Businessmirror february 16, 2017

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Thursday, February 16, 2017 Vol. 12 No. 127

C.O.M.P. SAYS MINES CLOSURE TO ALSO CUT REVENUES FROM METALLIC MINERAL EXPORTS

Metal production value seen declining by 50%

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By Jonathan L. Mayuga & Cai U. Ordinario

@jonlmayuga @cuo_bm

he Chamber of Mines of the Philippines (COMP) warned that the value of the country’s metallic mineral production could go down by as much as 50 percent this year, due to the closure and suspension of 28 operating mines.

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The value of metallic minerals produced by the Philippines in 2016 Ronald S. Recidoro, COMP vice president for legal and policy, said nickel is the country’s “best performer” and the closure of several large-scale nickel mines would significantly affect the performance of the metallic minerals sector. CSee “Metal,” A2

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Global production networks and the need for industrial stock taking Rene E. Ofreneo

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‘ASSASSINATED’ This combination of file photos shows Kim Jong Nam (left), exiled half brother of North Korean leader Kim Jong Un, in Narita, Japan, on May 4, 2001, and North Korean leader Kim Jong Un on May 9, 2016, in Pyongyang, North Korea. Kim Jong Nam, 46, was targeted on, February 13, in the Kuala Lumpur International Airport, Malaysia, and later died on the way to the hospital according to a Malaysian government official. Story on A8. AP/Shizuo Kambayashi, Wong Maye-E

‘Digital technology can help govt cut red tape’ By Jovee Marie N. dela Cruz @joveemarie

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he Joint Foreign Chambers (JFC) has backed the proposal now forming part of the Comprehensive Tax Reform Package requiring the use of e-invoices and e-receipts in commercial transactions between registered companies, their customers and the Bureau of Internal Revenue (BIR).

In a position paper submitted to the House Committee on Ways and Means, the foreig n c ha mbers sa id t he Philippines should optimize its use of digital technology when addressing merchant red tape and transaction flows in the country. “While we do not know how much of the traffic involves moving paper invoices and official receipts between businesses

PESO exchange rates n US 49.8940

and their clients, we believe that encouraging the maximum use of digital technology is an important policy [tool] to easing traffic congestion,” the foreign chambers said. “The [Duterte] administration has determined that there is traffic emergency in Manila and Cebu, and requested emergency powers to implement solutions,” the group added. See “Digital,” A2

Institutionalizing the use of e-invoices is definitely a step toward the right direction, given the move to digitize all information.”—JFC

onald J. Trump’s strident call for American manufacturers to reboot American industry by bringing back jobs outsourced to Mexico, China and other countries provide our economic planners and policy-makers an opportunity to do some stock taking and restrategizing development planning for job creation. Most of the jobs outsourced by these American companies fall under their global production networks (GPNs). The GPNs, also called global value chains (GVCs), allow American, European, Japanese and Asian multinationals to atomize or “fragment” the production of a product, such as a car, and distribute the manufacture of the different parts, such as engine, transmission, axle and so on, in different countries. The idea is to produce parts and components or even whole products, such as garments, where it is cheapest to do so. John West of Asian Century Institute sums it up as follows: in GPNs/GVCs, “companies from ‘headquarter economies’

like the US, Japan and Korea create and design products, and then outsource the labor-intensive stages of manufacturing to ‘factory economies’ like Southeast Asia or China”. In short, the world is treated as one market and one workshop; however, profits are not distributed equitably and wages are not paid uniformly based on a global division of labor and rewards. For example, the US Congressional Research Services found in 2006 that iPod sold in the US market for $299 gave American companies $163, Japanese and Korean parts suppliers $132 and Chinese workers doing assembly work $4. And, yet, 30 percent of iPod jobs are created in China! Now Trump wants those jobs back and is unilaterally changing the trade rules despite trade agreements under the World Trade Organization and North American Free Trade Agreement. What should the Philippines then do in the face of this American trade unilateralism?

n japan 0.4368 n UK 62.2378 n HK 6.4300 n CHINA 7.2668 n singapore 35.1342 n australia 38.1939 n EU 52.7729 n SAUDI arabia 13.3036

Continued on A2

Source: BSP (15 February 2017 )

BMReports BusinessMirror

A2 Thursday, February 16, 2017

Foreign and local business groups outline measures to modernize air-transport industry By Ma. Stella F. Arnaldo

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@akosistellaBM Special to the BusinessMirror

HE department of Tourism (DOT) underscored the importance hastening the development and improvement of the country’s airports to help spur more visitor arrivals, which could also boost tourism receipts.

In a presentation at the AIM Conference Center on Wednesday, Tourism Undersecretary for Tourism Development Planning Benito C. Bengzon Jr. said air passenger traffic in Asia and Pacific reached 1.06 billion in 2015, growing at an average of 8.71 percent every year since 2010. Of that figure, international air traffic to the Philippines hit a measly 10 million in 2015, increasing at an average of 7.3 percent from 2011 to 2015. He said the “growth [in international air traffic to the Philippines] can be attributed to the opening of new routes to major and secondary gateways and additional frequencies

Metal. . .

Continued from A1

“[The closure of mines] will impact not only on metallic production but also on exports, foreign currency earnings, and employment,” Recidoro said. See related story on A4. Based on the 2015 data of the COMP, the 28 mining companies account for about 51 percent of the production value for nickel. Recidoro said the COMP is set to conduct a comprehensive study on the impact of the Department of Environment and Natural Resources’(DENR) decision to shutter large-scale mines. The COMP official, however, noted that several large-scale mines remain operational after they have filed an appeal with the Office of the President. “Some companies received the closure order on February 13 and they immediately filed an appeal. Under Executive Order (EO) 22, an appeal to the President automatically stays the execution of any order,” Recidoro said. The COMP official made the pronouncement after the Mines and Geosciences Bureau (MGB) disclosed on Wednesday that Philippine metallic mineral-production value dropped by 8.4 percent to P100.56 billion last year, from P109.84 billion in 2015. The MGB, an attached agency of the DENR, attributed the sector’s lackluster performance in 2016 to poor base metal

Digital. . .

Continued from A1

The Japan International Cooperation Agency estimated the daily cost of mercantile traffic in the National Capital Region alone stands at some P2.4 billion. According to the foreign chambers, digital technology is an important tool helping ease the cost of doing business in the Philippines. “The Philippines should clearly do more, as measured by the United Nations e-governance Survey. In 2003 the country ranked 33rd of 193 countries rated, but in 2016 had fallen to 71st of

by foreign and local carriers”. Conversely, visitor arrivals in the Philippines reached only 5.97 million in 2016, the laggard among Asean countries, where tourist arrivals hit as high as 32.6 million as in the case of Thailand, and 26.52 million in Malaysia. With the DOT’s vision for the Philippines to become the “must experience” destination in Asia, it has drawn up a list of measures for the government and the private sector to accomplish, such as continuing the pursuit of a more liberalized civil aviation policy, speeding up the development and improvement of airports, and drastically improving the airport departure and price, the string of mine suspensions and the decision of some mines to temporarily suspend operations. The agency, however, said the 2016 data only took into account the suspension of several mines. On February 2 Lopez announced the closure and suspension of a total of 28 large-scale mines, which mostly produce nickel. Data from the MGB showed that gold accounted for the lion’s share of the value of metallic minerals output last year at 44 percent, or P44.85 billion. Of the total value of metals output last year, the share of nickel direct shipping ore, together with mixed nickel-cobalt sulfide, reached 37 percent, or P36.84 billion, followed by copper with 18 percent, or P17.76 billion. The remaining 1 percent, or P1.11 billion, came from the consolidated output of silver, chromite and iron ore. The P10.88-billion gain in the price of gold and silver was offset by the P16-billon decline in the production value of copper and nickel last year, according to the MGB. Nickel direct shipping ore production volume and value alone, went down by 23 percent and 41 percent, respectively, from 32.07 million dry metric tons (DMT) valued at P36.60 billion in 2015 to 24.65 million DMT valued at P21.77 billion in 2016. According to the MGB, of the 28 nickel mines, seven are currently suspended and four others temporarily stopped operations.

193 countries,” it said. “Slow adaptation of digital technology by the government in its interactions with the public is reflected in these rankings,”the foreign groups added. Currently, the government allows the use of e-invoicing under existing revenue regulations. “[However] institutionalizing the use of e-invoices is definitely a step toward the right direction, given the move to digitize all information,” the business groups said. The foreign chamber also asked the House of Representatives to consider the proposal amending Section 113 of the National Internal Revenue Code by adding a new paragraph. The group said the insertion should read,

arrival experience specifically in the following areas—Customs Immigration and Quarantine (CIQ), Duty Free, Retail Mix and Toilets. Bengzon, likewise, said another step toward improving air traffic to the Philippines and consequently lifting visitor arrivals is to “continue route development initiatives by attending international aviation events, provide market support to local and international carriers and charter operations, and conduct familiarization tours for network planners”. Bengzon’s presentation was in conjunction with the Arangkada Philippines project of the Joint Chambers of Commerce in the Philippines (JCCP), which forwarded an Air Transport Infrastructure Policy Brief. The paper offers recommendations to address key issues, which hinder the Philippines from becoming the preferred investment destination for air transport and tourism. In her presentation of the policy brief, economist Ma. Cherry Lyn Rodolfo stressed that “air transport stimulates economic growth”, adding almost 1.44 million jobs in the Philippine economy, and increasing the GDP by $9.8 billion, including benefits to the tourism sector. Some of JCCP ’s recommended

reforms include decongesting and improving the Ninoy Aquino International Airport; implementing a multiairport system policy in the greater capital region and accelerating the development of Clark International Airport; accelerating the development of secondary international gateways and provincial airports; modernizing and strengthening institutions and regulations (such as the Civil Aviation Authority of the Philippines, creation of a national transportation safety board, etc.); and improving the business environment and facilitating travel (i.e., lower application fees, provision of CIQs at international airports, among others). While significant strides have already been made in the area of air connectivity in the Philippines due to the government’s liberalized aviation environment, the JCCP emphasized that “the poor state of infrastructure...has hindered the ability of the country’s hard and soft players to capitalize on the growth opportunities and, most important, of consumers to enjoy safe, seamless and secure travel.” The group, likewise, called on the support of lawmakers to ensure reforms are carried out to modernize the country’s air-transport industry.

Their combined output in 2014 reached about 5.23 million DMT valued at P8 billion. The suspended nickel mines are Zambales Diversified Metals Corp., BenguetCorp Nickel Mines Inc., Eramen Minerals Inc. and LNL Archipelago Minerals Inc., all in Santa Cruz, Zambales; Berong Nickel Corp. (Berong Nickel Project); Citinickel Mines and Development Corp. (Toronto and Pulot Nickel Projects) in Palawan; and Claver Mineral Development Corp. (Tandawa Nickel Project) in Surigao del Norte. Those that suspended operations are Minahang Bayan ng Mamamayan ng Dinagat Island Cooperative (Bel-at Nickel Project); Oriental Vision Mining Philippines Corp. (Palhi Nickel Project); Wellex Mining Corp. (Wellex Area II Nickel Mining Project); 4Sinosteel Philippines H.Y. Mining Corp. (H.Y. Nickel-Chromite Project). All four companies are operating on Dinagat Islands in Mindanao. Major nickel producers, like Rio Tuba Nickel Mining Corp. in Palawan, Taganito Mining Corporation in Surigao Del Norte, Platinum Group Metals Corp. in Surigao del Norte, and SR Metals Inc. in Agusan del Norte, all incurred production setbacks, both in volume and value.

Canceled mineral production-sharing agreements (MPSAs) can be appealed to the President if the companies have exhausted

their legal options under the law, according to the President’s chief legal counsel. In a phone patch interview with Malacañang reporters on Wednesday, the President’s chief legal counsel Salvador S. Panelo said mining firms can file motions for reconsideration. “They have remedies under the law. They can file a motion for reconsideration fighting errors that they perceive to be and then if they are not clarified with their position on their motion for reconsideration, they can [appeal to] the office of the President,” Panelo said. However, Panelo made an assurance that Environment Secretary Regina Paz L. Lopez observed due process in cancelling the 75 MPSAs. “The mining companies have been given due process by the DENR, otherwise, I don’t think it will arbitrarily close any mining company,” Panelo said. Malacañang said in a statement that the DENR’s actions were consistent with Republic Act 7942, or the Philippine Mining Act of 1995, which calls on the government to preserve watersheds. On Tuesday Lopez said she canceled the 75 MPSAs to protect the country’s watersheds. The MPSAs covered 37 mining projects in Mindanao, 11 in the Visayas and 27 in Luzon. She also canceled the Financial and/or Technical Assistance Agreement of the Tampakan Gold-Copper Project purportedly to remove its threat to freshwater sources in South Cotabato.

“the use of e-invoice and e-receipt shall become mandatory within five years of enactment of this law, regardless of whether or nor they are part of a computerized accounting system.” “Taxpayers are no longer required to submit traditional hard copy [paper copy] of their invoice or official receipt with any compliance requirements of the Bureau of Internal Revenue [BIR]. The BIR shall simplify the invoicing and receipting data required of the taxpayer by only requiring name and tax identification number. The BIR may exempt taxpayers from this requirement if they can demonstrate sufficient reasons for noncompliance,” the JFCproposed amendment added. The JFC is a coalition of the American, AustraliaNew Zealand, Canadian, European, Japanese and Korean chambers, as well as the Pamuri. The group represents over 3,000 member -companies engaged in over $100 billion worth of trade and some $30 billion worth of investments in the Philippines. The House of Representatives is the one who pushed for the inclusion of the mandatory use of e-invoice and e-receipt in the DOF-backed Comprehensive Tax Reform Package. Under the tax package, a value-added tax (VAT)-registered person shall issue an electronically generated VAT invoice for every sale, barter or exchange of goods or properties. It also said an electronically generated VAT official receipt for every lease of goods or property and for every sale, barter, or exchange of services shall also be issued. Finance Undersecretary Karl Chua, at the House hearing on the tax package on Wednesday, endorsed the use of e-receipts, the interconnectivity and datasharing as these tools will enhance tax administration in the country. Chua, however, raised particular issues on the

implementation of e-invoices and e-receipts. He said the question of timing their adoption is important “because this will require also significant investments both in the BIR and the taxpayers to automate and to move to the mandated operating system, the interconnectivity and issuance of e-receipts.” Cua also cited the issue of who to prioritize among the taxpaying public: “Starting from the large, going to the medium and finally to the rest of the taxpayers.” “Third, we also need to consider that not all industries benefit or find the POS [point-of-sale] machine interconnection cost-effective. I think it’s more effective at the retail level when this is mandated for all sectors that have very limited transactions,” he said. According to him, the question of costeffectiveness is something that “we [in the BIR] need to study.” BIR Commissioner Caesar R. Dulay, meanwhile, said the tax agency has created a technical working group to address issues that may arise during the implementation of e-invoices and e-receipts. “The proposed amendments are very helpful in terms of revenue generation and, for our part, we are ready to implement whatever provisions are finally approved,” he said. In a bid to rid the agency of deep-seated graft and corruption, Dulay called for the resignation or early retirement of at least 300 allegedly corrupt employees and officials before the adoption of administrative reforms at the agency. “We are aware on the problem of graft. I’m happy to share that we are slowly addressing the issue,” he said. “We are slowly working on bad eggs. I suggested they either resign or take advantage of optional retirement,” he said.

Canceled MPSAs

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Global production networks and the need for industrial stock taking Continued from A1

What should it do if other populist Trumps of the world emerge in other developed countries and, like Trump, demagogically call for a return of industry and jobs at the home country? There are several points to ponder in a stock-taking on a new industrial strategy for the Philippines. First, we should take a lesson from our own history. Jobs in the GPNs/GVCs are not forever. In the 1980s the Philippines became one of the world’s biggest assembler of garments for export. Under the Neda’s laborintensive export-oriented industrial (LIEO) strategy, the Philippines was able to entice American and other global garments designers-distributors to help create around a million jobs in the country—one-third in the big factories and the rest under the scattered homebased subcontracting system. However, when China and other cheaper production platforms, such as Cambodia and Bangladesh, became available as alternative sites for the footloose multinational investors, garments jobs in the Philippines declined sharply, especially after 2004, the end year for the Multi-Fibre Arrangement, which gave us trade market quotas for nearly three decades. Today, garments is a comatose industry. The other major export industry bred by the LIEO is the electronics assembly industry, which registered high growth in terms of value and jobs in the 1990s. However, at the turn of the millennium, the industry’s growth began slowing down, as China, Vietnam and other countries became cheaper alternative production sites. Moreover, the Philippines, unlike South Korea in the 1980s, was unable to climb up the electronics industry ladder, meaning to do higher assembly work and develop new electronicbased products just like what Samsung—originally an electronics assembler for Sanyo—did. With the export industries down and most of the domestic industries not doing well under LIEO and the regime of trade liberalization, the Philippines was confronted in 2000 with a growth-less and jobless 21st century. But luck was on the side of the country. Despite the absence of an economic blueprint or program for its development, the call center-business-processing outsourcing (BPO) sector took roots from 1997 to 2003, thanks to the global advances in ICT and the pioneering efforts of companies like AOL and Sykes. Similar to the GPN for industry, the call-center-BPO sector came in as part of the global service outsourcing (GSO) of big American companies, specifically those belonging to Fortune 500. The subsequent boom in the call center-BPO sector has also been accompanied by the tremendous expansion of overseas Filipino workers (OFW) remittances. The huge remittances have enabled the Sys, Gokongweis, Ayalas and Villars to build malls, homes, stores, theaters and other facilities all over the archipelago. The Philippines has become a unique example of a consumption-led economy, meaning consuming and growing despite limited industrial and agricultural production because the remittances keep pouring in. Now back to the call of Trump for American companies to build/rebuild factories inside America. Is this doable in the era of fragmented global production system under the GPNs? The answer is yes… and also a bit terrifying. Why? The big issue in labor market studies today is the rise of the robots, which enable developed countries to erase the cheap labor advantage of developing countries. For example, in Denmark they are able to manufacture again the plastic materials they used to outsource to China. This time at an equal or even cheaper rate, with a little help from what the Danish workers call as “coworker robots”. In Germany Adidas is now able to manufacture shoes on German soil, again with the help of robots. Remember in the early-1990s, over 4,000 workers in Rubberworld Novaliches lost their jobs when Adidas transferred production to China because of the unsettled labor dispute in the Philippines. The point is that the global division of labor under the GPN system is also being shaken by the new labor-displacing technology. Labor economists call this displacement phenomenon as technology disruption, a process that paves the way for the establishment of a new work organization. The problem is that, unlike in the past episodes of technological breakthroughs, job destruction today is not accompanied by the creation of new and hopefully better, jobs. Right now, there are observations that part of the Philippine electronics assembly industry is vulnerable not only to Trump’s America First policy, but also to the increasing ability of robots to do more and more of the manual assembly work. The next question is: will robotization also spread in the call-center/BPO sector? Maybe, but not yet, in a radical or massive way. As it is, there are certain services that are increasingly being placed under the do-it-yourself (DIY) computer-aided programming, such as airline ticket reservation, purchasing and check-in. Clearly, all these developments tell us that the Philippines cannot afford to stick to simplified economic solutions raised in the past, such as export or perish, open up or collapse, and so on. We need to have a more balanced economic policy that gives equal importance to the development of both the domestic and export markets, which encourages the entry of productive foreign investments and the full mobilization of domestic resources and, yes, promotes the building of an independent and self-reliant economy.

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US attack submarine docks at Subic

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HE Los Angeles-class fastattack submarine USS Louisville (SSN 724) docked at Subic Bay on Tuesday for a brief port call that, the US Embassy in Manila said, highlights the strong community and military connections between the Philippines and the United States. The Louisville crew will participate in a series of community-service projects and sporting events during the crew’s visit to the Philippines. The submarine will also use the stop to conduct some minor maintenance with the assistance of local companies, the US Embassy statement said. The Philippines is a long-standing treaty ally of the United States with a history of partnership of more than 70 years. The American and Philippine militaries have worked closely together on areas of mutual interest, such as humanitarian assistance and disaster relief, counterterrorism, cyber security and maritime security, the embassy added. USS Louisville, one of 36, Los Angeles class fast-attack submarines of the US Navy, is forward-deployed to the US 7th Fleet area of operations in support of security and stability in the Indo-Asia-Pacific region.

Editor: Dionisio L. Pelayo • Thursday, February 16, 2017 A3

Rebs fire at relief convoy in Surigao

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UNMEN believed to be New People’s Army (NPA) rebels fired at Army troops who were escorting the relief mission of a television network in San Francisco, Surigao del Norte, on Tuesday night.

Capt. Jose Patrick Martinez, spokesman for the Army’s Fourth Infantry “Diamond” Division, said the rebels fired five shots at the soldiers aboard a military truck in Sitio Huwat Baboy, Barangay Linongga-

nan, at around 8:30 p.m. Martinez said the truck led the five-vehicle convoy. “The rebels fired from 75 meters on a high ground and the KM450 [light truck] blast protec-

tion plate was hit by two bullets,” he said. Martinez said nobody was hurt among the soldiers and the television network’s crew. Earlier, the NPA in Surigao del Norte declared a unilateral ceasefire in in the wake of the 6.7-magnitude earthquake on February 10 that hit the province and caused damage to thousands of houses and other infrastructures. Meanwhile, the National Disaster Risk Reduction and Management Council (NDRRMC) announced it is constantly flying relief goods to the eathquake affected areas using Air Force Lockheed C-130

“Hercules” cargo planes. NDRRMC Executive Director Ricardo B. Jalad said supplies that were meant to augment existing Department of Social Welfare and Development (DSWD) stocks in the Caraga region have been sent. These include 10 generator sets, 150 pieces of solar lamps, 30,000 pieces of high-energy biscuits, 5,000 pieces of mosquito nets, 500 dignity kits, 5,000 blankets, 3,250 pieces of brown rice bar, 130 rolls of laminated sacks and 5,000 plastic multipurpose containers. Jalad said these items were airlifted to Butuan City’s Bancasi Airport on February 12 and

13 by C-130s from the Air Force’s 220th Airlift Wing. On Tuesday Air Force C-130s also transported DSWD and Department of Health personnel to Butuan City for deployment in earth quakeaffected areas. Aside from the health personnel, thousands of Campolas (cotrimoxazole, amoxicillin, mefenemic acid, paracetamol, oral rehydration solutions, lagundi, vitamin A and skin ointment), family and hygiene kits; family tents, mobile kitchens and additional laminated sacks, highenergy biscuits and plastic mats were airlifted on the same day. PNA

CA affirms trial court’s grant of bail to Ampatuan scion By Joel R. San Juan @jrsanjuan1573

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HE Court of Appeals (CA) has affirmed the order of the Regional Trial Court (RTC) in Quezon City allowing the son of former Maguindanao Governor and clan patriarch Andal Ampatuan Sr. to be released from detention.

In a 10-page decision written by Associate Justice Marie Christine Azcarrage-Jacob, the CA’s Sixteenth Division denied the petition for certiorari filed by government prosecutors seeking the reversal of the order issued by Judge Jocelyn Solis-Reyes of Branch 221 of the RTC in QC granting the motion of Datu Sajid Islam Ampatuan, one of the accused in the 2009

Ampatuan Massacre, to post bail on January 9, 2015. Sajid Islam was released from jail in March 2015 after posting P200,000 per murder count, or a total of P11.6 million, for the 58 counts of murder filed before the court in connection with the Ampatuan Massacre. The Ampatuan clan was accused of masterminding the massacre, which

killed 58 individuals, including 32 journalists, to derail the political plans of rival Esmael Mangudadatu, incumbent governor of Maguindanao, in the 2010 elections. Solis-Reyes ruled that Sajid Islam’s mere presence during the three meetings with the other accused allegedly to plot the massacre does not constitute strong evidence of guilt to deny

his motion considering that based on the evidence showing that he did not utter any word while matters related to the crime were supposedly being discussed by the other respondents. In affirming the trial court’s order, the CA held that there was no grave abuse of discretion on the part Solis-Reyes in issuing the assailed order.

Economy

A4 Thursday, February 16, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

PHL manufacturing sector tops 2013 moneymakers’ list–PSA By Cai U. Ordinario

@cuo_bm

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he manufacturing sector is the country’s top earner in 2013, generating as much as a third of the income of all business and industry sectors, according to the Philippine Statistics Authority (PSA). Based on the final results of the 2013 Annual Survey of Philippine Business and Industry (ASPBI), the manufacturing sector earned P4.5 trillion in that year. “Data collected from the survey provide information on the levels, structure, performance and trends of economic activities of the formal sector in the entire country for the year 2013,” the PSA said. The manufacturing sector’s earnings amounted to 32.5 percent of total income booked by all establishments in 2013. Total establishments booked earnings worth P13.7 trillion in 2013, a 34.6-percent growth from P10.2 trillion in 2010. Second highest was Wholesale and Retail Trade, Repair of Motor Vehicles and Motorcycles, with 26.7percent share and earning P3.7 trillion in 2013. Financial and Insurance Activities placed third, with an 8.9-percent share, or an income of P1.2 trillion. The Professional, Scientific and Technical Activities recorded the highest increase in total income at 154.9 percent, from P106.7 billion in 2010 to P271.9 billion in 2013. Meanwhile, the 25,149 firms engaged in manufacturing also provided the most employment to Filipinos in 2013. PSA data showed there were 1.22 million Filipinos employed in the manufacturing sector. These accounted for 22.9 percent of the 5.34 million Filipinos employed in various businesses and industries in 2013. Data showed the number of employees in 2013 grew by 34.5 percent from 3,966,110 workers in 2010.

₧4.5T The total earning chalked up by the manufacturing sector in 2013, representing a third of the income of all business and industry sectors

Meanwhile, Filipino taxpayers extended P44.5 billion worth of tax exemptions and other subsidies to businesses and industries nationwide. Data showed the tax perks granted to businesses and industries grew 5.6 percent from the total subsidies granted to establishments of P43.1 billion in 2010. The Electricity, Gas, Steam and Air-Conditioning Supply received the biggest amount of subsidy equivalent to P9.2 trillion, or a 20.7-percent share of the total. Professional, Scientific and Technical Activities received the second-biggest subsidy amounting to P8.4 billion. Subsidies provided to Financial and Insurance Activities and Agriculture, Forestry and Fishing posted at P6.4 million and P6.3 million, respectively. “Accommodation and Food Service Activities, Human Health and Social Work Activities and Other Service Activities, however, were not provided with government subsidy in 2013,” the PSA said. The 2013 ASPBI is one of the designated statistical activities of the PSA. This is the 42nd in the series of establishment surveys. The survey was conducted nationwide in September 2014 with the year 2013 as the reference period of data, except for employment, which is as of November 15, 2013.

PHL sustains push for lower seasonal tariffs on banana exports to Japan

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he Philippines will continue to push for lower seasonal tariffs on its banana exports to Japan on its forthcoming investment mission to Tokyo later this month. Trade Secretary Ramon M. Lopez said the lower tariffs on bananas will be part of the agenda in the 35th Meeting of the Philippines-Japan Economic Cooperation Committee, Inc. (Philjec) and its counterpart Japan-Philippines Economic Cooperation Committee (JPECC) . “We already have an ongoing review to further liberalize and strengthen certain areas. May seasonal tariffs tayo under the Philippine-Japan Economic Partnership Agreement, 2.7 percent from April to September and 18 percent from October to March,” said Lopez, referring to tariffs slapped on Philippine banana exports to Japan. This is considered a follow-up to

an earlier appeal of the Philippines to lower the seasonal tariffs made during the state visit of President Duterte to Japan last October. The 35th Philjec-JPECC meeting will take place on February 28 in Japan, and will also serve as an investment mission to draw in further interest from Japanese companies into the Philippines. Japan is the Philippines’s largest trading partner. The Philippines’s exports to Japan have amounted to $15 billion in 2015, and from January to November of 2016 have totaled to $11 billion. Imports, meanwhile, are at $6.4 billion in 2015, and from January to November of 2016 have amounted to $8.6 billion. Among the notable Japanese firms that have set up shop here are Toshiba, Canon, Epson, Toyota and Tsuneishi Heavy Industries. Catherine N. Pillas

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Green groups laud, miners hit cancellation of mining deals By Jonathan L. Mayuga

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@jonlmayuga

nvironmental groups on Wednesday lauded Secretary Regina Paz L. Lopez of the Department of Environment and Natural Resources (DENR) for initiating the cancellation of 75 mineral production sharing agreements (MPSAs), a move lambasted anew by the Chamber of Mines of the Philippines (COMP). The Kalikasan People’s Network for the Environment (KalikasanPNE) said that, by removing the threats of forest denudation, water pollution, marine degradation and biodiversity loss, agriculture and fisheries productivity is facing a bright prospect. “The livelihoods of our farmers and fisherfolk in areas targeted for mining plunder can flourish. Maintaining healthy watersheds in these areas will guarantee that our population will have adequate, clean and safe water supply for irrigation and domestic water needs,” Clemente Bautista, national coordinator of Kalikasan-PNE, said.

Due process

The Philippine Chamber of Commerce and Industry has warned that the move of the Department of Environment and Natural Resources (DENR) to cancel contracts of 75 mining projects despite a resolution for a review issued by the Mining Industry Coordinating Council (MICC), would spook local and domestic investors. “Due process and multi-stakeholder reviews were guaranteed by DENR Secretary Lopez herself and other MICC members just days

1.2M The estimated number of workers in the mining sector that will be adversely affected by the recent closure or suspension of mines, according to the COMP

before the new cancellations orders,” PCCI president George T. Barcelon in a news statement issued on Wednesday. “She [Lopez] herself signed the MICC resolution and now it is not followed “How can a company risk stockholders’ money in projects if the investment rules are unclear and uncertain.” he said. “Business needs confidence that rulemakers would honor contracts.” “We hope the President could consider moving on this issue of due process quickly because investors could put on hold their investments

decisions,” Barcelon said. Barcelon underscored that the resolution of the MICC, chaired by Lopez with Finance Secretary Carlos Dominguez III, was clear in installing a multi-stakeholder review of the results of DENR audits of compliance with mining rules and regulations.

her ground,” said Sherwin de Vera, the group’s regional coordinator. De Vera also added that beyond cancellation, the department should also conduct an investigation into how mining companies were able to get permits and operate on watershed and critical habitats.

Excellent action

Sanctity of contracts

He added flash floods and landslides during heavy rainfall and strong typhoons will be minimized with forests intact and rivers free of siltation from mining operations. “The crackdown of DENR Secretary Lopez against erring large-scale mines and the junking of MPSAs in the watershed areas are excellent action for environmental protection,” Clemente said. The group also urged other government offices to work with the DENR to cushion the immediate impacts of the mining crackdown to its workers by providing aid and alternative livelihood.

Aid

“The P2-billion aid announced by President Duterte for displaced mine workers can be coursed through the Department of Social Welfare and Development. Agencies for rural development, such as the Department of Agriculture and Department of Agrarian Reform, can help mining communities by distributing land and support services to the displaced mining communities,” Clemente said. The Ilocos Network for the Environment, meanwhile, said Lopez’s “unprecedented [move] in the history of the DENR” is an “excellent follow through” after the closure order of 23 mining sites in the country. “I think the DENR is now charting its proper course, putting the environment and the people’s welfare over mining revenue and profit. We hope that Secretary Lopez continues to hold

Rule of law

“More important, we feel that Lopez now has to answer to the Filipino people on all these that are fundamental in a society that follows the rule of law,” the COMP added. Lopez said her decision to cancel the MPSAs is a preventive measure to protect the country’s water supply from the threats posed by mining activities. On February 2 Lopez ordered to close and suspend a total of 28 largescale metallic mines, 15 of which operate within or near watersheds. The closure order, the COMP said, will condemn 1.2 million people to hunger and poverty.

DOE sees rising power demand for Mindanao from 2021 to 2030 By Lenie Lectura

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High-tech shift The Civil Aviation Authority of the Philippines (Caap) has bared the launch of its satellite-based

Communications Navigation, Surveillance/Air Traffic Management (CNS/ATM) technology equipment that will put local aviation on a par with the rest of the world. With an aircraft transponder transmission, the CNS/ATM can determine the precise location of aircraft, resulting to a higher level of flight safety and less flight delays. The project, according to a Caap news statement, was partly funded by the Japan International Cooperation Agency. Nonie Reyes

briefs WTO sees moderate global trade momentum in q1

COMP, which represents mining industry’s big players, again lambasted Lopez’s decision. COMP said the recent announcement of the DENR chief “unilaterally canceling the MPSAs of 75 projects and the Tampakan Environmental Compliance Certificate is no longer a question of whether a handful of companies really violated environmental laws.” “It has now become a question of whether we still uphold the sanctity of contracts. It has now become a question of due process. And of fairness and justice that applies to all,” the COMP said in a news statement. The cancellation of these agreements should not rest on Lopez alone, but must be collectively be decided upon by the government as a whole, considering the adverse impact it may have on the country, the group said.

GENEVA—The World Trade Organization (WTO) on Tuesday, in its World Trade Outlook Indicator (WTOI), suggested that global trade growth will continue to build moderately in the first quarter of 2017, after having strengthened in the final quarter of last year. With a current reading of 102.0, the WTOI points to above-trend trade growth in February to March. The WTOI has risen further above trend since the last release three months ago, when the indicator stood at 100.9 in November 2016. According to WTO statistics, trade-related indicators, including air freight, automobile sales, export orders and container shipping, have all registered solid gains in recent months, auguring well for faster growth in merchandise trade volumes in the first few months of athe year. However, electronics and agricultural raw materials trade are both slightly below trend. The WTOI is a leading indicator of world trade, designed to provide “real time” information on the trajectory of merchandise trade three to four months ahead of trade volume statistics. It combines several trade-related indices into a single composite indicator to

measure short-run performance against medium-run trends. A reading of 100 indicates trade growth in line with trend, while readings greater or less than 100 suggest above or below trend growth. PNA/Xinhua

gma pushes for additional tax exemption for elderly care

Former President and now Pampanga Rep. Gloria M. Arroyo is pushing for additional tax exemption for taxpayers who care for their elderly parents. Arroyo has filed House Bill 1522, which seeks to amend paragraph B of Section 35 of Republic Act (RA) 8424, or the National Internal Revenue Code (NIRC) of 1997, to include an additional exemption of P25,000 for each elderly parent being cared for by a taxpayer. “An additional exemption of P25,000 for each elderly parent shall be, likewise, be allowed to the individual taxpayer: provided, that the elderly parent is chiefly dependent on and living with the taxpayer,” Arroyo stated in her bill. Under the measure, an elderly is defined as any parent who is at least 60 years old with no means of support. The current law allows an individual taxpayer an additional exemption of P25,000 for each dependent child not exceeding four. PNA

@llectura

he Department of Energy (DOE) on Wednesday said Mindanao would need a total of 3,650 megawatts (MW) of additional power-generating capacity by 2021 to 2030. Based on the agency’s latest data on demand-supply outlook, 2,100 MW of the needed capacity was identified as base-load, 1,500 MW of capacity from midmerit, and 50 MW from peaking plants. Baseload power plants are those that run 24/7, while mid-merit plants run on long hours, but not on a 24/7 basis. Peaking plants, on the other hand, run only when there is high demand, particularly during peak hours. The data was based on a “high GDP scenario” that includes “8 percent GDP and 25 percent reserve requirement.” Mindanao’s total installed capacity currently stands at 3,162 MW, but dependable capacity is at 2,702 MW only. Coal still accounts for 1,070 MW of installed capacity, diesel at 828 MW, hydro at 1,061 MW, geothermal at 108 MW, biomass at 36 MW and solar at 59 MW. In terms of dependable capacity, 959 MW is coal, diesel 749 MW; geothermal 104 MW; hydro 837 MW; biomass 10MW and solar 43 MW. Its highest peak demand was recorded at 1,653 MW on December 1, 2016. The same data showed that a total of 1,267.9 MW of committed capacity. The data was presented during a public consultation in Mindanao in preparation for the implementation of the Wholesale Electricity Spot Market (WESM) operation in June. Established under the Electric Power Industry Reform Act of 2001, WESM serves as the country’s electricity trading market. With an oversupply of power in Mindanao, a power spot market will provide a venue for efficient scheduling, dispatch and settlement of energy withdrawal and injections in the Mindanao grid. “Mindanao has experienced excess generation supply starting first half of 2016, which increased even further with the entry of other large generation capacities in the latter part of 2016, and shall increase even further in 2017,” according to the DOE. A power spot market in Mindanao, explained the agency, will ensure a reliable and stable supply.

Agriculture/Commodities BusinessMirror

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Editor: Jennifer A. Ng • Thursday, February 16, 2017

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NFA urged to extend arrival period for rice imports

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By Jasper Emmanuel Y. Arcalas

@jearcalas

armers’ cooperatives and private companies are asking the National Food Authority (NFA) for a one-month extension of the arrival period for rice imported under the so-called minimum access volume (MAV).

According to NFA Spokesman Marietta J. Ablaza, farmers’ cooperatives and firms need more time to bring in rice imported under the MAV scheme of the World Trade Organization. “The import permits were distributed only last December and with holidays, farmers’ cooperatives and firms had very limited time to prepare the necessary paperwork,” Ablaza said. She said NFA Administrator Jason Laureano Y. Aquino has yet to approve the request of the importers. Last December the NFA allowed 210 farmers’ organizations and private firms to import 692,340 metric tons (MT) of rice, 110,160 MT less than the country’s annual MAV of 802,500 MT. The NFA list available on its web

site also showed that 194 qualified rice traders, including AgriNurture Inc. and Pilmico Foods Corp., will import 642,340 MT of rice under the country specific quota (CSQ). Of the total rice to be imported under the CSQ, 293,100 MT of rice will be bought from Thailand and Vietnam. Meanwhile, 16 qualified applicants will import a total of 50,000 MT of rice under the “omnibus origin” category, according to the NFA list. Under NFA guidelines, rice imports under the MAV must arrive in the Philippines not later than February 28. The NFA administrator may also approve any extension of the arrival period. As of February 10, only 108 qualified traders have used their respective import permits for

Bloomberg

290,946.90 MT of imported rice, according to NFA data available on its web site. Under the importation guidelines released by the NFA, rice traders are allowed to source from countries with specific quota and from

Foundation to help Kalinga farmers produce specialty coffee

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he Department of Agriculture (DA) on Wednesday said a Hong Kong-based foundation is keen on assisting farmers in Kalinga province to produce specialty coffee, which usually fetches a higher price. “With the current market demand for coffee, including processed beans, the KCC [Kalinga Coffee Cluster] may no longer purely depend on green-beans [trading],” Hummingfish foundation Founder and CEO Daniel Groshong said. Citing the foundation’s project in Maubere Mountain, Timor Leste, Groshong said farmers would earn more if they would produce specialty coffee than merely selling ground beans. “Over time, the price of their processed coffee—now branded as Maubere Mountain Coffee— has increased from mere $1 per kilogram to $100 per kg, as they produce and sold specialty coffee to high-end cafes and restaurants in the country and abroad,” Groshong said. At present, KCC farmers sell

their roasted, ground beans at about $6 (P300) per kilogram to domestic buyers, according to the DA. According to Groshong, specialty coffee is different from mainstream coffee, as it has “complex and unique aroma and taste”. “The character of specialty coffee results from the type of climate and soil in which the trees are grown, as well as the processing methods used,” he said. Groshong said they are willing to provide a series of training to the KCC on how to produce specialty coffee. “Professional cuppers will be invited to provide competent recommendations. These cuppers also know the market very well, so they may be able to match the products to markets,” he added. Groshong said the foundation will also help the group in developing a brand and crafting a brand story, highlighting their community and marking an identity for the province. He said he recommended to the DA-Philippine Rural Develop-

ment Project (PRDP) team during their recent visit in KCC the establishment of a coffee-cupping laboratory. The facility will be used in the succeeding rounds of cupping to identify the group’s progress in improving their production and processing methods, and to narrow down on which methods, especially roasting, produce the best coffee drink. Groshong, together with the consultants of the DA-PRDP and members of the KCC, conducted an initial assessment of the group’s potential in producing specialty coffee. “I have seen some potential. I could see that we can create interesting coffee with [distinct] characteristic. Some of the cups we’ve made are quite interesting,” he said. The KCC has an approved P14.8million subproject under the PRDP’s enterprise-development component. However, the budget only covers production, preprocessing and consolidation of green coffee beans, the industry name for raw, unroasted coffee, according to the DA. Jasper Emmanuel Y. Arcalas

omnibus origin or from any country. R ice t raders a nd fa r mers’ groups can import 293,100 MT of rice from Thailand and Vietnam. They can also import 50,000 MT of rice from China, India and Pakistan; 15,000 MT from Australia;

and 4,000 MT from El Salvador. An additional volume of 50,000 MT is allowed to be imported from any country. The NFA said it allows each organization or firm to import 20,000 MT.

DENR pushes partnership with LGU to fight illegal logging

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AVAO CITY—The Department of Environment and Natural Resources (DENR) 11 is pushing for a stronger partnership with local government units (LGUs) and communities in their fight against illegal logging. Newly installed DENR 11 Regional Director Ruth M. Tawantawan urged all her field officials to further strengthen their partnership with the LGU and communities to help them in their campaign against any environment destruction. Tawantawan said the LGU and community are the ones who can give assistance when it comes to implementing the department’s programs and projects, such as their fight against illegal logging and any environmental destruction. Tawantawan assumed as DENR 11 regional director on February 6 and immediately talked to her field officials to be vigilant in stopping illegal logging activities in their respective areas. This order is also in line with the present administration’s plan to implement a total log ban in the country. The DENR right now has intensified its campaign against illegal logging in Davao Oriental, where they seized tons of logs in different areas of the province. On February 10 the DENR-Community Environment and Natural Resources Office (Cenro) of Baganga seized 16 pieces of Dipterocarp flitches, with a volume of 485 board feet, 2017 in Sitio Palo 8, Barangay Salingcomot. The success of the operation was not possible without the reports coming from concerned local residents in the area. On February 8, 23 pieces of Mancono logbolts were found abandoned by the

Forget alien armyworms, a bigger threat to African corn may loom

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ocusts breeding in central Zambia may pose a bigger threat to farmers in southern Africa than the fall armyworm that’s ravaged crops this year, according to an organization that combats the pests. Red locusts have already reached densities of as much as 50 per square meter over 76,000 hectares (187,800 acres) in an area known as the Kafue Flats, Moses Okhoba, director of the International Red Locust Control Organization for Central and Southern Africa, said in an interview late Tuesday. If uncontrolled, they could form swarms of 40 million insects, destroying corn fields in their way. “If you had an outbreak of locusts, the situation will be about ten times worse when compared to when you had fall armyworms,” Okhoba said in Harare, Zimbabwe’s capital. “You

do not want to see a swarm of locusts in your field because then you will not be talking of anything to harvest or to see.” Southern African countries, including Zambia, Zimbabwe and South Africa, are already battling an outbreak of crop-eating caterpillars that arrived from the Americas last year. Locust swarms would be yet another setback for growers in the region, which is still recovering from the worst drought in more than 35 years. While hoppers, or larvae, have infested only 1,600 hectares of crop fields, they must be immediately stopped from expanding further, according to Okhoba.

Staple food

A swarm of 40 million insects can eat 80,000 tons and travel anywhere between 20 kilometers (12 miles) and 100 kilometers a day, depend-

A swarm of red locusts north of the town of Sakaraha, Madagascar, on April 27, 2013. Bloomberg/AFP via Getty Images

ing on winds, he said, speaking on the sidelines of a regional emergency meeting to combat pests. Most farmers in southern Africa grow corn, the staple food in the region. “At the moment the locusts are breeding in Tanzania, Malawi and Mozambique,” Okhoba said. “Outbreaks from these areas, depending

Currently, the government allows rice imports within the MAV scheme to enter the country at a lower tariff of 35 percent. Imports in excess of the MAV are slapped a higher tariff of 50 percent.

on the period, can affect countries all around the region.” Zambian President Edgar Lungu already instructed the treasury to release funds to the International Red Locust Control Organization to complete surveying and start spraying pesticides to prevent an outbreak. Bloomberg News

personnel of Provincial Environment and Natural Resources Office (Penro) of Davao Oriental and Cenro of Lupon along a mining road in Sitio Trinidad Chapter, Barangay Maputi, Banaybanay, Davao Oriental. Based on their initial investigation, the team could not establish the owner of the logbolts, since nobody was around during the apprehension. The logbolts were manually hauled by hired laborers to the rented Saddam truck and deposited it at Puntalinao or Pintatagan Checkpoint in Banaybanay for safekeeping. On February 7 Penro and Cenro Mati City, along with the 28th Infantry Battalion of the Philippine Army, were able to apprehend illegally cut forest products, in Matayam, Macambol. A total of 138 pieces of mixed dipterocarp species with an aggregate volume of 2,766.66 board feet or 6.51 cubic meters were retrieved in the area, with estimated value of P82,819. PNA

TheBroad

Business

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A6 Thursday, February 16, 2017

PHL gamefowl industry T

By Oliver Samson | Correspondent

HE Philippine gamefowl industry’s worth stands at around P50 billion today and is exhibiting behaviors of growing more in the coming years, the government believes.

2017 World Gamefowl Expo at the Word Trade Center in Pasay City Oliver Samson

The gamefowl-feed market alone is currently valued at P15 billion; and veterinary products for game chickens, like medicine and vitamins and minerals, at P2 billion, Abraham Khalil Mitra, Games and Amusements Board (GAB) chairman, said in an exclusive interview on February 7. According to Mitra, the industry covers production of gamefowl feed and veterinary products, manufacturing of related equipment and tools—incubators, knives (tari), cords (tali), wing and leg bands, feeders and waterers—retail, farm lands, facilities and number of chickens produced. The industry also covers cockpits and operations and other related undertakings. The industry is overseen by the GAB, an agency under the Office of the President that “regulates and supervises professional sports and allied activities to combat and prevent the existence and proliferation of illegal bookie joints and other forms

of organized illegal gambling connected with all play-for-pay sports and amusement games.” The feed companies pay 35 percent corporate income tax, Mitra told the BusinessMirror. Local governments are also collecting their share in the revenues the industry generates.

Earnings opportunity

THE industry also generates opportunity to earn for individuals who are directly or indirectly engaged in the sport, according to Nick Crisostomo, president of the Luzon Gamefowl Breeders Association (LGBA). It provides hundreds of sentenciador (individuals who officiate the fight), gaffer (mananari), kristo (bet-takers), informal cock doctors (manggagamot) and cockpit vendors across the country an opportunity to make a living, he said. Gaffers can also make a fortune, Crisostomo added.

The top gaffers could make no less than P100,000 in a month, Noli Estrellado said in an earlier interview. Estrellado is known as one of the most successful gaffers today. “If the gaffer does his job professionally, he can make money,” he said. “It takes a good reputation for the bosses to trust you.” The gaffer gets paid P1, 000 for each rooster he arms that wins and takes a share in the prize when the entry wins as champion in the big derbies, Estrellado explained. Professional gaffers tie the knife (long knife), sometimes even on a Sunday, in Manila and other cockfighting hubs outside the metropolitan, he added. Estrellado said an excellent gaffer—if he has the skills and the discipline—can hop from one cocker to another. Estrellado’s properties in Laguna and Makati and financial ability to fund his children’s education bare witness to his success as a gaffer. Another top gaffer is Albert Margen. Like Estrellado, Margen believes that most gaffers are as competent as they are. But success takes more than simply that. “It’s not only the skill, but also the discipline and honesty,” he said. “The bosses will look for you if you have a good reputation.” And, like Estrellado, Margen was also able to acquire properties and ensure his children receive good education.

Cockfighting hubs

AT the La Loma Cockpit, seven people from two generations are huddled together on a table. They are furiously working to suture a rooster wounded from a fight. Looking at their faces alone, one could tell these people evolved from one gene. One of them is a widow who took the place of her husband who passed away years ago, the cockpit operator said. Had they worn white, many can mistake them for physicians in an operating room. No one dared disturb the manggagamot crew as a cacophony of sounds signal the start of another fight. Aside from Manila, the major

cockfighting hubs in the Philippines include Davao, Cebu and Bacolod. According to Crisostomo, indicators point to the industry continuing to get bigger in the coming years. “The gamefowl industry is still growing and will grow bigger in the next few years,” Crisostomo said. He pointed to the increasing number of gamefowl breeders— small and big alike—across the country as suggesting the entry of new players in the manufacturing of feeds. This also suggests an expanding market.

Associations, associations

ACCORDING to Crisostomo, every province in the country hosts at least an association of breeders. “Some provinces have even more.” He cited as example the LGBA. Founded by former Tarlac Rep Jose Cojuangco, Biboy Enriquez and Boy Diaz in the 2000, the LGBA has over 250 active members today. Crisostomo said the LGBA promotes about 20 derbies annually. It admits into membership any breeder who produces at least a hundred cockerels in a season. The candidate member should breed and raise the chickens on at least 1.5 hectares of land and be endorsed by at least two bona fide association members. Gamefowl farms across the country provide a living to hundreds of people, Crisostomo noted. The more chickens means more farmhands are required. “As a rule of thumb, a farm should employ one for every 100 roosters in cord,” Crisostomo said. If a breeder cords 1,000 roosters, he employs 10 people, he explained.

Eggs, hatchery

THE mounting volume of eggs in incubators denotes a climb not only in the number of chickens but also in the number of breeders, an owner of a hatchery in Los Baños, Laguna, explained. “I can see the industry is getting bigger,” said Boy Ang, who is an incubation technology specialist and also manufactures incubators. “More breeders are coming in.”

Enrico Reyes, who breeds fighting cocks in his backyard, watch his roosters fight. NONIE REYES

Currently, Ang incubates about 40,000 eggs from breeders across Laguna alone. The demand for new incubators and demand for repairs are rising, which is suggestive of industry growth, he noted. In fact, the production muscle of one of the major players in the gamefowl feed and medicine subsector may not even meet the current demand as a result of the growing number of enthusiasts nationwide, Mitra said. Currently, breeders and cockfighters in the country coalesce around two big umbrella organizations. We have two major associa-

tions, according to Mitra. He cited the Federation of Gamefowl Breeders Association (Figba) headed by Ricoy Palmares and the Digmaan, which is headed by Wilson Ong. The Figba holds the “Bakbakan,” a prestigious national annual stag derby. Multitime cock derby champions have said they find the Bakbakan” title so close to Ong’s “Digmaan”. The latter is also a national annual stag derby that is younger than Figba’s.

Gamblers, breeders

COCKFIGHTING is both a sport and gambling, pointed out Mitra, who is a cocker himself.

derLook

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y growing bigger–GAB Games and Amusements Board Chairman Abraham Khalil Mitra Oliver Samson

Some big-time breeder brand endorsers are into gambling, but the majority who gamble are backyard breeders, he explained. “There are two kinds of cocker. One is a gambler, the other is a breeder,” Mitra said. “But, I think, the number of breeders outnumbers the gamblers.” A class A battle-stag cost today P12,000, while a class A battlecock cost from P15,000 to P20,000, according to Mitra. A trio may cost P45,000, he added. “But for Nene Abello, it’s P60,000; for Gen-Gen Arayata, it’s P150,000; and for Lance dela Torre, it’s about P0.2 million,” he said.

“Their theory is, if you want the best, you really have to pay for it.” An imported trio may cost $1,500, Mitra said. Producing caliber, breeding materials undergoes a number of years of experimentations and infusions of several bloodlines, said Mitra, who is a gamefowl breeder himself.

Media involvement

ACCORDING to Crisostomo, the media helped the industry take leaps and bounds in the past two decades. The sport gained more popularity and breadth, drawing the interest of thousands of new and uninitiated enthusiasts, after a national televi-

sion program dedicated to it went on air in the late 1990s. Tukaan (now the All New Tukaan), aired on IBC 13, which was hosted by the late Emoy Gorgonia from 1998 until his death in 2007, was instrumental in revolutionizing the sport and in setting the industry on its course toward growth, he explained. Media practitioners specializing in cockfighting also grew in number. Magazines, television and radio shows dedicated to cockfighting are generating jobs. Rolando Luzong, for one, who leads All Angles Media Inc., goes print, radio and television. The competition among them to hit more viewers is seen to result in more mature and dynamic cockfighting media, to the benefit of the industry as a whole. The policy on importation of chickens, mostly from the United States, also helped the industry to grow in a rapid pace, Crisostomo said.

More opportunities

THE increasing number of breeders would also create new earning opportunities. Some breeders allow their

farmhands to bring their family with them in the farm. One of them is Biboy Enriquez, a retired hotelier, who houses his farmhands and their respective families at his 20-hectare farm in Tanay, Rizal. Their children go to the nearest schools. Some American breeders even partner with Filipino counterparts to breed and raise gamefowl in the Philippines, since the sport was outlawed in the US. Others wish to breed and raise gamefowl in the country without a local partner. The growth in the number of gamefowl enthusiasts across the country was giving one of the biggest feed and veterinary product manufacturers a volume of demand its current production muscle could not deliver. In 2008 the number of gamefowl, which include the breeding materials, chicks, cockerels, pullets and roosters for pit action nationwide, was estimated to have reached 40 million, Mitra said. The number rose to 44 million today. “We are the center of cockfighting in the world,” Mitra said. “Outside of the Philippines, of course, there is Mexico, Puerto Rico and several others. But cockfighting is

in no other country that big.” According to Mitra, the GAB oversees international derbies. We have the National Cockers Alliance, the Pit Masters Cup and the World Slasher Cup, he said. Promoters pay GAB a fee of P18,500 for every derby, and P300 for every match, Mitra said. Some people, however, attach the term “international” to their derbies, despite the fact that those are local derbies only and charge the audience an international derby admission fee, Mitra said. “An international derby should have a minimum of eight foreign participants,” he explained. “We understand some people in the Visayas, and Mindanao, as well as Luzon, who use the term international to their local derbies.” Starting March 1 this year, derby promoters should secure authorization from the board before holding a derby, Mitra said. As of today, only three leagues secure permission from GAB, which include the World Slasher Cup, NCA and Pit Masters Cup, he added. The major derbies draw from 1,000 to 3,000 audience, according to Mitra.

No worries

DESPITE moves to outlaw the sport in the country, enthusiasts and industry leaders are not worried. “I don’t think that would happen to the Philippines,” he said. “[The gamefowl industry is] a very strong industry. There are cockpits in almost all of the municipalities and cities.” About 75 percent of municipalities across the country have cockpits, he added. A municipality can operate one cockpit for every 150,000 people of its population. If a town has 300,000 people, it can operate two. “In the city of Puerto Princesa, Palawan, there will be two cockpits, since its population has over 300,000 people,” Mitra said. “One [cockpit could be] inside the poblacion [downtown], another outside it.” In Davao two cockpits operate in the poblacion and about five others outside it, since the city has a big population, he added.

“We feel that the chicken has a better chance in the ring with a knife compared to in the kitchen without a knife and a housewife with a big knife,” Mitra said. “That’s how we look at it. So, animal rights, go somewhere else.” Any initiative to outlaw cockfighting in the Philippines would fail, he said.

Industry drivers

The main drivers of the gamefowl industry growth are competition, the Internet and social media, Mitra said. “If the economy is good, the industry is strong,” he said. “Enthusiasts would have more power to purchase gamefowl, and the products and services they need.” The growing competition among players in the industry is seen to result in higher quality of products and services, Mitra added. “Five years from now the population of gamefowl in the country may rise to a total of 50 million and even higher.” The international derbies World Slasher Cup, NCA and Pit Masters Cup may have one or more competitor rivals, Mitra added. Mindanao had already secured permit to promote an international derby. Visayas might take a similar initiative. Recently, GAB conducted trainings, dubbed as Sabong Standardization Seminars, for upgrading the skills and licensing of a gaffer, sentenciador and manggagamot in Palawan, in cooperation with cockpit owners and the two big local associations in the province, Mitra said. The board issued a P1,020 twoyear license to the participants, he noted. GAB saw standardization of gaffing, officiating and post-battle care would upgrade these occupations and is good for the industry as a whole, Mitra added. We have 149 new licensees. The Philippines also hosts the annual International Gamefowl Festival, which was held in January at the SMX Mall of Asia, and its rival World Gamefowl Expo, held in the same month at the World Trade Center.

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Thursday, February 16, 2017

briefs

New Zealand wildfires prompt hundreds of evacuations

WELLINGTON, New Zealand—Hundreds of people in the New Zealand city of Christchurch were evacuated from their homes on Wednesday as wildfires threatened some suburbs. At least one home was burned down in the Port Hills. The mayors of Christchurch City and the adjacent Selwyn District declared a state of emergency. Selwyn Mayor Sam Broughton said changing winds had made the fires unpredictable. He said the region had been unusually dry for the past three years and that the grass in the hills had turned brown over the Southern Hemisphere summer. AP

India launches 100 satellites into orbit

NEW DELHI—India’s space agency said it successfully launched more than 100 foreign nano satellites into orbit on Wednesday aboard a single rocket. The Indian Space Research Organization (Isro) said the nano satellites—those weighing less than 10 kilograms— were sent into orbit on board its polar satellite launch vehicle in southern India. The agency said the launching of the 104 satellites was a record, overtaking Russia’s feat of sending 37 satellites in a single launch in 2014. The nano satellites belong to various companies in the United States, the United Arab Emirates, Israel, the Netherlands and Kazakhstan, according to the Isro. AP

Local China govt suspends plant project after protests

BEIJING—The government of an oil city near China’s border with Russia said on Wednesday it was suspending an aluminum-plant project following street protests by some residents over pollution fears, in the latest sign of rising environmental consciousness among some Chinese. On Tuesday more than 200 protesters faced off against dozens of police officers outside the Daqing government headquarters and chanted no to the plant planned by aluminum producer Zhongwang Holdings Ltd. A resident reached by phone, who asked not to be identified for fear of reprisals, said protests had been taking place since earlier this month. The Daqing city government and Zhongwang signed an agreement to cooperate on the plant in 2011. It is still in the planning stages and both say it would create more than 30,000 jobs. AP

Suicide attack kills 5 in northwestern Pakistan

PESHAWAR, Pakistan—A suicide bombing targeted the administrative headquarters of a tribal region in northwestern Pakistan on Wednesday, killing three policemen and two passersby, officials said. The explosion went off at the main gate of the tribal headquarters in Ghalanai in the Mohmand tribal region, just as the workday was about to start, said Hameedullah Khan, a local government official. No one immediately claimed responsibility for the attack. AP

The World BusinessMirror

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

A victory for Trump is a victory for big-name hedge-fund investors

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arl C. Icahn is one of several billionaire investors who have bet big on a Donald J. Trump presidency. So bullish was Icahn that he said he made $1 billion worth of bets in the stock market the morning after Trump won the election. In a regulatory filing on Tuesday with the Securities and Exchange Commission (SEC), Icahn, 80, revealed some of the other bets he made in the last three months of 2016. He loaded up on shares of his compa ny, Ic a hn Enter pr ises, which invests in a variety of industries. Icahn also increased his position in Herbalife, the beleaguered vitamin supplements company in which he already owned more than 20 percent of the outstanding shares. Icahn’s stock trading since the election has interested some Democratic senators, who recently raised concerns about potential conflicts of interest given his role as a special adviser to Trump on overhauling regulation. In a letter to the White House on Monday, seven Democratic senators sought assurances from t he W hite House t hat Ica hn would not recommend regulatory changes that could personally benefit some of his investments in a variety of industries. It is not just Icahn who is betting big on Trump. More broadly, Wall Street has turned bullish in the wake of Trump’s victory, pinning its hopes on a new administration—with a Republican-controlled Congress—delivering big tax cuts and rolling back regulation. The US stock market has risen to a record high even as the W hite House has come under scrutiny for a ban on immigration from seven mostly Muslim countries—blocked while the matter is argued in court—and the resignation on Monday of Michael T. Flynn as national security adviser over concerns about conversations he had with Russian officials before Trump was sworn into office. In the

$1B The amount of bets Carl C. Icahn made in the stock market the morning after Donald J. Trump won the election

months since the election, the Standard and Poor’s 500 stock index has soared about 9 percent. Banks and other financial stocks have risen about 20 percent, while industrial stocks, including manufacturing and construction firms, have risen about 11 percent. Consumer company shares have ga ined roughly 9 percent. Icahn was one of hundreds of hedge-fund and other investmentfund managers to make their quarterly declarations to the SEC about which stocks they bought in recent months. Known as 13Fs, these reports offer investors a glimpse at where these professional traders placed their bets during a given quarter, though they are filed roughly 45 days after the quarter ends. But the filings offer an imper fect w indow into the holdings of money managers because they are a snapshot of the past. T hey include only stocks traded in the United States but do not include shor t positions, or bets a manager might have made that a stock w il l fa l l in pr ice. T hey a lso do not include bets on the f uture direction of the market, a favor ite trade of Icahn and his fir m. This time, however, the regulatory filings reveal the big rush of money into the market over a quar-

Carl C. Icahn, the activist investor, speaks at a conference in New York on November 3, 2015. Karsten Moran/The New York Times

ter that coincided with Trump’s election victory. Many of the hedge-fund managers jumping on the so-called Trump Bump trade loaded up on financial stocks in the final quarter of the year, riding shares of banks like Goldman Sachs Group, which are up more than 37 percent since the election, and Bank of America, which has had a more than 40-percent gain over the same period. Some of the big-name managers whose firms added stakes in financial stocks in the final months of 2016 included Daniel S. Loeb, Julian Robertson, David Tepper and O. Andreas Halvorsen. Nelson Peltz’s firm, Trian Fund Management, took a big 4.86-percent stake in Procter & Gamble, one of the largest manufacturers of family, personal and household care products. Peltz has a reputation as an activist investor who takes stake in companies and then pushes for corporate changes to increase shareholder value. His firm also added shares of Bank of New York Mellon. Shares of Fannie Mae and Freddie Mac, the giant mortgage finance firms that the federal government placed in conservatorship during the financial

crisis, also have surged since Trump’s election. Shares of Fannie, for instance, are up more than 160 percent. The rally has been prompted in part by comments from Steven T. Mnuchin, Trump’s Treasury secretary and a former hedge-fund manager. Mnuchin said he favored the recapitalization of the two firms and would plan to cut the government’s hold over them. Mnuchin, confirmed by the Senate on Monday, made those comments a day after Trump nominated him. His early comments on Fannie and Freddie were welcome news to a group of hedge-fund managers, like Paulson & Co. and William A. Ackman’s Pershing Square Capital Management, that bet on mortgage finance firms. Ackman’s firm acquired big stakes in shares of both Fannie and Freddie in late 2013 and the stocks are two of his firm’s big winners in 2016—a year in which one of Pershing Square’s portfolios lost a little more than 13 percent. Paulson and Co, a firm led by John Paulson in which Trump and Mnuchin have been investors at various times, reported trimming its bet on gold through an exchange-traded fund. The firm also bought a new stake in the

drug company GlaxoSmithKline. But Icahn’s bet will be of most interest with politicians in Washing ton, where senators have sought assurances from the White House that safeguards would be put in place to ensure Icahn does not have access to information that is not public and could be used to make a profitable trade. Icahn Enterprises, Icahn’s firm, has several large investments in companies that are directly affected by regulations, which he has described as stifling. In the fourth quarter, he acquired another 2.9 million shares of his company. It is his majority investment in CVR Refining, an oil refiner that is a core investment of Icahn Enterprises, which is of biggest concern to lawmakers. CVR is required by the Environmental Protection Agency (EPA) to blend its oil or buy credits, something that Icahn has called “completely totally absurd.” Icahn, who did not return phone calls seeking comment, has blamed the EPA for the bankruptcy of several oil refineries in the United States. Still, in Tuesday’s filing, he did not report any change in the number of shares his firm has in CVR. New York Times News Service

Kim Jong Un’s half brother ‘assassinated’ in Malaysia

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EOUL , South Korea—He seemed like an ordinar y passenger in the departure hall of the airport for Malaysia’s capital, awaiting a four-hour f light to Macau. Moments later, he felt dizzy and was carried out on a stretcher, apparently dy i ng f rom poi soned- need le punctures or, perhaps, a toxic liquid splashed on his face by two women who ran away. T he r uc kus caused by t he man’s death on Monday at the international airport for Kuala Lumpur was minor news until a thunderbolt from the South Korean and Malaysian news media a day later: The victim was Kim Jong Nam, 45, the estranged older half brother of Kim Jong Un, the unpredictable and ruthless leader of North Korea. The death immediately turned into an international assassination intrigue connected to the opaque regime of the Kim family, which has ruled North Korea for more than 60 years. It came as Kim Jong Un, 33, who has ordered scores of subordinates executed if he questioned their fealty, has further shaken

up the ranks of his closest aides, purging the chief of the secret police less than two weeks ago. In addition, Kim Jong Un has stoked a new international crisis with a ballistic missile launching and threats of more nuclearweapons tests. The South Korean news channel TV Chosun said two women had stabbed Kim Jong Nam with poisoned needles and fled in a taxi and that the local police were searching for them. The Star, a Malaysian newspaper, quoted the police as saying the victim had sought help from a departure hall receptionist after someone “grabbed him from behind and splashed liquid on his face.” He died as medics rushed him to a hospital. Political experts on North Korea’s politics immediately speculated that Kim Jong Un had ordered the assassination of his older half sibling, who at one time had been the heir apparent and had been favored by China, the country’s ally and principal benefactor. “Maybe Kim Jong Nam was about to do something drastic that

would either compromise the regime or the family,” said Jae H. Ku, director of the US-Korea Institute at the Johns Hopkins School of Advanced International Studies. “By the nature of things in North Korea, the fact that he is in the bloodline represented a threat.” Others were even more emphatic in their suspicion that Kim Jong Un had been responsible, partly because Kim Jong Nam had been publicly critical of the transfer of power that made Kim Jong Un the top leader after the death of their father, Kim Jong Il, in 2011. “ The apparent murder today of K im Jong Nam in Malaysia by agents of his brother is the latest explosive turn in Pyongyang’s vicious palace intrigue,” said Nicholas Eberstadt, a political economist who specializes in North and South Korea at the American Enter prise Institute in Washington. “ The question remains: Do these deadly measures secure his rule or ser ve to undermine it? ” There also was speculation that Kim Jong Un might have ordered Kim Jong Nam killed because China might have been planning

to support him as a replacement for Kim Jong Un, who has angered Chinese leaders with his provocative weapons and missile tests. “Kim Jong Nam reportedly has been Beijing’s favorite, which may mean one day the Chinese Communist Party may overthrow Kim Jong Un and install Kim Jong Nam,” said Lee Sung-yoon, a North Korea expert at Tufts University’s Fletcher School of Law and Diplomacy. T he Roya l Ma laysia Police identified the dead man as Kim Chol, an alias that South Korean officials said had been used by Kim Jong Nam. A police statement said the cause of death was under investigation. In Seoul on Wednesday, Prime Minister Hwang Kyo-ahn, who is serving as acting president during the impeachment trial of President Park Geun-hye, called a meeting of security-related Cabinet ministers and urged his government to work closely with the Malaysian authorities to help uncover who killed Kim Jong Nam. “If he was killed by the Kim Jong Un regime, it will be an example of its cruelty and inhumaneness,”

Hwang said. North Korea’s staterun media has said nothing about the reports. Kim Jong Nam, the eldest son of Kim Jong Il, had been widely considered next in line to succeed him until 2001, when he was caught trying to take his son to Tokyo Disneyland with a fake visa. He was detained for several days, then deported to China. Other analysts in South Korea say Kim Jong Nam fell out of the succession race after his mother, Sung Hae Rim, was rejected by the North Korean leader, who favored Kim Jong Un’s mother, Ko Young Hee. Ko and Kim Jong Il had another son, Kim Jong Chol, who was seen at an Eric Clapton concert in London in 2015. North Korea began grooming Kim Jong Un as heir after his father had a stroke in 2008. As his youngest brother consolidated power, Kim Jong Nam lived in semi-exile abroad. Until recently, he had sometimes been seen in Macau. TV Chosun said he had also been visiting Singapore and Malaysia, where he had girlfriends. New York Times News Service

Asean

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The environment market Asean-EU Perspective

HENRY J. SCHUMACHER

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echnological advances in environmental protection are a key driver for the responsible use of natural resources—and a pivotal instrument to direct government policies, consumer behavior and market-driven incentives to achieve economic growth with minimal negative environmental impact. Hopefully, Environment Secretary Regina Paz L. Lopez reads this. The environmental services market in Asia is large and growing, but extremely fragmented. Continued economic growth—well above the global average—and more demanding citizens mean that most governments in the region have made a strong commitment to invest in all aspects of environmental spending: from clean-tech energy and wastewater treatment to soil remediation and a variety of related industries. The market’s size and diversity makes it attractive for foreign companies, but strong local players exist, as well—especially in the larger economies. Environmental spending in many countries will continue to be driven by government policies and funding. The Asia-Pacific region spent $179 billion on renewable-energy investments of all types in 2015, more than half of the global total, according to Bloomberg New Energy Finance. The environmental services market is even larger than these figures suggest, as they do not include many infrastructure services (such as waste and wastewater treatment), as well as infrastructure-related design and consulting services. Planned investment in a variety of transport-related infrastructure projects—including light rail, high speed and conventional running stock—is at historically high levels in the Philippines, India and China, and could also be considered when talking about environmental services. So, too, could parts of the construction sector. Environmental services can help countries in their transition to becoming a green economy by promoting more widespread use of efficient and cost-effective technologies. The green economy itself will also provide opportunities for exporters of environmental services, whose expertise will grow in demand. In the context of environmental services, let’s look at mineral resources: Southeast Asia possesses vast mineral resources, with both precious metals and industrial ores. Coal is the most abundant fossil fuel. The proven reserves, for example, are sufficient for 80 years of production at present levels, according to estimates by the International Energy Agency. Much of these reserves are located in remote areas that often lack basic services. Their exploitation and the income generated can serve to provide employment and to bring improvements to infrastructure, such as power supplies and roads to isolated communities. Many Asean economies are driven by the extraction of natural resources. Foreign direct investment (FDI) in the sector is high and in 2012 accounted for 17 percent of Indonesia’s FDI and 20 percent of Malaysia’s, with almost 93 percent of FDI in Lao PDR going into mining ventures. The mining industry has been one of the key sectors supporting Indonesia’s economic growth. The sector makes a significant contribution to Indonesia’s GDP, exports, government revenues, employment and, perhaps, most important, the economic development of the country’s remote regions. Other parts of the region offer similar mining potential. The Philippines, with some 9 million hectares of highly mineralized areas, is estimated to have some of the world’s biggest reserves of nickel, gold and copper, according the country’s Mines and Geosciences Bureau. Given the region’s mining potential, attracting FDI interest to the sector is not a problem, although fulfilling its potential will take time. In 2013 the Philippine government, for instance, valued the country’s mineral deposits at around $850 billion. However, investments and mining output have slowed in the last three years, as inconsequent policies and tax uncertainties have deterred investors. The latter also argue that since they often have to contribute to infrastructure, such as power supplies and roads, to serve mining sites, their investments deserve higher returns. If governed well, natural resources can help economies expand and to develop in a sustainable way, benefiting local communities, as well as the national treasuries and the responsible mining companies involved. In this, meaningful attention to human rights and to environmental issues is essential. There are many challenges ahead, but interest in mining ventures remains strong. Concerns over environmental impact, transparency, compensation levels and ultimate rewards to local populations need to be weighed against wider national economic-development considerations. It is a challenging agenda and given the sensitivities involved, likely to be a keenly argued debate throughout the region, and especially in the Philippines.

Asean officials meet on intellectual property cooperation in Lao PDR

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IENTIANE—Representatives from the Association of Southeast Asian Nations (Asean) gathered in Lao capital Vientiane on Tuesday for the 52nd Asean Working Group on Intellectual Property Cooperation (AWGIPC). The meeting aims to continue discussions on the Asean Intellectual Property Rights (IPR) Action Plan 2016-2025 and exchange views on matters of mutual interest. Participants intend to draw up plans to implement collective steps to carry forward the key initiatives and deliverables that will make Asean more competitive and innovative, according to Lao state-run news agency KPL. Speaking at the opening ceremony, Lao Deputy Minister of Science and Technology Houmphanh Intharath said that intellectual property (IP) is crucial to this endeavor. Asean formed the AWGIPC in 1996, consisting of the heads of the Asean IP offices. The focus was initially on meeting the challenges of IP, but over time, it has broadened to work towards the creation of a vibrant IP ecosystem for

businesses. With the AWGIPC commitment to building on the Asean Framework Agreement on Intellectual Property Cooperation and making intellectual property a vehicle of deeper economic integration in Asean, it thus contributes to the goals of AEC 2025. Working together as a regional bloc, Asean countries have the potential to become one of the world’s most important players in the global IP landscape and achieving the Asean Economic Community Blueprint by 2025, the minister told the meeting. “With intensified collaboration among Asean member-states, and with each one of our countries striving to develop its respective IP systems, we can achieve a robust and highly integrated intellectual-property ecosystem and our region can become the hub of intellectual property in this part of the world in the next five to 10 years according to the new Asean IPR Action Plan 2016-2025, which has underlined 19 initiatives to be implemented within the next 10 years,” the official said. The meeting of the Working Group is scheduled to last till Friday. PNA/Xinhua

Editor: Max V. de Leon • Thursday, February 16, 2017 A9

Singapore to ease VC regulations to promote financing for start-ups

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ingapore is proposing to ease regulations for venture-capital (VC) managers, including shortening their application process in a bid to promote financing for start-up development.

Under a consultation paper published by the Monetary Authority of Singapore (MAS) on Wednesday, new and existing VC managers won’t be subject to the same capital requirements and businessconduct rules that currently apply to fund mangers, in general. The MAS will focus primarily on fitness and propriety assessment, and retain regulatory powers to deal with “errant VC managers”, it said in a statement. The latest plan is part of efforts to support and implement recommendations from a top-level government-appointed committee that are aimed at sustaining Singapore’s growth at an average of 2 percent to 3 percent annually. The plan for VC managers follows initiatives seeking to make it easier to experiment with financial technology in the city-state and represents the latest step by the MAS toward a more agile, flexible regulatory role. Under the latest proposals, open for public consultation until March 15, the central bank won’t demand that VC managers have directors and representatives with at least five years of relevant experience in fund management. Base capital and risk-based capital requirements will be removed, the MAS said. It also won’t require VC managers to provide independent valuation, internal audits and audited

financial statements—a proposed change that Paul Santos, Singaporebased managing partner at VC firm Wavemaker Partners, described as “very encouraging”.

‘Midterm marks’

“The holding values of start-up portfolios are just like midterm marks,” he said. “Nobody makes any money from these midterm marks. The only time the values are real are when the companies are wound up or are sold or listed.”

The central bank said other requirements, involving the annual submission of information on funds and the prevention of money laundering and financing of terrorism, will remain unchanged. Singapore is home to 153 VC firms, according to data provider Preqin. The city-state saw record private equity and VC investments totaling $3.5 billion in 2016, rising from $2.2 billion in 2015, based on figures from Duff & Phelps, a corporate finance adviser. The island-nation is taking steps to address a lack of technology initial public offerings on its stock exchange, with the Singapore government-appointed committee last week recommending that dualclass stock be allowed. This shareownership structure has enabled minority shareholders to control some of the world’s largest technology companies, including Facebook Inc. and Alphabet Inc.

Risk management

Singapore isn’t the only country in Southeast Asia trying to lure start-ups. Last year Indonesia announced plans to establish a dedicated section within its main stock exchange to host IPOs by startups, pursuing its vision of becoming a regional cradle of technology entrepreneurs. The city-state’s planned easing of requirements for VC managers may bring in more of such firms, but the MAS would need to mitigate any risks through the enforcement of industry standards, according to James Bitanga, chief legal officer at Reapra Pte., a Singapore-based VC firm. “While there is an implicit recognition here that VC investments take on a different risk profile than that of other types of investments, we should wait and see how the government plans to ensure that it can attract and retain quality VC players,” Bitanga said. Bloomberg News

Aerials of the Lion City as GDP contracts the most since 2012. Bloomberg Photo

Asia goes back to the future on trade to manage in Trump times

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verything old is new again when it comes to trade deals. There’s been a flurry of interest in reverting to one-on-one talks with the US, after President Donald J. Trump ditched a 12-nation Pacific trade pact. Japanese Prime Minister Shinzo Abe went to Washington, in part, to talk about the potential for a bilateral agreement. The Trans-Pacific Partnership (TPP) went well beyond traditional pacts and addressed everything, from intellectual property rights to state-owned enterprises to labor standards. In theory, direct deals should be easier. Still, getting traction may not prove that simple, given Trump’s attacks on trade deals, in general, and his “America First” policy on jobs. Countries may find themselves being asked to make major concessions on key industries—like autos or agriculture—in order to get Trump’s sign off. “Those who have been involved in bilateral deals know how difficult they are,” said Mark Michelson, chairman of the Asia CEO Forum in Hong Kong, a networking group of about 300 international corporate chiefs. “Multilateral agreements are difficult, too, but if you get one, you can have a lot of people signing up. That’s what makes them so valuable.”

‘Jobs killer’

During his campaign, Trump called an accord with South Korea enacted in 2012 a jobs killer. Though he hasn’t directly identified it a target for renegotiation—unlike

the North American Free Trade Agreement—Korean officials are concerned: This month the trade minister outlined plans to explain the benefits of the deal. Trump has repeatedly said every decision the US makes on trade will benefit American workers. “Believe me, we’re going to have a lot of trade deals. But they’ll be one-on-one,” he told Republican lawmakers, after announcing the US exit from the TPP, which would have covered 40 percent of the global economy. In Asia, New Zealand and Japan, both TPP signatories, have expressed interest in exploring bilateral agreements with the US, but even exploratory talks aren’t expected to begin until Wilbur Ross, Trump’s nomination for commerce secretary, and Robert Lighthizer, his pick for US trade representative, are confirmed. Trump has said US negotiators on multilateral deals like the TPP allowed countries to gain at America’s expense. Bilateral agreements will let his administration “create fair and economically beneficial trade deals,” according to his executive order canceling TPP. He’s also suggested he’d terminate deals if the other party treats the US unfairly.

Fair, unfair

“How do you define fairness?” said Kim Jong-hoon, a former Korea trade minister who was a key negotiator for the US-Korea agreement. “What’s fair to you can be unfair to me.” The prospect of sitting down at the table will be daunting for any country, according to Deborah Elms, executive

director of the Asian Trade Centre, a Singapore-based consultancy that also trains trade negotiators. “In order for you to have a US first at all time and in all categories, the other party in a bilateral negotiation must be getting the short end of the stick every single time,” she said. “Why would any party sign up to that kind of agreement?” Trump’s officials would need to convince partners that the reward of a deal with the US—access to the biggest market in the world—is worth devoting the time that might be better spent on a multilateral pact that could offer access to multiple markets including China. The US has Free Trade Agreements (FTA) in the region with Australia, Singapore and South Korea. Most of its other trade relationships are governed by World Trade Organization rules, under which trade has flourished. Malaysia abandoned FTA talks with the US in 2009. Since then its exports to the world’s biggest economy climbed more than 40 percent. “To have a negotiation there has to be a mutual understanding from both sides that the negotiations are a good idea and should take place,” said Carlos Kuriyama, who was Peru’s chief trade negotiator on the PeruChina FTA that was signed in 2009, and is now a senior trade analyst with the Asia-Pacific Economic Cooperation secretariat in Manila. “If you don’t have that, you don’t have a negotiation.” In the wake of the US withdrawal from TPP, the Asia-Pacific signato-

ries—Japan, Vietnam, Malaysia, Singapore, Australia, Brunei and New Zealand—are also focusing on the Regional Comprehensive Economic Partnership. China, which wasn’t part of the TPP talks, is an advocate for completing the RCEP. “If two parties negotiate it is probably going to be faster than ten or 12 at the same time,” Kuriyama said. “But even between two parties, it takes time.”

Smaller firms

Bilateral deals impose costs, particularly on small- and mediumsized businesses that don’t have the resources of larger companies to comply with a myriad of rules rather than one set of multilateral regulations, according to Jayant Menon, lead economist for trade and regional cooperation at the Asian Development Bank. “Have you seen an FTA? If you dropped one on someone you’d kill them.” Multilateral deals can ease road blocks to access, according to Frank Lavin, a former US ambassador to Singapore who was a lead negotiator for the US-Singapore FTA in force since 2004. For example, giving US access to New Zealand’s dairy products in a bilateral deal could hurt US dairy producers. But a broader pact, including countries without large dairy industries, would absorb some of New Zealand’s production, mitigating the effect across a wider population. “That is the advantage of a multilateral rather than a bilateral agreement—you are getting more bang for the buck,” Lavin said. Bloomberg News

A10 Thursday, February 16, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

Doing one’s duty within the bounds of the law

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nvironment Secretary Regina Paz L. Lopez’s orders to suspend the operations of 28 mining operations and cancel a total of 75 mineral production sharing agreements (MPSAs) on Valentine’s Day have sent shock waves to the global nickel market. The worry is that the mining closures can impair the global market supply, considering that the Philippines currently accounts for about a quarter of the world’s nickel-ore supply. The closure orders will remain in place while the Mining Industry Coordinating Council consults with stakeholders, including local communities, said Lopez, whose department has audited the affected mining firms. On the cancellation of MPSAs, Lopez said this was done to protect the country’s watersheds. She said protecting the watersheds, a source of freshwater supply, is mandated by law—the Philippine Mining Act of 1995— and is enshrined in the Constitution. An MPSA is an agreement wherein the government shares in the production of the contractor, whether in kind or in value, as owner of the minerals. In return, the contractor shall provide the necessary financing, technology, management and personnel for the mining project. Meanwhile, stakeholders said they have yet to receive any order on the cancellation or suspension, even if the Department of Environment and Natural Resources (DENR) has said it has already sent out notices. They alleged there was a grave abuse of authority, owing to the lack of due process, which requires that the accused be given the opportunity to respond to violation charges. “Parties must be heard, evidence presented and any decision should be based on substantial evidence,” they said. Philex Mining Corp., for example, has voiced out its concerns, after it was informed that its wholly owned subsidiary Silangan Mindanao Mining Co. Inc. (Silangan Mining) covering the Silangan project was included on the list, even as Silangan Mining has not, to date, received any cancellation order or any notice of a cancellation proceeding from the DENR or any other government agency. In a press statement, Philex said Silangan Mining is a copper and gold project in Surigao del Norte in Mindanao, with an expected investment opportunity of P40 billion. “Mindanao is an area where President Duterte has declared his fight against hunger, poverty and underdevelopment. It is expected that, starting 2020, the Silangan project will, for the first 10 years of operation, generate P170 billion of revenues, pay P31 billion in national and local taxes, and create at least 8,000 employment opportunities. Silangan Mining is also expected to spend P6 billion over the same period for social development and infrastructure programs that will benefit Mindanao. The project will promote much-needed development in an area that, in the words of Duterte, has long been neglected,” Philex said. Philex explained that Silangan Mining secured its MPSA for the Silangan project from the national government after a thorough review process by all relevant government agencies and the endorsement of the host communities and local government units. The company stressed that none of the areas covered by the Silangan Mining MPSA is in a proclaimed watershed forest reserve, where mining is prohibited. “Silangan Mining, is, therefore, confident that its MPSA is valid and can withstand any legal challenge,” Philex said. If this is the case, the DENR’s haste to cancel the MPSAs could adversely affect the Philippine economy. As a regulator, the DENR’s duty is to faithfully enforce all mining laws and to act against irresponsible mining firms. However, it must do its duty well within the bounds of the law. The agency must be reminded that responsible mining companies can be the government’s partners in nation-building. Since 2005

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merican heavyweight boxing legend Joe Louis was asked about his strategy against a smaller opponent, Billy Conn, who promised to “hit and run” during their fight. Louis answered: “He can run, but he can’t hide”. The Philippines has enjoyed a nice run of prosperity since 2012 during a period of building turmoil across the globe. But, as I have written many times, the long-term cycle of centuries, the medium term of decades and the shortest of eight years forecast that confidence in government would peak in 2015. Note that the global economic meltdown began in 2007. Government was supposed to fix the problem, and by 2015 it was clear that was not going to happen. The political meltdown became unavoidable in 2015 and we saw the results in 2016, which will continue through this current year, as elections in the Netherlands, France, Germany and potentially Italy (which must be held not later than May 2018) will create more mayhem.

The turning of the cycles leads to a “war” between those who want more of the same, hoping that this time those policies will succeed against those who want dramatic change also hoping for better results. It is never pretty. The problem for both viewpoints is that everyone gets caught up in the personalities that represent the opposing positions. And the moment you identify with the person, you lose the proper perspective of the policy. People cannot see the forest, because there are too many trees blocking the view. I wonder how many ancient leaders and shamans were killed when normal cyclical droughts and flooding destroyed the crops. Since the presidential election, US consumer confidence has soared to

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All those jobs that the new US president “brought back” to the US are as bogus as the traveling preacher who walks on water across the river. He knows where the river rocks are, and the people want to believe. President Donald J. Trump capitalized on pushing forward company plans that were already in the making. the highest level ever recorded. Well, it must be because the nation has a new “High Priest” that the gods favor, and that is why the rains have come to the dry fields again. All those jobs that the new US president “brought back” to the US are as bogus as the traveling preacher who walks on water across the river. He knows where the river rocks are, and the people want to believe. President Donald J. Trump capitalized on pushing forward company plans that were already in the making. But the economic chaos that follows the political upheaval is being ignored as usual. The US economy is headed for a recession. While the new wizard is going to make everything right, the US economy is rolling over right on schedule. Employment growth has turned

negative at the 500 largest US companies, the first since 2009. The US goods and services trade deficit for 2016 was the worst going back to 2012. One of the key indicators to watch is average weekly hours. When the economy shifts into recession mode, employers tend to start cutting back hours. The year 2016 witnessed the largest percentage decline in US average weekly hours since 2008. Automobile sales are a good indication of the US economy. Total sales in January fell 1.8 percent, which is not a big deal, but car sales to ordinary consumers was down 21 percent at General Motors. So who was buying? Government deliveries went up 12 percent. And for stock-market watchers, the US S&P 500 index has generated an 18-percent annual return, including dividends, since 2009. Understand, this has been against the backdrop of a disintegrating European Union, Chinese currency devaluation, a potential trade war, and a crashing global bond market. Remember, you have to know where the rocks are to walk on water. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

WHO says unitary tax system favors multinational cigarette firms Cecilio T. Arillo

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HE latest technical manual of the World Health Organization (WHO) on Tobacco Tax Administration says a unitary tax system favors producers of expensive brands.

“That’s why the European Commission, recognizing the health objectives of cigarette excises, simultaneously imposes two types of taxes on tobacco—a specific tax to set a minimum floor, which is high enough to discourage smoking, and an ad valorem tax for progressivity. This way, taxes contribute to a levelplaying field among manufacturers,” said University of the Philippines Prof. Dr. Ernesto R. Gonzales, quoting Chapter 2 of the WHO manual. Gonzales, a London School of Economics-trained economist, cautioned lawmakers and prohealth advocates that they might be overlooking the issue of upshifting to premium brands under a unitary tax regime due to negligible gaps in retail prices.

Under provisions of Republic Act 10351, or the “sin” tax-reformed law, the Philippines is now under a unitary tax regime, where cigarettes are taxed P30 per pack regardless of classification (nonpremium and premium). It’s not only Gonzales talking. In fact, the WHO manual, in page 45, supports what he is saying: “An upward substitutability [upshifting] might occur when the price gap between cheaper and more expensive brands narrows. The price increase, due to higher taxation, may alter consumers’ marginal willingness to pay for product ‘quality’ subject to income. “The hypothesis that the market share of lower-priced cigarettes falls when specific excises increase,

Gonzales concluded that the twotier tax rates under House Bill 4144 are higher than the current unitary tax rate and is prohealth, since poor smokers are more elastic to price changes, thus a P32 tax (under two tier) is more discouraging than a P30 rate, while noting that poor smokers are sensitive to price increases. as the relative price between higher- and lower-priced cigarettes is reduced, is supported by empirical evidence. Sobel and Garrett [1997] find that increases in specific taxes reduced the market share of generic [lower-priced] brands in the US significantly.” The manual further states: “Theory shows that profits are relatively higher under specific taxation [e.g., Delipalla and Keen, 1992]. Moreover, a tax increase may lead to an increase in profits. More than 100percent overshifting [i.e., prices rise by more than the tax increase itself] is a requisite for an increase in profits: as a higher tax increases consumer price and reduces demand, for profits to rise, the after-tax markup must rise. It is not, therefore,

surprising that tobacco multinationals prefer specific taxes.” Gonzales supported former National Economic and Development Authority chief Romulo Neri’s statement that the Table 1 of Seatca Tobacco Tax Index 2015 report shows only Brunei Darussalam and Singapore, out of 10 Southeast Asian countries, with a unitary excise tax. “He did not misuse data provided by Seatca but merely cited it objectively,” Gonzales pointed out. Comparatively, page 36 of the WHO manual shows a table that out of 182 countries, 60 used ad valorem (according to value), 48 used mix ad valorem and specific excise tax system, while specific (unitary or multitier) excise tax are applied in 55 countries and 19 have no excise taxes at all. Gonzales concluded that the twotier tax rates under House Bill 4144 are higher than the current unitary tax rate and is prohealth, since poor smokers are more elastic to price changes, thus a P32 tax (under two tier) is more discouraging than a P30 rate while noting that poor smokers are sensitive to price increases. To reach the writer, e-mail cecilio.arillo@ gmail.com.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Thursday, February 16, 2017 A11

Much ado about mining The ethical standard of true Christians Ariel Nepomuceno

Msgr. Sabino A. Vengco Jr.

DECISION TIME

Alálaong Bagá

he mining industry and its ardent supporters have been hugging the headlines for already three weeks, and the murmurs, jitters and speculations have not ceased as of yet. The center of all these discussions in the press and social media has been the Department of Environment and Natural Resources’s (DENR) controversial decision to shut down the operations of 23 metallic mines and the suspension of five other mining outfits for alleged violations of prevailing environmental laws. It has become so caustic that the appointment of Environment Secretary Regina Paz L. Lopez is now being opposed by big mining companies and supportive stakeholders who vouch for the industry’s contributions to the nation’s economic well-being.

ontinuing last week’s instruction to His disciples on how to be truly belonging to God’s reign, Jesus goes into a couple of instances that should concretize their manner of being differently holy like their heavenly Father (Matthew 5:38-48).

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There are conflicting information on the actual contribution of mining activities to the Philippine’s GDP. In the 2016 Philippine Mining Conference, a National Economic and Development Authority official has been quoted as saying the closure of mining companies can have an impact on GDP growth. Basis given was data from the Mines and Geosciences Bureau (MGB), which showed that the industry produced 0.7 percent to GDP in 2015. But there are equally strong challenges in that gross value added was only close to .60 percent or thereabouts from 2012 to 2016, and this amounts to roughly less than 1 percent of total GDP. It also constituted only 5.6 percent of total exports. But per the Mining Industry Coordinating Council (MICC), this sort of performance was precisely brought about by threats of suspension of operations from the DENR and the lack of support from government for mining. The MGB also warned that unwarranted closures or suspensions would negatively affect the economy in the areas of production, investment and employment. Close to 43 percent of the industry core workers would lose their jobs, and this does not even include those indirectly working for related activities. Additional investments of around $1.69 billion may not come in and output in gold and nickel may be reduced by 45 percent and 67 percent, respectively. But Malacañang has been exerting tremendous efforts in aligning the objective of protecting and preserving the environment while taking care of the legitimate investment interests of the mining industry. The President has given full assurance to the industry that the companies affected will be given full due process by giving to them the chance to check and scrutinize the audit findings made by the DENR, and the opportunity to either affirm, dispute, oppose or even resort to proper legal remedies if they find that the audit results have no factual or legal bases. This is a very good move, because the entire process would necessitate an honest-to-goodness, real conversation among the DENR, the MGB and other involved agencies. Those with the proper competencies and expertise must be tapped to really drill down on what exactly were the violations, how the conclusions were reached

and what the recommendations were. This would then remove the alleged politics, lack of transparency and the unreasonableness of the way the results were communicated to the various stakeholders who have solid stakes in the issue. Quite an unfortunate situation, because there are, indeed, certain countries that have benefited from responsible mining. Australia, South Africa, India and other countries in Asia and Africa have derived great socioeconomic gains from using sustainable-development tools and practices in the industry. Experience shows there can be a right formula for mining to be a powerful driver for economic growth. If government provides the appropriate legal framework, good infrastructure, attractive fiscal regime and administrative capability, and these are matched by superior technical acumen, legally compliant plus good corporate governance practices by the mining companies, with support from civil society, non-governmental organizations and the private sector, then the industry can produce a high economic and social rate of return for the Philippines. But one should not solely focus on the economics if we talk about sustainable development. Responsible mining entails stewardship and care for the environment. It is undeniable that mining poses a real threat to the environment if not properly checked and monitored. Some of the proven harmful effects of mining to the environment are caused by the need to clear forest, agricultural lands flora- and fauna-rich areas. The use of toxic chemicals and metals to process minerals; siltation and pollution of our rivers waterways and even the air; deforestation and the huge consumption of water are occurrences that anyone would and should frown upon. Balancing of aforementioned concerns is most critical not only for the government, the mining companies, but the nation’s populace, as well. As in any economic activity or undertaking, there are risks and opportunities. The key is managing those risks well, while capturing the opportunities and turning the latter into positive outcomes. For comments and suggestions, arielnepo. businessmirror@gmail.com.

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Only “an eye for an eye”? The law of retaliation (lex talionis, “law in kind”), “an eye for an eye”, was instituted in the ancient world as a safeguard against excessive revenge to control violence, going for proportionate injury as acceptable self-defense. This measured retribution was not enough for Jesus; it was still too much for him. He wants it superceded by His principle of nonviolent resistance. Turning the other cheek, or giving your cloak as well, or going an extra mile does not mean becoming a doormat to violent people. It is a creative strategy to take power from violence. When someone backhands you to shame you, or when you are strip naked and your tunic repossessed

by a creditor, or when armed troops force you to carry something—they fail in their attempts to reduce you to servility, instead you make a burlesque of their violence and show of legality, and you remove the control from their hands, as you in your new, courageous way of behaving show that you not only refuse to participate in violence by responding in kind, but you demonstrate the other way and possibility of nonviolence. This rejection of the way of the world is further illustrated by the command of Jesus, not to stay at the unjust stratified economic structure where the borrower remains in debt and the beggar has to keep begging, but to give outright to a beggar or a borrower. A disciple does not solely

protect his own wealth, rather acknowledges mutual need and responsibility as foundation of community living and acts accordingly.

That is why we care also for the others who may be, in fact, persecuting us and ridiculing us, and doing the very opposite of what we believe in.

Be perfect like your Father!

Alálaong bagá, loving all even your enemies is the final antithesis in the Sermon on the Mount. It is the peak of Jesus’ reinterpretation of the law. The law of love must be practiced magnanimously and universally, not selectively or merely out of ethical humanism or for one’s interests. Just as God lets His love like the sun shine on all, so must the disciples of Jesus let their love like a light shine on a hill or on a lampstand for all. Vowed to divine perfection, true Christians must sublimate their human capacities for revenge, favoritism and prejudice, and imitate the Father’s holiness of loving, giving and forgiving. The rampant killing going on, both extrajudicial and vigilante, and the brutalizing incidence of daily violence and death in our supposedly Christian country, in addition to the insalubrious move to reimpose the death penalty, are a livid contradiction to the Gospel of Jesus Christ. Join me in meditating on the Word of God

The ultimate norm for a disciple is to be together with Jesus like the heavenly Father. And that is not done if one is predictably and unremarkably like everybody else in loving only those who love you and hating those who hate you. One has to go beyond the presupposed irreconcilable divide between friends and enemies, and purposely move beyond the traditional standard of giving it back to others as you get it from them. To love all, even your enemies, and to wish them well is to imitate your heavenly Father who is the Father of all, saints and sinners alike, and who makes His sun rise on the evil and the good. Revenge, even what is commonly considered as fair retaliation in kind, finds no endorsement from Jesus. The radical stand He demands of His followers is not only not to meet violence with violence, but to love even your enemies. In being good even to those who do you ill authenticates where you really belong. We belong to God’s holy people, we are part of His kingdom, for we are all His children.

Mining industry gasps for breath Val A. Villanueva

Businesswise Conclusion

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he mining industry has received a reprieve, with the decision of President Duterte to ensure due process in the implementation of the order of Environment Secretary-designate Regina Paz L. Lopez to shut down the operations of 23 mining firms, while suspending five others.

The fight is not over yet, as gleaned from Lopez’s media blitz defending her decision. She’s emphatic that no mining firms should be allowed to operate in watersheds. I was given a sneak peek (courtesy of reliable industry sources) of the audit report prepared by the Mines and Geosciences Bureau (MGB), which Lopez has dismissed as “only recommendatory” and which she is not bound to follow because only she has the final say. The report says that there are numerous illegal and unlicensed miners in the areas mentioned, but no legal large-scale mining firms in critical watersheds. These illegal miners are the ones responsible for damaging the environment and posing great risk to the surrounding communities. Now I understand why Lopez does not wish to follow the MGB’s recommendations. Nowhere in the audit report validates the closure of the 23 mining firms she has targeted. Lopez showed the media aerial videos of areas supposedly “destroyed” by mining operations. But a responsible government official needs more than just a cursory view of the surveyed zones on which to base a critical

decision that could affect the lives of thousands of people who rely on these mining firms for livelihood. A view from thousands of feet from the comfort of a private chopper is not enough. Soil and water samples should have been thoroughly examined for proper vetting. Perhaps, this was the basis of the recommendation of the MGB that Lopez has conveniently glossed over. The secretary-designate says that she is for responsible mining, but her actions belie her claim. Take the case of OceanaGold’s Didipio operations in Nueva Vizcaya, one of those she ordered closed. Interestingly enough, OceanaGold has been cited by no less than President Duterte as the “poster boy” of responsible mining. The Didipio operations won the Presidential Mineral Industry Environmental Award in recognition of “OceanaGold’s exemplary performance in safe and environmentally responsible mining.” Large-scale legal mining is the most regulated and heavily taxed industry in our country. Few people understand that large-scale legal mining companies are mandated by law to spend 1.5 percent of their respective gross operating costs on social development

alone even before they earn from their respective operations. Most of these firms, such as Philex and Rio Tuba, undertake creditable rehabilitation efforts in their mining sites. The Philippines has the world’s second-largest gold reserves. The queue of foreign investors who wish to tap its vast mineral reserves is getting longer, with each one eager to extract gold and other precious metals that lie beneath the ground. At the moment, mining contributes a miniscule percentage to the national economy. Access to the $1.4-trillion mining sector, which is rich also in copper and nickel, has been elusive, mired since the 1980s in irrelevant local laws, environmental battles and land rights issues. For several years now, environmentalists, politicians and media have made it trendy to oppose all forms of mining. Ironically, mining exists because people consume products that are made from its by-products. Mining is literally the bedrock of civilization. That the industry’s critical future impacts on mankind’s quality of life should not even be the subject of debate. Almost everything that people use —household appliances, computers, farm implements, transport vehicles, mobile phones, beauty and hygiene items, medicines, fertilizers, etc.—is a mineral product or relies upon minerals and metals for production and distribution. In order to maintain the lifestyle and security that a modern society enjoys, the mining industry must continue on a course of healthy production and exploration into the future. In the Philippines the mining industry has been rocked by strong negative criticisms in recent years. Unwanted fears, real or perceived, have created for the industry an image of an environmental despoiler. Forgotten is the fact that mining has been, is and will continue to be a significant contributor to the country’s economic growth. But

every Sunday, 5 to 6 a.m. on dwIZ 882, or by audio-streaming on www.dwiz882.com.

because mining companies have such a huge impact on local economies, they must bear an even larger responsibility: to help sustain a high quality of life in their host communities. Modern mining that is conducted responsibly will undoubtedly provide a more efficient and sustainable future for both the industry and the country. Mining has gone a long way toward this end. In many parts of the world, the mining industry has proven to be a partner of communities in environmental protection and social development. The concept of sustainable mining requires a mining company, among other things, to redevelop the area and ensure that the host-community thrives long after the company has extracted the minerals it needs. According to a study made by the Mining Association of British Columbia, “Mining represents the highest value use to which a hectare of land can be utilized.” Time and again, large-scale miners immerse themselves in the dissemination to the public of its best practices in responsible mining, with emphasis on rehabilitating the environment and improving the lot of the community where they operate. Illegal miners, on the other hand, wantonly pillage the environment, usually in collusion with local executives who, BusinesWise sources intimate, receive a share of their “loot”. (On Tuesday, Lopez had canceled 75 mining contracts, saying that mining firms which have them are operating on watersheds. The contracts, known as mineral production sharing agreements (MPSAs), allow companies to explore their respective areas. Mining companies cried foul because the mining law permits operations in watersheds, except those declared protected by the government. They are planning legal actions.) For comments and suggestions, e-mail me at mvala.v@gmail.com

Balancing the presumption of regularity with the right to be informed Atty. Jared C. Vicencio

Tax law for business

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ection 228 of the National Internal Revenue Code (NIRC) of 1997 codifies an integral right of the taxpayer to due process. It is the provision that mandates the Bureau of Internal Revenue (BIR) to inform any taxpayer found to have allegedly failed to pay proper taxes, of the law and the facts on which the BIR’s assessment was made. This is an important provision, as it ensures that the spirit of fair play is upheld, and that the taxpayer is given a fighting chance of disproving the BIR’s findings. The violation of this provision shall invalidate the BIR’s assessment for failure to afford the taxpayer its right to due process.

Given the value of the rights being preserved by Section 228 of the NIRC of 1997, as amended, it is therefore imperative that taxpayers are clearly aware of what the provision grants them. In a recent decision of the Court of Tax Appeals (CTA) en banc, the Court had the occasion to explain what Section 228 of the NIRC of 1997, as amended, required from the BIR. In CTA EB 1338, the Tax Court struck down an assessment for failure to “provide details on how the figure assessed came about.” Going further, the Court en banc declared that “the details of discrepancies reveals that the assessments were made ‘based on information’ without any elaboration

as to the kind of information and how the figures were arrived at.” Reading the decision, it appears that the CTA en banc is not satisfied with just the computation of the alleged deficiency. The numbers stated by the BIR must be duly substantiated with details explaining where the figures were taken from. This pronouncement of the CTA en banc helps counterbalance the presumption of correctness in favor of the BIR. Before such a presumption may be invoked, it must first be proved that the assessment has, in the words of the Court, “rational basis”. The same rule also applies to allegations of fraud. The BIR may not impute fraud on taxpayers, for purposes of extending the

prescriptive period of assessments, without factual basis. Also in the case of CTA EB 1338, the CTA EB said: “In civil tax fraud cases, the burden of proof is always on the CIR [Commissioner of internal revenue] to prove that the taxpayer committed fraud intentionally.” In the said case, the taxpayers were imputed with fraud for failure to report income received through check payments. However, it was later found that the checks in question could not be linked to the taxpayer. The CTA en banc was not satisfied with this finding as basis for imputing fraud. The Court expressly declared that there was failure to establish fraud committed by the taxpayer.

One important takeaway from the CTA en banc decision is that there are certain, immutable rights granted to taxpayers under the law. These rights, when properly invoked, will be honored by the Courts.

The author is a junior associate of DuBaladad and Associates Law Offices (BDB Law), a member-firm of WTS Global. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at jared.vicencio@bdblaw.com.ph or call 403-2001 local 370.

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