Page 1

Seemingly innocent actions = conflicts of interest = corruption


By Henry J. Schumacher

Kirill Makarov | Dreamstime

magine you discover a financial opportunity that promises to benefit yourself, your family or your friends. The only drawback is that this opportunity would put your company or its clients at a slight disadvantage. In this situation, your loyalties are torn between personal and professional duties—what’s known as a conflict of interest. Continued on A12

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

BusinessMirror A broader look at today’s business


Tuesday, December 12, 2017 Vol. 13 No. 62

TRAIN passes with Senate having its way in bicam


By Jovee Marie N. dela Cruz @joveemarie & Butch Fernandez @butchfBM

ongressmen protested the Senate “insertions” as unconstitutional. The Philippine Chamber of Commerce and Industry then opposed the coal-tax hike, a Senate addition that was also bucked days later by Speaker Pantaleon D. Alvarez and Trade Secretary Ramon M. Lopez.

None of these mattered, however, after the bicameral conference committee approved on Monday the Tax Reform for Acceleration and Inclusion (TRAIN) Act, with senators walking away grinning, as their version prevailed in the weeklong deliberations by representatives of the two chambers.   House Deputy Speaker Romero S. Quimbo of Marikina said lawmakers adopted the Senate’s proposal on the coal tax, but at reduced rates of P50 per metric ton for the first year, P100 for the second and P150 for the third.  See “TRAIN,” A2

BSP bolsters Philippines’s investment-friendly climate Manny B. Villar



rofit is the primary factor that drives investors to take their capital to a certain country. Aside from opportunities to generate income, investors also look at a host country’s financial system, which is important, particularly for corporations that operate in different countries. Continued on A10

PSEi trending toward 9,000 in 2018 and 10,000 in 2019

Shorter working hours seen to boost Pinoys’ productivity

8,300 The forecast close of the Philippine Stock Exchange index this year, according to BDO-Nomura Securities

By Elijah Felice E. Rosales


Part Two

N August the House of Representat ives unanimously passed House Bill (HB) 6152. The measure intends to compress the workweek by allowing Filipino employees to work beyond eight hours a day to complete the required 48 working hours in just four to five days. HB 6152 aims to give workers and employers the option to refer to an alternative arrangement of working hours other than the standard eight working hours a day schedule. Under the bill, the normal workweek is reduced to less than six days, but the total number of working hours will remain at 48 hours. The arrangement is not mandatory, though it recommends employers to discuss with their workers the alternative schedule. The compressed workweek is currently being allowed by the Department of Labor and Employment in some companies, as the scheme apparently gives workers and employers greater freedom in fixing hours of work that are compatible with the needs of the

TANJUSAY: “It’s a wonder to think though, that despite of these burdens of the Filipino work force, we were able to produce a very productive and very regionally competitive 6.9-percent average GDP in previous years, and we seem to be capable to do and produce more.”

business and the employees’ desire for a balanced work-life. The Associated Labor UnionsTrade Union Congress of the Philippines (ALU-TUCP) backed the measure. Militant labor group Kilusang Mayo Uno (May First Movement) opposed it. On the other hand, the Center for Trade Union and Human Rights branded HB 6152 as “retrogressive, probusiness and pro-capitalist, while silent about the detrimental effects that extended hours have on workers’ health and well-being.”


ACCORDING to Rene E. Ofreneo, labor and industrial relations

PESO exchange rates n US 50.5720

Continued on A2

business news source of the year

P25.00 nationwide | 4 sections 26 pages | 7 days a week



2016 ejap journalism awards

By VG Cabuag @villygc

B VACCINE NATION On December 11 government health officials and executives of Sanofi Pasteur, manufacturer of the controversial Dengvaxia, testify under oaths before the Senate probe on an immunization program involving the anti-dengue vaccine. The Philippine government will demand a refund of P3.5 billion ($69.5 million) from Sanofi Pasteur and look at possible legal action after a study showed the firm’s vaccine used in the dengue immunization program could expose some people to severe illness, Health Secretary Francisco T. Duque III said last Friday. From left, Sanofi Pasteur’s Thomas Triomphe, former Undersecretary of Health Dr. Kenneth Hartigan-Go, former Health Secretary Janette Garin and Duque. AP

‘Fitch upgrade good for infra push’ By Cai U. Ordinario @cuo_bm

& Bianca Cuaresma



he decision of Fitch Ratings to raise the Philippines’s sovereign rating by one level bodes well for the private sector and for the government’s massive infrastructure program, according

to the National Economic and Development Authority (Neda). Socioeconomic Planning Secretary Ernesto M. Pernia told the BusinessMirror that the credit upgrade would allow the government to obtain cheaper loans to finance its “Build, Build, Build” program. “The [upgrade] is a welcome development, especially at a time that we are seeing a sustained improve-

ment in government spending. The upgraded rating reflects the steady and strong economic performance of the Philippines and the firm confidence of investors,” Pernia said in a statement. “This positive outlook and ratings from global credit watchers encourages the whole of government to be more efficient and swift Continued on A2

DO-Nomura Securities, an online brokerage firm, said the benchmark Philippine Stock Exchange index (PSEi) may breach the 9,000-point level next year and possibly hit the 10,000-point milestone by 2019, as corporate earnings continue to drive growth. BDO-Nomura Securities research head Dante Tinga Jr. said the 30-company PSEi may settle at around 8,300 at the end of this year and grow by 13.9 percent to 9,100 in 2018. This will further grow by 13 percent to about 10,280 by 2019. Tinga added growth next year will be driven mainly by rising earnings per share, led by the property, banking and industrial sectors. It is, however, bearish on the consumer and telecoms sectors. “There is no bubble in the property sector and sales continue to be strong,” he said. See “PSEi,” A2

n japan 0.4455 n UK 67.7007 n HK 6.4794 n CHINA 7.6347 n singapore 37.3998 n australia 37.9644 n EU 59.4980 n SAUDI arabia 13.4851

Source: BSP (11 December 2017 )

BMReports BusinessMirror

A2 Tuesday, December 12, 2017

Shorter working hours seen to boost Pinoys’ productivity Continued from A1

professor at the University of the Philippines, reducing working hours and compressing the workweek are not new policy reforms sought for by workers and employers. “Shortening the work hours or workweek is a proposal articulated by trade unions in a number of countries as a way of creating more jobs and easing workload,” Ofreneo told the BusinessMirror. “Compressing the workweek from five to six days to four to five days by lengthening working hours per day is one solution for the horrendous traffic, and so is the old flexible work scheduling,”

added Ofreneo, who also writes a column for the BusinessMirror. “Personally, I am not against both, so long as there is serious consultation with the workers and there is unanimous agreement among the parties.”


ON the other hand, ALU-TUCP Spokesman Alan A. Tanjusay said, although their group supports the passage of HB 6152, they are still open to discussing other options as to fixing the working hours, including reducing it. “I am looking at the [proposal] as another option for workers to cope and become productive for

themselves and for the company in a changing work environment and evolving business landscape imposed by the Internet age and climate-change phenomena,” Tanjusay told the BusinessMirror. He said it is also good to look into trimming the total number of working hours, though he admitted it will not be easy to push for such a radical labor reform. “Working eight hours in Philippines is entrenched in the psyche of Filipinos,” he said. “Eight hours [of] work in previous decades seemed a normal way of life for Filipinos.” However, Tanjusay explained, with the rising cost of living,

lowering value of wages and worsening traffic congestion into the equation and other factors, “eight hours work become too long of an ordeal.”


IN spite of all these, Tanjusay said Filipino workers continue to strive good for the economy, and this should be rewarded by giving to them what is due to them—a balanced work-life schedule. “It’s a wonder to think though, that despite these burdens of the Filipino workforce, we were able to produce a very productive and very regionally competitive 6.9-percent average GDP in previous years, and we seem to be

‘Fitch upgrade good for infra push’ Continued from A1

in executing the needed policy reforms and projects laid out in the Philippine Development Plan [PDP] 2017-2022,” he added. Apart from cheaper loans for the government’s infrastructure projects, Neda Undersecretary Rosemarie G. Edillon also told the BusinessMirror that private investors and borrowers can also benefit from the upgrade, as this would make capital cheaper. With the private sector also able to use the ratings upgrade to their advantage, policy-makers expect this to boost economic growth starting next year. “But we still need to be aggressive in implementing the ‘Build, Build, Build’ program and other reforms cited in the PDP, especially those relating to ease of doing business,” Edillon told the BusinessMirror.

‘Vote of confidence’

The country’s Investor Relations Office (IRO) said credit-rating upgrades are “crucial measures” of a country’s willingness and ability to pay debts as they fall due. “Because rating agencies take into account many factors in assessing a sovereign’s credit worthiness, including its macroeconomic fundamentals and institutional strength, higher ratings help to improve a country’s image before the local and

international investor communities,” the IRO said. “Higher ratings, therefore, also contribute to a more robust assessment of investors of the country’s growth prospects and investment environment,” it added. Local economic managers also welcomed the development and expressed optimism of more rating upgrades in the near future. “We are pleased that Fitch is finally convinced that the Philippine economy now is much stronger and more resilient than in 2013, when they granted the Philippines its first investmentgrade credit rating of BBB -,” Fi n a nce Sec ret a r y C a rlos G. Dominguez III said. “While we are not targeting ratings per se, I am confident that, with these reforms, there will be more positive rating actions in the next couple of years,” he added. BSP Governor Nestor A. Espenilla Jr. said the rating upgrade from Fitch is a recognition of the “positive transformation” that is taking place in the Philippines. “The productive capacity of the economy is expanding. This is making possible higher GDP growth that is sustainable. Inflation is low and stable, while the balance of payments remains very manageable,” Espenilla said. “The domestic financial system’s resources and profitability have continued to increase, governance standards and risk-management

systems have been enhanced and significant inroads toward financial inclusion is being achieved,” he added. Trade Secretar y R amon M. Lopez and Rep. Karlo Alexei B. Nograles of the First District of Davao City said the decision of the international credit-rating agency is an affirmation of the “soundness” of the Duterte administration’s economic policies. “This is solid testament that ‘Dutertenomics’ and the president’s ‘Build, Build, Build’ program are working effectively. I just hope that this latest Fitch rating would be enough to prove that the administration is on the right track,” Nograles said. The chairman of the House Committee on Appropriations said the international body is now seeing the “positive effects of strong governance.” “The administration’s strongwilled governance has demonstrated it can deliver much-needed reforms that our country needs and, at the same time, maintain the effective implementation of the government’s reform strategy, spelled out in the President’s 10-point economic agenda,” Nograles said. The Management Association of the Philippines (MAP) attributed the Philippines’s recent Fitch Ratings’s credit upgrade to the momentum for infrastructure buildup, coupled with the move to ease economic restrictions.

“It’s [upgrade] a vote of confidence on President Duterte’s economic team. I can attribute this upgrade to various factors, among them the coming Overseas Development Assistance financing to start the major infrastructure projects from the government, the lifting and recommendation for lifting of the various economic restrictions in our foreign investment negative list,” MAP National Issues Committee Chairman Perry Pe said in a statement. The rating on the Philippines’s long-term foreign currency-denominated debt was raised to “BBB” with a stable outlook, Fitch said in a statement on Monday. The upgrade puts the Philippines on a par with Italy and ahead of Indonesia. Despite the controversy over Duterte’s antidrug war, Fitch said there’s no evidence it’s undermined investor confidence. The economy is set to remain one of the fastest expanding in Asia with growth of 6.8 percent next year and in 2019, the ratings company said. “Strong and consistent macroeconomic performance has continued, underpinned by sound policies that are supporting high and sustainable growth rates,” Fitch said. “Investor sentiment has also remained strong, which is evident from solid domestic demand and inflows of foreign direct investment.” With Catherine N. Pillas,

Jovee Marie N. dela Cruz & Bloomberg News

capable to do and produce more,” the labor leader said. He added that, as much as the ALU-TUCP wants to push for reducing working hours, not much study has been produced about the policy reform. Tanjusay said it is important to conduct further assessment on the benefits and disadvantages of shortened work ing hours for it to gain ground and support in the circles of trade unions. “This is where lies the main challenge [that] the proposed lesser working time poses,” Tanjusay said. “There has to be a thorough time and motion study to convince [the] government and employers to

TRAIN. . .

Continued from A1

The Senate earlier passed “a 3,000percent increase in coal taxes” to be collected in three tranches until 2020, which means the current P10 excise tax will be raised to P100 in 2018, P200 in 2019 and P300 by 2010. “This is a big step toward a cleaner environment,” Quimbo said.   Earlier, Alvarez vowed to block Senate insertions of the additional taxes, particularly on coal, as they run counter to the constitutional mandate that all revenue measures must originate exclusively from the House of Representatives. Article VI, Section 24 of the Philippine Constitution, which provides that “all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.”  Moreover, the bicameral committee has agreed to exempt workers earning P250,000 from paying personal-income tax while raising the 13th month pay’s tax-exempt ceiling to P90,000, from the current P82,000.  It also agreed on the tax rate to be imposed on sugar-sweetened beverages, P6 tax per liter for juices and energy drinks and P12 tax per liter for beverages with high-fructose corn syrup.  The TRAIN Act is targeting to raise P130 billion in revenues to finance the Duterte administration’s ambitious infrastructure program.  The bicameral committee report is now being prepared to be transmitted to the both houses for ratification and submitted to the Palace for President Duterte’s signature. The congressional committee should approve the consolidated version of the taxreform bill this week to ensure its passage before Congress goes on Christmas break on  December 13. The government is eyeing to implement the TRAIN by January 1, 2018. According to Majority Leader Rodolfo C. Fariñas Sr. of Ilocos Norte, the bill will be ratified before the Congress goes on Christmas break on Wednesday.  Fariñas said both chambers of Congress have until December 13 to ratify the bill. 

Senate to work overtime

Senate President Aquilino L. Pimentel III confirmed on Monday  that senators are scheduled to ratify the final version of the TRAIN bill and the 2018 national budget bill after a joint session with the House of Representatives on the proposed extension of martial law in Mindanao. “I appealed to my fellow senators that, even after the special session, we go back here for our legislative session,” Pimentel said. “No matter the time. There is no choice.” Pimentel added there may even be no need to convene a special session, as lawmakers are prepared to work overtime if needed. “Besides, if we need to work overtime, we will do two

PSEi. . .

Continued from A1

“Tax reform and accelerated infrastructure spending should provide long-term tailwinds to the sector. Concerns on residential oversupply have eased. Real estate remains a direct proxy for the Philippine economy,” Tinga said. On the other hand, the banking sector is seen to benefit from the strong economic activity, which will support loan growth. Rising rates, meanwhile, provide near- to medium-term net interest margin boost. “High capex companies with dominant franchises are seeing cash flows and balance sheets at positive inflection point. Valuations

embrace lesser working hours.” So far, the ALU-TUCP has not received any complaints on working hours, according to Tanjusay. But the group vowed it will look into such cases should a member-trade union raise the issue. “It is high time to do a timeand-motion study on the current eight-hour work period given the new conditions not present when the [International Labor Organization] stipulated it to be decades ago,” Tanjusay said. “By then, we can make a convincing assumption that would pave the way to maintaining or changing the current eight working hours [a day requirement].” To be concluded functions on Wednesday  so there will be no more special session.”  He admitted, however, that “if there is unfinished agenda, then we will have a special session”. Pimentel added that, if the schedule is followed, the lawmakers would hold session only “until Wednesday.” He voiced confidence that a joint session to tackle the proposed extension of martial law in Mindanao could be done in one day.  “Yes. We are hoping it could be done half-day, more or less...that is the ideal,” said Pimentel, adding this was why they scheduled a briefing for the lawmakers.” He explained that “we need a briefing to be informed of the factual basis for martiallaw extension. What is the factual basis? What does the military know? How come they recommended the extension? We will listen first.”  As for the TRAIN bill and the 2018 budget bill, Pimentel said they are looking to pass the annual budget bill first. If the TRAIN bill is not approved before Congress adjourns for Christmas recess later this week, its proposed effectivity on January 1, 2018 will be affected. “Hopefully, the new  effectivity is January 1, but we will definitely have a new tax law. It is just the effectivity; if we don’t do it now, its timetable as projected by the Department of Finance and the Department of Budget and Management will be adversely affected,” he said. Sen. Juan Edgardo M. Angara, chairman of the Ways and Means Committee that conducted hearings on the TRAIN bill, noted its enactment into law will mean “bigger tax exemptions for hardworking workers.” “After two decades, we have finally reformed personal income-tax law to give more takehome pay to our hardworking workers and their families,” the senator said. Angara noted that the new P250,000 taxexemption rate for all Filipino employees will take effect next year, in addition to bigger exemptions for bonuses and 13th month pay. Here are the highlights of the consolidated bill:   ■ Mining—double the rates;     ■ Auto excise—4 percent for up to P600,000; 10 percent for over P600,000 to P1 million; 20 percent for over P1 million up to P4 million; and 50 percent for over P4 million;   ■ Tobacco tax—P32.50 effective January 1, 2018 to June 30, 2018; P35 effective  July 1, 2018 to December 31, 2019; P37.50 (24 months), P40 (24 months), 4-percent annual increase after;   ■ Housing—status quo for three years, then Senate version after;   ■ Oil excise—gasoline P7, Av gas P4, asphalts P8, kerosene P3, diesel P2.50, LPG P1, naptha P7, Ref. fuel P8, bunker fuel P2.50, lubricating oil P8, paraffin wax P8, petcoke P2.50, all petroleum products used as input, feedstock, raw materials for petrochem and refining or as replacement fuel are exempt;   ■ Cosmetic procedures—5 percent rate;   ■ Coal—P50-P100-P150. are still reasonable, with most stocks trading at a discount versus regional peers,”he said, referring to the Industrial sector. But Tinga also sees risks to these rosy prospects, including rising inflation driven mainly by fuel costs, as well as possible delays, dilution or reversal of some of the economic reforms promised by the Duterte administration. The broker is bearish on the telecom and consumer sectors, with the telecom players undergoing structural shifts and allotting huge amounts for capital expenditures, while margins are under pressure. For consumer companies, Tinga said these firms face difficulty in translating the strong macro backdrop into profit growth due to intensifying competition and rising input costs.

The Nation BusinessMirror

Editor: Vittorio V. Vitug • Tuesday, December 12, 2017 A3

Aquino Cabinet execs eyed in ‘hasty’ funding for risky dengue vaccine


By Butch Fernandez


op Aquino administration officials promptly approved the disbursement of P3.5billion public funds to pay for what was seen to be a hasty acquisition of an “unproven” anti-dengue vaccine, Senate probers confirmed on Monday. Sen. Richard J. Gordon noted the speed by which the funds were released to pay for the procurement of Dengvaxia aroused suspicion among Senate probers, citing concerns that the vaccination of 830,000 people is “now turning into a major health nightmare.” Gordon, chairman of the Senate

Blue Ribbon Committee, suspects a “conspiracy” in the Aquino administration’s procurement of the P3.5-billion Dengvaxia vaccines from French pharmaceutical company Sanofi Pasteur. He said this was triggered by reports reaching the Senate that the funding for the procurement of

the vaccine was not even found in the annual national budget, also known as the General Appropriations Act (GAA), as “there was no assurance yet that the vaccine was safe to be administered.” “There are very, very strong signs there may be a conspiracy,” Gordon said. “In the first place, it is not in the GAA,” the senator added, referring to the budget allocation for the dengue vaccine acquisition. Moreover, Gordon suspects the funding was “only inserted” by its proponents who “found a way to make the budget insertion.” He added this was what made the transcation “suspicious.”  Gordon said that findings of the Senate Committee on Accountability of Public Officers and Investigations, or the Blue Ribbon Committee, also indicated that  no less than former President Benigno S. Aquino III and former Health Secretary

Janette Loreto-Garin held several meetings with Sanofi officials. Gordon added Senate probers were, likewise, informed  these meetings resulted in the “acceleration of the procurement process,” fueling suspicions the Dengvaxia procurement may have been supply-driven instead of needs-driven. “Is this [Dengvaxia supply deal] needs-driven or supply-driven?” Gordon said. “In government, when you are approached, they court you; they supply medicines or other things not much needed by government. After these meetings, the process is fast-tracked.” Gordon recalled that Garin’s May 2015 meeting with Sanofi Pasteur executives, “though not irregular on face value, creates a circumstantial connection leading to irregularity.”  The senator added the Aquino administration “bought and rolled out the dengue vaccines” from Sanofi

There are very, very strong signs there may be a conspiracy [among Cabinet members of the previous administration]. In the first place, it [funding for the vaccine] is not in the GAA.” —Gordon

in 2016, during the time Garin was the secretary of the Department of Health (DOH). The Senate chief prober clarified, at the same time, that while former President Aquino may not have been invited to Monday’s hearing, Gordon did not clear him of any culpability in the dengue vaccine mess, considering his meetings abroad with Sanofi executives and the fact that the funds used for the procurement were realigned from the savings from Miscellaneous Personnel Benefit Fund pertaining to the DOH. Gordon said that in order “to realign the budget without getting approval from Congress, only someone from higher up can order this.” He added that former Budget Secretary Florencio B. Abad “cannot walk 10 meters without the President knowing, especially with this kind of amount—P3.5 billion.” 

Group revives call to probe Alvarez’s complicity in Naia Terminal 3 deal By Joel R. San Juan @jrsanjuan1573


GROUP advocating good governance on Monday urged the Office of the Ombudsman to investigate anew if House Speaker Pantaleon D. Alvarez benefited from the Ninoy Aquino International Airport (Naia) Terminal 3’s build-operate-transfer contract with the Philippine International Air Terminals Co. Inc. (Piatco).   In a 16-page letter-complaint addressed to Ombudsman Conchita Carpio-Morales, the Pinoy Aksiyon for Governance and Environment (PAGE)  said the antigraft body should  investigate Alvarez in light of the 2005 ruling of the Supreme Court favoring  the Manila International Airport Authority-Naia Association of Service Contractors (Maso).   “The Supreme Court’s decision in 2005 should have paved the way for a more thorough preliminary investigation of this case, but it

appears that no resolution has yet been made,” the group said. “We are not unmindful of the fact that this complaint was initiated by the Maso, but we, the people, are no less interested in its just resolution. We appeal to the Honorable Ombudsman to shine a light on Maso’s complaint,” it said.   It can be recalled that Maso filed a plunder case against Alvarez and several other government officials before the Ombudsman in connection with the alleged anomalous deal.   The Ombudsman, however, dismissed the case, prompting Maso to file another case before the Supreme Court.   In alleging that the Piatco contract was illegal, Maso won favorable ruling from the Supreme Court.   PAGE insisted that Alvarez should be charged with plunder, violation of Section 3(h) of the Anti-Graft and Corrupt Practices Act, and violation of Section 9 of the Code of Conduct and Ethical

Standards for Public Officials for having business interests with Wintrack Builders Inc. Alvarez’s wife, Emelita Alvarez, was one of the incorporators of Wintrack, which was subcontracted in 2014 to clear below-ground debris at the Naia compound without the benefit of a public bidding. According to PAGE, Emelita’s shares in Wintrack were deemed as conjugal property under the Family Code, giving Alvarez direct interest in the company.   “Representative Alvarez was prohibited by the Constitution from maintaining such interest: the Constitution provides that members of Congress may not be indirectly interested in any contract with the government during their term of office,” the group said.   “It is time for the Ombudsman to investigate if Alvarez is liable because the government paid Wintrack more than P132.5 million,” the letter-complaint read.

Children’s Day

In what has evolved to be a yearly tradition, Vista Land Chairman and former Senate President Manuel B. Villar and wife Sen. Cynthia A. Villar, joined by children Paolo and Camille and Public Works Secretary Mark A. Villar, played hosts to some 150 indigent children from Baseco Compound in Tondo, Manila, and Barangay Iruhin, Tagaytay, at the Crosswind Luxury Suites Resort in Tagaytay. The Villar Social Institute for Poverty Alleviation and Governance has been spearheading the gift-giving event for the last eight years. ROY DOMINGO

Duterte seeks 1-year martial-law extension in Mindanao By Elijah Felice E. Rosales @alyasjah

& Jovee Marie N. dela Cruz @joveemarie


resident Duterte has asked Congress to extend martial law in Mindanao for another year, in a bid to crush the communist and extremist rebellion in the island. In his letter to Senate President Aquilino L. Pimentel III and House Speaker Pantaleon D. Alvarez, the President appealed to Congress to prolong military rule in Mindanao. He cited the continued recruitment of the Islamic State (IS) and the heightened offensives of the New People’s Army (NPA) in the island as reasons for his request. Duterte said he received a letter last Monday from Defense Secretary Delfin N. Lorenzana recommending the continued imposition of martial law in Mindanao for one year, from January 1, 2018 to December 31, 2018. The recommendation was made to “ensure the total eradication of [the] Daesh-inspired Da’awatul Islamiyah Waliyatul Masriq [DIWM], other like-minded local and foreign terrorist groups and armed lawless groups, and the communist terrorists and their coddlers, supporters and financiers.” “The security assessment submitted by the AFP [Armed Forces of the Philippines], supported by the Philippine National Police [PNP], highlights certain essential facts that I, as Commander in Chief of all Armed Forces of the Philippines, have personal knowledge of,” the President said. According to Duterte, the extremist threat in the southern third of the country remains to be high, in spite

of the deaths of Isnilon Hapilon, selfstyled leader of the IS in Southeast Asia, and the Maute brothers, leaders of the Daesh-inspired Maute Group. He said at least 185 persons listed in the martiallaw arrest orders are still at-large and they might be in the process of regrouping and consolidating their forces. He added, DIWM members are reported to be strengthening their radicalization activities in Central Mindanao, particularly in Maguindanao, North Cotabato, Sulu and Basilan. “These activities are geared toward the conduct of intensified atrocities and armed public uprisings in support of their objective of establishing the foundation of a global Islamic caliphate and of a [local caliphate] not only in the Philippines, but also in the whole of Southeast Asia,” the President said. He also noted the alleged planned bombings in South Cotabato of a certain Turaifie group. Turaifie is reported to be the successor of Hapilon as leader of the IS in the Philippines and in Southeast Asia. Duterte also pointed to the continued violent activities of the Bangsamoro Islamic Freedom Fighters in Maguindanao and North Cotabato and the Abu Sayyaf Group in Basilan, Sulu, Tawi-Tawi and Zamboanga Peninsula. The two groups were behind numerous attacks against government troops and civilians. Above all terrorist groups, it is the NPA that the Chief Executive considers as the largest security threat in Mindanao. The NPA and its ideological arm, the Communist Party of the Philippines (CPP), were recently declared as terrorists by the government, following a series of encounters between soldiers and NPA units resulting to

dozens of casualties from both sides. “Last, but certainly not the least, while the government was preoccupied with addressing the challenges posed by the Daesh-inspired DIWM and other local terrorist groups, the New People’s Army took advantage of the situation and intensified their decades-long rebellion against the government, and stepped up terrorist acts against innocent civilians and private entities, as well as guerrilla against the security sector and public and government infrastructure, purposely to seize political power through violent means and supplant the country’s democratic form of government with communist rule,” the President said. Duterte added the NPA is responsible for at least 385 atrocities in Mindanao, which claimed the lives of 42 soldiers and wounded 61 others. He added the communist group also killed 23 civilians, including a policeman and a four-month-old infant in an ambush in Talakag, Bukidnon on November 9. The President also claimed the NPA carried out at least 59 arson activities in Mindanao, which resulted to a loss of P2.2 billion worth of properties, mostly owned by big businesses. “Of these, the most significant were the attack on Lapanday Food Corp. in Davao City, on April 9 and the burning of facilities and equipment of Mil-Oro Mining and Frasec Ventures Corp. in Mati City, Davao Oriental, on May 6, which resulted in the destruction of properties valued at P1.85 billion and P109 million, respectively,” he said. He added extending martial law in Mindanao will support efforts of the government to suppress the CPP-NPA in the island. “These recent develop-

ments involving [the communists] forebode another year of intensified armed hostilities, which, together with other security concerns described above, continue to make Mindanao a hotbed of rebellion,” Duterte said. He assessed a martial-law extension in Mindanao will help security forces “quell completely and put an end to the ongoing rebellion in Mindanao and prevent the same from escalating to other parts of the country.” He also said prolonging military rule and the suspension of the writ of habeas corpus in the island will enable the government to pursue its rehabilitation program for Marawi City, Lanao del Sur, and efforts to promote stable socioeconomic growth and development. If Congress approves the request, Duterte will become the first president in the post-Marcos era to declare martial law due to the communist insurgency. Ferdinand E. Marcos in 1972 placed the country under military rule in the face of social unrest, primarily due to the rise of the CPP-NPA in the countryside. On the other hand, human-rights group Karapatan questioned the President’s appeal to extend martial law in Mindanao. Karapatan said the military already declared victory against the Maute Group in October, so why then is the President still asking for an extension. “What then, is the basis for extending martial law for another year? This is a dangerous precedent that inches the entire country closer to a nationwide declaration of martial rule,” Karapatan Secretary-General Cristina E. Palabay said. Karapatan claimed there were at least 29 victims of extrajudicial killings

since the declaration of martial law in Mindanao on May 23. The group said most of the victims were members of peasant group Kilusang Mambubukid ng Pilipinas, which is active in the campaign for genuine agrarian reform. Palabay argued activists and progressive groups will most likely be at the short end of the stick if military rule in the southern third of the country is prolonged. “Another year of martial law will not be beneficial to anyone, except the fascist military dogs and their equally proudly fascist leader,” she added.

Joint session

The 17th Congress may likely hold a joint session on Wednesday to discuss the proposed extension of martial law in Mindanao, Majority Leader Rodolfo Fariñas said on Monday. “Our session officially ends on

Wednesday,” he said.

The Congress is expected to go on Christmas break on December 15 and will resume on January 15, 2018.   President Duterte signed Proclamation 216, imposing martial law and suspending the writ habeas corpus in Mindanao on May 23 following the attacks of the Maute Group in Marawi City. Section 18 of Article VII of the Constitution empowers the President to declare martial law and suspend the writ of habeas corpus only “in case of invasion or rebellion, when public safety requires it.” In a special joint session, the House of Representatives granted the extension of martial law until  December 31 on President Duterte’s request. 


Meanwhile, Rep. Edcel C. Lagman

of the First District of Albay questioned President Duterte’s request for Congress to extend martial law in the entire Mindanao for one more year. According to Lagman, the 1987 Constitution imposes for the limited grounds and duration of martial law and its extension.  “Malevolent perpetuation of the subjugation of the supermajority in Congress by the President even against the unequivocal provisions of the Constitution protecting civil liberties and the rule of law,” he said.  “Blatant mocker y of the libera l it y of t he major it y of t he Supreme Court in upholding the President’s past questionable actions,” Lagman added.  The lawmaker said the Constitution provides that martial law can only be declared and its extension authorized in case of invasion or rebellion when public safety requires it. “ W here is the actua l invasion or actua l rebel lion in Mindanao? ” Lag man asked.  “Since the original or initiatory declaration of martial law is limited to not more than 60 days, it stands to reason that any extension is subject to the same constraints with respect to duration and grounds,” he said.  Lagman added there is no more factual basis for the extension of martial law in Mindanao after President Duterte declared the liberation of Marawi City from rebels and terrorists.   He said the PNP and the AFP recommended the extension of martial law in Mindanao for another year purportedly to contain continuing threats by terrorists. 


A4 Tuesday, December 12, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon


Wholesale price of construction materials on 5-year high in Nov


By Cai U. Ordinario

2.1 percent in November 2016. “The double-digit annual growth in fuels and lubricants index further accelerated by 18.3 percent. Moreover, higher annual gains were posted in [other] indices,” the PSA said.  Data showed that reinforcing steel and concrete products were among the main reasons for the increase, with a growth of 4.2 percent and 3.5 percent.  Further, PSA data showed concrete products, reinforcing steel and fuels and lubricants had the biggest weight in terms of computing the index.  Concrete products had a weight of 43.87-percent in the index, followed by reinforcing steel with 12.131 percent and fuels and lubricants with 9.091 percent.  The PSA, however, said that, in terms of the month-on-month growth, the CMWPI in Metro Manila saw a 0.1- percent decline in November, from 1.2 percent in October.  Concrete products and galvanized iron (GI) sheets posted slower increases in November, as well as tile works and plumbing fixtures


holesale prices of construction materials posted a five-year high in November due to more expensive fuel, reinforcing steel and concrete products, according to the Philippine Statistics Authority (PSA). PSA data released  on Monday  showed the Construction Materials Wholesale Price Index (CMWPI) in the National Capital Region posted a growth of 4.7 percent in November.  The CMWPI growth was the highest since March 2012 when it posted a growth of 5.2 percent. The index posted a year-on-year growth of 4 percent in October 2017 and

4.7% The average CWPI jump registered by the PSA in Metro Manila in November

and accessories/waterworks, plywood and lumber. “Hollow blocks, concrete drainage pipe, cement, tie wire, nails, plywood, lumber, GI sheets, steel bars, door and circuit breaker were priced higher during the period. Similarly, petroleum products, such as gasoline, diesel and bunker oil went up in November. On the other hand, price decreases were observed in grout and faucet this month,” the PSA added.  The CMWPI is a variant of the General Wholesale Price Index that measures the changes in the average wholesale prices of construction materials. It is used for the computation of price escalation of construction materials for various government projects. It is computed using the weighted arithmetic mean of price relatives, a variant of the Laspeyres formula with fixed base year period weights. The current CMWPI market basket considered those construction materials prevailing in 2000. The market basket for the 2000-based series includes 108 items.

Solon prods govt to hike House suspends Sereno impeach subsidy for new PUJs proceedings until Jan next year By Butch Fernandez



ooking to untangle the gridlock between government and transport stakeholders over the public-utility vehicle (PUV) modernization program, Sen. Grace Poe has proposed the consideration of easier financing options to repay loans for new public-transport vehicles, including increasing the subsidy level of P80,000 per unit that was initially offered. The senator pushed for a higher subsidy rate, citing concerns of transport groups on  the difficulty of servicing the loans they will take out to acquire the new vehicles offered to replace their old jeepneys.  Presiding over the hearing of the Senate Public Services Committee, Poe thanked transport leaders for putting off their threat to mount a protest-strike on December 4 and 5 against the planned modernization, heeding Poe’s pledge to “broker a full dialogue between the drivers and the Department of Transportation [DOTr].” Restive transport groups indicated the strike was their “only option left” after DOTr insisted on rolling out the ambitious PUV program in 2018—with “little preparation by way of institutional reforms, availability of the modern vehicles replacing the jeepneys and the financial unpreparedness of small operators and drivers.” Leaders of the transport groups voiced fears of facing “bankruptcy in trying to repay the loans” estimated at P1.6 million to P2.1 million for units costing a little over P1 million on cash basis. They were earlier informed that, under the Duterte administration’s PUV program, the government would offer equity on the loans—or a subsidy of P80,000 per unit—to ease the financial burden of borrowers.  But Poe, citing estimates obtained by her Senate office, noted this would mean the jeepney driver-borrower would need to set aside P800 daily just for repaying the loan for the next seven years. “This, on top of the driver’s salary to be fixed under the PUV plan and maintenance costs, could make the fiscal impact unbearable,” she added. “What is fair as equity, if P80,000 is too small?” Poe asked as she wondered aloud if the restive transport leaders would reconsider their opposition if the financial burden were greatly eased. The senator took note of suggestions that the program must include a “balik jeepney program” that encourages owners of decrepit units to turn in their units for modern and cleaner ones. The proposed scheme should also include a transparent audit by the Land Transportation Regulatory and Franchising Board of all public-utility jeepney (PUJs) available. Poe cited a suggestions raised by IBON Foundation on distributing the jeeps to existing cooperatives for better consolidation of resources and economies of scale, a measure that is already a key plank of the DOTr blueprint.  IBON also suggested that payment terms must be reasonable. Under the proposal, the government can enter into 10-year loan agreement with cooperatives, as part of the financial dispersal. IBON said the government can take the budget for higher subsidies from realignments. It estimated that at 50-percent subsidy of the loan value, the government would have to shell out P700,000 per unit. The total cost for subsidizing the purchase of 234,000 new PUV units would then come up to P63 billion, IBON said. Poe found the numbers reasonable, even as she said the proposal of some groups for state banks like the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) not to impose any interest is not tenable. “You can’t have 0-percent interest; it’s not fair to LandBank or DBP. [They’d have to charge something] but definitely not 6-percent [interest, either].”   “Come to think of it, if the government is subsidizing trains run by rich companies to the tune of billions, then why should it allow jeepney drivers and operators to foot the bill for new units almost all by themselves?” Poe told reporters after the hearing, adding that, “If PPP [public-private partnership] grantees are given incentives, in amounts with dizzying number of zeros, and are hailed as patriots, then why are jeepney drivers, who are asking for a little more help, treated as pests?”

By Jovee Marie N. dela Cruz @joveemarie


he House Committee on Justice has decided to suspend until January next year its impeachment proceeding against Chief Maria Lourdes A. Sereno.    Rep. Reynaldo V. Umali of the Second District of Oriental Mindoro, the panel chairman, said his committee has decided to cut short its hearing to accommodate the ratification of 2018 P3.767-trillion general appropriations bill, Tax Reform for Acceleration and Inclusion, proposed extension of martial law in Mindanao and other important pending bills.   The 2018 national budget and the tax- reform bill are both pending before the congressional bicameral committee, while President Duterte has already asked Congress to extend martial law in Mindanao for another year.   Congress is expected to go on Christmas break on December 15 and will resume on January 15, 2018.  


Me a n w hile , A ssociate Just ice Noel Tijam said Sereno not only failed to act promptly on the request of the Department of Justice to transfer the venue of trial of cases against members of the Maute terrorist group, but also kept the court en banc in the dark on crucial information that could have allowed speedy disposition of the case. Tijam said that while Justice Secretary Vitaliano N. Aguirre II submitted the initial request for the transfer of the Maute cases outside of Mindanao as early as May 29 for security reasons, the court en banc actually granted it only on August 8. “It is important for the en banc to consider matters of urgency. And we can only consider these matters of urgency if the en banc is given full information, immediate information, complete information,” Tijam said. Accord ing to Tijam, t he Supreme Cou r t (SC ) h a s been pen a li z i ng jud ges a nd cou r t person ne l for i nord i n ate de l ay i n ac t i ng on m at ters a ssig ned to t hem so t he H ig h Cou r t mu st hold it se l f to a n e ven h ig her st a nd a rd . On May 31 Court Administrator Midas Marquez wrote a letter to Sereno supporting Aguirre’s request. However, Tijam said, the matter was not taken up in the en banc session on June 6. Also, Tijam said that on the same day he received a phone call from Sereno after the June 6 session, informing him that the issue was taken up during lunch after the en banc session and that

the members agreed to hold the trial in Cagayan de Oro City. Yet, the SC en banc issued a resolution on June 6 reflecting the supposed decision that was reached by the court during lunch. “But there is distinct difference between discussing something important during the en banc session where you have the docket folders, you have the materials with you, and holding a caucus on an important matter where in front of you are forks, plates and food,” Tijam said.  In the impeachment complaint against Sereno, lawyer Lorenzo Gadon alleged that the Chief Justice committed culpable violation of the constitution when she manipulated and delayed resolution of Aguirre’s request on the transfer of venue of Maute cases.  Justice Francis Jardeleza, meanwhile, confirmed the transfer of Maute case was not taken up in the June 6 en banc session. For her part, Justice Teresita de Castro, who is a member of the raffle panel, said the case was not actually raffled on June 5, which is inconsistent with Sereno’s claim that she is the member in charge of the case. “The Chief Justice is not the Supreme Court. In other words, unlike the chief of a tribe in a community, the chief of a conglomerate, the chief of a group of companies, the Chief Justice cannot overrule, supersede or cancel the decision of the en banc,” Tijam added. The four magistrates appeared at the House justice committee’s hearing on the impeachment proceeding against Sereno.  Jardeleza has testified on the allegation that Sereno manipulated the selection process of the Judicial and Bar Council (JBC) to block his appointment to the high court.  De Castro, on the other hand, made another appearance at the continuation of the proceeding. Brion has testified his  concurring  opinion  that “CJ Sereno manipulated the JBC process to exclude Jardeleza as a nominee.”  Tijam, meanwhile, has testified about the allegation of foot-dragging of the SC in ordering the transfer of cases of Maute members from Cagayan de Oro to Metro Manila.  De Castro has earlier testified, saying Sereno not only altered a temporary restraining order on the Senior Citizens partylist  proclamation in 2013, but also created the Judicial Decentralized Office in Region 7, contrary to resolutions the high court had approved.

NSWC pins hope on Villar to push for EPR in Senate By Jonathan L. Mayuga @jonlmayuga


he National Solid Waste Management Commission (NSWMC) is pinning its hope on the initiative of Sen. Cynthia A. Villar and other lawmakers in pushing for the so-called extended producer responsibility (EPR) that will hold companies accountable for the hazardous packaging materials they produce that end up in garbage dumps, or worse, pollute the country’s water bodies. NSWMC Secretariat Executive Director Eligio Ildefonso said there’s no law penalizing manufacturers for the packaging materials, particularly single-use plastics that are not recyclable or end up as residual wastes.   He added a law imposing extended EPR will compel manufacturers to be more responsible for helping address the problem brought about by single-use plastics.   In a telephone interview, Ildefonso, who is currently in Iloilo to attend a provincial summit on solid-waste management, said lack of adequate recycling facilities is a major hurdle in the implementation of Republic Act (RA) 9003, or the Ecological Solid Waste Management Act.   The law mandates local government units to come up with 10-year solid-waste management plans and promote waste-reduction measures, such as segregation at source, recycling nonbiodegradable wastes and composting those that are degradable.   While he said there are a few recycling facilities that can accommodate solid wastes for recycling, the absence of such in many areas, plus the high cost of transporting wastes, is thwarting government and private-sector effort in practicing waste recycling.   “We are hoping to have an audi-

ence with Sen. Villar to hopefully file a measure-imposing EPR,” Ildefonso said in Filipino. Ildefonso is confident that it will be “easier” to find a champion in the House of Representatives who will file a similar bill.   The lady senator earlier raised the concept of EPR during a recent public hearing of the Senate Committee on Environment and Natural Resources, which she chairs.   EPR is an environmental-protection strategy requiring manufacturers using plastic materials in their packaging to be responsible for recovering the plastic wastes. Environmental groups, such as Greenpeace, have been pushing for EPR because of the apparent failure of manufacturers to help address ocean-plastic pollution.   Under the concept of an EPR, manufacturers must develop and implement a program to reuse, buy back or recycle packaging materials. In effect, this will reduce, if not, transfer the burden solid-waste management from the national and local governments to the manufacturers.   The Department of Environment and Natural Resources (DENR) is stepping up the implementation of RA 9003 and vowed to close all open dumps in various parts of the country.    Around 20 percent of these, which represent the uncollected wastes, end up in vacant lots or, worse, clogging canals, creeks and rivers causing severe flooding, water pollution and health problems.    T he DENR is eyeing a noburn, waste-to-energy solution to the country’s waste-management problem.   The Philippines produces around 40,000 tons of waste a day, with Metro Manila accounting for around 9,000 tons. Most of these end up in open dumps such as the Payatas Sanitary Landfill and other disposal facilities in nearby provinces. 

‘TIKALUSUGAN’ Residents of Barangay 160 Zone 14 Raja Bago street Tondo, Manila,

avail themselves of free medical checkup and medicines during a medical mission conducted by the Turkish Cooperation and Coordination Agency (Tika), in partnership with the Office of the Vice Mayor of Manila, over the weekend. The project aims to improve the living standard of Filipinos and strengthen bilateral ties between Turkey and the Philippines. PNA/Oliver Marquez

Congressmen approve MUP pay increase on 3rd and final reading


measure authorizing the increase in the base pay of military and uniformed personnel (MUP) in the government is now inching its way to become a law, as the House of Representatives on Monday approved on final reading House Joint Resolution 18.   Voting 167-4, the House of Representatives has approved on third and final reading House Joint Resolution 18 that will modify the existing base pay of around 381,381 military and uniformed personnel nationwide. The resolution will double the base pay of a Police Officer (PO) 1 in the Philippine National Police, a private in the Department of National Defense and equivalent ranks in the Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine Public Safety College, Philippine Coast Guard and the National Mapping and Resource Information Authority (Namria). A PO 1 will enjoy a 100-percent increase in monthly base pay from the current P14,834 to P29,668 effec-

tive January 1, 2018.  The national government will tap P64.24 billion from its coffers to fund the salary hike. For the other ranks, the increase in base pay will be calibrated resulting in an average increase of 58.70 percent for all ranks.

As to the indexation of the pension of retired MUP with the base pay of those in the active service, House Committee on Appropriations Chairman Karlo Alexie B. Nograles of the First District of Davao City, one of the principal authors of the measure, said that while the joint resolution suspends the indexation with respect to the base-pay increase, the suspension of indexation will be automatically lifted on January 1, 2019.  While supporting the passage of the resolution,  Party-list Rep. Gary G. Alejano of Magdalo, meanwhile, raised some concerns, specifically about the suspension of the indexation provision for retirees’ pension provided in the bill. Jovee Marie N. dela Cruz 

Banking&Finance BusinessMirror

Editor: Jun B. Vallecera • Tuesday, December 12, 2017


Cash-rich Treasury prompts total T-bills rejection By Rea Cu



he Bureau of the Treasury (BTr) refused to sell a single Treasury bill (T-bill) on Monday, which marked the second time this year when auction officials decided on an acrossthe-board rejection of bids. This development, the BTr said, resulted from an attempt by banks and financial institutions to jack up the cost of short-dated funds to an unreasonable and unwarranted level. According to National Treasurer Rosalia V. de Leon, the total rejection of bids was prompted by expectations of an interestrate hike by the US Federal Reserve (the Fed). Such an adjustment was seen prompting the monetary authorities, the Bangko Sentral ng Pilipinas, to make similar policy-rate adjustments of their own. “Again, unreasonable offers were provided during the auction, [forcing] the committee to make a full rejection in all tenors,” de Leon told financial reporters. The auction committee received bids amounting to only P2.975 billion for the 91-day tenor when a total P8 billion was at stake on Monday. Had the auction committee accepted the bids, the three-month T-bill rate would have jumped 62.1 basis points to 2.769 percent, from only 2.148 percent at the previous sale. The 182-day T-bills received bids amounting to only P2.325 billion, substantially lower than the P6 billion on offer. Had the auction committee entertained the offer, the six-month T-bill rate would have averaged 45.7 basis points

higher to 3.020 percent, from only 2.563 percent at the previous auction. As for the 364-day tenor, bids aggregated only P2.276 billion, versus P6 billion the Treasury wanted to sell. Were the national coffers empty and the Treasury in need of quick cash, the one-year T-bill rate would have similarly jumped 34.8 basis points to 3.30 percent, from only 2.952 percent at the previous auction. Among the factors that contributed to high rates for the government securities include expectations of policy pronouncements from the incoming US Fed chairman and the closing of the book of accounts of the banks by the end of this year, according to de Leon. “Based on our survey of the banks, the market feels we will not really go with the high bids because of expectations of a US Fed rate hike next year. At the same time, the banks are already preparing for the closing of the books and that the market knows the Treasury was inclined to accept the high rates offered by the banks today,” she added. The BTr also said the government anticipates selling so-called ROPs which are dollar-denominated bonds early next year. ROP is shorthand for the sovereign, or the Republic of the Philippines.

De Leon said the BTr is watching the global bond markets closely for opportunities to tap the potential for comparatively cheap foreign financing no matter that the economic managers would rather borrow from domestic creditors. She noted the bond markets already price the ROPs “much tighter” at present than in the recent past, following the credit upgrade the sovereign got from Fitch Ratings announced on Monday. On Monday Fitch Ratings upgraded the long-term foreign currency rating of the Philippines to “BBB” with a stable outlook from the minimum investment grade of “BBB-.” “We are pleased that Fitch is finally convinced that the Philippine economy now is much stronger and more resilient than in 2013, when they granted the Philippines its first investment grade credit rating of BBB-,” Finance Secretary Carlos G. Dominguez said. Budget Secretary Benjamin E. Diokno also said the credit upgrade strengthens the consensus that the Philippine economy is among the fastest growing in the Asia-Pacific region. “The Duterte administration welcomes the good news of the credit upgrade by Fitch Ratings Inc. The upgrade supports the growing consensus that the Philippines is one of the fastest-growing countries not only in the fast-growing Asia-Pacific region but also in the entire world,” Diokno said. De Leon reiterated the government will maintain a borrowing mix for 2018 favoring domestic sources of funds over foreign lenders. “Well, it depends on how things will evolve next year, on collection and expenditures. We are also looking into least cost financing for the republic. But still the preference would really be to source internally given the FX [foreign-exchange] risk. That is the plan, there is no revision of the plan as of now,” de Leon said.

Bitcoin futures trading brings crypto into mainstream T

he intersection of digital money and traditional finance is at 400 South LaSalle Street in Chicago this weekend. That’s where trading in Bitcoin futures opened last Sunday evening, as the first major United States exchange offers a product pegged to the wildly fluctuating cryptocurrency. The currency has risen more than 1,500 percent this year, and about 85 percent just in the past two weeks, driven largely by demand from individual investors. But, even as Bitcoin—launched in 2009 as an alternative to banks—divides Wall Street executives and central bankers worldwide, those kinds of gains are a powerful magnet. The futures offered by Cboe Global Markets Inc. and similar contracts that start trading in a week at another Chicago-based exchange, CME Group Inc., may open the door to greater inflows of institutional money, while also making it easier to bet on Bitcoin’s decline. Either way, it’s likely trading will start slowly, said Mike Novogratz, CEO of Galaxy Investment Partners, which is raising a crypto hedge fund targeted at $500 million. “If people have expectations that it’s going to have huge liquidity on day one, they’re just wrong,” Novogratz said last Thursday in Toronto. “It’s going to take a while to build liquidity. People need to go through at least one cycle to figure out how it settles.” Derivatives trading is the culmination of a wild year for Bitcoin, which captured imaginations and investment around the world, propelled by its stratospheric gains, and its antiestablishment mission as a currency without the backing of a government or a central bank, and a payment system without a reliance on banks. The derivatives contracts should thrust Bitcoin more squarely into the realm of

regulators, banks and institutional investors. In addition to the contracts at Cboe and CME, which will start trading on December 18, Cantor Fitzgerald LP won approval from regulators to trade binary options, and LedgerX, a start-up exchange, already trades Bitcoin options. “There will be a ramp-up time,” said Ari Paul, chief investment officer of Blocktower Capital Advisors LP. “There just isn’t a rush. The professional traders will mostly be looking to do arbitrage, between the futures and Bitcoin itself. I don’t expect massive money flows right away, but then I expect gradual buying from people who want passive exposure” without buying Bitcoin directly. The two exchanges on December 1 got permission to offer the contracts after pledging to the US Commodity Futures Trading Commission that the products don’t run afoul of the law, in a process called self-certification. “Derivatives should have the effect of bringing a deeper liquidity to the market, which should reduce volatility,” said Alistair Milne, chief investment officer and cofounder of Altana Digital Currency Fund, which is based in Monaco. “As the whole cryptocurrency economy gets bigger the volatility should reduce.” But not everyone is convinced it’s a good idea. On December 6 the Futures Industry Association—a group of major banks, brokers and traders—said the contracts were rushed without enough consideration of the risks. Last month, Thomas Peterffy, the billionaire chairman of Interactive Brokers Group Inc., wrote an open letter to CFTC Chairman J. Christopher Giancarlo, arguing that Bitcoin’s large price swings mean its futures contracts shouldn’t be allowed on platforms that clear other derivatives. Bloomberg News

PLDT fintech unit to exploit Sterling Bank partners with payments platform areas across Southeast Asia By Lorenz S. Marasigan @lorenzmarasigan


ROM a plan of expanding to a new market in the Association of Southeast Asian Nations this year, the digital innovations and financial-technology arm of PLDT Inc. now eyes exploiting three territories in Asia in 2018. Voyager Innovations Inc. President Orlando B. Vea said his group will be expanding to at least two or three markets in Asia next year, a much-anticipated move from the group, which started its Philippine operations in 2015.  “We’ll have two or three new markets by next year. In fact, we have already created an entity for one,” he said. “We should start by the first or second quarter—most likely second quarter—of 2018.” Vea did not reveal the target markets but said his group has partnered with local companies to establish the holding company for Voyager’s offshore subsidiaries.  “The said entity in the first country is all owned by Voyager, in partnership with a local company,” he said.  His group initially planned to expand to a new market this year.  “We will come in using a multiplatform play,” Vea added, referring to different products and services under the Voyager brand.  Voyager operates PayMaya, mobile wallet that allows users to make digital and physical transactions, including bills payment,

among other services. It also allows users to make loans through their mobile phones through the Mobile Loan Saver and Lendr.  The company also offers digital-marketing products through a company called hatch, an online market place through Tackatack, and a money-remittance service called Smart Padala.  Asked if the group will keep the cited brands when it enters a new market, Vea replied: “It depends on the market. When there is a strong brand that we can use in that market, then we can adopt.” At home, PayMaya has around 8 million users, while Lendr has disbursed more than P26 billion worth of loans in the last twoand-a-half years.  Besides digital transactions, PayMaya account holders may also use their digital wallet for physical transactions.  Using the quick-response (QR) codes, users without physical cards may pay for their purchases from retail establishments, such as SM Stores, Robinsons Department Store, Robinsons Supermarket and stores under Robinsons Store Specialists Inc., such as Topman, Topshop, G2000, Warehouse and Dorothy Perkins in Robinsons Galleria; Ministop branches in Cyberscape Alpha and Cyberscape Beta in Ortigas; Fairmont Hotel; and The Yard in Timog, among many others. Account holders paying using the QR tech are entitled to a 10-percent rebate on their purchases during the Christmas holidays.

Case clippings

By Justice S J Ranada Jr. EVIDENCE–testimony of whistleblower There is no grave abuse of discretion when a court considers testimonies of whistle-blower in denying an application for bail, despite their participation in conspiracy itself. The mere fact that the whistle-blowers were conspirators themselves does not automatically render their testimonies incredible and unreliable. The evidence of accomplices is admissible and competent. If not uncorroborated, credibility is affected; however, the accused may be convicted upon the unsupported evidence of an accomplice. Napoles v. Sandiganbayan                                          GR 224162 07 Nov. 2017                                                                Reyes, J 


terling Bank of Asia Inc. (SBA), a savings bank, signed a partnership with CIS Bayad Center Inc., a leading multichannel payment platform in the Philippines, as part of its commitment to make cash loading easier and more efficient for its customers. “The partnership aims to increase the loading channels of SBA through Bayad Center’s branch network. This will enable the bank to reach and service more clients, particularly its prepaid cardholders,” Sterling Bank President and

CEO Cecilio San Pedro said. CIS Bayad Center Inc. Senior Vice President and COO Francispito Quevedo added, “It’s basically called the cash-loading services. It also provides greater convenience for both the SBA and Bayad Center consumers.” Cash-loading services provide convenience and immediate access for loading their Sterling Bank prepaid card. Bayad Center has been continuously expanding and the partnership will provide SBA’s prepaid cardholders access through strategically located Bayad

Center branches nationwide. Sterling Bank’s partnership with CIS Bayad Center is the lender’s response to one of the thrusts of the Bangko Sentral ng Pilipinas—to provide accessible financial products to Filipinos. “The bank sees the potential of Bayad Center’s branch network as a channel to promote its products and services, especially to the unbanked sector,” San Pedro said. “It is all about ensuring convenience and easy accessibility for our customers and clients,” he said.

3 essential skills that every entrepreneur should master


f you’re planning to start a new business, I believe that the first step is to ask yourself: “Am I ready to be an entrepreneur?” While having the proper mind-set is important, there are also skills that you need to become successful at business. The following are three of those essential skills.

Sales and marketing skills

I remember years ago as a young entrepreneur when I realized just how important sales and marketing was to any new business. As a somewhat technical person, I have always looked down in some measure on those who made sales their full-time occupation. I definitely do not feel that way anymore. When I started my first company, I worked part time in a local software development firm. It was amazing to me at the time, as I saw and realized how sales and marketing was absolutely essential to the success of the firm. Even in a company filled with talented programmers who make amazing software, the only way to bring money in the door was to get the word out via sales and marketing. If you are someone who has always had an aversion to sales, then it can be tempting to think that you will just create a great product or offer a great service and sales will take care of itself. This is just not the way it works. Yes, if you have a great customer expe-

reports and instant-noodle cups—but in order to rapidly scale up your business and properly document your processes for new employees, then you will need to master the absolutely essential entrepreneurial skill of becoming organized.

Fitz Gerard Villafuerte

personal finance rience, then customers will help spread the word about your company, but the only way to get any customers in the first place is by mastering the absolutely essential entrepreneurial skill of sales and marketing.

Organizational skills

Chances are that, if you took a random sampling of 10 entrepreneurs and paid them a surprise visit, you would be shocked at their lack of organization. Some of their offices have stacks of paperwork, cluttered desks, etc. For others, you may need to dig a little deeper to find that their computer has 89 desktop icons or 454 unread e-mails from last week in their inbox. The stereotype of the rushed, disorganized and frazzled entrepreneur is all too common. Yes, it is certainly possible to have great success while still being a disorganized mess, but your ceiling will always be limited by your lack of organization. Things may be trucking along just fine with your office—a pig sty of expense

Financial-management skills

If you don’t know the difference between a balance sheet and an income statement or can’t tell a liability from an asset or a business credit-card expense from a business loan expense, then you are likely holding your company back from its true potential. Yes, it is almost always smart to outsource accounting and other financial tasks to a good certified public accountant (CPA), but if you are not even able to prepare a budget or make smart planning decisions, then that is another matter altogether. If your financial-management (or even basic financial-literacy) skills are lacking, then take a basic accounting class at your local college, be proactive in having your CPA or other qualified financial planner thoroughly explain things to you, and commit to learning all that you can. Fitz Villafuerte is a registered financial planner of RFP Philippines. Learn more about personal f inancial planning at the 67th R FP prog ram this January 2018. To inquire, e-mail info@r f or text <name><e-mail> <RFP> at 09179689774.


Tuesday, December 12, 2017 • Editor: Lyn Resurreccion

The World BusinessMirror

Cyber heist linked to Russians Israeli and French hits banks from Moscow to Utah leaders tangle over US


previously unknown ring of Russian-language hackers has stolen as much as $10 million from United States and Russian banks in the last 18 months, according to a Moscow-based cybersecurity firm that runs the largest computer forensics laboratory in eastern Europe.

The MoneyTaker group broke into 20 systems, which includes 15 US lenders, targeting automated teller machines (ATMs) with “mules” and Russia’s interbank money-transfer system, GroupIB said in a report provided to Bloomberg. The hackers, who also breached a UK software and service provider, are now probing institutions in Latin America and may be trying to compromise the Swift international bank messaging service, according to the security firm, whose clients range from Russia’s

biggest lender Sberbank PJSC to Raiffeisen Bank International AG. “Criminals have changed tactics and are now focusing on banks rather than their clients, as was standard operating procedure in the past,” Dmitry Volkov, the head of Group-IB’s cyber-intelligence department, said by phone. Russia, considered a hotbed of government-backed information attacks, increasingly finds itself a victim of cybercrime. It took the initial blame for the Badrabbit ransomware virus that spread to more than 200 targets globally,

Corporate hacks prompt United States review of public role in company security.

even though some of the biggest disr uptions af fected Russian businesses.

‘Limited resources’

Since its first successful breach in May 2016, MoneyTaker has stolen from banks in New York, California, Utah and Moscow, primarily targeting smaller institutions with limited cyber defenses, Group-IB found. The average haul from US banks was about $500,000, and it stole over $3 million from three Russian lenders. “They understand that banks— especially community banks with limited resources—are the easiest marks,” Volkov said. The cell remained undetected by using so-called fileless malware that only exists on a computer’s temporary memory and destroys itself when the system reboots, meaning, it’s not permanently stored and, therefore, can more easily evade antivirus programs, according to Group-IB. At one bank, the hackers gained access to the network via the home computer of the lender’s system administrator.

This report doesn’t represent the full picture, and I can say with 100-percent certainty that there are more victims that haven’t been identified yet.”­— Volkov

While hackers are transnational, many new types of attacks are discovered in Russia because it’s at the forefront of cybersecurity, a deputy head of the Russian central bank’s information security and protection department, Artem Sychev, said in an interview in November.

In crosshairs

Group-IB said the United States banks were targeted by gaining access to their card-processing system and then opening accounts at the compromised institutions. The attackers removed limits on the legitimate bank cards and used mules to withdraw cash from ATMs. The virus was so stealthy that, in at least one instance, a bank was successfully robbed twice. While Group-IB didn’t uncover evidence of a successful attack on Swift by MoneyTaker, it found that the hackers were searching for documents related to the messaging system, which could indicate pending attacks. Last year, in one of the biggest heists in cybercrime history, hackers used Swift to steal $81 million from Bangladesh. “The more we dig, the more we’ll find,” Group-IB’s Volkov said. “This report doesn’t represent the full picture and I can say with 100-percent certainty that there are more victims t hat haven’t been ident if ied yet.” Bloomberg News


New evacuations as huge S. California fire flares up


OS ANGELES—A powerful flare-up on the western edge of Southern California’s largest and most destructive wildfire sent residents fleeing last Sunday, as wind-fanned flames c hur ned t hrough old-g row t h brush in canyons and along hillsides toward coastal towns. Crews with help from a fleet water-dropping planes and helicopters saved homes as unpredictable gusts sent the blaze deeper into residential foothill areas northwest of Los Angeles that haven’t burned in decades. New evacuations were ordered as the fire sent up an enormous plume near Montecito and Carpinteria, seaside areas in Santa Barbara County that had been under fire threat for days and were now choked with smoke. “The winds are kind of squirrely right now,” county fire Spokesman Mike Eliason said. “Some places the smoke is going straight up in the air, and others it’s blowing sideways. Depends on what canyon we’re in.” The department posted a photo of one residence engulfed in flames. It’s unclear whether other structures burned. Thousands of homes and businesses in the county were without power.

The air thick with acrid smoke, even residents of areas not under evacuation orders took the opportunity to leave, fearing another shutdown of US 101, a key coastal highway that was closed intermittently last week. Officials handed out masks to residents who stayed behind in Montecito, the wealthy hillside enclave that’s home to celebrities, such as Oprah Winfrey, Jeff Bridges and Rob Lowe. “Our house is under threat of being burned,” Ellen DeGeneres tweeted at midday last Sunday. “We just had to evacuate our pets. I’m praying for everyone in our community and thankful to all the incredible firefighters.” A few miles to the west, Santa Barbara Zoo was closed to the public and its 500 animals confined to their night quarters all day. The zoo was just outside the evacuation area, but smoke and ash blew through the 30-acre property. Firefighters made significant progress last Saturday on other fronts of the enormous fire that started on December 4 in neighboring Ventura County. As containment increased on other major blazes in Los Angeles, Riverside and San Diego counties, resources from those fires were diverted to the Santa Barbara foothills.

Forecasters said Santa Ana winds that whipped fires across the region last week would continue in some areas at least through Monday. A lack of rain has officials on edge statewide because of parched conditions and no end in sight to the typical fire season. “This is the new normal,” Gov. Jerry Brown warned last Saturday after surveying damage from the deadly Ventura fire. “We’re about ready to have firefighting at Christmas. This is very odd and unusual.” High fire risk is expected to last into January and the governor and experts said climate change is making it a year-round threat. Overall, the fires have destroyed about 800 homes and other buildings, killed dozens of horses and forced more than 200,000 people to flee flames that have burned over 270 square miles (700 square kilometers) since December 4. One death, so far, a 70-year-old woman who crashed her car on an evacuation route, is attributed to the fire in Santa Paula, a small city where the fire began. The Ventura County blaze also continued to burn into rugged mountains in the Los Padres National Forest near the little town

of Ojai and toward a preserve established for endangered California condors. Ojai experienced hazardous levels of smoke at times and officials warned of unhealthy air for large swaths of the region. The South Coast Air Quality Management District urged residents to stay indoors if possible and avoid vigorous outdoor activities. As fires burned in Ventura and Los Angeles counties, firefighters were already in place north of San Diego last Thursday, when a major fire erupted and rapidly spread in the Fallbrook area, known for its avocado groves and horse stables in the rolling hills. The fire swept through the San Luis Rey Training Facility, where it killed more than 40 elite thoroughbreds and destroyed more than 100 homes—most of them in a retirement community. Three people were burned trying to escape the fire that continued to smolder last Sunday. Most of last week’s fires were in places that burned in the past, including one in the ritzy Los Angeles neighborhood of Bel-Air that burned six homes and another in the city’s rugged foothills above the community of Sylmar and in Santa Paula. AP

Jerusalem decision

French President Emmanuel Macron (right) and Israeli Prime Minister Benjamin Netanyahu attend a news conference after a meeting at the Elysee Palace in Paris last Sunday. Philippe Wojazer/Pool via AP


ERUSALEM—The French and Israeli leaders sparred verbally last Sunday over the United States decision to recognize Jerusalem as Israel’s capital, while new violence rippled across the region following the move by US President Donald J. Trump. In Jerusalem, a Palestinian stabbed an Israeli security guard, seriously wounding him in the first attack in the volatile city since Trump’s pronouncement last Wednesday. In Beirut scores of Lebanese and Palestinian demonstrators clashed with security forces outside the heavily guarded US Embassy, and Arab foreign ministers meeting in Cairo demanded that the United States rescind the decision. The move upended decades of US policy, and a long-standing international consensus, that the fate of Jerusalem be decided in negotiations. Israeli and Palestinian claims to the city’s eastern sector form the emotional core of their conflict, and Trump’s announcement was seen as siding with the Israelis and has drawn wide international criticism. At a meeting in Paris with Israel ’s visiting Prime Minister, French President Emmanuel Macron condemned recent violence against Israelis. But he a lso ex pressed “ disapprova l ” of Trump’s decision, calling it “ dangerous for peace.” “It doesn’t seem to serve, in the short term, the cause of Israel’s security and the Israelis themselves,” Macron said. He urged Israel to freeze its construction of settlements on occupied lands and called for other confidence-building measures toward the Palestinians. Israeli Prime Minister Benjamin Netanyahu, who has called Trump’s decision “historic,” said Israel has maintained its capital in the city for 70 years and the Jewish connection to Jerusalem goes back 3,000 years. “Paris is the capital of France, Jerusalem is the capital of Israel,” he said. “We respect your history and your choices. And we know that as friends, you respect ours.” “I think the sooner the Palestinians come to grips with this reality, the sooner we move toward peace,” he added. The exchange between the two allies set the stage for what could be a tense meeting on Monday for Netanyahu with European Union (EU) foreign ministers in Brussels. The Jerusalem issue and the moribund peace process are expected to be high on the agenda. Last week EU foreign policy chief Federica Mogherini warned that Trump’s decision “has the potential to send us backward to even darker times than the one we are already living in.” She also warned that Trump’s “move could diminish the potential role that the United States could play in the region and create more confusion around this.” The meeting could be a precursor for what seems to be an emerging rift between Israel and the US on one side, and Europe and the Palestinians on the other.

Palestinian President Mahmoud Abbas has said Trump’s decision has in effect disqualified the United States from continuing in its role as the traditional mediator of peace talks. The Palestinians have spent recent days trying to rally Arab and broader international opposition to the decision. After Abbas’s political adviser Majdi Khaldi said last Saturday that the Palestinian leader won’t meet with Vice President Mike Pence when he visits the region this month, a Spokesman for Pence said last Sunday it was “unfortunate that the Palestinian Authority is walking away again from an opportunity to discuss the future of the region.” European Union leaders, including Macron, have reiterated support for establishing an independent Palestinian state alongside Israel. Trump has said he would support the idea if both sides endorse it— effectively giving Israel a veto over any peace proposal. Netanyahu’s government is dominated by opponents to Palestinian independence. Trump’s Middle East team, headed by his son-in-law Jared Kushner, has been working for months on a peace plan but has not yet released it. Israel captured East Jerusalem from Jordan in the 1967 Middle East war, and annexed the area to its capital in a move that was not internationally recognized. The Palestinians claim east Jerusalem as the capital of a future state, along with the West Bank and Gaza Strip. East Jerusalem is home to Judaism’s most sacred site, as well as key holy places for Christians and Muslims. These conflicting claims have erupted into deadly bloodshed in the past. A senior US official appealed to world leaders, especially in the Middle East, to calm regional tensions. Acting Assistant Secretary of State David Satterfield told Arab journalists that Trump’s pronouncement was merely a “recognition of simple reality” that Israel’s government already is in Jerusalem. He said the United States was not prejudging final-status negotiations about the city’s final borders and expressed hope that world leaders understand the US is committed to moving forward with a peace plan he expects to be unveiled in the new year. “This is a question of choice: Do leaders choose to speak to their peoples, to their regions in terms that reflect reality or in terms that incite or inflame?” he said. “We hope it’s the former.” The Palestinians staged three “days of rage” after Trump’s dramatic announcement, with clashes breaking out in flashpoints across the West Bank, east Jerusalem and the Gaza Strip, and Gaza militants firing rockets into Israel. Four people in Gaza were killed. In the West Bank, there were dozens of injuries, but no deaths. There were indications that Sunday’s stabbing at the Jerusalem bus station was motivated by Trump’s move, although police did not officially confirm it. AP

The World BusinessMirror

Tuesday, December 12, 2017


US growth pickup to spur earlier Fed hike in 2018, survey shows


strengthening United States economy may spur the Federal Reserve (the Fed) to raise interest rates twice in the next three-and-a-half months as a tight labor market pushes risks to the upside, a Bloomberg survey showed.

Median results of the survey of 41 economists, conducted from December 5 to 7, showed economists still expect three rate hikes in 2018 but moved forward one of those projected moves to March from June. There was near unanimity the central bank will raise the target range for the federal funds rate a quarter percentage point to 1.25 percent to 1.5 percent after its twoday meeting starting on Tuesday in Washington. “The unemployment rate has fallen sharply to 4.1 percent and on top of that we’ve had two straight quarters of 3-percent-plus growth,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “Everything on the economic front is pointing toward more and not fewer hikes.” The Federal Open Market Committee (FOMC) will issue a statement and new economic projections at 2

p.m. on Wednesday. Fed Chairman Janet Yellen is scheduled to hold a news conference at 2:30 p.m. That’s expected to be Yellen’s last post-meeting session with the media. Fed Governor Jerome Powell, President Donald J. Trump’s nominee to succeed her in February, is likely to be confirmed by the Senate. Economists don’t expect the leadership change to result in any major shift in Fed policy in 2018. Ninety percent of those surveyed said they believe the path of the federal funds rate will be “about the same” next year compared with their expectations had Yellen been reappointed. Economists do, however, see the economy beginning to pick up in ways that weren’t evident in mid-2017. The survey showed the perceived balance of risks to the outlook for inflation and growth shifting noticeably higher, with

changes in new quarterly projections that Fed officials will submit next week. Most notably they expected the median Fed forecast for economic growth in 2018 to reach 2.3 percent, up from 2.1 percent in September. They didn’t expect policy-makers, however, to adjust their median forecast for inflation at the end of 2018 from 1.9 percent.

Tax stimulus

Everything on the economic front is pointing toward more and not fewer hikes.”— Stanley 63 percent of those surveyed now seeing risks tilted to the upside. That means they think it’s more likely that growth and inflation

will exceed the Fed’s expectations than fall short. In the September poll, just 25 percent saw risks tilted to the upside. That balance was tilted to the upside in Bloomberg’s March survey, but shifted to “roughly balanced,” and slightly to the downside, after inflation readings fell below expectations for several months beginning in March.

What our economists say

Bloomberg Economics’s Carl Riccadonna and Yelena Shulyatyeva are forecasting two rate hikes in 2018, in June and December. They

also expect the FOMC’s median growth projection for 2018 will jump to 2.4 percent. The Fed’s preferred gauge of inflation, after excluding food and energy, fell as low as 1.3 percent in August, though inched back to 1.4 percent in October. It’s been below the Fed’s 2-percent target for most of the past five years. Gross domestic product on an annualized basis exceeded 3 percent in the second and third quarters this year, the first time it’s done that in two consecutive quarters since 2014. Economists predicted a few

UK ‘divorce’ official: No-deal Brexit now less likely


ONDON—The likelihood of Britain leaving the European Union (EU) without a future trade deal has “dropped dramatically” now that the two sides have reached a preliminary agreement on their divorce terms, the country’s Brexit secretary said last Sunday. The deal hammered out by Prime Minister Theresa May last week means the negotiations on Britain’s March 2019 departure from the EU can move onto the next phase, Brexit Secretary David Davis told the BBC. The progress should give Britain enough time to negotiate a freetrade agreement for once it is outside the European Union, making it unlikely the country will have to fall back on World Trade Organization (WTO) rules that would impose tariffs, he added.

“The odds, as it were, against a WTO, or no-deal outcome, have dropped dramatically,” Davis said. The risk of Britain crashing out of the EU without a deal has raised concern among business leaders who feared such a result would hamper trade and investment and weaken the nation’s economy. The danger of a no-deal Brexit would have been much greater without last week’s agreement on so-called divorce issues, including citizen’s rights and the Irish border, because the preliminary talks could have stretched on for months, leaving negotiators short of time to complete an agreement before the 2019 deadline, Davis said. The government’s goal is to maintain tariff-free access to the European Union market for both goods and services, which make up a large part of the British economy.

Critics have argued that time already is too short, citing the case of Canada, which took seven years to negotiate a free-trade deal with the EU. Davis disagreed, saying it will be easier for Britain because the country’s rules and regulations are already aligned with European Union rules after 40 years of membership. “We start in complete alignment, we start in complete convergence, with the EU and we then work it out from there,” he said. “The thing is how we manage it doesn’t undercut access to the market.” However, Davis noted that nodeal terms would be iron-clad until everything is agreed upon—underscoring a caveat in the deal announced last Friday. Asked what would happen if Britain weren’t able to reach a fi-

nal Brexit deal, Davis said Britain wouldn’t necessarily be bound by the commitments it made in the preliminary agreement, including provisions on the Irish border. Britain has guaranteed that Northern Ireland, which will have the United Kingdom’s only land border with the European Union after Brexit, would remain in “full alignment” with European Union rules to ensure the border remains open and trade between the two parts of Ireland isn’t impeded. Some have asked whether that means Britain as a whole will have to remain part of the EU’s single market and customs union, undercutting the government’s promise to leave the 28-nation bloc. Pressed on the contradictory statements, Davis said Britain still plans to leave both the single market and the customs union. While the

agreement May reached ensures that standards on goods and services will remain very close to those in the EU, the British government will decide how to achieve that goal, he said. The comments are already causing issues in Dublin, where Irish Prime Minister Leo Varadkar had described statements on avoiding a hard border in last week’s deal as being “cast iron.” The Irish government’s chief whip, Joe McHugh, branded Davis’s comments as “bizarre.” “My question to anybody within the British government would be, why would there be an agreement, a set of principled agreements, in order to get to phase two, if they weren’t going to be held up? That just sounds bizarre to me,” McHugh said. “This, as far as we’re concerned, is a binding agreement, an agreement in principle.” Bloomberg News

Freezing cities force China to ease anti-smog curbs on coal


hina’s efforts to tackle air pollution are getting a reality check, with some regions told to revert to burning coal after shortages of natural gas left people without heating, amid freezing winter temperatures. Officials in China’s frigid northern provinces were ordered to prioritize keeping citizens warm and areas that hadn’t yet converted fully to gas were permitted to burn coal for heating, state media reported last week, citing a statement from the Ministry of Environmental Protection. Beiji ng , wh ic h repor ted ly stopped using coal for heating and power in March, asked a plant to restart its coal-fired units because of gas shortages, Caixin magazine said last Saturday. The easing of curbs on coal came after some provinces were reported to have suspended heating to households and ordered factories and businesses to curtail power use because there wasn’t enough natural gas. Reducing the reliance on coalpowered energy is key to China’s push to reduce smog, which can be particularly bad in the north and northeast, home to the rustbelt and

cities like Beijing and Tianjin. President Xi Jinping has made the transition to cleaner power a priority, but implementation hasn’t been smooth. Switching industrial and residential users to gas pushed demand up 19 percent during the first 10 months of the year, according to data from China’s National Development and Reform Commission (NDRC). And this is the second straight year that regulators’ efforts to reform the energy sector have fallen victim to their own success. A drive in 2016 to limit coal output sent prices soaring and squeezed power companies. This year the creation of natural gas infrastructure hasn’t kept up with the government’s push to tackle pollution, leading to the heating disruptions, a particular problem for the north, which has—in parts—a winter climate similar to the US Midwest. Last month more than 1,000 households in the central Shaanxi province saw their heating suspended because of the gas shortage, reported. In the city of Wuhan, the local gas company reportedly said it would

Smog is bad in the north and northeast of China and in the cities of Beijing and Tianjin. Bloomberg

stop supplying gas to entertainment venues and asked people to stop cooking with the fuel during peak times of the day. In another town, gas-powered taxis and buses had to line up overnight after supplies were curbed. Chinese have taken to social media to vent their frustrations, with some claiming their coal-fired heaters were dismantled and that elderly people and children were suffering from the cold. Even state media has spoken out, with the China Daily saying in an editorial last week that local officials were

being too hasty in implementing the gas-for-coal drive. The environment ministry’s circular encouraging the use of coal if needed was sent to 28 cities—including Beijing—and was marked urgent, according to the China Daily. Those cities, which have long used coal for heating, were told in August to cut air pollution, but some natural-gas projects in the region are yet to be completed, the statebacked newspaper said. Multiple calls by Bloomberg News to the ministry weren’t answered. Beijing closed all coal-fired units

in its heating and power plants in March, making it the first city in China to be powered by clean energy, according to Caixin. But the municipal government has asked for coal-powered sections of a plant run by China Huaneng Group to be restarted because of the gas shortages, the financial magazine reported last Saturday. Calls and a fax to China Huaneng weren’t answered outside of regular business hours. The north often has issues with gas-supply shortages, but it became a national issue this year after it got attention on social media, said Tian Miao, an analyst at North Square Blue Oak Ltd. in Beijing. “There is a mismatch in these areas as the time taken to complete gas infrastructure projects—including project bidding and planning—has been much longer than it’s taken to dismantle coal-fired heating sources,” she added. The NDRC, China’s top economic-planning body, has set up a monitoring system with local governments and gas suppliers to combat shortages of the fuel, particularly in the north, China National R adio reported last Sunday. Bloomberg News

For those predicting higher growth forecasts, respondents were split over what would be the single biggest driver, with 15 percent citing the Republican tax package currently making its way through Congress and 15 percent pointing to faster global growth. “Global growth is going to be a positive for US exports, there’s no question about that, but consumer spending is 70 percent of the economy,” said Brian Horrigan, chief economist at money manager Loomis Sayles and Co. in Boston. Tax cuts for households and companies “could be a bigger factor” in boosting the economy in 2018, he added. When it comes to the biggest threats to the US economy in 2018, 45 percent chose “an external economic or financial shock.” Another 25 percent said a steep decline in stocks was the biggest potential threat, while 23 percent chose “a disruption in external trade relations.” Bloomberg News

Putin and Sisi set to finalize $30-B nuclear deal, boost ties


gypt and Russia plan to finalize this week a long-awaited deal to build a $30-billion nuclear plant in the North African country, officials with knowledge of the deal said, as the Kremlin seeks to further expand its influence in the volatile region. Russian leader Vladimir Putin is due to meet his Egyptian counterpart Abdel-Fattah El-Sisi in Cairo on Monday. Formal statements announcing the visit made no specific mention of the nuclear plant but Egyptian and Russian officials familiar with the matter said they were preparing for the possible signing of the energy pact after more than two years of talks. The Russian official said the deal was ready to be signed, though final approval will depend on top-level political discussions. Both officials asked not to be named as they were not authorized to speak to the media. Russia’s state nuclear monopoly Rosatom Corp. declined to comment. Egypt’s electricity ministry and the presidential spokesman did not immediately respond to calls or texts. Egypt’s state-run Al-Ahram cited an unnamed electricity official last Saturday, however, saying that the final deal would be inked during Putin’s visit. Putin has worked to boost Russia’s influence in the Middle East and North Africa in recent years, intervening militarily in Syria in 2015 and playing an active diplomatic role in the Libyan conflict and beyond. His visit to Cairo comes less than two weeks after Moscow announced that the two countries were negotiating a deal to use each other’s military air bases. Russia and Egypt agreed three years ago to begin work on a nuclear-power project, with Rosatom initially expecting the deal to be sealed in early-2016. But progress was delayed after the bombing of a Russian airliner over Egypt in late2015 in which 224 holidaymakers were killed.Bloomberg News

Global Eye

Tuesday, December 12, 2017 • Editor: Angel Calso



SoftBank Group’s Saudi Arabia powerful contacts could mean cash after crackdown


By Takashi Nakamichi | Bloomberg

with the inner circle of the Saudi government, there will be no impact at all,” Son said. While the collapse of merger talks in November between SoftBank’s United States wireless unit Sprint Corp. and T-Mobile US Inc. dented gains in the Japanese company’s shares, they remain up 21 percent so far this year.

illionaire Masayoshi Son may be getting closer to achieving his dream of making SoftBank Group Corp. the world’s biggest investor in technologies. The reason has to do with the main patron of Son’s $100-billion investment plan, Saudi Arabia’s Crown Prince Mohammed bin Salman. The Saudi prince has been the largest investor in the SoftBank Vision Fund, contributing almost half of the money Son has been raising to accelerate his dealmaking around the world. And since November, Prince Mohammed has been at the center of an unprecedented purge of officials and political rivals in the oil-rich nation, leading to a consolidation of his power. A stronger Prince Mohammed could mean steady flows of Saudi money into the fund, which allows SoftBank to make investments without adding to its heavy debt load and offering the potential for those investments to generate revenues to pay down the burden. At the same time, any unforeseen reversal in the prince’s fortunes may raise questions about the sustainability of his investments.  “Saudi Arabia has money to invest, meaning that it has the potential to sponsor the second, third Vision Fund,” said BNP Paribas SA’s Chief Credit Analyst Mana Nakazora, who added that having a more influential Prince Mohammed increases that possibility. Saudi Arabia has committed $45 billion to the fund, making it the largest investor.

Walking away

Increase influence With the Vision Fund, SoftBank’s billionaire founder Son is looking to increase his influence as a technology investor, wagering on the future of artificial intelligence (AI), connected devices, and the integration of computers and humans. The fund has raised at least $93 billion so far. In addition to the Saudi money, it had gathered $28 billion of SoftBank’s own money plus an additional $20 billion from other investors. “I think you have to be aware that the guy who is winning in Saudi today is Mr. Son’s friend who desperately wants the Vision Fund to help diversify Saudi Arabia’s economic future” away from oil, said Richard Kaye, a portfolio adviser at a Japan unit of Comgest Global Investors S.A.S., which holds around $165 million of SoftBank shares. Mitsuhiro Kurano, a SoftBank spokesman, declined to comment on the Saudi events and potential effect on SoftBank investments. Prince Mohammed, in a statement when the Vision Fund was announced in October 2016, noted “the long history, established industry relationships and strong investment performance” of SoftBank

Mohammed bin Salman, Saudi Arabia's deputy crown prince, looks on during a bilateral meeting with UK Prime Minister Theresa May at An Nasiriyah Palace in Riyadh, Saudi Arabia. Bloomberg

and its founder. SoftBank plans to invest as much as $25 billion in a new megacity the Saudi prince is building on the Red Sea coast and the state-controlled Saudi Electricity Co., people familiar with the matter said last month.

Chinese finance

Elsewhere, the fund is looking into investing in businesses owned by Chinese insurer Ping An Insurance (Group) Co., including Lufax, China’s largest online-financing company, and another business that offers AI-powered services for financial companies, other people with knowledge of the deals said last week. The fund has also agreed to invest $450 million in Compass, which is building an Internet-based

real estate platform, the New Yorkbased company announced. For bond investors, the fund may offer peace of mind. SoftBank now has ammunition to undertake deal making for some time without adding much to its liabilities, said Nakazora at BNP Paribas. The company’s interestbearing debt totaled 14.7 trillion yen ($130 billion) in the quarter ended September, according to its earnings data. S&P Global Ratings has a junk rating on SoftBank in part because of its “heavy debt burden and heightened financial leverage” amid big acquisitions and investment, the rating firm said in September. Some Japanese brokerages and investors have recently begun asking  Japan Credit Rating Agency (JCR) about whether the crackdown

in Saudi Arabia could hit the firm’s creditworthiness, said chief analyst Akihisa Motonishi. JCR rates SoftBank as A-, four levels above junk. “Because a lot is happening in the country, people are naturally wondering whether there is any risk to SoftBank,” he said. If SoftBank’s initial fund investment ends up tripling in value, “that would be positive for their credit” because the firm could use it to pay down its debt, Motonishi added. Saudi security forces arrested princes, ministers and former top officials  on November 4, in a development that analysts said would help Prince Mohammed consolidate his power. Son, in a news conference two days later, was unfazed.  “Because the fund is affiliated

A risk for SoftBank is the possibility of the Saudis walking away from the fund, Motonishi said. It would be especially negative for the firm’s credit if it began to borrow to fill in the hole, a scenario that he called very unlikely. Even if the Saudis withdrew, other investors would likely jump in on expectations that the fund would generate high returns, said Yoshihiro Nakatani, senior fund manager at Asahi Life Asset Management Co. in Tokyo. “I’ve been hearing that there are many who want to invest in the Vision Fund” if there is room, he said. SoftBank stated earlier this year that it had delivered a 44 percent rate of return over the preceding 18 years on its investments in Internet companies. Son isn’t the only one in Japan wooing Saudi Arabia. Prime Minister Shinzo Abe and King Salman have been trying to strengthen bilateral cooperation through  a package of initiatives announced in March. Japan wants to export more to Saudi Arabia in addition to buying its oil, whereas the Middle Eastern nation wants cutting-edge Japanese technologies to reduce its reliance on oil. Japanese firms including Toyota Motor Corp., synthetic fibers maker Toyobo Co. and engineering service provider JFE Engineering Corp. have exchanged memorandums of cooperation with the Saudis, according to Japan’s Ministry of Economy, Trade and Industry.

The Tokyo whale’s $150-billion ETF binge seen slowing down next year By Min Jeong Lee & Emi Urabe Bloomberg


S stocks surge and consumer prices inch higher, investors say it’s time for the Bank of Japan (BOJ) to reduce equity purchases that have been criticized for distorting the market. Sometime next year, the BOJ will cut its annual buying target for domestic exchange-traded funds (ETF) by as much as a third from the current ¥6 trillion ($53 billion), says Toru Ibayashi, head of Japanese equities at UBS Wealth Management in Tokyo. Soichiro Monji of Daiwa SB Investments Ltd. expects a similar reduction, but by the end of March. “¥4 trillion,” UBS’s Ibayashi predicted. “And everybody will understand.” Conditions have improved drastically since July last year, when the bank virtually doubled its ETF buying goal. Back then, investors were worried about another market downturn following Britain’s vote to leave the European Union. Now, they’re booking profits after Japanese stocks surged to their highest in 26 years, and watching as the economy marks almost a year of mild inflation. “Fear of deflation was behind the ¥6-trillion target,” Monji said in an interview. “We’re no longer in that kind of environment. Risks are now skewed toward the upside, rather than the downside. It’s hard for the central bank to justify its buying spree.” The BOJ started buying ETFs in 2010, with Governor Haruhiko Kuroda later accelerating purchases as part of an unprecedented stimulus package aimed at revitalizing the economy. The central bank had

Pedestrians cross a road in front of the Bank of Japan (BOJ) headquarters in Tokyo, Japan. The BOJ left its massive monetary-stimulus program unchanged even as it trimmed its inflation forecasts, signaling further divergence ahead from its global peers. Bloomberg

spent $150 billion on Japanese ETFs as of December 8. It owned 74 percent of the market at the end of October, up from 65 percent a year earlier, according to Investment Trusts Association figures, BOJ disclosures and data compiled by Bloomberg. Everyone from the head of the country’s stock exchange to the chairman of the Japanese Bankers Association has questioned the ETF program’s size and whether it artificially depresses volatility. The central bank slowed purchases in October, when the Nikkei 225 Stock average rose

for 16 straight days, its longest run on record. The bank, which tends to buy on days stocks fall in the morning, purchased only ¥167 billion of ETFs that month, well short of its monthly average of ¥505 billion for the year until September. Annual buying doesn’t necessarily need to be measured from January to December, BOJ Governor Kuroda said in Nagoya last month, while stressing that the target was for “about” ¥6 trillion a year. He sees no immediate need to adjust the pace of buying, he added. The BOJ stepped up purchases in November after equities retreated, buying ¥598 billion of ETFs. Ibayashi of UBS says the global economy has entered a positive cycle, allowing central banks around the globe to rein in massive easing programs. To him, the BOJ should be no exception, as companies are increasing capital spending, which he says will replace stimulus measures. Federal Reserve policy-makers are projected to raise the target range for their benchmark interest rate for a third time this year when they meet later this week. The European Central Bank decided in October to reduce monthly asset purchases by half starting in January. “Given the circumstances at this point in time, it is difficult for the BOJ to keep buying ETFs at six trillion yen per year,” Ibayashi said. Jonathan Garner, chief Asia and emerging markets equity strategist at Morgan Stanley in Hong Kong, says the ETF purchases have become “perhaps the most controversial part” of the bank’s stimulus program. The BOJ’s measures include everything from negative

interest rates and yield-curve control to buying tens of trillions of yen of bonds each year, on top of its stock purchases. “The current easing program is a bit too much,” said Kazuyuki Terao, chief investment officer at Allianz Global Investors Japan Co. “A bullish market presents a window for the BOJ to decrease its purchases.” Naoki Kamiyama, chief strategist for Nikko Asset Management Co. in Tokyo, and Hisao Matsuura, a strategist at Nomura Holdings Inc., say the BOJ won’t cut its ETF target anytime soon. For them, the bank is still far from its 2-percent inflation goal, and market distortion is less of a concern. While the BOJ owns about three-quarters of Japanese ETFs, that’s less than 4 percent of the stock market. “Why would the BOJ change?” Kamiyama said. “It would hurt investor confidence and make a pickup in inflation much less likely.”

Mild inflation

Core consumer prices, which exclude fresh food, rose 0.8 percent in October from a year earlier, still less than half Kuroda’s goal, despite the tightest labor market in decades and an economy that’s chalked up seven straight quarters of growth.But Ibayashi and Monji say any cutback in ETF buying wouldn’t hurt the economy or prices. Spending ¥4 trillion a year is plenty, according to Ibayashi, who expects the bank to promise to step in again when needed if it does lower the target. “We don’t have 2-percent inflation yet but we’re headed toward it,” Monji said. “That’s a reason to reduce the scale a bit. There’s no need to wait.”

Global Eye BusinessMirror

Sweden braces itself for property market’s rayless ‘November Noir’

Tuesday, December 12, 2017 A9

Tale of what could have been for the EU’s poorest country

Newly built apartment blocks sit beside a waterway in the Sodermalm district of Stockholm, Sweden. Bloomberg

By Hanna Hoikkala, Love Liman & Niklas Magnusson Bloomberg News


nyone with a stake in Sweden’s property market should make space for Thursday in their calendar. That’s when they’ll get fresh clues as to whether they are facing a temporary blip or the start of a full-blown crash. Svensk Maklarstatistik AB and Valueguard will both publish housing price data for November on December 14. There are indications that the monthly drop will be as big—if not bigger—than October’s, when prices fell 3 percent, the steepest decline since the global financial crisis of 2008. Nordea Bank AB expects a “November Noir,” with home prices declining 3 percent on a monthly basis and 1 percent on an annual basis. Property-listings web site Booli, which is owned by mortgage lender SBAB, said on December 7 that the average selling price for Swedish apartments last month fell 3 percent from the same period a year earlier, led by a 7-percent drop in Stockholm. While few analysts believe Sweden is headed for a repeat of the real-estate crash of the early-1990s, which brought the economy and the banks to their knees, households are getting increasingly jittery about the outlook of a market that ties up large chunks of their wealth. “I think prices have to come down, but I’m also a bit worried that we’ll have a similar crash as we had in the early-1990s, where the effects were substantial,” Ann-Helen Meyer von Bremen, a journalist, said in an interview at Stockholm’s central station. The turn in the market comes after years of rapid price gains, caused by a shortage of housing and recordcheap mortgages. A recent surge in construction has now pushed supply to outstrip demand. Figures

from Booli show that the number of Swedish apartments for sale was 57 percent higher in November than in the same month last year. Anders Lillehagen, 26, is experiencing firsthand the changing fortunes of Sweden’s housing market. The public-sector worker and his partner bought an apartment in Stockholm in 2015 and saw its valuation steadily climb, only to have seen that increase suddenly be erased. “We’ve been thinking about moving this spring and we’ve had brokers over at our place, but it’s all been very uncertain,” Lillehagen said in an interview in Stockholm. “They say that, if we want to move in February or March, we could maybe get about the same price as what we bought the flat for.” Psychological factors are also at play in determining future home prices. On December 11 SEB AB provided some insight into households’ expectations when it published its latest housing-price indicator, which measures the difference between those who believe prices will rise and those who expect them to drop. It’s already at its lowest level since 2013. All told, there may still be a glimmer of hope. “Looking only at developments over the past two weeks, prices have remained largely stable, both in the country as a whole and in Stockholm,” Nordea’s Andreas Wallstrom said on December 5. “This could be a tentative signal that we are close to the bottom and that our forecast of largely stable prices ahead is on track.” Riksbank Governor Stefan Ingves, who has been particularly sanguine in his warnings over surging property prices, has argued that the slowdown is “ not a big concern.”

A European Union flag flies outside the European Convention Center during a Eurogroup meeting of European finance ministers in Luxembourg. Bloomberg

By Elizabeth Konstantinova & Slav Okov | Bloomberg News


decade ago, Bulgarians flooded the streets in celebration of their ex-communist nation joining the European Union (EU). There was a light show in the skies above the capital. Then-Prime Minister Sergei Stanishev called it a “dream come true.” The euphoria wasn’t just about shaking off the country’s Eastern Bloc legacy.  Accession carried the promise of bridging the wealth gap with Europe’s richer west. Membership would boost trade and bring billions of euros in infrastructure investments. For its part, Bulgaria would rebuild its political institutions, bringing them up to European standards. Ten years later, as Bulgaria gears up to host the bloc’s six-month presidency for the first time, not all has gone to plan. While exports have doubled and living standards have improved, wage growth has disappointed and workers have fled what’s still the EU’s poorest member. The bloc’s prolonged financial crisis didn’t help, particularly with troubled Greece right next door, but  that’s not the

whole story. Neighboring Romania, which joined at the same time and embraced reforms more enthusiastically, has notched more impressive gains. Bulgaria may have passed up a chance to advance. “One can’t escape the impression that Bulgaria has missed out on economic-growth opportunities,” said Otilia Dhand, an analyst at Teneo Intelligence in London. “Given the level of economic development and given the level of wages in Bulgaria, it should still be outperforming everyone. But it’s not.” A major reason is corruption. Bulgaria ranks as the worst European Union nation for graft, and the issue is at the heart of many of its challenges. Foreign investment has stagnated, the EU continues to monitor the judiciary and some members are reluctant to permit entry to the

passport-free Schengen zone. There’s a renewed push to tackle corruption before Bulgaria takes the helm of the European Union presidency in January. But past initiatives have fallen flat, and analysts have little faith that Boyko Borissov, prime minister for much of the past 10 years, will change much this time. “I’m afraid there’s a lot of smoke being created right now that will ultimately lead nowhere,” Daniel Kaddik, project director at the Friedrich Naumann Foundation in Sofia, said by phone. “Look at how many attempts we’ve had in the past years at both judicial and anticorruption reforms. And nothing ever  really happened.” Hristo Vassilev, a 48-year-old entrepreneur, can testify to that. He’s waging a three-year court battle to regain control of his real-estate company, Happy Lands Ltd., after a gang used fake documents to appropriate it. Vassilev is currently fighting an appeal by the perpetrators against reinstating his ownership. “After all this time, no one’s been charged, even though prosecutors have a lot of evidence,” he said by phone from the Black Sea port of Varna. “The case is too big, and it’s full of things no one wants to deal with.” Scandals have engulfed bigger businesses, too, from the 2014 collapse of Bulgaria’s fourth-biggest bank to an aborted plan to build a €10-billion ($12-billion) nuclear plant with Russia’s Rosatom Corp.

Corruption costs almost 15 percent of Bulgaria’s GDP, the European Parliament estimates, and does nothing to stem an exodus of workers heading west in search of higher pay. The population has shrunk to 7 million from 8 million in the past 15 years. The logic for leaving is clear: at €544 ($640) a month, the average wage is a sixth of Germany’s. “The decline in the active population, which in Bulgaria is dwindling as a result of emigration, is hindering the economy,” Deputy Labor Minister Sultanka Petrova said  in an interview. While GDP is rising for a fifth year, growth is forecast to continue trailing peers, reinforcing the departures. It’s unclear where a solution will emerge. While Hristo Ivanov, a former justice minister, accuses the government of a “10-year imitation of reform,” the antigraft Yes Bulgaria party he founded this year failed to make it into parliament at elections in March. The EU said last month that the “institutional setup to fight corruption in Bulgaria remains fragmented and, therefore, largely ineffective.” While also criticizing Romania, whose judicial progress it monitors, too, that country has been cracking down on graft for five years, jailing scores of officials and helping unseat a sitting prime minister.

Political will

Bulgaria’s parliament gave preliminary backing in October to an anticorruption bill that would boost scrutiny of public officials and allow seizure of assets that exceed owners’ taxable incomes. The law aims to meet European Union recommendations and “show a clear political will to prevent corruption pressure,” Tsvetan Tsvetanov,  deputy leader of the ruling Gerb party, said by phone in November.  Responding to  emailed questions, the cabinet said it’s “working to overcome” poverty and corruption. To be sure, Bulgaria has achieved a lot in the past 10 years. A construction boom  has revitalized  tourism in the Balkan country’s ski and Black Sea resorts. The government boasts one of the EU’s smallest debt-to-GDP ratios and a stable budget. Germany and France back the country’s efforts to join the euro. S&P Global Ratings lifted Bulgaria’s credit rating to investment grade this month, lauding “sound government and external balance sheets.”

Africa’s richest woman prepares new deals after losing post in oil company By Ahmed Feteha, Tamim Elyan & Henrique Almeida | Bloomberg News


ess than a month after being fired as head of Angola’s state-owned oil company, Isabel dos Santos says she is studying new deals. Dos Santos, Africa’s richest woman, said two major Angolan banks she has links to are preparing to sell shares as part of plans to strengthen their operations at home and abroad. She also said last Friday she remains committed to her investments in Portuguese oil company Galp Energia SGPS SA and cable operator NOS SGPS SA. The daughter of former Angolan President Jose Eduardo dos Santos, the 44-yearold has an estimated wealth of $2.5 billion. Joao Lourenco, who became the head of state in September, fired dos Santos from her position as chairman of Sonangol last month. He has vowed to end monopolies and tackle corruption and poverty in a country where the former leader’s family and their allies control large sectors of the economy. Dos Santos said her dismissal was “normal” in the context of the change in political control. “I think there was a change in vision in terms of where to take the company,” dos Santos said in an interview during a conference in the Egyptian resort of Sharm El-Sheikh.

On speculation about the decision, she said: “I’m not a politician and my focus is on business, on building businesses.” Banco de Fomento Angola, the oil-rich country’s second-biggest bank, may sell a stake of as much as 25 percent in an initial public offering in the first quarter of 2019, said dos Santos, who is the vice president of the lender. The bank is controlled by Unitel, Angola’s largest telecommunications company, of which dos Santos owns a 25-percent stake. Lourenco’s government is also planning to sell a minority stake in a state-owned telecommunications provider and hold an auction for a fourth industry operator, moves that may threaten Unitel’s market share.

New shareholders

There are also plans to sell a stake in Luanda-based Banco BIC through a private placement of shares, dos Santos said. A roadshow to market Angola’s fourthbiggest lender to potential investors will take place in the first quarter of 2018, said dos Santos, who owns a 43-percent stake in Banco BIC and sits on the board. “These banks have gone from strength to strength and I think it’s time now to open their capital and receive new shareholders,” dos Santos said. Unitel owns 51.9 percent

The offices of Sonangol EP stand illuminated at night in Luanda, Angola. Bloomberg

in Banco de Fomento Angola, while Lisbonbased Banco BPI, controlled by Spain’s CaixaBank SA, holds the rest. “We’re still discussing whether London or Lisbon would be a better place,” she added. “But we’ve already made our intention clear to Angola’s central bank and their view was positive.”

‘Aggressive plan’ While the size of the possible sale of shares in Banco BIC hasn’t been decided, it has put together a team to study the share offering and has also picked financial advisers for the sale. Banco BIC, which has operations in Angola, Namibia, Cape Verde and Portugal,

would use funds raised from a share sale to fund the expansion, and is looking for opportunities in Africa and Asia, dos Santos said. “We’re looking at mergers, we’re looking at acquisitions. We have quite an aggressive acquisition and licensing plan.” Banco BIC is discussing an opportunity in South Africa, without elaborating she added. Her dismissal as chairman of Sonangol shouldn’t affect her investment in Portuguese oil company Galp Energia, where she holds an indirect stake, along with Sonangol and the heirs of Portuguese investor Americo Amorim of 33.4 percent, dos Santos said. “These are two different things,” she added. “The Galp investment is a very old investment, it dates back to 2008. It’s a stable investment.” Dos Santos said she remains happy with her investment in Portuguese cable operator NOS, which is controlled by a joint venture she owns with Sonaecom SGPS SA. “The position in NOS is one to maintain and to keep,” dos Santos said. “I like to think that our investment in NOS is an investment that will allow it to generate further growth and to look at the possibility of NOS growing in other areas, both inside and outside Portugal.”

A10 Tuesday, December 12, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror


No more cutting of trees please


hose of us who have ever stood before some particular tree and found ourselves utterly transfixed by its beauty understand why Joyce Kilmer wrote his poem “Trees” (many might be surprised to know the poet Joyce was not a woman but a soldier who was killed in action during World War I). Its first line goes “I think that I shall never see/A poem lovely as a tree” and many, at least of the older generation, can recite the rest of it by heart, perhaps because it is one of the first poems they learned in school or at home. Perhaps, it is also because one or two generations ago, there were still many trees to look at, whether in the provinces or the cities. There was a time, for instance, as late as the 1950s, when Manila was known as a garden city, when it had more green spaces than grey buildings, and trees shaded the streets and avenues. It is no coincidence that floods were practically unheard of during this time. Nowadays, trees are largely gone in the metropolis, and millions of hectares of our forests in the provinces have been denuded. Is it no wonder we don’t value trees as much? Recent news reports say some 32 Caliandra trees inside the Philippine Information Agency compound in Baguio City are going to be cut down to give way to the construction of a vacation cottage for the President’s Executive Secretary. There was the reported “massacre of trees” within a mineral production sharing agreement (MPSA) area of the Ipilan Nickel Corp.  in Brooke’s Point in  Palawan, the province often called our country’s “last ecological frontier.” Based on reports from environment officers, Ipilan cut down some 7,000 century-old trees within 30 hectares of land for its mining operations. There are also some 2,000 doomed trees along Escario Street, one of Cebu City’s main thoroughfares, planned for cutting to give way to the P10.6-billion bus rapid transit project to ease traffic in the metropolis. Two years ago, 187 trees that used to line the sidewalk of South Avenue along the walls of the Manila South Cemetery were removed to give way to a road-widening project linking the Makati Central Business District to Ayala Land Inc.’s Circuit Makati. If we don’t feel grief at the sight of a dying tree or one being cut off to give way to a new road, building, mall, golf course or whatever, well it may be because we also no longer carry a sentimental poem about trees in our hearts. We have become citizens who take the miracle of trees for granted, living in a country where trees are routinely cut and woodlands and forests are being mauled all in the name of development. Trees should be an extension of our people’s pride and community spirit. It should be a no-brainer for our cities to want to preserve trees. Local governments should even maximize in their urban-planning programs the positive benefits of trees, by siting buildings, structures, roads, car parks and other constructions appropriately to prevent trees from being cut down or removed. The Department of Environment and Natural Resources should set stricter guidelines to prevent the indiscriminate cutting of trees, whether on public or private land.  In fact, it should not be allowing this, unless the trees are already dying or pose a risk to public safety, and the local government and the people should be consulted before any tree cutting is done. We believe in development, but the natural environment, especially our trees, should be part of the development equation too, because they provide social and economic benefits to the community and to the ecosystem. Trees improve air quality by absorbing pollution and greenhouse gases. They reduce surface runoff water from storms and soil erosion and prevent landslides. They also enhance property values. Given a choice, people are more intuitively drawn to a greener landscape. Studies say it makes people more productive and healthier to be closer to nature. People linger and shop longer along tree-lined streets. Offices and apartments where there is more greenery have higher occupancy rates. Trees are natural attractions for tourists, homebuyers and businesses. This is the 21st century. There has to be a better way to build than simply paving over green space, a way to develop new structures without harming the existing ecosystem. When there are so fewer trees left, let us not touch them but enjoy them. Or else, the future generations will bear the cost of our follies.

Since 2005

BusinessMirror A broader look at today’s business ✝ Ambassador Antonio L. Cabangon Chua Founder Publisher

T. Anthony C. Cabangon

Editor in Chief

Jun B. Vallecera

Managing Editor Associate Editor City & Assignments Editor

Max V. de Leon Jennifer A. Ng Vittorio V. Vitug

Senior Editors

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes Judge Pedro T. Santiago (Ret.) Benjamin V. Ramos Adebelo D. Gasmin Marvin Nisperos Estigoy Aldwin Maralit Tolosa Rolando M. Manangan

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

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

Manny B. Villar

THE Entrepreneur Continued from A1


he Philippines, now the growth leader in Asia, has been attracting investors who see a lot of potential in domestic industries. In addition, the Philippine financial system has proven its resilience in previous global crises and continues to operate under international standards. Now is the time to invest in the Philippines, according to President Duterte’s economic team, which has made presentations about the investment climate and business opportunities in the country. From the monetary authority perspective, the Philippines continues to be in a sweet spot characterized by low and stable inflation and rapid economic growth. In his presentation, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. says the BSP’s policy direction over the next six years will be “continuity, plus, plus.” The “continuity” part means the BSP will continue to implement sound monetary policy and effective bank supervision that have resulted in low and stable inflation and a

strong and resilient banking system. The “plus, plus” refers to the BSP’s plan to implement ambitious financial-sector reforms that will bolster and support equitable economic growth. Espenilla, who was appointed BSP governor in July this year, noted that, since 2009, the BSP has consistently achieved its inflation target, except in 2015 and 2016 when inflation went below 2 percent due to unusually low oil prices. Moreover, as of the second quarter of 2017, the Philippines has posted 74 consecutive quarters of uninterrupted growth (from the first quarter of 1999 to the second quarter of 2017), or a span of 18.5 years, with growth accelerating in recent years.

PSE bad? SEC bad? John Mangun

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

Online Editor Social Media Editor

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

BSP bolsters Philippines’s investment-friendly climate



hat do the following locations have in common: a hospital waiting room, a fast-food restaurant and a bus terminal? You will probably see a sign that reads: “Do not leave your valuables unattended”. A person with even the minimum amount of common sense understands that you have to take care of your own possessions. The sign is placed there, not to inform people of the realities of life, but to simply remind them if they get distracted. Also, you may see, “This establishment is not responsible for any loss or theft of personal property.” Perhaps a copy of those two signs should be put at the top of every stockbrokerage account form in big letters. An important legal concept is “in loco parentis,” which is Latin for “in

the place of a parent.” It helps define the legal responsibility of a person or organization to take on some of the responsibilities and functions of a parent. This idea has, most often in the past, been applied to a school setting, where teachers and administrators are required and expected to protect the students in a manner similar to how parents would protect their children. The problem is that many people still expect to be treated and protected as if they were children and kept out of trouble. The delisting of the shares of Calata Corp. by the Philippine Stock

The BSP chief expects this combination of high growth and low inflation to be sustained moving forward on the back of the economy’s rising productive capacity and prudent conduct of monetary and fiscal policy. On the external front, the Philippines’s balance of payments (BOP) position is very manageable and can stand resilient against external headwinds. The BSP estimates a moderate BOP deficit of $500 million this year, equivalent to -0.2 percent of GDP. Providing liquidity buffer to the BOP is the country’s gross international reserves, which stood at $81.7 billion as of end-August, equivalent to almost nine months’ worth of imports of goods and services. At this level, our reserves are also larger than the country’s total outstanding external debt, which continues to decline. The Philippine banking system is now on very sound footing and continues to be a stable anchor for the economy, according to Espenilla, and this is a product of deep and meaningful financial-sector reforms that the BSP implemented since the 1997 Asian Financial Crisis. The reforms include the enactment of a law in 2014 that allows the full entry of foreign banks. This complements the BSP’s other initiatives to further liberalize the industry. The BSP has lined up more reforms to further strengthen the

efficiency and competitiveness of the economy. These include the fine-tuning of monetary-policy operations to make it more market-oriented and to make the BSP even more effective in managing domestic liquidity; initiatives that will deepen the local currency bond markets, consistent with the need to fund infrastructure and other big-ticket investments; and issuing regulations enabling digital innovations and financial technology to allow more people, including those in far-flung areas, to access financial products and services. Espenilla assures investors that the Philippines can sustain a highgrowth economy and that the country will remain among the most resilient in the world to external shocks. For its part, the BSP will stay focused on its core mandates of price stability and financial stability, conducive to sustainable economic growth. It will also continue to adopt ambitious financial-market reforms that will expand economic potential, avoid overheating and lay the foundation for durable economic growth. From my perspective, the Philippines is one country where the monetary authority is not focused only on monitoring the financial system but is actively contributing to sustaining economic growth.

Exchange has created the same kind of complaining. Sure, many investors have been left holding the bag, and it is certainly reasonable that they would be angry. Nonetheless, if a baby is born under a full moon with wolves howling in the night, fiery red eyes and a skull-and-crossbones birthmark on its forehead, this may not be the person you want holding your immortal soul in the future. When the stock of a listed company appears to have been manipulated from the first day of trading, and 13 individuals are charged with that manipulation, it might be wise to find another issue to buy. And do not expect either the Philippine Stock Exchange (PSE) or the Securities and Exchange Commission (SEC) to act as your mommy to protect you. That is your job. Philippine courts have clearly ruled in cases of investors being taken for a bad trip that the SEC does not have “in loco parentis” responsibilities. While both the PSE and the SEC have rules and penalties for breaking those rules, the same can be said for snatchers and bank robbers. But if you rely on those laws to protect

you, you are just being foolish. Trading in Calata shares was suspended for—among other violations—failure to file the required disclosures and documents to the PSE in a timely manner. You can be late paying your association dues or with your spouse’s birthday present. You do not fail to file on time if you are a listed company. Earlier this year, I cautioned that a listed company was late in filing its financial statement. They submitted their documents the next day, one day late. No harm; no foul. But the reality is that a company that does not file on time is either hiding something or is incompetent and, either way, is not a company you want to own. “Do not leave your valuables unattended” and “This establishment is not responsible for any loss or theft of personal property.” That is the way it is and, if you are old enough to invest, you should be mature enough to know that.

For comments, e-mail mbv.secretariat@gmail. com or visit

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

Opinion BusinessMirror

The insurgency situation, then and now

Partisan politics could derail economic growth Ernesto M. Hilario

Cecilio T. Arillo



N the 16 months that President Corazon C. Aquino ran the government as a dictator after abolishing the 1973 Constitution and wreaked the entire Marcos bureaucracy, she arbitrarily freed the communists from prison and their social-democrat allies.

After that, she declared a unilateral cease-fire and held peace talks with them without precondition, hoping that she would win the coveted Nobel Peace Prize. Among those released were Jose Maria Sison, Communist Party of the Philippines (CPP) chairman, and Dante Buscayno, New People’s Army (NPA) commander, who were placed, respectively, in the custody of the late Joker Arroyo, President Aquino’s first Executive Secretary, and Doña Aurora Aquino, the President’s mother-in-law. Sison subsequently escaped to Eastern Europe on a passport issued by the Aquino government and then settled in Utrecht, Netherlands, where he relentlessly directed the armed and political struggle against the Philippine government with other members of the CPP Central Committee, who later joined him there. Sison and the key CPP members were convicted by the courts for waging an insurgency war for more than two decades before Mrs. Aquino freed them from prison. Their socialist democratic allies were, likewise, imprisoned for exploding bombs and burning shopping malls and hotels that killed innocent people, including American nationals. Worse, the Aquino administration, after issuing Proclamation 2, which granted general amnesty to communist rebels and their socialist democrat allies (left of center), compromised national security, employed many of them in her government and triggered a spate of rebellion among the young officers in the police and military organizations. Hundreds of these leftists and their allies later went back to the hills and elsewhere and resumed fighting the government. Some infiltrated the trade unions, schools and universities, businesses, church, media, judiciary and departments of Agrarian Reform, Agriculture, Human Rights Commission, defense department, Congress and other sectors of society. When Marcos lost power, the NPA, the guerrilla arm of the CPP, had 16,500 regulars, but none of them could operate effectively in Metro Manila. By 1988, the NPA had an armed strength of 25,200, including 2,500 operating in Metro Manila. Worse, 20 percent of the country’s 42,000 barangays or villages were under the CPP-NPA’s influence. Ironically, this was the same year that President Aquino announced in her second State of the Nation address that “the insurgency was broken.” Between 1988 and early-1992, 78 policemen and military men were systematically assassinated by the NPAs in Metro Manila alone. Only then-Defense Secretary Juan Ponce Enrile and the reformist officers questioned President Aquino’s immediate release from prison of the communists and their allies at the height of the Edsa euphoria. “Cory’s point was that everybody who fought Marcos deserved a second chance for freedom. It did not seem to matter that Sison and company were not just fighting Marcos—they were out to overthrow the state and democracy. Cory would be proven wrong and naïve,” Enrile said. Enrile, who initiated the militarylead Edsa uprising that swept Aquino to power and whom she had tried to banish from her administration that early, told the President and her Executive Secretary that releasing the leftists from prison without first requiring them to renounce their

Sison and the key CPP members were convicted by the courts for waging an insurgency war for more than two decades before Mrs. Aquino freed them from prison. Their socialist democratic allies were, likewise, imprisoned for exploding bombs and burning shopping malls and hotels that killed innocent people, including American nationals. own constitutions, abjure armed struggle and pledge allegiance to the Philippine flag would be a dangerous move. The CPP and NPA operate under their own separate constitutions and bylaws that they approved on December 26, 1968, and March 29, 1969, respectively. Recalling that incident, thenArmy Col. Gregorio B. Honasan, head of the Reform the Armed Forces Movement, known by now as Revolutionary Alliance of the Masses, said that President Aquino merely ignored Enrile’s advice. Honasan said: “Mrs. Aquino was supposed to provide the leadership and a clear direction to the armed services in fighting the communists, but she chose, instead, to stay in the middle [centrist] and treated the insurgency problem as if it was the sole concern of the individual soldiers.” First elected to the Senate in 1995 as an independent candidate, Honasan said when President Aquino ordered the military to deliver a string of victories against the communists, “I didn’t know whether I should laugh or curse her, for how can we deliver a string of victories when she was sleeping with the communists and, at the same time, treating the military as her enemies?” Mrs. Aquino’s successor, President Fidel V. Ramos, who also aspired the Nobel Prize, did not even object to the wholesale release of the leftists, according to Enrile in his book. Worse, Ramos repealed Republic Act 1700, the country’s only anti-subversion law, with his allies in Congress on January 22, 1992. The repeal, in effect, created a serious security vacuum, enabled the communists to expand and rearm, resurrected the already moribund Moro National Liberation Front (MNLF) and revitalized the Moro Islamic Liberation Front, a group that had been granted belligerent status by the previous regimes and now incessantly demanding for the creation of its own laws, separate territory, parliamentary system of government, separate taxation, armed force and its own human-rights commission, among others, all in violation of the Philippine Constitution. It can be recalled that it was also Mrs. Aquino who resurrected MNLF Chairman Nur Misuari, then on selfexile in Libya, on the initiative of her brother, Jose “Peping” Cojuangco, Local Government Secretary Nene Pimentel and Butch Aquino, her brother-in-law. With them then was socialist-democrat Norberto Gonzales, who played a key role as a national security adviser of both Presidents Ramos and Gloria Macapagal-Arroyo. Looking back, can the Moros really outsmart President Duterte and Congress in the name of a “peace negotiation,” which many observers believed is just, to them, an extension of their battlefield as multifarious security events showed?        To reach the writer, e-mail cecilio.arillo@

Tuesday, December 12, 2017 A11



he Philippine economy is doing well as its growth prospects for this year remain within target. The International Monetary Fund (IMF) sees a 6.6-percent GDP growth for 2017 based on what it said are continued robust domestic demand driven by investments and consumption, and fiscal policy supportive of growth. While the multilateral lender has lowered its 2018 growth projection for the Philippines to 6.7 percent, from 6.8 percent, it has emphasized that this still “remains one of the fastest growth rates in Asia.” “The Philippine economy has performed well and is in a favorable position to address its socioeconomic challenges. Sound policies have delivered solid growth, low inflation, financial stability and external and fiscal buffers,” the IMF said in its latest assessment of the Philippine economy. The Asian Development Bank also sees the Philippines growing 6.5 percent in 2017 and 6.7 percent in 2018. Moreover, we are likely to sustain economic growth in the next few years as a result of government’s focus on infrastructure development, buoyant private-sector investment and the recovery in external demand. That’s the overall assessment of the Philippine economy by Moody’s Investors Service, which said real GDP growth for the rest of this year would be stable and average 6.5 percent for the year as a whole.

Meanwhile, foreign direct investments (FDI) surged to $674 million in June, or 183.1 percent higher than the $238 million recorded in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP). The BSP is targeting a net FDI inflow of $8 billion this year after reaching a record high of $7.9 billion last year on the back of enhanced investors’ confidence in the Philippine economy. Our economic growth could be derailed, however, by what appears to be a relentless assault on the integrity of our electoral process. While the 2016 elections gave a clear mandate to Rodrigo Duterte as president and Leni Robredo as vice president, the camp of former senator and losing vice presidential candidate Ferdinand “Bongbong” Marcos Jr. wants the Commission on Elections (Comelec) to recount votes in 25 provinces as part of his electoral protest.

The baker and the empire By Ross Douthat

New York Times News Service


here are fine constitutional lawyers who can argue back and forth about the Masterpiece Cakeshop case the Supreme Court heard last week, which will determine whether a Christian baker can decline to make a same-sex couple’s wedding cake. The court’s decision will either limit anti-discrimination law or limit First Amendment protections, so it’s not surprising that you can find deeply footnoted legal arguments on both sides. Nor is it surprising that I’m on the side of the baker. But I’m not going to make a constitutional argument for his rights. I’m going to make a political argument for why our country would be better off if he were left alone to bake his cakes. The United States has the rules of a democratic republic but, increasingly, the cultural divisions of a sprawling Old World empire. We are governed by a Constitution, by the power of national majorities (or minorities with good luck in the Electoral College), and our laws are basically uniform across the land. But the scale and diversity of our country is vast and wild, encompassing immigrants from every part of the world and a native population riven by racial divisions, ideological wars and a widening religious chasm.

Democratic life requires accepting that your own faction may be out of power roughly half the time. But, in a culture this diverse and divided, we trust our fellow citizens less, we share less with them, and we fear that any political defeat will leave our communities at their mercy, that if we lose power, we will be routed and destroyed. Meanwhile, because we are so distant from our rivals, we cannot recognize that they share the same fears about what will happen if power is in our hands—or else we dismiss those fears as the pleadings of a wicked claque whose destruction is entirely merited. As a conservative Catholic who works in a liberal milieu, I watched this happen after Obergefell v. Hodges. For its opponents, the same-sex marriage ruling was less frightening for what it did than for what they feared might follow: not just legal same-sex nuptials, but a sweeping legal campaign against the sexual revolution’s dissidents, in which conservative believers would be prodded out of various occupations, while their schools and hospitals and charities would be fined and taxed and regulated and de-accredited to death. And liberals who felt ascendant in the Obama years simply couldn’t accept this fear as something to be managed and assuaged; to them, it was either ridiculous alarmism or a cloak for bigotry. So while the Obama White House was requiring nuns to

The Marcos camp alleges that the recount would clearly show “major discrepancies” in the votes cast and those transmitted by the votecounting machines and reported in the certificates of canvass (COCs). The Supreme Court, however, denied the Marcos camp’s petition to examine election documents in all the 25 provinces as it said it would decide on the merits of the electoral protest based on the results of the recount of ballots in only three provinces: Camarines Sur, Iloilo and Negros Oriental. Collecting the ballots in these three provinces would in fact already cost millions of pesos, aside from taking up much of the time of officials and personnel of the Supreme Court convening as the Presidential Electoral Tribunal (PET). The Comelec has already started the process of decryption and printing of ballot images, a process that would take at least seven months. The PET would collect ballots starting in Camarines Sur in January. The recount of votes in the three provinces would prove the reliability of the automated process of counting votes, a system that removes human error and fraud. Data show that of the 500 election protests questioning the past automated elections in 2010, 2013 and 2016, not a single one had succeeded, which can only mean that the data in the vote-counting machines matched those reported in the COCs. This also means that attempts by certain sectors to bring back the fraud-ridden manual elections are bound to fail amid the clear and unmistakable benefits of automated

pay for abortifacients and the American Civil Liberties Union was suing Catholic hospitals for not performing sterilizations, and state bureaucrats were trying to punish a handful of Christians in the wedding industry, what Rod Dreher called “the law of merited impossibility” dominated the liberal mind: Religious conservatives were worrying about attacks on their institutions that would never arrive, and when the attacks did arrive, they obviously deserved it. Which, in turn, encouraged religious conservatives to vote rather desperately for a celebrity strongman named Donald J. Trump. At which point the roles reversed, and suddenly it was a certain kind of right-winger who couldn’t understand why blacks and Hispanics and Muslims might feel threatened by the new president, why Trump’s rhetoric might make them fear for their very safety, why causes conservatives regarded as procedurally neutral exercises in enforcing laws— illegal-immigrant roundups, strict voter ID laws—were experienced as acts of white-identitarian aggression. This kind of cycle of incomprehension and aggression tends to destroy republics if it isn’t broken, if leaders can’t compromise ideological principles to maintain civic peace, if partisans can’t imagine how the world looks in communities vastly different from their own.

Race and religion are the crucial loci here. We need a liberalism that doesn’t just rely on demographic replacement to win elections and a conservatism that doesn’t just rely on fears of that replacement to hold its own. And we need a way to make the new shape of religion in America, in which a Christian core looks resilient, the lukewarm are secularizing and non-Christian faiths expand apace, feel less threatening to everybody—so that conservatives stop panicking about Shariah law every time a mosque goes up nearby, and the left stops preening about social justice while dragging nuns and florists into court. I’ve written before that one hope is a president who behaves like a good emperor, who acts to reassure threatened-feeling out-groups in a way that Barack Obama failed to do and Trump is incapable of even attempting. But Anthony Kennedy is also an imperial figure, and he has a chance to rule like a good emperor in the Masterpiece Cakeshop case, to balance his Obergefell decision with a panicdefusing counterpoint. Liberalism won the same-sex marriage battle. Religious conservatism isn’t going away. We all have to find a way to live together. That goal requires some compromise and magnanimity. Here is an opportunity: Please, for the sake of the country, leave the baker alone.

elections. The Filipino electorate should protect the transparent and error-free counting of votes through the automated system in order to strengthen our democratic system. The successful conduct of the past three automated elections, perceived by many Filipinos and the international community as credible and honest, is among the key reasons why the Philippines now has a favorable image as reflected in successive credit-ratings upgrades and continuing economic stability. Automated elections have made the transmission of results fast, efficient and credible, earning the trust of the public and investors. The majority of Filipino voters were satisfied with automated elections and want this electoral system to continue. In the 2016 elections, the speedy transmission of results allowed the proclamation of nearly 18,000 elective positions within 10 days after the election. Filipino voters also knew who the next president would be on the election day itself. With this third automated political exercise, we can already conclude that manual elections, with their vulnerability to dagdag-bawas and other forms of electoral fraud, are a thing of the past. But why are there still doubts on the reliability of computerized polls? There should be no going back to manual elections as certain quarters insist. Why do they want a return to manual elections anyway? So that the dagdag-bawas operators can once again resort to manipulation and thwart the people’s will? E-mail:

Spotify could get a little wild when it goes public By Matt Levine | Bloomberg View


t looks like Spotify AB really is going  to go public by  doing a direct listing on a United States stock exchange, and I am starting to get excited. The idea of a direct listing is that, instead of doing an underwritten initial public offering (IPO) in which sellers (Spotify and its founders and early investors) decide how much they want to sell, sign up some banks, build a book of demand and then, all at the same time, sell their stock to investors chosen by the underwriters, Spotify will just one day declare that it is public and that anyone who wants to buy or sell can, on the stock exchange, like any other stock. In practice, I assume this means that Spotify will go public by means of an opening auction on the New York Stock Exchange or Nasdaq: Early one morning, some Spotify shareholders will  make indicative offers  to sell

their shares, and some bold investors will make indicative bids to buy them, and the exchange will publish some tentative price that seems like it will clear the supply and demand, and then other shareholders and buyers can come in and adjust the prices and quantities that they want and, eventually, a clearing price will be reached, and the stock will open and trade normally. It’s what happens in every other stock every morning, except that every other stock had a closing price the day before, and Spotify won’t. So that opening auction will be a bit wild.  If it is totally wild, that’s a little bad: If the opening cross in Spotify is at $10, and then the stock quickly trades up to $30, future companies will be skeptical about direct listing because it “leaves money on the table” (for their shareholders) while, if it opens at $10 and then trades down to $3, future buyers will be skeptical about direct listing because it “creates a

winner’s curse.” On the other hand, it’s not that bad, just because not that much stock needs to change hands at the opening price. If you’re an early investor who owns a million Spotify shares, you can chuck a thousand of them into the opening auction to see what happens, and then sell the rest over the course of the day or week or month. It’s not as much of an all-or-nothing proposition as a traditional IPO is, where you sell a big chunk the first day and then are (typically) locked up from selling any more for six months. My bigger worry with the direct listing is just that: If not much stock changes hands on the first day, then you have a weird situation where the public market for Spotify is a tiny fraction of its market capitalization. Usually, when a company IPOs, it sells a lot of stock, and then frenzied speculators and high-frequency arbitrageurs and excited retail investors have a lot of

stock to trade back and forth among themselves. If Spotify direct-lists, and most of its investors decide to wait a while to see how it shakes out, then you’ll have a lot of people doing a lot of trades with not very much stock. That could lead to a lot of volatility for a long time. But if it works. Part of the point of a traditional IPO is that you need the human touch to make trading orderly: Bankers need to allocate shares thoughtfully to a mix of long-term investor, and set a price that gives those investors reasonable upside. A stock exchange’s mechanical auction process—where anyone can buy or sell, and where prices are set by brute supply and demand rather than the experienced judgment of professionals—is fine for the daily opening of a public stock, but obviously inappropriate for something as important as an IPO. Unless it works. In which case, what do you need the humans for?

2nd Front Page BusinessMirror

Transco ready to partner with China Telecom, but franchise may not allow it


By Lenie Lectura @llectura & Lorenz S. Marasigan @lorenzmarasigan

he president of the National Transmission Corp. (Transco) on Monday said the state firm is a candidate to be the local partner of state-run China Telecom Corp. in the much-hyped search for a third player in the country’s telecommunications industry.

“We can be the 60 percent,” said lawyer Melvin Matibag during a media gathering at the Department of Energy. “They have the technical expertise in operating and Transco has the facilities to offer. This will shorten the process.” Matibag was quick to point out though that there are no discussions with China Telecom on this yet. “It’s beyond my pay grade. I think they are talking to somebody higher, maybe the secretary, secretary of finance or the Office of the President. What I did is to make the available recommendations.” The Transco official is open to partnering with another local firm, if needed. “Or maybe not the entire 60 percent, we can still partner with a private entity.” If all things fall in the proper place, Matibag said, “The way we project it, for Luzon we can do it  in six months, and for the entire country for one year. This is from the time it’s going to be agreed and all.” As a rule, foreign firms could not operate alone in the Philippine telco industry and would need to partner with a local company.  Another possible candidate to be China Telecom’s partner is Philippine Telegraph & Telephone Corp., which had said it was talking with China Telecom and Datang Telecom about strategic partnerships to challenge the PLDT group and Globe Telecom Inc. President Duterte last month asked China to try to invest in the

Philippine telecom industry. “We want to push Transco to be part of whatever project it is, considering the owner of the facility is Transco,” Matibag added. For Winthrop Yu, the chairman of the Internet Society of the Philippines, the entry of the Chinese telco is good for the market, as this could help heighten competition. “The more the merrier,” he said. “The sooner the better.” Competition in the telco market has been limited between the two providers: PLDT and Globe. Introducing a new player will help further competition, thus, driving prices down, while services improve. 

Spectrum limitation

Better Broadband Alliance convener Mary Grace Mirandilla-Santos, on the other hand, is quite curious on how China Telecom would enter the Philippine market. “If, for example, the third telco plans to offer fiber broadband but will have to start from scratch, nationwide deployment would take five years,” she said.  There is also the issue on mobile-data services, which require telco operators to have a generous amount of frequencies to flourish in the market.  “If it plans to offer mobile broadband and other services, it will have to find a way to get the spectrum that it needs, most of which are with the incumbent telcos,” Santos said.  Data from the National Telecommunications Commission (NTC) showed that existing telcos hold the majority of the said real

Transco’s franchise does not allow it to operate as a telco. It needs to have Congress approval for such a franchise.”—Santos

estate to date. PLDT holds 400 MHz of the total holdings, while Globe has rights to 325 MHz.  What remains for budding telecom players is a mere 140-MHz frequencies in the 700-MHz, 850MHz, 2100-MHz, 2500-MHz and 3500-MHz spectrums.  Spectrum  is the real estate on which telecommunication operators develop their respective network to deliver services to customers.  The amount of spectrum assigned to a telco has an impact on the cost, the build capacity, overall network performance, ability to offer new multimedia services and general customer experience of wireless services. Democracy.PH Founder Pierre Tito Galla added that China Telecom may find it hard to provide good mobile services, given the spectrum holdings available at the NTC.  “China Telecom may  find that it could be prohibitive to provide SMS and voice services. They may not become a third mobile player to challenge the duopoly, but just another player in the wired space,” he said.  He added that, in order to make this setup work, the government needs to refarm and reallocate the spectrum holdings “as soon as possible.” “We need spectrum refarming and reallocation as soon as possible, if we want more players,” he said. 

Congressional franchise

What bothered Santos more, when she learned that Transco could be China Telecom’s local partner, was the issue on a congressional franchise. “Transco’s franchise does not allow it to operate as a telco. It needs to have Congress approval for such a franchise,” she said. Santos is also curious as to how this would play in the Department of Information and Communications Technology’s (DICT) plan on

using the power grid as backbone to its free Wi-fi Program. “It would be interesting to see how this would affect the DICT’s plan to use the fiber in the power grid for building the Domestic Wideband Information Network and as the backbone of its free Wi-fi program,” she said. 


And, while PLDT is mum on the entry of China Telecom, Globe has signaled that it is ready to face a new comer in the market. “We are ready to compete just as we have been doing all these years in this business,” Globe Spokesman Yolanda C. Crisanto said.  T he C h i nese gover n ment , which controls its phone carriers, picked China Telecom to be the one entering the Philippines, Communications Secretary Martin Andanar said last Sunday, citing information from a Cabinet meeting last week. China Telecom will have to look for a local partner with an existing franchise and a significant presence in the Philippines, Andanar said. Shares of PLDT and Globe fell as Duterte, who has sought warmer ties with China amid a South China Sea territorial dispute, pushes through his pledges to open the phone market. For China Telecom, entering the Philippines would help the company expand into one of the fastestgrowing economies in Asia. Philippine Telegraph & Telephone Corp. said last month that it’s in partnership talks with China Telecom, China Mobile Ltd. and other Chinese companies. China Telecom confirmed in an e-mailed statement that it’s conducting a preliminary study on investing in the Philippines, but no concrete plan had been determined. PLDT fell as much as 5.2 percent on Monday, while Globe Telecom dropped as much as 4.3 percent.



file photo

A12 Tuesday, December 12, 2017

he country’s milled-rice production this year could settle at 12.78 million metric tons (MMT), 5.35 percent higher than the 12.13 MMT recorded output last year, according to the latest forecast of the United Nations’s Food Agriculture Organization (FAO). Through its marketing outlook arm Agricultural Market Information System (Amis), the FAO hiked its projection for Philippine milled-rice production this year by 1.614 percent, or by 203,000 MT, from its earlier forecast of 12.577 MMT. “In the Philippines harvesting has begun for wet-season rice planted in July to August under generally favorable conditions,” Amis said in its December Market Monitor published recently.  “Heavy rainfall and cyclones in October and November brought flood damage to northern regions of Luzon island, affecting final yields,” Amis added. The latest iteration of Amis’s monthly monitoring report would be the last issuance for this year. In November the Philippine Statistics Authority (PSA) projected that the country’s paddy-rice production for 2017 would reach 19.4 MMT, 10.11 percent higher than the 18.15 MMT produced last year. The PSA said in the October round of its report, titled “Rice and Corn Situation Outlook,” the projected paddy output of 7.45 MMT in the October-toDecember period would allow the Philippines to end the year with a bigger rice supply. “Probable palay production for the October-to-December period may surpass the 2016 level by 6.26 percent. The anticipated increment in output may be attributed to increase in yield resulting from sustained use of high-yielding varieties, coupled with sufficient water supply during the early stages of crop development,” the PSA report read. The PSA said its forecast for the fourth quarter was based on standing crop. Despite the contraction in harvest area to 1.86 million hectares, from last year’s record of 1.88 million hectares, the report noted that yield per hectare may improve by nearly 6 percent to 3.99 MT from 3.73 MT last year. “Substantial increments in output may be anticipated in the Cordillera Administrative Region [CAR], Cagayan Valley, Central Luzon, Bicol region and Central Visayas,” the report read. “Probable growths in production may be attributed to possible increase in yield in most regions, except Western Visayas, Davao region, Caraga and the Autonomous Region in Muslim Mindanao [ARMM]. This may be attributed to sustained use of high-yielding varieties, coupled with sufficient water supply/ rainfall,” it added. Because of the projected hike in fourth-quarter output, the PSA added paddy production in the second half of the year would reach 10.84 MMT, 8.61 percent higher than the 9.98 MMT produced in 2016. “Harvest area may expand by 3.46 percent to 2.72 million hectares, from 2.63 million hectares. Yield per hectare may rise to 3.99 MT, or by 4.98 percent, from 3.8 MT,” the report read. For the whole of 2017, the improvement in yield is expected to settle at 4.03 MT per hectare, from last year’s 3.87 MT, while harvest area would expand to 4.81 million hectares. Based on farmers’ planting intentions, the PSA said paddy output in the first quarter of 2018 would go up by nearly 3 percent to 4.53 MMT, from 4.41 MMT recorded in the same period in 2017. “Probable increments in production may be expected among regions, except CAR, Western Visayas, Zamboanga Peninsula and the ARMM,” the report read. Citing forecast from the US Climate Prediction Center, the Amis report said there is a high probability that the Philippines would experience a prolonged La Niña next year, resulting in higher rice production during the summer harvest. “On  November 9 the US Climate Prediction Center announced a change in La Niña status from Watch to Advisory, meaning that La Niña conditions are observed and expected to continue. The probability of continuation through February is about 70 percent, double the typical probability for this period. There is a 50 percent chance thereafter of La Niña persisting through April 2018,” the report read. “Above-normal rains are favored for Central America, the Caribbean, northern South America, and parts of Southeast Asia [the Philippines, Malaysia and eastern Indonesia],” it added.  Jasper Emmanuel Y. Arcalas

With Bloomberg News

Seemingly innocent actions = conflicts of interest = corruption Continued from A1

Most of us have seen or heard about such conf licts or have been offered such dea ls—ar rangements t hat ap pear too cozy or str ike you as tak ing advantage of a situation. Another story I heard recently: when the CEO briefed the sales force that bribing clients will not be tolerated, one of the sa lesmen arg ued that he is not br ibing his clients, he is just sharing his commission w ith them. Being able to clearly identify and discuss conflicts of interest is essential in order to protect your organization from corruption.

Why conflicts of interest matter

Let’s say you’re hiring for a management position at your company, and happens to run into a close friend from college. He tells you his daughter is looking for a job, and that he’d really appreciate it if you’d hire her. Bowing to the social pressure, you do your friend a favor and hire his daughter.

She turns out to be a great manager and an asset to the company. On the surface, it may seem like you’ve done the right thing: You’ve helped a friend, and the company. Unfortunately, your actions still qualify as cronyism, and hiring family and friends may be a conflict of interest. Hiring people due to their social connections harms companies because it can exclude more qualified candidates who would have been more beneficial to the company. But wait—didn’t we say that the friend ’s daughter was actually a great manager? That doesn’t necessarily matter: Your actions don’t need to actually harm the company or have bad intentions to constitute a conf lict of interest. It comes back to split loyalties: simply being in a position to benefit yourself, your friends or your family, at the expense of the company. This is also the reason many companies have a clear policy that family members of employ-

ees/executives cannot be hired.

Penalties for conflicts of interest

Conflicts of interests are considered corruption—a serious matter for all concerned. And compliance professionals have a responsibility to seek out and address any instances of such corruption. Earlier this year, the head of the UK’s central bank had to resign over just such a matter. The deputy governor of the Bank of England resigned when it was revealed that the brother was an executive at Barclays, one of the large banks the deputy governor regulated. The issue wasn’t whether decisions were made that benefited or harmed Barclays. What mattered was that the deputy governor kept this potential conf lict of interest secret. The perception of corruption was damaging enough to require the resignation. As the above example shows, people who have conflicts of interest could face serious penalties. These range from disciplinary actions to loss of

a job, from legal actions to harm to one’s professional reputation.

Identifying conflicts of interest

Nepotism is a well-known example, but it’s just one type of conflicts of interest. The most common conflict arises when a person has a personal interest in a company transaction, and is in a position to influence that transaction or arrangement. Again, the interest may be actual or potential, direct or indirect—and it doesn’t need to cause harm to the company. Here are four other types of conflicts of interest that may arise in your company: ■ Diversion of business opportunities: In the course of their work, an employee comes across a business opportunity of potential interest to the company, such as an investment, but decides to take it for himself/herself without prior permission. ■ Accepting benefits from third parties: Accepting gifts, entertainment and hospita lit y from other par-

ties raises conf licts of interest, because the socia l pressure to retur n the favor conf licts w ith an employee’s duty to do what’s best for the company. In some cases, accepting such courtesies can even represent a breach of anticorr uption laws. ■ Outside employment and professional activities: This may sound obvious, but employees must avoid taking on outside employment and professional activities that would in any way compete with the needs of your company. Upon leaving the company, employees may be prohibited from soliciting your clients or recruiting your other employees. In conclusion, let’s remember that a company’s social license to operate makes good corporate governance imperative. Through this, long-term sustainability outsmarts short-term greed. Comments are welcome; you can reach me under

Businessmirror december 12, 2017  
Businessmirror december 12, 2017