not allow corruption among our ranks,” de los Santos said. He believes that he modernization of the NBP could be a major solution to the decadeslong problems of corruption and illegal activities inside the penitentiary. He cited plans to build a new facility in Fort Magsaysay in Laur, Nueva Ecija, which has been pending since 2013. He revealed that the P142-billion project has been halted owing to legal issues raised by private claimants in both the current NBP land in Muntinlupa and the property in Fort Magsaysay. The property in Muntinlupa will revert to the original owners if the NBP were transferred, while the land in Fort Magsaysay has been invaded by squatters. He lamented that the current NBP facility was originally built to accommodate only 5,000 inmates, but the prison population has grown to 23,000.

5,000 The original number of NBP facility built to accommodate but the prison population has grown to 23,000

With the modernization program comes better benefits for NBP jail guards and personnel, de los Santos assured. “We aim to upgrade salaries of prison guards and put up a correctional academy, where training will focus on security, administrative and rehabilitation competence of NBP personnel," he further revealed. As to the drug trade inside the NBP, de los Santos admitted that it would be really difficult to dismantle because of the well-entrenched hierarchy inside the NBP. But de los Santos backed the plan initiated by Aguirre to isolate the high-profile drug lords in the NBP to prevent them from contacting other drug traffickers outside the penitentiary.

‘Kintanar a sacrificial lamb for DOTr execs’

A

N umbrella network of commuter stakeholders has pressed for the resignation or ouster of Transportation Secretary Arthur P. Tugade, saying Undersecretary for Rails Noel Kintanar became a “sacrificial lamb” when he decided quit his post to ease criticisms against the current crop of officials of the Department of Transportation (DOTr). “We have likened this to a chess game where you sacrifice the rook to save the king. But it is the mastermind who must be removed,” Road Users Protection Advocates (Rupa) chairman Ray Junia said. “If there is anyone who should resign first, that should be Tugade. He is the most conflicted of them all,” Junia added. Junia said member of both the House of Representatives and the Senate have “said in so many words that Tugade is not fit to head the DOTr.” He said the Commission on Appointments must stand firm on its earlier decision not to confirm Tugade as DOTr chief despite his reappointment. “The position of Cabinet secretary is one that is sensitive and of very high trust, the Lower and Upper Chambers of Congress have already cast doubt on his loyalty, his competence and his intention to maneuver contracts to benefit big businesses,” Junia said. “If Tugade has any self-respect left, he should resign immediately,” Junia added. Rupa earlier wrote the Commission on Appointments to register their opposition to Tugade’s appointment, scoring the latter for his “incredible and fantastic solutions,” such as his plan to install cable cars over the length of Laguna de Bay, as well as to transform the Metro Rail Transit Line 2 into a Bus Rapid Transit system. Earlier, two lawmakers have pressed for the resignation of three more undersecretaries of the DOTr owing to conflict of interest, having previously served under private companies that have stakes in big-ticket transportation projects. Liberal Party Rep. Winston Castelo of the Second District of Quezon City and Party-list Rep. Tom Villarin of Akbayan said the officials— Undersecretary for Air Operations Robert Lim, Undersecretary for Maritime Affairs Felipe Judan and Undersecretary for Legal Affairs Raoul Creencia—must resign immediately to spare President Duterte from accusations of corruption and irregularities. With Jovvee Marie N. dela Cruz


Economy

A4 Thursday, December 1, 2016 • Editors: Vittorio V. Vitug and Max V. de Leon

Mindanao biz council backs finance dept’s tax-reform plan By Rea Cu

@ReaCuBM

T

he Mindanao Business Council Inc. (MBCI) has given its full support to the comprehensive tax-reform program crafted by the Duterte administration, saying the reform package is a step to achieving the country’s full economic prosperity by 2040. MBCI Chairman Vicente Lao said President Duterte’s vision of significantly reducing poverty by 2022 and completely eradicating it by 2040, or 24 years from now, is a goal to aspire for. “[It] is a dream we share and we will commit to working toward it,” he said. Lao pointed out that the MBCI is one with the Department of Finance (DOF) in making the tax system simpler, fairer and more efficient, which would be achieved by the first package of reforms it had submitted to Congress in September. This first package involves reducing personal income-tax (PIT) rates, expanding the tax base and adjusting the excise taxes on petroleum products and automobiles, with certain exceptions. The MBCI said in a news statement that, “as partners for change, we, the MBCI, fully support the Duterte Administration’s comprehensive tax-reform program, spearheaded by the DOF.” “We believe that the program, comprising several packages beginning with the first package submitted to Congress in September 2016, will simplify and correct the inefficiency and inequity of our tax system. More important, we believe that the CTRP [comprehensive taxreform package] is fiscally sound, responsible, and will address the development needs of our country, which are particularly acute in Mindanao,” the MBCI added. The MBCI also called for the sup-

port of the Filipinos in pushing for the comprehensive tax-reform package as it will be “economically transformative for the country.” “The long-delayed development of Mindanao can be attained by securing peace and investing in the future, particularly rural development. These are at the heart of Duterte’s economic policy, which we continue to support and seek to advance,” the group added. It pointed out that the proposed PIT reduction “is immediately needed and rightfully deserved by the Filipino taxpayer, as this will provide due relief for the middle and lower-income classes and spur consumption, the effects of which we hope to feel immediately in Mindanao.” Lao added that the Mindanao business community is also backing the DOF’s proposal to broaden the va lue-added ta x (VAT) base by reducing unnecessary exemptions and “insidious sources of revenue leakage.” “Many of our VAT exemptions aim to protect vulnerable sectors, but we are in agreement with the DOF that these sectors must be protected through more targeted and effective means, and not through the tax system, which benefits the rich far more. Most importantly, rationalizing VAT exemptions will improve compliance and contribute to ease of doing business,” the MBCI said. In earlier reports, Finance Secretary Carlos G. Dominguez III has assured the public that the tax-reform plan will not only raise revenues to fund the country’s infrastructure requirements and investments in human capital, but also aims to protect vulnerable sectors, comprising the poorest 50 percent of the population, from the impact of the government’s revenue-enhancing measures.

BusinessMirror

news@businessmirror.com.ph

Neda report shows ‘negligible’ contribution of mining to GDP

M

By Cai U. Ordinario

@cuo_bm

ining and quarrying contributed less than a percent of the country’s GDP between 2000 and 2015, according to the National Economic and Development Authority (Neda).

Based on the Mineral Asset Accounts of the Philippines, Socioeconomic Planning Secretary Ernesto M. Pernia said the mining sector only contributed 0.7 percent of GDP and 5.6 percent of total exports. Pernia added the sector has only been able to generate an average of 236,400 jobs annually between 2011 and 2015. “Considering its small contribution to the economy and the contentious debate on mining and its links with issues on land-use, environment and social accept-

0.7% The total contribution of mining sector to GDP from period covering 2000 to 2015

ability, the question for us is: How can we harness the full potential of the country’s mineral resources

to contribute to economic growth, generate employment and reduce poverty,” Pernia said. One of the ways to maximize the sector, he added, will begin with the release of the Philippines Wealth Accounting and Valuation of Ecosystem Services (Phil-WAVES) data next year. Phil-WAVES, which began in 2013, aims to create macroeconomic indicators and develop the national accounts and ecosystem accounts. This will assist in evidence-based decision-making. Pernia said this will help develop sound and effective policies, especially in the environmental sector. “The proliferation of illegal smallscale mining activities that adopt destructive mining practices and standards, the limited number of processing plants to create added value to our mineral products, and the lack of an efficient revenue collection and distribution that will ensure the equitable and timely distribution of the mining income to legitimate beneficiaries,” he said.

Earlier, Filipino taxpayers extended a total of P39.74 billion worth of tax perks to businesses in 2013, according to the Philippine Statistics Authority (PSA). Based on the preliminary results of the PSA’s 2013 Annual Survey of Philippine Business and Industry, this was a 5.8-percent decline, from P42.19 billion in 2010. The highest subsidy was extended to electricity, gas, steam and air-conditioning supply firms at P9.16 billion, or 23 percent of the total. This was followed by professional, scientific and technical activities, which received the second-biggest amount of subsidy of 21.3 percent, or P8.45 billion of the total. Subsidies provided to financial and insurance activities and agriculture, forestry and fishing were 16 percent to P6.38 billion and 15.8 percent to P6.29 billion, respectively. The subsidies extended to agriculture posted the largest increase of P5.68 billion, from P619.3 million in 2010.

QC Vice Mayor Belmonte seeks review of socialized-housing tax ordinance By Jonathan L. Mayuga @jonlmayuga

Q

uezon City Vice Mayor Joy Belmonte has asked members of the city council to review the ordinance that imposes a .05-percent socialized housing tax (SHT) to property owners to cushion the impact of the proposed adjustment of property values. In a new statement, Belmonte said a thorough review of Ordinance SP-2095, Series of 2011, should determine if it is still reasonable to continue implementing it on top of the proposed Ordinance 20CC-141, which sets the revised schedule of fair market value of lands and basic construction cost for buildings in the city as mandated by Section 219 of Republic Act 7160, or the 1991 Local Government Code. “It has been a few years since we started imposing it to the property owners to raise funds for our socialized housing programs. Is it still prudent to continue implementing it? Did we not achieve our goal of collecting enough funds yet?” Belmonte asked. Belmonte, the presiding officer of the Quezon City Council, said property owners have called for the repeal of the socialized housing tax ordinance, especially now that the city council is working on a new ordinance, which is being backed by Mayor Herbert Bautista, to boost revenues from real-property tax (RPT). “This is one of the mitigating measures we are looking into,” Belmonte said. “Maybe it would be a big help to the property owners if we’ll review the SHT ordinance first before we consider implementing the proposed revision of our fair market value.” She added she is also eager to

know if the SHT collections were, indeed, property utilized, following reports culled during the public consultations for Proposed Ordinance 20CC-141 that those who paid the tax were never given a report of how the money was spent. “Did all the funds go to where it was supposed to be?” Belmonte asked, echoing the same question asked by the taxpayers during the public consultations in different barangays. The SHT ordinance is supposed to be effective for five years only, which Bautista had said would be sufficient to collect the needed funds to finance the city’s land development, construction and improvement of the existing socialized housing programs, such as the Bistekville housing projects, and construction of core houses and sanitary cores, medium-rise buildings and other similar structures. Under the ordinance, a property owner who owns a land that has an assessed value of P100,001 or more is charged an additional 0.5 percent of the assessed value as “housing” tax on top of the annual RPT payments. According to estimates, only 26 percent of property owners in the city will be affected by this ordinance, half were owners of residential lots. Before a temporary restraining order was imposed by the Supreme Court in February 2014, following the petitions filed by opposing homeowners and taxpayers, the city government’s SHT collections totaled P147.44 million in 2012 and P193.51 million in 2013. Last year the SC eventually ruled that the SHT ordinance was valid and legal, as it was consistent with Section 43 of Republic Act 7279, or the Urban Development and Housing Act of 1992.

House of Santa Claus

A collection of Santa Claus miniature images on display and sale at the House of Santa Claus store outlet along A.H. Lacson Street in Manila brings out a dreamy, boyish smile on the face of this elderly man. Christmas shopping is expected to peak with the onset of the month of December. Roy Domingo

Study: 50 percent of Filipinos give ‘recycled’ items as Christmas gifts By Roderick L. Abad

@rodrik_28

O

NLINE buy-and-sell provider Lazada Philippines reported that more than half of Filipinos claim to practice gift recycling to spare themselves from getting stuck in traffic on their way to crowded malls during the Christmas holiday rush. Based on the latest results of its survey about Christmas giftgiving habits of the domestic market, 51 percent of the 220 respondents conceded that they repurpose the presents they receive into gifts for others. According to Lazada CEO Inanc Balci, most Filipinos reuse items to give to someone as they have difficulties to look for the ideal one, not to mention the various hassles of shopping that they have to go through. “While we all practice gift giving, finding the right gift is extremely hard. There’s the traffic, the lines in the malls, time spent, and the severe lack of options. That’s why it’s no surprise that Filipinos will cut

corners to the formal, personalized gift-giving process,” he said. Another prevalent practice nowadays is “bulk gift giving”, wherein 63 percent give the same gift to multiple people during Christmas. Topping their wholesale gift list as surveyed are gift baskets, pastries and personal care. Despite their changing ways, the study reveals that Filipinos still have a very high regard for the

Yuletide gift-giving tradition. In fact, it is shown that 82 percent of respondents believe that gifts for others must come before themselves. Hence, the best gift-giver remains the family at 61 percent, followed by partners or loved ones at 24 percent; and best friends or peers, 5 percent. Meanwhile, 10 percent reward themselves with a gift. More than three-fourth, or 76 percent, of respondents describe

their Yuletide presents as “a long list of small gifts.” Size doesn’t matter for 83 percent who believe that gift wrapping is an important tradition. Meanwhile, it’s the thought that counts for 55 percent who consider themselves as “do-ityourself ” givers. But in case they find it not necessarily to give an actual gift, 74 percent agree to just give money. As regards to Christmas gift-giving games, Kris Kringle is the most favorite with 59 percent of the respondents do it as a holiday tradition. Since the Philippines has the longest Christmas celebration on Earth, 81.6 percent find it’s fine to give gifts even after the natal day of Jesus. Lazada is the largest online shopping mall in Southeast Asia and is pioneering e-commerce by providing a fast, convenient and secure onlineshopping experience, combined with an extensive product offering in categories ranging from mobiles and tablets and consumer electronics to household goods, toys, fashion and sports equipment.


Agriculture/Commodities BusinessMirror

news@businessmirror.com.ph

Editor: Jennifer A. Ng • Thursday, December 1, 2016 A5

‘Lifting of rice QR should also benefit farmers’

A

By Cai U. Ordinario

@cuo_bm

S the lifting of the quantitative restriction (QR) on rice is expected to boost government revenues, the state-owned think tank urged the Duterte administration to set aside P18 billion a year to compensate farmers. ‘ In a policy note, titled Compensatory payment scheme for rice farmers after tarification, Philippine Institute for Development Studies (PIDS) senior researcher Roehlano M. Briones and research analyst Lovely Ann C. Tolin said the removal of the rice QR is expected to boost government revenues due to more rice imports. At a tariff rate of 35 percent, the government is expected to generate P27 billion to P28 billion in duties from rice imports, which could reach as much as 2.26 million metric tons (MMT) a year. “Earmarking the rice-tariff revenue to pay for the compensation scheme is a feasible funding strategy. Residual money from the tariff revenues could be used for other product-enhancement measures for rice farmers,” the authors said. The influx of rice imports, the study stated, will lower paddy rice prices by P4.56 and P6.97 per kilogram at the farm gate and retail level, respectively.

The impact on farmers’ incomes of the removal of the QR, the researchers said, should compel the government to compensate them. Farmers cultivating 2 hectares of irrigated land should receive around P19,000 a year, according to the study. “This is greater than transfer per household from the Conditional Cash Transfer (CCT) Program, which is P15,000 for three children. Note that compensatory payments can be received simultaneously with the CCT,” the researchers said. The researchers said the government can adopt a payment compensation scheme. Between 2017 to 2022, this can be done using the Registry System for Basic Sectors in Agriculture. Farmers or their heirs can receive compensation which is computed using the National Food Authority’s (NFA) support price of P17 per kg and the cost of production in 2012.

FILE PHOTO

The compensatory payment, the study stated, can be divided by the area harvested. This will be distributed per cropping season or twice a year. “Tarification of the Philippine rice sector by 2017 is inevitable. Since our analysis suggests massive fall in domestic prices, it is imperative to provide farmers a

measure for income support,” the study read. In October the National Economic and Development Authority (Neda) said the Philippines could impose a tariff of as much as 50 percent once the rice-import quota is removed in July 2017. A Ned a of f ic i a l told t he BusinessMirror that the opening

Negros Occidental coffee producers urged to capitalize on branding B ACOLOD CIT Y—The Department of Trade and Industry (DTI) is urging coffee producers and processors in Negros Occidental to capitalize on branding to strongly position the product in the market. DTI-Negros Occidental Trade and Industry Development specialist Rachelle Nufable, at the sidelines of the training on branding held at the Negros First Negosyo Center here on Tuesday, said that branding is an important marketing tool that every enterprise should invest in.

Despite the premium or higher market cost, having brands or trademarks is an advantage as buyers would still opt for products with “recall” or those known to them. “Brand also speaks for traceability, thus, it also carries the place of origin of the products,” she said, adding that with coffee, for instance, the province could actually have a brand like those of other third wave or specialty coffee in Sagada, Kalinga and Benguet, among others. The Negros Occidental Coffee Association had earlier said they

target to produce the “Negros Coffee,” a collective brand of coffee for the province by next year. The training on branding is one of the initiatives of the DTI to prepare local producers and processors in coming up with the said Negros Coffee brand. “This is purposely for our coffee sector, because we wanted them to develop a brand of coffee for Negros,” Nufable said. During the training attended by about 30 coffee growers and processors in the province, representatives of the Intellectual

Property Office (IPO) taught them the importance and advantages of branding. IPO, an attached agency of the DTI, also presented to the participants the requirements and procedures on registering a brand. Aside from collective brand or trademark registration, DTINegros Occidental is also pushing for individual brands, not only for coffee but also for other sectors. The agency, however, reminded farmers and processors to prioritize product quality alongside having a good brand. PNA

California targets dairy cows to combat global warming

G

ALT, California—California is taking its fight against global warming to the farm. The nation’s leading agricultural state is now targeting greenhouse gases produced by dairy cows and other livestock. Despite strong opposition from farmers, Gov. Jerry Brown signed legislation in September that, for the first time, regulates heat-trapping gases from livestock operations and landfills. Cattle and other farm animals are major sources of methane, a greenhouse gas many times more potent than carbon dioxide as a heat-trapping gas. Methane is released when they belch, pass gas and make manure. “If we can reduce emissions of methane, we can really help to slow global warming,” said Ryan McCarthy, a science adviser for the California Air Resources Board, which is drawing up rules to implement the new law. Livestock are responsible for 14.5 percent of human-induced greenhouse gas emissions, with beef and dairy production accounting for the bulk of it, according to a 2013 United Nations report. Since the passage of its landmark

In this November 23 photo, cows are seen at the New Hope Dairy in Galt, California. Gov. Jerry Brown signed a legislation in September that, for the first time, regulates heat-trapping gases from livestock operations and landfills. AP PHOTO/RICH PEDRONCELLI

global warming law in 2006, California has been reducing carbon emissions from cars, trucks, homes and factories, while boosting production of renewable energy. In the nation’s largest milkproducing state, the new law aims to reduce methane emissions from dairies and livestock operations to 40 percent below 2013 levels by 2030, McCarthy said. State officials are developing the regulations,

which take effect in 2024. “We expect that this package, and everything we’re doing on climate, does show an effective model forward for others,” McCarthy said. Dairy farmers say the new regulations will drive up costs when they’re already struggling with five years of drought, low milk prices and rising labor costs. They’re also concerned about a newly signed law that will boost overtime pay for farmworkers.

“It just makes it more challenging. We’re continuing to lose dairies. Dairies are moving out of state to places where these costs don’t exist,” said Paul Sousa, director of environmental services for Western United Dairymen. The dairy industry could be forced to move production to states and countries with fewer regulations, leading to higher emissions globally, Sousa said. “We think it’s very foolish for the state of California to be taking this position,” said Rob Vandenheuvel, general manager for the Milk Producers Council. “A single state like California is not going to make a meaningful impact on the climate.” Regulators are looking for ways to reduce so-called enteric emissions—methane produced by bovine digestive systems. That could eventually require changes to what cattle eat.But the biggest target is dairy manure, which accounts for about a quarter of the state’s methane emissions. State regulators want more farmers to reduce emissions with methane digesters, which capture methane from manure in large storage tanks and convert the gas into electricity.

tariff that it will impose will be between 40 percent and 50 percent for all imported rice that will enter the country. A tariff rate of 50 percent is within the bound rate set by the World Trade Organization (WTO). This is, however, higher than the 35-percent inbound tariff imposed on rice shipments from Southeast

Asian countries under the Asean Free Trade Agreement. Economists said, however, that the Philippines may be allowed to impose a much higher tariff if it could justify the need to do so, as in the case of Japan. When Japan converted its QR on rice to a tariff, Tokyo set an opening tariff of 400 percent.

San Miguel Corp. backs 2016 Binhi Awards

S

AN Miguel Corp. (SMC) has partnered again with the PhiIippine Agricultural Journalists Inc. (PAJ) for the  2016 PAJ-SMC Binhi Awards,  the group’s annual national agricultural journalism contest that is now open to online journalists.  PAJ President and former  Philippine Star  business editor Roman Floresca said the support of SMC, under President and COO Ramon S. Ang, to the Binhi Awards is a big boost to Philippine journalism and stakeholders who comprise the country’s agriculture sector.  “We sincerely thank SMC for its strong support to the PAJ through four decades and counting, particularly the Binhi Awards, as we continue to raise the bar of coverage and reportage of the country’s agricultural developments and breakthroughs, and success stories of farmers, fishers, livestock raisers, food manufacturers and agribusinessmen,” said Floresca, who was reelected for a sixth term as PAJ president.  SMC and PAJ recently formalized the agreement at the SMC main office in Mandaluyong City. The PAJ board has once again designated PAJ Vice President for Internal Affairs Noel Reyes as contest chairman.  The 2016 PAJ-SMC Binhi Awards will offer cash prizes, ranging from P15,000 to P50,000, for 17 individual and institutional contest categories.  Starting this year, online journalists can now compete in three major categories, which include agricultural journalist, agri-beat reporter and environment journalist, where the firstsecond- and third-place winners will receive P50,000, P30,000 a nd P20,0 0 0 c a sh pr i z es, respectively.  In previous years only print journalists from national and regional newspapers, agricultural

magazines and other publications vied for major and minor individual categories, said Reyes, who formerly served as information director at the Department of Agriculture.  Further, print and online journalists can compete in other four minor individual categories, namely agri news story agri feature story, environment story and climate story of the year. One winner per category will be awarded a P15,000 cash prize and a trophy.  The other 2016 PAJ-SMC Binhi Awards minor categories are agriphoto journalist; agri section of a national and regional or provincial newspaper; agri magazine; agri newsletter; national and regional agri radio program; national and regional agri TV program; and agri info and/or media campaign of government agency. Winners will each get a P20,000 cash prize and trophy.  The contest coverage is from November 1, 2015 to October 31, 2016, which means all entries should be published, uploaded or aired during the 12-month period. Entries should be submitted on or before December 16 to The 2016 PAJ-SMC Binhi Awards Committee, c/o Filipino Inventors Society Producer Cooperative (FISPC), Ground floor, Delta Building, Quezon Avenue corner West Avenue, Quezon City. For contest guidelines and requirements, visit the PAJ facebook account: Philippine Agricultural Journalists. AP


A6 Thursday, December 1, 2016

TheBroa

Business

BPOs under Trump, Duterte: A

By Catherine Elizamarie N. Pillas & Jonathan L. Mayuga

T past 6 in the evening, P. Campos Street in Dasmariñas City, Cavite, is engulfed by a gray mist. There Susan (not her real name) stands almost every day for five days.

There, just outside the gates of a housing subdivision where she lives, Susan waits for a ride to work at a commercial center in Pala-Pala. She works at iQor, a business-process outsourcing (BPO) company, which rents a huge space at SM Pala-Pala. It is the only BPO firm that operates in Dasmariñas City, a first-class city in terms of income classification and currently the largest in terms of area and population in the province of Cavite. “It is easy to go to work for me now,” she told the BusinessMirror during the 10-minute ride to SM Pala-Pala. “Our office is nearby and I can afford to sleep longer.” Susan said she previously worked for another BPO company in Ayala, Makati City. “I spend at least six hours on the road every day to go to work and back home after our shift,” she said adding that she spends at least P100 a day for bus fare. “If I am lucky, I get to sit on the bus.” From the city’s center to PalaPala, it takes about 10 minutes to 15 minutes using public transportation. From elsewhere in the city, traffic notwithstanding, Pala-Pala is less than an hour away. More often, when all the seats are taken, Susan has no choice but stand up and wait for other passengers to alight before she is able to sit down on the way to Ayala. “It was really difficult,” she said. “Fortunately, iQor is here now.”

iQor

FLORIDA, United States-headquartered iQor started operation in Dasmariñas in the late 2014 and remains the only BPO company operating in the city. Early this year, it rented space at a shopping center adjacent to the building where its first offices were located. The company’s branch in Dasmariñas maintains eight different but mostly US accounts, and employs about 5,000 employees—and growing. It is currently hiring more employees. Employees of iQor are mainly from the city and other towns of Cavite and a few from as far as Laguna, Batangas and Metro Manila, such as Las Piñas City. Early this month, iQor announced the opening of contact centers in Iloilo and in Bacolod, Negros Occidental. The additional 150,000 square feet and more than 2,500 workstations will expand iQor’s service capacity for leading technology, telecommunications, retail and financial services brands, the Saint Petersburg, Florida-based iQor Inc. said on November 17. According to iQor, it has 40,000 employees providing customer interaction and product support solutions in 18 countries. The new centers in Iloilo (Iloilo Business Park, Iloilo City) and Bacolod provide further geographic diversity to iQor’s existing presence in Clark, Davao and Dasmariñas, bringing the total number of iQor employees in the Philippines to more than 16,000, the company said. Susan hopes the independent foreign policy of President Duterte would not take its toll on the BPO-information-technology (IT) sector, as well as that of his counterpart in the US, President-elect Donald J. Trump.

Trump + Digong

SINCE the business-process management industry’s rise to become a pillar of economic growth, the government and the private sector have been striving to spread the industry’s reach toward less-developed corners of the country. But with clouds of uncertainty hovering over the political landscape of the Philippines and the US, the public-private drive to spur BPO growth in the countryside has reached the start of a steep incline. In the run-up to the US elections, Trump has bannered the pledge to “bring back” jobs to America. One of the ways suggested was to impose heavier taxes on American firms who outsource jobs. “Unlike Clinton, Trump did not comprehensively outline his domestic and foreign policies,” according to a paper from Control Risks web site. “As a result, there is considerable uncertainty about which policies he will pursue in office and how aggressively he will do so.” Following the business mogul’s victory, Socioeconomic Planning Secretary Ernesto M. Pernia commented that if Trump’s comments be made into policy, BPOs in the Philippines could suffer. In the Philippines Duterte has not minced words in conveying his distaste at White House’s perceived ‘meddling’ in local affairs, especially on criticism of his bloody, anti-drug campaign. The firebrand has lashed out against top US diplomats, and has, on more than one occasion, swore at the incumbent President Barack Obama.

No worries

DEVELOPMENTS in the diplomatic sphere have sent jitters in the local BPO industry, which has seen a meteoric rise in a matter of six to eight years and now provides employment for 1.15 million workers. The industry is also estimated to contribute every year 4 percent to 6 percent to the country’s GDP. This is all the more significant as the industry aims to provide more jobs to Filipinos in rural areas, targeting to generate work in BPO hubs outside of Metro Manila to 500,000 Filipinos. For the newly created Department of Information and Communications Technology (DICT), however, the rhetoric of both sides in the absence of any real policy discouraging the industry would not do any real damage to the prospects of the $22-billion BPO industry. “[The US] doesn’t have a policy out on the outsourcing industry, unlike before when there was a bill that was introduced that got us worried,” Emmy Lou Delfin, DICT’s Next Wave Cities program manager, said in a phone interview. “We’re not really worried about the situation; every week there’s a potential inquiry from an American locator. It’s not really something to worry about.”

Diversifying services

ACCORDING to Delfin, even as the country sees no immediate danger in the interest of American companies to keep outsourcing their activities to the Philippines, the country has been diversifying its services to attract other countries such as Australia, Japan and Singapore, among others. Information Technology and Business Process Association of the Philippines’s (IBPAP) Roadmap


aderLook

sMirror

www.businessmirror.com.ph | Thursday, December 1, 2016

A7

Waiting for the next big wave Other university and college branches are from the Technological University of the Philippines, the Philippine Christian University, National College of Science and Technology, Emilio Aguinaldo College and Saint Paul College (Island Park branch).

nonoy lacza

Business-friendly

2016 to 2022 indicates that 70 percent of the outsourcing work received by Philippines-based BPOs comes from the North American market, with the remaining 30 divided among the Middle East, Europe, Australia and East Asia and the Pacific If one looks at the employment contribution, it’s evident the industry has provided a means of living to an increasing number of Filipino workers, and will continue to do so in the next six years, Delfin added. The IBPAP, however, declined to comment on the prospects of the industry with President-elect Trump at the helm of the US government, and the past tirades of Duterte. Even as the industry is keeping mum on the implications of increasingly antagonistic relations between the Philippines and the US, the BPO industry’s continued strength indicate that more and more Filipinos will rely on the sector for their livelihood under the Duterte administration.

BPO hubs

ACCORDING to the IBPAP’s 2016 to 2022 Roadmap crafted with Frost & Sullivan consultancy firm, 14 percent, or one in every seven jobs, of the country’s employment requirements will be fulfilled by the IT-BPM sector once 2022 comes around. The projection is based on Philippine labor-demand projections for 2016 to 2022. Not only will the full-time employee (FTE) work force balloon from 1.15 million by end-2016 to 1.8 million by 2022, but a growing segment will come from the areas outside of Metro Manila as IBPAP and the DICT try to establish BPO hubs in the countryside. This program, dubbed the “Next Wave Cities Program,” aims to spread the benefits of the booming BPO industry to less-developed areas, in pursuit of the past and present administration’s goal of “inclusive growth”. “There continues to be a push as far as the IBPAP and as far as Roadmap 2022 is concerned. We’re pushing our expansion to the countryside, these cities, both in New Wave and emerging cities, are critical in terms of us achieving our goals,” IBPAP Board Chairman Sebastian L. Reyes said in a separate interview. “They will be the ones who will have the talent that will push the growth of services.”

Next wave

EVERY two years the government and the IBPAP release a list called Next Wave Cities. These are essentially cities that have gained high rankings on the four criteria of talent availability, infrastructure, cost of doing business and business environment and risk

management. These cities are also deemed ready to host BPOs. The ranking also identify centers of excellence and emerging cities. Delfin said that, as of this year, Next Wave Cities have contributed 300,000 FTEs to the total work force. Reyes said this push to spread growth is especially significant for recovering areas, such as Tacloban, which is now getting back to its feet after being ravaged by Supertyphoon Yolanda in 2013. “In the Visayas, we’re looking at past hosts of BPO companies, which, hopefully once they recover, can host again in Tacloban and Palo, Leyte,” Reyes said. “These are showing potential.” Aside from the calamitystruck Visayas region, new areas such as Balanga in Bataan have just welcomed GenPact Philippines, the local unit of New York-based business-processing management firm. New areas that are expected to see growth in employment and increased economic activity due to the entry of BPOs are Puerto Princesa and Laoag. The IT-BPM industry is eyeing total revenue to increase from an estimated $22.9 billion in 2016 to $38.9 billion by 2022.

Dasmariñas City

EARLY this year, the IBPAP named Dasmariñas City among 10 new areas on the growing list of locations that will support the growth of the IT-BPM sector outside Metro Manila. The others are Baguio, Cagayan de Oro, Dagupan, Dasmariñas, Dumaguete, Lipa, Malolos, Naga, Santa Rosa in Laguna and Taytay in Rizal. These areas emerged on top of 42 cities identified and evaluated by the IBPAP, the Department of Science and Technology-Information and Communications Technology Office (now called the DICT) and Leechiu Property Consultants (LPC) for their potentials based on factors such as talent pool, infrastructure, good business climate, and cost competitiveness. Situated about 27 kilometers south of Manila, Dasmariñas is the largest component city and the 12th-largest city in the Philippines. Dasmariñas has a population of 659,019, according to data from the Philippine Statistics Authority. In an interview, Mayor Elpidio F. Barzaga Jr. told the BusinessMirror he is confident that more BPO companies would soon find Dasmariñas City among the most suitable places to do business. After being picked as one of the 10 Next Wave Cities, Barzaga said he immediately wrote IBPAP,

expressing his gratitude, with the promise to make the city an ITBPO hub.

Strategic location

ACCORDING to Barzaga, Dasmariñas is strategically located as compared to other local government units (LGUs) in the province of Cavite. Dasmariñas is very accessible, to Metro Manila, and other towns in Cavite all the way to Tagaytay City and Batangas, he added. The city official said iQor told him the company has approximately 5,000 employees in Dasmariñas. “They have very good prospects in the city.” iQor, he added, is expanding, which only shows that Dasmariñas is providing a good investment climate. According to Barzaga, he expects other companies to start scouting for office spaces in Dasmariñas in the coming months. “So far, we only have iQor, which is expanding. But I expect IT-BPO companies to come in in the ensuing months,” he said.

Commercial, industrial

OVER the years, from an agriculture town, Dasmariñas has evolved into a commercial and industrial city. It is currently one of the fastest growing LGUs in Cavite. There are numerous commercial establishments, which include major shopping malls, fast-food restaurants, grocery and convenience stores, restaurants and other service-oriented businesses in Dasmariñas’s City Centre and central business district. Meanwhile, industrial establishments are in the outskirts of the city. It boasts of three industrial estates, namely: First Cavite Industrial Estate (FCIE) in Barangay Langkaan, Dasmariñas Technopark located in Barangay Paliparan I and NHA Industrial Park in Bagong Bayan. There are over 300 factories and business establishments scattered in the different barangays. According to Barzaga, Dasmariñas has a pool of talents with excellent English communication skills that fit the requirements of IT-BPO companies. He said the city boasts of learning institutions, including college and universities that are highly competitive. In fact, Dasmariñas is also called the “university city” of Cavite because it is the recipient of dispersal thrusts of several universities based in Metro Manila. Dasmariñas is home to the De La Salle University (DLSU), which offers various social science and business courses. The institution also offers medical courses, operates and manages a hospital, the DLSU Medical Center.

AS local chief executive of Dasmarinas, Barzaga said it has always been his policy to promote a business-friendly environment anchored on good governance. “Our basic requirement, the policy of the city government from the time I became a mayor, we want Dasmariñas to be investment-friendly. We know the basic conditions,” he told the BusinessMirror. “For Dasmariñas to be an ideal place for investment, we have to solve the basic problems.” According to Barzaga, transparency is a policy of the local government under his watch. “We have to address the basic problems pertaining to peace and order, traffic and environment, garbage,” he said. Transportation, Barzaga added, is not a problem because of its road networks leading to Manila, Laguna and Batangas. To encourage IT-BPO companies in doing business in Dasmariñas, BPO companies like iQor are entitled to tax holiday, as well as other benefits provided to businesses located within the Philippine Economic Zone Authority Special Economiz Zones. Barzaga bared that SM and Robinson requested the city government to issue an endorsement to have certain parts of their malls declared as Peza zones. “If there are owners of buildings here [Dasmariñas] who would like to establish a BPO and who want to have an endorsement to be covered by the special law, the city government is willing to help,” he said.

Good governance

ACCORDING to Barzaga, he has a strict policy against corruption. Businessmen, he said, need only to pay permits and the taxes due to the local government to be able to put up shop in Dasmariñas. Peace and order, he said, is not a problem as members of the Philippine National Police (PNP), through the Dasmariñas Police Station, are always on their toes. “Our police are very visible,” he said. “Even our local traffic enforcers ensure a smooth flow of traffic.” All intersections in the city, he added, have traffic lights installed by the city government. Some areas, he said, even have closed-circuit television (CCTV) cameras to deter crime. “In the next few months, we plan to put up more CCTV cameras,” he added. Barzaga claims he is “hands on” when it comes to running the city to ensure the delivery of basic social services. Dasmariñas, he said, recently completed the construction of its own public hospital. Next year, he added, the city targets to establish a university fully funded and managed by the city government.

High hopes

ACCORDING to Barzaga, Dasmariñas is a potential BPO hub in the Southern Tagalog region because of available infrastructure, such as roads and bridges. He said the establishment of more IT-BPOs would boost employment opportunities not only for the city’s residents but also the other cities and towns near it. Settling in the city is a breeze for employees of various companies in Dasmariñas, as the city boasts of 70 different residential subdivisions. In fact, Barzaga said only about 20 percent of the city’s residents are native of Dasmariñas,

with 80 percent coming from all over because of the employment opportunity offered by commerce and industry. According to Barzaga, Dasmariñas is now among the fastest-growing economies in the region, more than half of the city’s 9-hectare land area is still undeveloped. “We have the space. As a matter of fact, only about 50 percent of the city’s total land area of 9 hectares [is] developed,” he said. “We expect BPOs to be growing more and more.” “The Philippines remains a terrific place to conduct business,” iQor CEO Hartmut Liebel was quoted in a statement as saying. “Government officials at all levels remain engaged and helpful, as we grow due to client demand and the service-oriented, tech-savvy talent we continue to find in labor markets across the Philippines.” iQor, a global provider of BPO and product support services, today announced that it has expanded its service operations in the Philippines with the opening of Island Region. “We’re excited to expand our operations in some of the fastestgrowing regions of the Philippines,” Gary Praznik, iQor COO, was quoted in a statement as saying. “The labor force, infrastructure and economic development support in Iloilo and Bacolod are fantastic, and we are excited to create local jobs for local talent.” The company is actively seeking to hire more than 2,000 qualified individuals to help support client growth in customer care, technical support, sales and collections.

Road-map goals

THE IT-BPM and global in-house center (GIC) industry in the Philippines has grown at an annual rate of 30 percent over a decade, faster than the growth of the global offshore services market, the IBPAP Roadmap 2016 to 2022 said. Collectively, the industry provides services for a wide range of prominent Fortune 1000 firms in North America, Asia and the European Union. The Philippines’s share of the global IT-BPM and GIC market is estimated at approximately 9.5 percent. As it has grown, the industry has diversified significantly in breadth, scale and maturity of services. An ambitious forecast embodied in an industry road map of revenues of $25 billion and 1.3 million direct employees by 2016 appears to be within reach. Expansion into Next Wave Cities and towns has increased with 150,000 FTEs spread across Tier 2 and Tier 3 towns across the country, the IBAP report said. The Philippine IT-BPM work force grew at an average of 21 percent annually between 2007 and 2011. The rapid growth in employability across Next Wave Cities has increased the pool of talent supply in the Philippines, the report said. In the O2P and BPAP surveys of 2009 and 2012, 92 percent of respondents (companies of different sizes and portfolio offerings) said they planned to increase their employee base; with most planning to increase by under 5 percent to as much as 50 percent. The industry is projected to earn $25 billion in revenues and employ 1.3 million and 3.2 million Filipinos directly and indirectly by 2016. At this size, it could account for about 8 percent of Philippine GDP. If these targets are reached, the Philippine IT-BPM and GIC industry will have consolidated over 10 percent of the global ITBPM market. This share will be maintained at least until 2016, when global market is expected to be between $240 billion and $250 billion (Everest Global estimate as of 2012).


A8

Thursday, December 1, 2016

briefs

Disqualified separatist HK lawmakers lose appeal 

HONG KONG—Two separatist Hong Kong lawmakers lost their appeal on Wednesday against a ruling disqualifying them from office because they altered their oaths with an anti-Chinas insult. The Court of Appeal sided with a judgment earlier this month barring Sixtus Leung and Yau Wai-ching of the Youngspiration Party from taking their seats in the city’s Legislative Council. It agreed with the High Court’s decision two weeks ago that the pair effectively declined to take the oath, violating the semiautonomous Chinese city’s Basic Law constitution covering oaths taken by officials. The threemember panel said its ruling was backed up by Beijing’s own controversial interpretation of the Basic Law. AP

Protesters vs Aussie refugee treatment delay Parliament 

CANBERRA, Australia—Rowdy protesters demonstrating against Australia’s treatment of asylumseekers have caused a disruption in Parliament, with security officers finally wresting them out. Around 30 shouting demonstrators in a public gallery drowned out the House of Representatives, where lawmakers had gathered Wednesday for a combative, daily 90-minute session in which opposition lawmakers question government ministers about their portfolios. Some protesters appeared to glue their hands to a front railing. Speaker Tony Smith adjourned the sitting after the first question, while security officers regained order. Government Minister Christopher Pyne described the 40-minute disruption as “the most serious intrusion into the Parliament” in 20 years and asked the speaker to investigate. AP

Australian theme park to reopen 6 weeks after 4 deaths

GOLD COAST, Australia—An Australian theme park said on Wednesday it will reopen more than six weeks after four people died in a ride malfunction. Dreamworld on Queensland state’s Gold Coast will reopen to the public with several of its rides operating on December 10, the park owner Ardent Leisure Group told the Australian Securities Exchange. The Thunder River Rapids ride, in which four people died when a raft overturned on October 25, will never reopen. The rest of Dreamworld’s rides will progressively open as they are signed off as part of a safety review, the company said. AP

Nepal proposes Constitution amendment for ethnic demands 

K ATHMANDU, Nepal—Nepal’s government proposed amending its new constitution to carve out a new state to meet the demands of an ethnic group whose protests for bigger federal state last year left more than 50 people dead. The government registered the bill in parliament late on Tuesday that proposes a second state in southern Nepal where there is large presence of Madhesi ethnic community. Hridesh Tripati of the Terai Madhes Democratic Party said on Wednesday it was a welcome progress, but still inadequate. “It is one step forward and a good progress but it is still not enough. This new proposal does not cover the districts we have been demanding to be included in Madhesi state,” Tripati said, adding that an alliance of Madhesi parties would meet to decide if it was going to accept and support the government initiative. AP

The World BusinessMirror

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

Opec deadlocked as Iran, Saudi harden positions

A

n Organization of Petroleum Exporting Countries (Opec) deal to curtail oil production and prop up global prices appeared in jeopardy as Iran said it won’t make cuts, while Saudi Arabia insisted Tehran must be willing to play a meaningful role in any agreement. Ministers gathering in Vienna before Wednesday’s crucial Opec meeting attempted to resolve differences obstructing an accord. Iranian Oil Minister Bijan Namdar Zanganeh laid out his country’s position following talks with his Algerian and Venezuelan counterparts. Under an Algerian proposal on Tuesday, the 14 members of Opec would cut production to 32.5 million barrels per day from their October level of 33.6 million, according to two delegates familiar with the talks.  With oil prices languishing below $50 a barrel, Opec meets on Wednesday to finalize its first production curbs in eight years. Resistance from Iran—and from neighboring Iraq—has made the foundations for a deal look increasingly shaky. Top producer Saudi Arabia is ready to reject an accord unless all members, bar Libya and Nigeria, participate, people with knowledge of the kingdom’s position said earlier. “I don’t know” if there will be an agreement, Indonesian Energy Minister Ignasius Jonan told reporters in Vienna. “The feeling today is mixed.” Under the Algerian proposal, Angola, which had a key oil field under maintenance in October, w i l l c ut f rom its September level. Nigeria and Libya will be exempted from cuts. Still, Opec will consider their output to calculate the overall 32.5 million-barrel target, using their

$50 The price of a barrel of oil is below this level

year-to-date averages, rather than their October levels. A n Opec proposal initially agreed in Algiers in September would see producers trim output by about 1.2 million barrels a day from October levels. Iran has sought special treatment since it’s ramping up output following years of crippling sanctions. Iran has sug gested it freeze produc t ion at 3.975 m i l l ion barrels a day, or about 200,000 barrels a day above current output, t wo Opec delegates said on Monday. Saudi A rabia countered w ith a proposa l for Iran to cap output at 3.707 mil lion. A lger ia, acting as a go-between, offered an a lter native that wou ld see Iran freeze at 3.795 mil lion, the delegates said. Crude prices remain at half their level of mid-2014 as global supply continues to swamp demand. Brent gained 1 percent to $46.82 a barrel as of 5:28 a.m. in Vienna on Wednesday, after dropping 3.9 percent on Tuesday to the lowest settlement in two weeks.

An Iraqi worker operates valves at the Rumaila oil refinery, near the city of Basra, 550 kilometers southeast of Baghdad, Iraq. Iraq’s prime minister says his country will agree to cut production to boost oil prices. AP/Nabil al-Jourani

Fighting for barrels

At ne got i at io n s i n V ie n n a , countries have fought to the very last barrel. W hile Iraq finally appeared to accept that Opec supply estimates known as “secondary sources” should determine the basis for cuts, it was still insisting it should be allowed to freeze at October’s output of 4.6 million barrels a day, according to one delegate. That’s roughly the same level as would be reached if the proposal for a group-wide cut of 4 percent to 5 percent were applied to Iraq’s own output estimate of 4.8 million barrels a day. Algeria proposed Iraq cut production by 240,000 barrels a day from the October secondar ysources level, two delegates said.  Saudi Arabia won’t insist that Iraq and Iran make the same size reduction as other OPEC members and hasn’t decided from which production level they’ll be asked to cut, according to the people familiar with the situation.

Special treatment

Iraq had previously demanded an exemption from a supply deal, citing the urgency of its offensive against Islamic State. “We support Iran in the sense that they’ve had sanctions and we have to take that into account in the deal that we make,” Ecuador’s Minister for Foreign Affairs Guillaume Long told reporters in

Vienna on Tuesday. “The same goes for Iraq as well. We know Iraq has a very expensive security situation that it faces, basically a war. We understand that requires special treatment.” Infor ma l d iscussions between the heads of Opec delegations will take place at about 8 a.m. on Wednesday, preceding the formal meeting at the Secretariat at 11 a.m., said two delegates, asking not to be identified because information isn’t public.

No deal?

On Sunday Saudi Oil Minister Khalid Al-Falih for the first time f loated the possibility of leaving Vienna without an agreement. It was unclear whether the minister changed his mind about the deal ’s merits, or was trying to boost his negotiating position with Iran and Iraq. As Opec tries to resolve its own differences, the group is also asking other big producers including Russia to reduce output by as much as 600,000 barrels a day. The Kremlin so far has resisted requests that it join the cut, offering instead to freeze production at current levels. Energ y Minister A lexander Novak said on Tuesday that he has no plans to visit Vienna on Wednesday, but that Russia is ready to talk if the group reaches an internal consensus. Bloomberg News

World leaders sing praises of Fidel Castro in Cuba

H

AVANA—Political leaders and other dignitaries from around the world joined Cuban mourners on Tuesday night in the packed Plaza of the Revolution—the site of so many fiery orations by Fidel Castro—to pay their last respects to the former Cuban leader in a service called “Song to Fidel”. As the island ’s f lag f luttered at half staff over the plaza, Cuban actress Corina Mestre began the ceremony by reading the poem “Triumphant March of the Rebel Army”, and encouraged the massive crowd in chants of “Fidel! Fidel! Fidel!” at appropriate passages. One by one, world leaders rose to pay tribute to Castro, whose death was announced on Friday. No cause of death was released, but the 90-year-old had been in declining health for years. “He died undefeated. Only the inexorable passage of time could defeat him,” Ecuadorean President Rafael Correa said. As Correa arrived at the airport, he paid tribute to Castro and the accomplishments of the revolution in health care and education. “Fidel lives in every child with a school, every person with health, each laborer who is the master of his work, in each idealistic young person, inspired by the principles

of Fidel and the Cuban Revolution, who will keep fighting for a better world,” he said. At the plaza, Correa commended Cuba’s resistance to the US embargo, saying, “Any capitalist country in Latin America would collapse in a few months under the blockade that Cuba endured.” Castro said South African President Jacob Zuma will be remembered as “a great fighter for the idea that the poor have a right to live with dignity.” And Li Yuanchao, China’s vice president, called Castro “a colossus of our era, history and the people who will remember him eternally. The best homage to Fidel will be to follow his cause.” Among the dignitaries from 60 countries who have arrived in Havana to take part in a weeklong tribute to Castro were: Venezuelan President Nicolas Maduro, Bolivia’s Evo Morales, Nicaragua’s Daniel Ortega, Mexico’s Enrique Pena Nieto, Panama’s Juan Carlos Varela, Honduras’s Juan Orlando Hernandez and King Emeritus Juan Carlos, who headed the Spanish delegation. During the nationally telev ised ceremony at the plaza, Maduro, a staunch ally of the island, sat next to Cuban leader Raul Castro, who was the last of 18 speakers at the homage.

Other allies, such as Russian President V ladimir Putin, announced that they would not travel to Cuba. The US delegation included Deputy National Security Adv iser Ben R hodes and Jeffrey DeLaurentis, the top American diplomat at the US Embassy in Havana. House Foreign Affairs Committee Chairman Ed Royce, a California Republican, objected to any US officials attending Castro’s funeral. “History will record and judge this decision to send US officials to the funeral of a ruthless dictator, murderer and supporter of terrorism,” he said. The Tuesday night memorial at the plaza was the final event in Havana before Castro’s ashes leave early on Wednesday on a 600-mile journey across the country to Santiago de Cuba, which will be Castro’s final resting place. The caravan will follow the reverse of the route that Castro and “los rebeldes [the rebels]” took from Santiago before marching triumphantly into Havana on January 8, 1959, after the ouster of dictator Fulgencio Batista. During this lengthy journey, Castro’s ashes will pass through rural communities significantly changed by social and economic reforms he adopted.

Many residents now have access to health care and education. But many of those towns are also in a prolonged economic collapse, with the country’s once dominant sugar industry decimated, and the sugar mills and plantations gone, The Associated Press (AP) reported. Castro and his revolutionary government believed the island’s reliance on sugar exports to the US was the root of many of the country’s ills and have struggled to diversify the island’s economy. In state broadcast programs and Cuba’s official newspapers, the government has urged Cubans to unite behind the socialist, singleparty system installed by Castro. Hundreds of thousands of Cubans are expected to line the streets as his ashes are transported over the course of three days. Some Cubans said the caravan symbolizes the island’s continued loyalty to the revolution. Julexis Hernandez, a bank auditor, recalled watching yearly events commemorating Castro’s jubilant march into Havana since she was a child. “It has always been the caravan of victory,” Hernandez told AP as she and a colleague waited to pay respects at the public memorial site in Havana. “Now, it will be a caravan of sadness.” TNS

‘Li Keqiang Index’ jumps as China’s old econ roars back

P

roxies for growth once favored by China’s premier are bouncing back amid a stabilization in smokestack industries. Electricity use, rail-cargo volume and bank loans—combined in a weighted average known as the Bloomberg Intel ligence “Li Keqiang Index”—are collectively at the highest level in three years. W hi le t he streng t h shows f i s c a l a nd mone t a r y s t i mu lus is put t ing a f loor u nder ex pansion, it’s a lso ev idence that stabilization is rev iv ing industries, such as steel and property, that don’t really fit plans to shift to more reliance on ser vices and consumption. Another wrinkle is that some cr ucia l new economy dr ivers are looking slightly less robust. “The smokestacks are billowing again as the old economy comes roaring back,” said Frederic Neumann, cohead of Asian economic research at HSBC Holdings Plc. in Hong Kong. “That can only be temporary, being fueled by an ultimately unsustainable build-up of debt. The key to lasting development is the new economy, the gizmos and services of future consumption, but that’s seemingly on hold for now as the old economy gobbles up credit.” Reports on Thursday will give a fresh look at how factories and services fared in November. The official manufacturing purchasing managers index (PMI) and a private reading from Caixin Media and Markit Economics both edged down to 51, according to economists surveyed by Bloomberg as of late Tuesday, near the prior month’s two-year high of 51.2 for both. Numbers above 50 indicate improving conditions. Services rose to 54 in October. Rebalancing is a key goal for China’s policy-makers, who  are seeking more sustainable growth centered on consumers, instead of factories and other old economic engines. Services accounted for more than half of output last year for the first time. However, some metrics show the new economy is cooling. The Bloomberg I nte l l igence Ne w China Rea l Activ it y Index fel l to 8.34 in September, the lowest in its 10 -year histor y. T he gauge is a weighted average of consumption of medicine, vehicle ex por ts, clean energ y e le c t r ic it y ge ner at ion , com puter production and out put by pr ivate companies. “It shou ld put to rest t he thought of a smooth rebalancing from manufacturing to services,” said Derek Scissors, Washington-based chief economist at China Beige Book International. “Successful rebalancing will face repeated bumps.” Another sign of life in the old economy: Production of cement, electricity, steel and glass accelerated in October from the previous month, statistics bureau data show. Fresh highs for the Li Index point to China’s “old economy clanking into gear,” Bloomberg Intel l igence economists Tom Orlik and Fielding Chen w rote in a recent repor t. “ T he good news: It confir ms the stor y of robust grow th told by the officia l data,” they said. “ T he bad news: It shows the old, energ y-intensive industr ia l sector roar ing back to life.” The Li gauge rose 10.58 percent in October from a year earlier after rallying from 1.16 percent in September 2015, the lowest reading stretching back more than a decade. Loans had the best gain with a 13.1-percent rise from a year earlier,  though that’s up from a recent 10-year low. Rail cargo has risen 10.7 percent. Power output is up 8 percent. Bloomberg News


Asean

BusinessMirror

www.businessmirror.com.ph

Tourism Asean-EU Perspective

HENRY J. SCHUMACHER

I

participated in last week’s Tourism Summit and was reminded again that Tourism is the economic sector with the highest potential to create inclusive growth, through employment generation and economic development in remote areas across the archipelago. The Philippine government has recognized the tourism sector’s potential as a key growth driver and is developing a number of initiatives to promote tourism development, including a National Tourism Development Plan up to 2022, which provides a road map for national tourism development. However, while international arrivals showed double-digit growth in 2015, the Philippines has a long way to go before it becomes a top tourist destination in the region. International connectivity, domestic connectivity and destination development require improvement in line with international standards if the Philippines is to become a desirable tourist destination. Europe has a long tradition in tourism excellence and, therefore, investment by European companies can drive the development of tourism infrastructure on a par with top international standards. However, they need to be assured of an attractive investment environment. Additionally, improving connectivity with Europe will be a decisive factor to increasing European visitors to the Philippines. We, therefore, set out a number of recommendations that aim to improve international connectivity, domestic connectivity and destination infrastructure in support of the development of the Philippines as a top international tourism destination: I. Improvement of international and domestic connectivity II. Development of internationally competitive tourism destinations III. Facilitation of investment through adequate data collection on supply in the hospitality sector

Market data

The Philippine tourism industry is growing faster than the global and Asian average and is expected to be one of the key economic drivers by 2021. Specifically, in 2015 international arrivals to the Philippines grew by 10 percent to 5.3 million, while the collective growth of international arrivals to the region was 2.6 percent, with a total of 96.7 million visitors. At a global level, international travel increased by 4.4 percent to a total of 1.1 billion travelers. According to the World Economic Forum’s Travel and Tourism Competitiveness 2015 Report, the Philippines is the most improved Asia-Pacific economy in terms of the overall travel and tourism competitiveness index, rising to a rank of 74 among 141 economies, from 82 out of 140 in 2013. Tourism will always remain a major global industry, and this sector is recognized by the government as an important contributor to the generation of foreign-exchange earnings, investments, revenue, employment and the country’s output growth. According to the Philippine Statistics Authority, the tourism industry in the Philippines accounts for one in every 10 jobs in the economy, or a 12.7-percent share in the total employment. Statistics from the Department of Tourism (DOT) showed that the tourism industry was able to generate $5 billion and generate approximately 4.9 million jobs in 2015. At the Tourism Summit I reiterated that the Philippines should focus on becoming the destination for medical tourism and retirees: A major opportunity, which can drive tourism growth in the Philippines, is medical tourism. With state-of-the-art facilities in many hospitals, an expanding pool of competent health-care professionals with good English communication skills and reasonably priced medical services, the Philippines is bound to be one of the major players of the expanding global medical-tourism industry. More and more foreign retirees are looking to settle in the Philippines. Aside from the affordable cost of living, expats enjoy things the country is known for, such as its beaches, tropical climate, warm and hospitable people, discounts for senior citizens and the duty-free import of household goods. In the Annual Global Retirement Index 2016, the International Living Magazine ranked the Philippines as 17th out of the 23 best countries to retire in. The Annual Global Retirement Index bases its rating on a number of composite factors, namely, real-estate costs, special benefits for retirees, cost of living, leisure amenities, health-care services, infrastructure and climate. The retirement industry has made considerable contributions to the economy, reflected largely in revenues from visa deposits of Special Resident Retiree’s Visa (SRRV) holders. Introduced by Philippine Retirement Authority (PRA) in 1987 to entice foreign nationals and former Filipino citizens to retire in the country, retirees can either apply for multiple entry privileges and rights to stay permanently or indefinitely in the country by way of visa deposits ranging from $10,000, to $50,000, and $1,500 for former diplomatic corps workers. In 2014 the PRA enrolled 4,781 new retirees. Total visa deposits of SRRV holders as of December 31, 2014, amounted to $452 million. The European Chamber of Commerce of the Philippines and the Retirement & Healthcare Coalition have spent time and effort in getting this subsector of tourism going but did not find the right partners in the government to drive this “sunrise” subsector.

Editor: Max V. de Leon • Thursday, December 1, 2016 A9

Election chatter to dominate as Malaysia party elites meet

M

alaysia’s ruling elites gather this week in election mode, with Prime Minister Najib Razak seeking to portray his party as united and ready to take on the opposition at the ballot box. Members of the United Malays National Organization (Umno) are meeting after a year that’s seen Najib secure his grip on power and sidestep political funding scandals. The group has indicated their annual assembly will focus on the next general election. While it doesn’t need to be held until mid-2018, there have been whispers it could come as early as March. At stake is the unbroken rule since independence in 1957 of Umno, the biggest actor in one of the longestruling coalitions in the world. While it secured strong wins in races earlier in 2016 and has benefited from opposition parties beset by policy differences and infighting, a slowing economy and  voter concern about bread-and-butter issues highlights the need for Umno to avoid complacency. Rising living costs risk chipping away at support for Najib among ethnic Malays. And while the opposition has struggled, talk of a unified force led by Najib’s ally-turned-nemesis Mahathir Mohamad could see a more concerted effort to woo away those Malay voters, particularly in rural seats that have been Umno heartlands for decades.

Divisional chiefs

“The situation is fluid,” said Mohamed Mustafa Ishak, a professor of politics

and international studies at Universiti Utara Malaysia. He said the solution is for Umno to address day-to-day issues more strongly, including housing, unemployment and education—matters that delegates  are expected to raise at the assembly. Najib told Umno leaders in a private briefing on Tuesday to prepare the party machinery for elections that aren’t very far away, the Star reported, citing an official from the state of Perak. Najib retains the backing of his party’s powerful division heads, the bulk of whom have stood by him in the past year. That’s even as his critics have tried to weaken Najib with attacks over the finances of state fund 1Malaysia Development Bhd., whose advisory board he chaired until recently and is at the center of global probes into alleged money laundering and embezzlement. “Within Umno, he is very much secure,” Mustafa said. “There is no big challenge against him from within the party, as those who opposed him have been removed.” Still, the meeting this week may indicate whether there is any internal concern about Najib’s ability to win the next election. In the past year, even as many party leaders publicly pledged support, some privately expressed frustration over the scandal-hit premier and how

At the end of the day, the majority of the people want only one thing: better quality of life, they want a transparent government that can offer efficient services.” —Faisal S. Hazis

he is perceived by voters. Mohd Aznam Mohd Zin, an Umno branch leader, said he firmly supports Najib as party president, but has struggled to counter the opposition’s allegations against the premier at a grassroots level. “As the branch chief, it’s my task to spread Umno’s message in my area,” said Aznam, who heads a branch in the capital Kuala Lumpur. “I would say 60 percent of the people I meet have fallen for the opposition’s propaganda” and those “duped” included Umno members upset about rising living costs, he said.  “The goods and service tax has really hit them hard, so I have to work harder, spend more time to convince them,” said Aznam, adding that Najib would do well to provide more aid and subsidies to win over these groups. Najib has already increased handouts to farmers, government workers and low-income Malaysians. In an interview

published on Monday by state news agency Bernama, the premier said he was aware that people were concerned about living costs, and the government was tackling that through measures such as cash payments and affordable housing.

Urban voters

While the votes of rural and semiurban areas are crucial for the broader Barisan Nasional coalition, analysts said urban voters were also not beyond Najib’s grasp. In the 2013 election, an analysis showed there were 125 rural seats and 54 semiurban ones, of a total of 222. “At the end of the day, the majority of the people want only one thing: better quality of life,” said Faisal S. Hazis, head of the Centre for Asia Studies at the National University of Malaysia. “They want a transparent government that can offer efficient services.” The general assembly may see Umno continue to “flirt” with opposition group Parti Islam se-Malaysia, to retain the support of Malays who are predominantly Muslim, said Oh Ei Sun, a senior fellow at the S Rajaratnam School of International Studies and former aide to the prime minister.  Najib last year reached out to PAS and proposed the parties work to promote Islam’s doctrines. Although PAS’s allegiance remains unclear, ties between the two have become warmer, culminating in the Islamic party being given an opportunity to be heard in parliament this month for its motion to strengthen Shariah courts. The move has raised the ire of some component parties in Barisan Nasional. The public can “expect to hear more calls for unity around Najib, and also vehement upholding of race and religion at the assembly,” Oh said. Bloomberg News

Indonesia protests awaken fears for minority Chinese

T

he capital of Muslim-majority Indonesia is on edge ahead of what is expected to be a second massive protest by conservative Muslims against its Christian governor and no group more so than its Chinese minority. They have reason to be concerned. The movement against the governor, who is being prosecuted for allegedly insulting the Koran, has overflowed with racial slurs against his Chinese ancestry, an unnerving sign in a country with a history of lashing out violently against the ethnic minority that makes up 1 percent of its 250 million people. The first major protest against Gov. Basuki “Ahok” Tjahaja Purnama on November 4 drew more than 100,000 people to Jakarta’s streets. Some held up banners calling for Ahok to be killed or decrying Chinese influence. It ended in violence, with one death and dozens injured after hard-liners attacked police. A separate mob tried to invade the apartment complex where Ahok lives in the north of the city and vandalized property in the area, which is home to many Chinese. Hard-line organizers of the protest, who were unsatisfied by a police decision earlier this month to formally name Ahok as a suspect in the blasphemy case instead of arresting him, are promising another giant rally on Friday. After the police pressure, they have agreed to concentrate the rally around a national monument in central Jakarta and insist it will be peaceful. The furor over Ahok, sparked by his criticism of detractors who argued the Koran prohibits Muslims from having a non-Muslim leader, has highlighted religious and racial fault lines in Indonesia, the world’s most populous nation, and the growing challenge from proponents of Shariah law to its secular system of government.

100,000

The number of people that went out to Jakarta streets to protest against their governor For Chinese Indonesians, the controversy has awakened painful memories of the mass protests that ousted late dictator Suharto during the 1998 Asian financial crisis. Boiling resentment against immigrant Chinese tycoons who profited from ties to Suharto and his famously corrupt family spilled over into mob attacks on Chinese property and people, killing many. Nearly two decades later, Jakarta’s Chinatown is still scarred by the burned out shells of buildings torched in the chaos. “Certainly as Chinese descendants, we are still traumatized by the riots in 1998,” said Clement Alexander, a grocery store owner in a narrow lane of the bustling Petak Sembilan market in Chinatown. “We heard that horrible event may happen again if the government fails to control the protests. It’s scared us, but we cannot do anything except pray,” he said. “For rich ethnic Chinese, they could flee to Singapore or to other countries, but for lower-class people like me it is rather difficult, we just survive and depend on the government for protection.” When Ahok in 2012 became the first Chinese to be elected deputy governor of Jakarta, and the first Christian in half a century, it was seen as a sign of the pluralistic tolerance fostered by the moderate form of Islam practiced in Indonesia. But his rise to governor in 2014 to

Religious leaders perform a prayer during a military-sponsored interfaith rally held ahead of the planned December 2 Muslim rally against Jakarta Gov. Basuki Tjahaja Purnama in Jakarta, Indonesia, on Wednesday. AP

replace political ally Joko “Jokowi” Widodo after his election as president was unpalatable to hard-liners. With the support of moderates that hope to gain from Ahok’s fall, they have elevated their agenda to the national stage, and revealed that intolerant interpretations of Islam adapted from the Middle East have made greater inroads than believed. Ahok is running for a second term as governor in elections due in February but since the blasphemy accusations erupted in September, his sky-high popularity in opinion polls has melted away. A protolerance rally in Jakarta on November 19 attracted less than 10,000 people. A military-organized event in the city on Wednesday meant to showcase respect for all of Indonesia’s six officially recognized religions was mainly populated by soldiers, schoolchildren and the police, who had no choice about attending. For the November 4 protest, the normally clogged streets of Jakarta were

nearly emptied of cars, embassies closed, countries, such as Australia, issued advisories against travel to the city and many businesses shuttered for the day, particularly in Chinatown. “We are afraid the riots in 1998 would be repeated. But I don’t want to talk about that horrible event,” said Jhony Tan, owner of a store selling Buddhist worship paraphernalia. “I hope the government can handle this issue, so there’s no negative impact to any other community, especially to ethnic Chinese here. If they fail, Indonesia will be ruined,” he said. “I’m sure the majority of Indonesian people are willing to see that this problem has nothing to do with us.” Christianto Wibisono, an ethnic Chinese businessman and former government adviser whose home was burned in the 1998 riots, said that, despite communal tensions, he is hopeful the government will maintain calm during Friday’s protest and beyond. AP


A10 Thursday, December 1, 2016 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

Corporate-tax rate as investment lure

T

he Philippine economy’s third-quarter growth is currently the envy of everybody in the region. Bolstered by upbeat consumer spending and strong construction and infrastructure investment, our 7.1-percent GDP growth rate for the period is Asia’s best. This is an auspicious sign of things to come. Barring hitches, pundits say the Philippine economy is set to expand at this rate until 2018 despite threats of protectionism in the US, our top trading partner, under President Donald J. Trump.

To make the US economy more investment-friendly, Trump has promised to cut corporate tax to 15 percent, from 35 percent. Not to be outdone, British Prime Minister Theresa May also pledged to make the UK’s corporate tax the lowest in the Group of 20, which comprises 19 countries plus the European Union.  A competition to cut corporate-tax rates appears to be heating up globally. And it does not require a rocket scientist to figure out why world leaders are doing this. At a time when global economic growth remains subdued, government leaders are looking at fiscal policy changes to invigorate their ailing economies. Following this logic, a country that can offer the lowest corporate-tax rate has the biggest opportunity to attract multinational investors. The Duterte administration’s tax-reform initiative appears headed in the right direction, particularly its commitments to lower corporateand individual-tax rates. Despite the political noise, our fundamentals remain intact. Yet, we can make the Philippines more investor-friendly by reducing the country’s corporate-tax rate, which currently stands at 30 percent, the highest in Asean. Compare this with our neighbors: Corporate-tax rate in Singapore is 17 percent; Cambodia, 20 percent; Vietnam, 22 percent; Thailand, 23 percent; and Indonesia, 25 percent. It’s about time we realize that our high corporate-tax rate has for the longest time served us nothing but deter investors from locating in the Philippines. In the event that tax cuts are implemented, the country will have better chances to compete with regional rivals. Only then can we exploit our demographic advantage associated with our young and growing population and fully capitalize on our key assets, such as our English-speaking work force. The government has to roll out its tax reforms soon to show the world it is serious in its drive for increased competitiveness. In the months ahead, global investors will be following where Philippine corporate-tax rates will settle. This is important because a survey by the University of the Philippines School of Economics has found out that investments are negatively related with tax rates. The study said for every percentage point increase in corporate-tax rates, the reduction in investments is 6 percent to 8 percent. It’s good to know Chinese investors are planning to come over and help finance big-ticket infrastructure projects. But we can’t afford to lose global investors from our traditional trading partners, such as the US or the UK. According to Bloomberg, “Trump’s move can potentially change the business logic of US multinationals, which now prefer to stash international profits—more than $2.5 trillion of them—overseas”. Low corporate income-tax rate can make a country’s economy attractive for investment. The Philippines would do well to make its corporate-tax rate more attractive to free-moving global capital. The more investors we can attract, the more jobs we can create. Since 2005

BusinessMirror A broader look at today’s business

Are you ready for ‘Trump World’? John Mangun

OUTSIDE THE BOX

D

uring political campaigns, candidate statements usually come down to three types. The first is that they say what they really intend to do. Next comes the things they say to hopefully get more votes but do not intend to push through with. Finally, candidates talk about ideas that the voters actually do not care about but that makes the candidate look good in the press. Those three elements are also found in the wedding vows we make. Prior to the election, voters respond to the candidates in three ways. There is happiness that a candidate is finally going to do the right thing. Next, some voters dismiss the ideas that they do not like and focus on the “good” things that the candidate said. Other voters use the “negatives” they find in a candidate’s statements as a confirmation that their pick for office is obviously the “right choice”. Those are the justifications we

They don’t even know how to count Cecilio T. Arillo

✝ Ambassador Antonio L. Cabangon Chua

database

Founder

Publisher Editor in Chief Managing Editor Associate Editor News Editor City & Assignments Editor Senior Editors

T. Anthony C. Cabangon Jun B. Vallecera Max V. de Leon Jennifer A. Ng Dionisio L. Pelayo Vittorio V. Vitug Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos

Online Editor Social Media Editor

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes

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

Judge Pedro T. Santiago (Ret.) Benjamin V. Ramos Adebelo D. Gasmin Marvin Nisperos Estigoy Aldwin Maralit Tolosa Dante S. Castro

BusinessMirror is published daily by the Philippine Business Daily Mirror

HOM

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

www.businessmirror.com.ph

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

make to friends about why we chose or did not choose a particular person to be our future spouse. After the election, supporters of the winning candidate know that all their dreams have come true. Supporters of the loser know that all their worst nightmares are now a reality. That is the reactions of a mother-in-law after the wedding is finished. On Friday, January 20, 2017, Donald Trump will be the 45th president of the United States. Already the mothers-in-law in the Philippines

are going hysterical. “Trump win a threat to BPO industry” and “Solons fear Trump presidency to hurt BPOs” read the headlines. Here is the reality. For US call-center agents, the average hourly wage is $12.87 plus minimal benefits. For manufacturing jobs, the average hourly wage is $20.60-plus benefits that average another $13.35 per hour. That is why “Trump Leans on Carrier to Keep 2,000 US Jobs From Moving to Mexico” and then “Carrier says it has struck a deal with Trump to keep nearly 1,000 jobs in Indiana”. Perhaps, because math is hard and the financial markets are even more difficult for solons and economists, the greatest concerns for the Philippines in “Trump World” are an excessive strengthening of the dollar and increasing interest rates—not due to an insignificant Federal Reserve (the Fed) rate hike—but because of that stronger dollar. The Euro currency is potentially headed to below dollar parity and that will force the financial markets to raise interest rates beyond what anyone now expects. While the Fed has done nothing this year, the financial markets have raised US interest rates through

A

NGRY leftists, left-of-center social democrats, hypocrites and ignorant people pretending to be moralists have one thing in common while demonizing President Ferdinand Marcos and his family: they don’t understand simple arithmetic. Here are their favorite refrain in their vicious ad hominem attacks: “Marcos 20 years dictatorship,”  “Marcos 14 years martial law”, and so on and so forth, in their unqualified generalization of how Marcos supposedly committed murders, tortures, plunders, corruption and human-rights violations, among other crimes. Marcos ran the country for 20 years, declared martial law on September 22, 1972, and lifted it nine years later, on January 1, 1981. So, how could this be 14 years or more as his critics repeatedly remonstrated. Marcos died on September 28, 1989, and not a single case of the crimes attributed to him was filed against him in a court of law. On record, the Supreme Court in President Corazon C. Aquino’s presidency turned down his petition to allow him to come home and confront his accusers. Strangely, even his remains were denied entry for security reason.

To many who suffered detention or injuries largely for engaging in subversive acts inordinately described the martial law period as the most brutal in Philippine history. To memorialize their contention, they organized in September 1999 the Conference on the Legacies of the Marcos Dictatorship, with American impetus (from the Legacies of Authoritarianism Project started by the University of Wisconsin-Madison in 1998).  The apparent aim of this project was to portray President Marcos, from the perspective of the victims of martial law, as a dictator whose example must never again be followed. However, leafing through the conference report that came out in book form, what was found were a litany of allegations but a serious shortage of evidence.  The report evoked a feeling that individuals who hated Marcos for a certain reason, the American participants included, were making him a

convenient scapegoat at a time when he could no longer defend himself. For a long time, this version of Philippine history where Marcos and his family were villains and his political opponents were heroes is the only and jealously guarded interpretation of the Marcos era.   To digress from their version of history invites a warning against historical revisionism. Their selfstyled historians and misguided journalists desperately wanted the people to swallow only their version hook, line and sinker. Filipinos who have experienced the martial law period up close would swear that life was better then than now. They remembered lawless anarchy to which democracy was reduced from the late-1960s onward until the declaration of martial law.  Describing the period, American historian Lewis Gleeck Jr. agreed with US Embassy political counselor Francis Underhill that “the Philippines needs a strong man to get the country organized and moving again.”  He noted: “Significant evidence of the strength of the authoritarian tradition was that the introduction of martial law was accepted with relief by most of the public, and that it proved overwhelmingly popular in the beginning. Filipinos were fed up with the chaos produced by “surplundering” congressmen, corrupted media, venalities in the bureaucracy and crime in the streets. An approving majority applauded his abolition of Congress and even

market pricing on the 10-year US government bond by 58 percent from 1.450 percent to 2.298 percent. But even then how worried should we be? The latest interest yield on Philippine government 10-year bonds is 5.213 percent, compared to 2.6 percent in Thailand, 4.4 percent in Malaysia, Vietnam’s 6.2 percent and 8.28 percent for Indonesia. We are in the middle of local yields. However, the key is the risk of the bonds as measured by the price of Credit Default Swaps. Here the Philippines is safer than all the rest, except Thailand. Further, the Philippines has a lower annual foreign debt payment than all those four nations. This gives the Bangko Sentral ng Pilipinas much room to maneuver around whatever happens. Based on policy pronouncements to this point, the greatest fear the Philippines might have of Trump World is that The Donald’s hair color and style could become popular.  

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.

the muzzling of the press.” The political scientist and writer Alexander Magno added: “In the first 500 days after martial law was imposed, Marcos reported that his government disbanded 150 private armies with a total strength of 25,000. Over 550,000 registered firearms were confiscated, along with 1.5 million rounds of ammunition.” One welcome by-product of the social disarmament was the dramatic drop in crime. In the first year of martial rule, the crime index dropped 505 points overall. Murder cases went down by 73 percent. Homicide was reduced by 65 percent and robbery by 51 percent. Notwithstanding his having saved the Republic from fragmentation by separatists and from a takeover by communists, Marcos continued to be demonized in history as a thieving tyrant.  Vilification was thorough and most of Marcos’s successors needed to distance themselves away from his examples, or from any association with him. The most visible, perhaps, among them was President Aquino who claimed to be the “exact opposite” of Marcos.  Unable to reconcile with a leftist Cabinet, inexperienced in politics and statecraft, she ruled with a weak hand and was criticized for lacking political will and for simply drifting with the flow until the end of her term.  To reach the writer, e-mail cecilio.arillo@ gmail.com


Opinion BusinessMirror

opinion@businessmirror.com.ph

Thursday, December 1, 2016 A11

VAT refund by the seller A voice we all must listen to Msgr. Sabino A. Vengco Jr.

Atty. Irwin C. Nidea Jr.

Tax law for business

T

he Philippine Economic Zone Authority (Peza) manages and operates the ecozone as a separate Customs territory. An ecozone is a foreign territory separate and distinct from the Customs territory of the Bureau of Customs (BOC), and that accordingly, the sales made by suppliers from the BOC territory to a purchaser within an ecozone will be considered exportations. Under the Cross Border Doctrine and Destination Principle, no value-added tax (VAT) shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Supplies of goods or services by a supplier from the BOC territory to any registered enterprise operating in the ecozone, regardless of the latter’s registration, is entitled to zeropercent VAT (if the supplier is VATregistered) or VAT exemption (if the supplier is VAT exempt). In other words, because of the fiction that an ecozone is considered a foreign territory, no VAT should be passed on to that entity in that “foreign territory” in the same way as any exports made to another country. The purchases of goods and services by an ecozone enterprise that were destined for consumption within the ecozone should be free of VAT; hence, no input VAT should then be paid on such purchases, rendering the ecozone entity not entitled to claim a tax refund or credit. In a recent ruling (GR 190506), the Supreme Court (SC) held that, if the ecozone enterprise had paid the input VAT, the ecozone enterprise’s proper recourse was not against the government but against the seller who had shifted to it the output VAT. The SC further explained that the nature of VAT as an indirect tax should be taken into consideration. Although the seller is statutorily liable for the payment of VAT, the amount of the tax is allowed to be shifted or passed on to the buyer. However, reporting and remittance of the VAT paid to the Bureau of Internal Revenue remained to be the seller/supplier’s obligation. Hence, the proper party to seek the tax refund or credit should be the suppliers, not the ecozone enterprise. In a claim for refund, the basis is Section 112 of the Tax Code. There are only two instances where a claim for refund of unutilized input taxes can be made. The first one is input taxes related to VAT zero-rated sales. The other one is refund of VAT upon cancellation

of VAT registration. In both cases, the premise is that the input taxes had not been utilized against output taxes. Input tax and output tax are defined as follows: “The term ‘input tax’ means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services. The term ‘output tax,’ on the other hand, means the value-added tax due on the sale or lease of taxable goods or properties by any person registered or required to register. Hence, the input tax refers to the purchaser, as opposed to the seller where the VAT is considered the output tax. Since in a claim for refund what is involved is the input tax, the rightful party to claim the same is the buyer. Besides, the claim for refund of input tax is anchored on the fact that the said input taxes on purchases are related to the claimant’s own zero-rated sales. Thus, it must really be the buyer who has the right to claim the same, as he or she is the only party who can relate/attribute said input taxes to his or her sales. The seller, on the other hand, cannot relate that transaction to a zero-rated sale as that transaction is itself its sale. This ruling is novel in the realm of VAT refunds. This time, the seller is found to be the proper party to seek the tax refund or credit of input tax related to zero-rated sales. There will be instances when a seller has no zero-rated sales to show but will be granted a VAT refund anyway. When this happens, the VAT system might be put in jeopardy. The author is a partner of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm of World Tax Services (WTS) Global. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at irwin.nidea@bdblaw.com.ph or call 403-2001 local 330.

The sinking peso Val A. Villanueva

Businesswise

I

N recent days, we’ve seen the Philippine peso depreciating against the US dollar. As of this writing, the exchange rate is P49.81 per US dollar. It looks like the prediction made by the Bank of the Philippine Islands (BPI) in June of this year is coming to fruition.

As forecast by the bank’s economist Emilio Neri Jr., the peso will slide, while the US Federal Reserve (the Fed) could take a potential rate hike, “creating a perfect storm for expats and foreigners living in the Philippines.” His prediction rides on reports that show a higher-than-normal infrastructure spending within the country, compounded by the US Fed raising interest rates. He says the peso is likely to hit 50, and this fore-

cast could easily run through 2017. With the announced intention of US President-elect Donald J. Trump to reshape the central bank monetary policy, the Fed is poised to gradually become more belligerent on inflation and interest rates. Trump has indicated that he will be appointing economists who believe borrowing costs should be higher. Trump vowed during the election campaign that he would replace Fed Chairman Janet Yellen

Alálaong Bagá

A

S in the first Sunday of Advent, we are admonished to be watchful and prepared for the coming of the Lord. But for this very purpose, we are now confronted with a voice of one to whom we should all listen (Matthew 3:1-12).

A voice in the desert The figure of John the Baptizer is center stage in the second and third Sundays of Advent. In Saint Matthew’s schematics of the history of salvation, John represented the final voice from the old dispensation while signaling, at the same time, the inauguration of the new and definitive era founded on Jesus Christ. John personifies the attitude proper to the coming of the Kingdom of God. He was the precursor then, as he is now our Advent precursor, calling the people to prepare and receive the one who comes. John was a prophet, therefore, a voice of God and the conscience of the people. In appearance, John reminded the people of the austere Elijah

(2 Kings 1:8), corresponding to the widespread expectation among the Jews that Elijah would return in order to prepare Israel for the final manifestation of the reign of God (Matthew 11:14; 17:11-13). His food of locusts and wild honey recalls the desert days of Israel, poignantly stressing expectation and hope for deliverance. This entire atmosphere is summed up by the evangelist’s conclusion that John was the fulfilment of the prophecy by Isaiah (40:3) that a voice would be crying out, “In the desert prepare the way of the Lord; make straight his paths.” A new exodus was being evoked by Isaiah that the survivors of the Babylonian exile would be led back by God to Israel. The

The writ of freedom Ariel F. Nepomuceno

DECISION TIME

T

repunctuation (“a voice of one crying out in the desert, Prepare the way...”) neatly fits the background of John in the desert and hints of him as the voice of the friend of the bridegroom calling the bride into the desert.

A baptism of repentance

John’s call to conversion and his baptism of repentance were preliminary and preparatory. His baptism with water was only to indicate longing and readiness for God’s kingdom. He attested that one mightier would be coming after him, and this would be the one to bring baptism with the Holy Spirit and fire. The baptism with the Holy Spirit by Jesus Christ would actually impart the Holy Spirit whose return signals the establishment of the reign of God. The conjunction with fire underlines the fact that acceptance of the kingdom of God involves judgment. Fire will probe and prove the sincerity of one’s conversion and return to God. John’s call to conversion is radical like a new exodus and intimate like a nuptial. For conversion means that one who is lost has realized his fatal deviation from the right path and now returns wholeheartedly to God (Jeremiah 7:5-11; Isaiah 2:6-22).

corpus was a product of the parliament’s settled view that neither the king, nor any other executive, can remove the right to receive a writ of habeas corpus.

Enshrined in our own Constitution and challenged

But what is habeas corpus? It is a Latin phrase which means “that you have the body.” Through the writ, a court can validly order the production of the physical body of the imprisoned person in order to determine the legality of the detention. This important legal check against tyranny and oppression is an American doctrine, which originated from English Common law when the Saxons invaded England after the end of the Roman Empire. It allows a prisoner to ask for a fair

treatment in a trial. The concept became law in 17th-century England, when Catholics were persecuted on account of alleged disloyalty to King Charles II. The writ recognized that God gave all men three great rights: liberty, personal security and property. Because these rights are inherent, one could not be deprived of it through the use of force, even if for the sake of public order or good. An individual or his representative should, therefore, voluntarily give up these rights for it to be legal. Eminent jurist William Blackstone explained that the parliament was the only body that can abridge the right of British citizens to petition for a writ of habeas corpus. Thus, the Magna Carta’s declaration that “No free man shall be seized or imprisoned...except by the lawful judgment of his equals or by the law of the land.” The law on habeas

The US Constitution enshrined the writ from its English forefathers and found its way in the first Article and the Bill of Rights. As we all know, these precepts became part of the Philippine Constitution and have been tested in several Supreme Court (SC) decisions that reflected various milestones in our history as a Republic. The writ was suspended in some portions of Luzon by President Elpidio Quirino in his fight against the Hukbalahap movement. Later on, the 1971 Plaza Miranda bombing led President Ferdinand E. Marcos to suspend it anew but many petitions were filed in the SC for the release of several arrested persons. The Court ruled that the suspension had factual and legal basis and, more important, that it had the power to pass upon the legality of such suspension. During the martial law era, the SC, believed to be a “Marcos Court”, held that declaration of martial law automatically suspends the application of the said writ, thus imprisoned Sens. Jose Diokno and Benigno Aquino cannot be released. In a later decision in 1983, the Court flip-flopped again and declared that the validity of the suspension of the

when her term expires at the end of January 2018. He lashed at her easy money policies and accused Yellen of being “very political” by holding rates near zero to help Democratic President Barack Obama. This development may well affect global markets. While some believe that a weaker peso may be good for the Philippine economy in general, it has its downside on some sectors, particularly those in the import business. Exporters, the business-process outsourcing sector and other dollar earners, of course, welcome this development. The peso slide means stronger purchasing power for families reliant on overseas Filipino workers (OFWs). They get more value from dollar transmittals, enhancing the economy through public spending. The downside is that the Philippines imports nearly all of its fuel, most of its transportation apparatuses, and a very large quantity of the raw materials and transitional goods

required for industries. These sectors would need more pesos to bring their raw materials into the country. From where I sit, a stronger peso is akin to a restrictive monetary policy. It alleviates inflation, but, in the same token, depresses lending, since it effectually increases interest rates. On the other hand, a weak peso, given our import dependence, exacerbates inflation. As the peso falls, importers pass on the added cost to consumers to ensure their steady margins. I believe, however, that not only does a strong peso lessen the country’s debt burden, a strong and stable peso also attracts foreign investment. With a strong currency, the Philippines has to cough up fewer pesos to service its debt in dollars. Is the peso susceptible to political developments? To some extent, yes; but the exchange rate has always been market-driven, and its unpredictability makes everything ambiguous. We are a small country, but we

strictly adhere to an open economy. The Bangko Sentral ng Pilipinas (BSP) does not interfere, unless extremely necessary, and allows market forces to dictate the exchange rate. And this makes all these volatilities affect us. The devaluation of China’s yuan—for one—has made “collateral impact on the Philippine peso and other regional currencies,” according to the BSP. It said global markets, including the Philippines, have been falling since China cut the value of its currency, highlighting anxieties on its weakening economy. Because China is a giant economic player, what happens there affects the global economy. I dread the continuation of these external factors: It could mean bracing ourselves against darker days ahead. These uncertainties, to some extent, spook the market, but we can find comfort in the stability of our monetary policy amid these external factors. This is why business welcomes

he drug problem of this country is so massive and persistent that President Duterte said the widespread lawlessness and violence brought about by it may lead to a possible suspension of the writ of habeas corpus as a safeguard to protect the people.

This statement drew a lot of attention and attracted various reactions, particularly criticisms from those who have experienced the horrors of a habeas corpus suspension during the dark days of martial law, where many innocent people have been incarcerated or lost their lives in the quest for democracy,

Habeas corpus defined

Metanoia is a dynamic and determined assumption of a new way of life, not merely a static remorse for the past. That is why John was so very frank with the Pharisees and Sadducees, who need to “produce good fruit as evidence of repentance.” A tree that does not bear good fruit must be cut down. Alálaong bagá, now also the proofs of fidelity to the gospel of Jesus sift and identify peoples as to whether their conversion is authentic. The ax and the winnowing fan tell us that lineage and purely external, ritual piety cannot substitute for or simulate true change of heart and conversion, which, alone, will be blessed with salvation. John the Baptizer’s call to repentance and radical change applies now to us Filipinos most specifically, if we ourselves are not to be called “a brood of vipers”. We have to return to the Lord, “making straight his paths” so that we really receive him and live according to his gospel. It is not enough to claim we are Christians; we need to show that we are. Join me in meditating on the Word of God every Sunday, 5 to 6 a.m. on dwIZ 882, or by audiostreaming on www.dwiz882.com.

writ was a political question and not justiciable.

Limits when writ is suspended

Such uncertainty, fear and trauma produced by the vagueness in the way this very important privilege of the writ led our constitutional commission to clearly indicate in Article 7, Section 18 of our 1987 Constitution that, while the president may, for a period not exceeding 60 days, suspend the privilege of the writ of habeas corpus or place the Philippines or any part thereof under martial law, he or she is also required to submit a report to Congress within 48 hours from the proclamation of martial law or the suspension of the privilege of the writ of habeas corpus. Most important, the SC may also review the sufficiency of the factual basis of the proclamation of martial law or the suspension of the privilege of the writ of habeas corpus. The Great Writ was meant to provide citizens with the power to seek court redress when their liberty and security are divested by a strong, abusive state and military machinery. It is a fundamental and essential avenue to challenge illegality and excesses in the way government conducts its drive against criminality, disorder or prevalent societal violence. The writ is freedom protected and guaranteed. It must be preserved and protected.

President Duterte’s reappointment of BSP Governor Amando M. Tetangco Jr. The Makati Business Club (MBC) has, in fact, urged our lawmakers of the 17th Congress to amend Section 6 of the New Central Bank Act of 1993, which limits the term of the BSP governor to one reappointment. The MBC recognizes Tetangco’s work as BSP head: “Under his leadership, the BSP has been effectively executing and fulfilling its mandate of keeping inflation manageable, conducting sound monetary policy, and supervising financial institutions under its jurisdiction.” Since the exchange rate is directly linked to economic stability, the BSP closely monitors the forex market so it can take suitable action, if and when needed, to maintain the country’s economic health. Business sees Tetangco’s leadership more than adequate to fulfill this mandate. For comments and suggestions, e-mail me at mvala.v@gmail.com


{

We’re not saying we’re really good at what we do.

{

They are... 13th Lasallian Scholarum Awards for Outstanding Media Coverage

PAJ-SMC Binhi Awards

n Agriculture/Commodities Page, Agriculture Section of a National Paper of the Year n Mary Grace Padin, Agricultural Journalist of the Year n Mary Grace Padin, Agriculture Reporter of the Year n Jonathan L. Mayuga, Environmental Journalist of the Year (3rd place) n Mauricio E. Victa, Agriculture Photojournalist of the Year

Gawad Sulo ng Bayan 2016

25th Journalism Awards of the Economic Journalists Association of the Philippines (Ejap)

n BusinessMirror, Best Business News Source of the Year n Mary Grace Padin, Agribusiness and Mining Reporter of the Year n Lenie Lectura, Energy Reporter of the Year n Cai U. Ordinario, Macroeconomy Reporter of the Year n Lorenz S. Marasigan, Best Business Feature Story, for “PHL’s slow but expensive Internet service”

2016 Jose G. Burgos Awards for Biotech Journalism

n BusinessMirror, First Place, Institutional Category n Mary Grace Padin, First Prize, Best News Story Category, for “Genetically modified corn allowed farmers to earn $560 million–study”

n Leonila R. Garcia, Outstanding Feature Story, for “Journey of a Lasallian Scholar”

n Tet Andolong, 2016 Prestigious Seal Award for Real Estate Journalism

Second Sarihay Media Awards

n Jonathan Mayuga, Best News Story for Print (National), for “Ugly Scars Left Behind by Miners Overshadow Development” n Jonathan Mayuga, Best Feature Story for Print (National), for “Saving Danjugan Island”

Department of Agriculture Biotechnology Program

n Lyn Resurreccion, Filipino Faces of Biotechnology

WWF-Philippines

n Certificate of Recognition for BusinessMirror’s continued support in promoting WWF activities

Our 2016 haul BusinessMirror Best Business News Source


Businessmirror december 01, 2016