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Thursday, January 18, 2018 Vol. 13 No. 99

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House, Senate headed for stalemate on Cha-cha vote

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

enators on Wednesday reached a consensus that they would stand by their position that the House of Representatives and Senate should vote separately in revising the 1987 Constitution, thus, presenting a stalemate scenario, as congressmen insist on joint voting. E m e r g i n g f r o m a p u b l i c hearing, senators remained undecided on the preferred mode for tinkering with the Charter, either through Congress with senators

Govt to look into antitrust practices of 9 priority sectors Quimbo: “We had identified priority sectors, and these sectors tend to be those that would have a big impact on consumers.”

and congressmen convening as a constituent assembly (Con-ass), or by electing delegates to a constitutional convention (Con-con). However, Senator Francis N.

Pangilinan, chairman of the Committee on Constitutional Amendments, told reporters that what was made clear at the hearing was that senators firmed up their position that the Senate and House should be “voting separately” if Charter change (Cha-cha) is to be done by lawmakers sitting in a Con-ass. “It is a stalemate on the issue of [the Senate and the House] voting Continued on A2

BMReports Shopping mall fire:

When will we ever learn?

Sustainability 101 Rene E. Ofreneo

laborem exercens

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he global development goals adopted by the United Nations and its member-states for 2016 to 2030 are the Sustainable Development Goals (SDGs), collectively called the SDG Agenda. The SDGs have succeeded the Millennium Development Goals (MDGs), which sought to reduce poverty and hunger worldwide from 2000 to 2015. The SDGs, however, have a higher ambition: zero poverty and zero hunger by 2030 in a world projected to become truly inclusive, peaceful, prosperous and, yet, sustainable. The word “sustainable” has become the mantra for the SDGs. So why have the framers of the SDG Agenda chosen “sustainability” as the unifying theme for the new global development goals? The word sustainable became popular worldwide after the release by the Brundtland Commission of Our Common Future (1987), a UN Report on the degraded global environment. Gro Brundtland of Norway and her UN team articulated the need for “sustainable development” to arrest the continuing deterioration of the human environment and depletion of natural resources. The team explained: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In short, there are natural limits to what countries may do in the exploitation or harvesting of natural resources, such as forests and minerals. Once those limits are surpassed, floods, desertification and, now, global warming, follow. Growth and development are interrupted and reversed. And the next generation faces a truly bleak future. There is no need to belabor all of the foregoing, for so much has already been written about them. Continued on A12

NGCP dispels fears over thinning power reserves By Lenie Lectura @llectura

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@alyasjah

See “Govt,” A2

ALABANZA: “There’s a lot of factors considered throughout the year. But, now, we see no problem.”

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By Elijah Felice E. Rosales

ine industries, including telecommunications (telecom), are bound to face scrutiny this year for reported anticompetitive practices, as the country’s antitrust agency vowed to go full force in its campaign to address competition concerns. In a news briefing on Wednesday, the Philippine Competition Commission (PCC) named nine industries that it will probe this year for alleged anticompetitive behaviors. Aside from telecom, the PCC will also study the markets of rice, meat and poultry, pharmaceutics, land transportation, air transportation, agricultural credit, digital commerce and retail. PCC Commissioner Stella Luz A. Quimbo said these sectors will be investigated as they were deemed as “most crucial” to consumers.

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Art. 17, Sec. 1 The provision in the 1987 Constitution being cited by House leaders in pushing joint voting

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A fire strikes the New City Commercial Center shopping mall in Davao City on December 23, 2017, and caused the death of the mall-safety officer and 37 employees of a United States call-center facility. CREDIT: commons.wikimediaorg By Manuel T. Cayon Mindanao Bureau Chief @awimailbox

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Conclusion

AVAO CITY—Identifying the bodies of the illfated victims of the December 23 NCCC mall fire would be tedious and difficult. Authorities said the victims were likely felled by the poisonous smoke, and the heat that followed shortly had charred their bodies later. The remains of Melvin Gaa, the lone non-RN SSI employee, was identified by his wife Rosela four days after the fire.

PESO exchange rates n US 50.4540

The NCCC Mall management confirmed the death of Gaa, one of its employees. Gaa was the mall-safety officer who had brought SSI employees to safety, according to Mall Spokesman Thea Padua. But the search was not yet over even after personnel of the Bureau of Fire Protection (BFP) found the scattered, charred remains of 36 individuals. The search was launched anew for a final name that surfaced: that of Alexandra Moreno-Castillo. Moreno-Castillo, a quality-assurance supervisor at the American firm Research Now Survey Sampling International (RN SSI), was also reported as among those who helped fellow employees escape the fire. Continued on A2

he National Grid Corp. of the Philippines (NGCP)  on Wednesday said the country is assured of  sufficient power reserves despite the probability of power outages as raised by the Energy Regulatory Commission (ERC) chief. “ We have sufficient reser ve based on capacity,” NGCP Systems Operations Manager Erwin Bugawisan said during a briefing held at the NGCP Command Control Center. NGCP presented its 2018 all-time peak outlook. For Luzon, peak demand is expected to hit 10,561 megawatts (MW) in May. In the Visayas and Mindanao, the forecast could reach 2,143 MW and 2,064 MW, respectively, to occur sometime in November and December. There was no data presented as to the respective power supply and reserves anticipated for Luzon, the Visayas and Mindanao. Still, the NGCP official said Luzon and the Visayas are assured of sufficient reserves, mainly due to the new power plants scheduled to come on stream.

In Mindanao, meanwhile, Bugawisan noted that “we have so much capacity.” When pressed for details, Bugawisan said Luzon’s “thinnest “ power reserve is expected to reach 1,432 MW. In the Visayas, “the thinnest is 400 MW,” while in Mindanao, “it’s 1,133 MW.” Further, the NGCP said the total Luzon power supply is expected to face constraints in April, due to expected rise in demand brought about by rising temperatures. NGCP’s forecast, according to its spokesman, lawyer Cynthia Alabanza, was mainly based on DOE (Department of Energy) data, committed capacity from new power plants and scheduled maintenance  shutdown of existing power plants .

n japan 0.4571 n UK 69.6114 n HK 6.4497 n CHINA 7.8382 n singapore 38.2025 n australia 40.1614 n EU 61.8919 n SAUDI arabia 13.4544

See “NGCP,” A12

Source: BSP (17 January 2018 )


BMReports BusinessMirror

A2 Thursday, January 18, 2018

Shopping mall fire:

When will we ever learn? Continued from A1

Fire Senior Supt. Jerry Candido, spokesman of the Inter-Agency Anti-Arson Task Force, later said her body was recovered on January 4, already 12 days after the fire. In a somber tone, Candido explained that the remains of Moreno-Castillo was found stuck at the crevice of the charred floors of the RN SSI office at the fourth floor of the NCCC Mall. Found near the remains was a Volkswagen Beetle steel keychain, a passport inside the folds of a burnt purse and the frame of a pair of eyeglasses. Moreno-Castillo’s family said these items were hers.

Accounting time

CANDIDO said the continuing probe at the NCCC Mall would now shift to gathering more evidence of guilt and identifying the guilty. Only a week after the incident, the probe body composed of the national offices of the BFP, the National Bureau of Investigation and other national agencies, took over the investigation from the local BFP and ordered the relief of five BFP officers from their post. They were: Fire Supt. Honey Fritz Alagano, Davao district fire marshal; Fire Insp. Renero Jimenez, Talomo fire station commander; Senior Fire Officer 1 Leo

Govt. . .

Continued from A1

“As you know, we had identified priority sectors, and these sectors tend to be those that would have a big impact on consumers,” she said. Among the nine, Quimbo zeroed in on the telecom industry, which had the PCC engaged in a legal dispute with Globe Telecom Inc. and PLDT Inc. The PCC asked the Supreme Court last April to stop Globe and PLDT from completing its acquisition of San Miguel Corp.’s telecom assets until the agency finishes its review of the P69.1-billion deal. Quimbo said it is worth noting the market study on telecom will be conducted at a time the government is in the process of looking for a third player in the presently duopoly-dominated sector. “As you know, we had the telecom

Lauzon, fire safety inspector who inspected the mall’s call center; Fire Officer 2 Joel Quizmundo, fire-safety inspector of the NCCC Mall; and, Sr. Fire Officer 1 Roger Dumag, chief of the fire-safety enforcement section. The Inter-Agency Anti-Arson Task Force found violations of fire safety and yet the NCCC Mall and the RN SSI were still given the Fire Safety Inspection Certificate (FSIC). For instance, Candido was quoted in a local newspaper that Quizmondo, who inspected the NCCC Mall last April, only recommended the establishment conduct firesafety drills after his inspection report. Candido added the report did not include the apparent violations they saw and the fire rating of the NCCC Mall.

Altered system

AFTER inspection, the violations should have been included in the report and to let these be acknowledged by the person responsible: the administrator, the manager or owner of the building, Candido said. He added that the NCCC Mall had several other violations like failing to prove it is smoke-proof and heat-proof. Both are required by the Fire Code of the Philippines. case with the Court of Appeals [CA]. We were actually unable to proceed with any form of assessment on the market, mainly because the CA had already ruled on this. We felt like, now, we can resume our market study,” she said. The market study, she described, will be broader and will cover all aspects of the industry and the entire value chain. Should it prove anticompetitive practices in the sector, the PCC can make policy recommendations to the concerned government regulator—in the case of telecom, the National Telecommunications Commission. Quimbo said the PCC lost the opportunity to impose remedies on the acquisition of San Miguel’s telecom assets when the CA stopped the agency from reviewing the multibillion-peso transaction. She added that would have been the best time to conduct a market study on the telecom sector, make a determination on how to dis-

He said the sprinkler and alarm systems were neither functioning, with the mall’s third-floor sprinkler system found with no sprinkler head. “Because it was altered, the system did not work during the fire that started at the third floor,” Candido said. The alarm system was also defective, with the NCCC Mall system not connected with that of the RN SSI alarm system so that when a fire breaks out inside the mall, the RN SSI would not know it, and also the other way around, he added. “The alarm system of the mall is ordinarily designed as automatic, but did not function at the time of fire,” Candido said. “Sprinklers did not function, [they were] altered because the valve system has been closed.” Candido added the cause of the fire was “electrical short circuit” and traced to the ceiling of the third floor. When they examined the electrical wiring system, he said the “way the contractor installed the wires, there were nails and bolts near the wires and we believe it caused the short circuit” when the insulation wore off.

A senior police officer who requested anony mit y said he

believes the loss of lives could have been prevented or lessened had there been “a quick thinking, brave and no-nonsense ground commander” on site. He added he based this view on the comments of people and rubberneckers outside the mall. The police said if the comments were true, “that firemen outside lingered for several hours, point to the lack of a critical leader commanding his men.” “He could have asserted his command against the wishes of the mall owners or managers, and he should have ordered critical resources to be brought in, or to force damage to the building to build ventilation,” the police officer added. “He could even ram the fire trucks through vehicles that obstruct the way, citing emergency nature, and to face court cases later, knowing that the city government would stand by him and his decision that time.” Meanwhile, the Business Process Outsourcing Employees Network has appealed to investigators to ensure an unbiased report. They said previous incidents have pointed to establishments were still allowed to operate, despite having been found to have violated fire-safety standards. The city government has kept its distance from the investigation.

tribute the country’s frequencies and, perhaps, even go as far as require Globe and PLDT to divest their assets. PCC Commissioner Johannes R. Bernabe said what the agency can do now is recommend to government regulators policies on how to even the playing field in the market. “For instance, significant market power obligations could arise out of an investigation that was launched because of an abuse of market dominance,” he said. “In that context, one of the remedies that you can impose is to require divestment of certain assets, which, in this case, frequencies that the telecom players may have,” he added. Bernabe admitted the PCC considered ordering Globe and PLDT to redistribute its frequencies had the agency been able to complete its review of the deal. The market study that will look into the nine industries with reported

anticompetitive practices will be scrutinized down to the core, Bernabe said. As for the telecom sector, he added the market study cannot help but look into the critical aspects and impact to consumers of the transaction among Globe, PLDT and San Miguel. Bernabe said the PCC will inhibit in the market study of the telecom sector to avoid allegations of bias, and will leave to independent experts the duty to scrutinize the industry. He added some of the market studies will be conducted by the state’s think tank, the Philippine Institute for Development Studies, in compliance to a memorandum of agreement. The government is currently assessing applications of telecom firms wishing to operate as the third telecom carrier in the country. The third player is expected to begin operating in the first quarter of this year as instructed by President Duterte.

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Central Bank faces inflation dilemma in cutting reserve requirement Continued from a12

February meeting,” said Jonathan Ravelas, chief marketing strategist at BDO Unibank Inc. “But they may highlight potential risks to inflation. It could create a reassessment of the inflation path, and if they see a steeper rise in inflation that could mean an earlier rate hike in the first half, maybe as early as the second quarter.” Last December the Central Bank forecasted inflation will average 3.4 percent this year and 3.2 percent in 2019. Those projections don’t include the effect of a tax law implemented in January, Espenilla said. “February 8 is going to be an interesting meeting from the standpoint of assessing whether our position last December remains a valid position,” he said. “We said that we can hold policy rates for the time being. What has happened since then? Tax reform happened.”

The government estimated the tax changes could raise the inflation rate by 0.4 to 0.7 percentage points, while ING Group NV economist Joey Cuyegkeng forecasts a jump of as much as 1 percentage point, and another 1 point increase from indirect effects, such as higher fares, wages and production costs. Policy-makers are always ready to act and “we’re not closed-minded to raising rates if we have to,” Espenilla said. The Central Bank is also on guard for signs of an overheating economy. Growth has exceeded 6 percent in every quarter for the past two years, and set to continue booming as President Duterte rolls out a record $180 billion of spending on roads, rails and port projects. Bank loans rose 18 percent last November from a year earlier, while the trade deficit surged to a record. Bloomberg News

House, Senate headed for stalemate on Cha-cha vote Continued from A1

jointly of proposed constitutional amendments,” he said.

‘Railroaded’

At the House, which approved on Monday Concurrent Resolution 9 seeking to convene Congress into a Con-ass, members of the minority bloc slammed the leadership of the lower chamber for “railroading” the passage of the measure. Rep. Edcel C. Lagman of the First District of Albay, Party-list Rep. Lito Atienza of Buhay and the Makabayan bloc asked the House leadership, led by Speaker Pantaleon D. Alvarez, to respect the legislative process. “The inordinate fast-tracking of the approval by the House of Representatives of the concurrent resolution calling for a constituent assembly to recommend the shift to a federal system by amending the 1987 Constitution confirms the critical view that the supermajority will railroad Charter change,” Lagman said.  “The leadership of the House, with the support of the supermajority, is addicted to expediting the approval of bills and resolutions without affording dissenting representatives the full opportunity to ventilate their opposition.” After approving the resolution, the House leadership said voting in the Con-ass should be done jointly. Rep. Roger G. Mercado, chairman of the House Committee on Constitutional Amendments, invoked Article 17 of the Constitution. Article XVII, Section 1 of the Constitution states: “Any amendment to, or revision of, this Constitution may be proposed by [1] Congress, upon the vote of threefourths of all its members.” “Congress, upon the vote of all its members, so, both houses will be convened and upon a vote of three-fourths of all its members, meaning the House of Representatives and the Senate, then we can propose amendments to our Constitution,” Mercado said.

Unanimous vote

But even Senate Minority Leader Franklin M. Drilon confirmed the “unanimous vote” of all senators during a closed-door caucus “that the Senate and the House should be voting separately if the lawmakers convene as a constituent assembly to craft the Charter amendments.” “In my 20 years as a senator, there’s just a few times where there is unanimity. The unanimity was shown yesterday when all the senators said ‘no, we should vote separately,’” Drilon said. “In fact, there was a rumor that one or two senators may opt to attend a sup-

posed joint session with the House to amend the Constitution, and Sen. Panfilo M. Lacson Sr. warned no senator has been authorized to do that, and may face sanctions. In the first place they have no authority.” Lacson said: “I will vote to expel the senator if he or she goes there.” Drilon indicated that Lacson’s position was unanimously supported by the senators because “there was no disagreement.” “But what is significant is that how serious the senators feel about our power to vote separately [on Cha-cha], so that any indication that any member of the Senate will defy that kind of unanimous opinion can be subjected to sanctions,” Drilon added. Drilon also supporterd former Chief Justice Renato Puno’s view that the Supreme Court cannot interfere in the congressional process of amending the Constitution and how the Charter should be changed “because this is a political exercise and a political question, outside of the sphere of power of the Supreme Court to review actions and decisions of the government.” Should a deadlock arise in voting to adopt proposed Charter amendments, Drilon conceded that “then there is nothing to work on; the Constitution will stay if there is a deadlock.”

Rubber-stamp?

Lagman, meanwhile, urged lawmakers not to be a rubber-stamp of the President. “What happens now in the House will certainly happen in the projected constituent assembly composed of the supermajority blindly allied with the President.” Atienza sa id t he House leadersh ip shou ld g ive its members enough time to scrutinize all the measures, especially the Cha-cha proposal.  “The issue is procedure,  the correct way of making laws especially when you are talking about the fundamental law of the land. We are talking about changing the Constitution, revising the Constitution and probably even changing the system of government,” Atienza said.  The Makabayan bloc also  denounced the abrupt approval of House Concurrent Resolution  9. “If anything, it is but an outright show of power of the supermajority and undisputed proof of how Congress now merely acts as a rubber-stamp of the executive.” Alvarez admitted that, while he has the support of the supermajority in the lower chamber for Conass, he has no idea if there is enough number in the Senate in support of the proposal.


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Thursday, January 18, 2018

A3

Ma. Victoria C. Españo and the ‘Butterfly’ Effect

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N the business community, she is known for her extensive experience in taxation and organizational management. Ma. Victoria C. Españo, the new president of the Financial Executives Institute of the Philippines (FINEX), however, admits that her journey to her current leadership role has been unexpected and unplanned, much like a “butterfly effect.” “I have always been searching for something new to learn,” confesses Ms. Españo. “My mother would chide me for being a ‘butterfly’ — always moving from one job to another. She was worried I’d be left with measly retirement benefits as I was too restless to stay in one job.” This restless spirit, the constant hunger to make things better, learn new skills and competencies, are the very tools she uses in her current role in Punongbayan & Araullo (P&A Grant Thornton), one of the Philippines’ top 5 auditing firms. As its chairperson and chief executive officer, Ms. Españo is known for her management style that enforces strict discipline, as well as inspires people to achieve unexpected but remarkable results, ultimately developing followers into leaders.

Toughening Up

Hard lessons from a long career in taxation saw the young and restless Ms. Españo. After graduating as a Department of Science and Technology scholar of the BS Math for Teachers program at Philippine Normal University, she became a legislative liaison specialist at the National Tax Research Center (NTRC) of the Department of Finance (DOF). She got actively involved in the formulation of significant tax legislations such as the expanded valueadded tax and the comprehensive tax reform

program in the late 1980s. She thrived in interesting yet ‘taxing’ times: the country was under a debt moratorium, inflation and interest rates were skyrocketing, and government assets were being sold to avert a fiscal crisis. “To a big extent, the work was very much highly politicized, as may be expected. We would talk to legislators to push for certain tax reforms,” said the former bureaucrat, who counts the late NTRC Executive Director Angel Q. Yoingco and former DOF Undersecretary Milwida M. Guevara as her mentors. Ms. Españo found herself juggling her work at the DOF, completing her master’s degree in accountancy, passing the CPA Board exam, and building a young family. Still, her restlessness drove her to shift careers. She quit her DOF post for an auditing firm, but then returned after two weeks, convinced that her role in tax policy formulation is important. Soon after, she again left for Atlantic, Gulf & Pacific Company (AG&P), then the country’s leading construction company. She even briefly dabbled in entrepreneurship, selling goods in a tiangge (bazaar) just to know what she really wanted to do. After experiencing several work roles in six organizations over a span of 12 years, Ms. Españo finally found a home in P&A Grant

but also a good one for audit and business advisory. Companies were scrambling to restructure debts and clean up their books to survive. She became a partner in P&A in 1999, and later headed its tax advisory and compliance division, from 2002 to 2005. After a decade, she became managing partner and chief operating officer (COO), and was named as CEO after only two years, eventually succeeding P&A founder Benjamin R. Punongbayan as chairperson. “The demands of the role are huge, but I am blessed to have a very supportive husband and three patient and appreciative children,” Ms. Españo emphasized. P&A vastly transformed since its partnership with Grant Thornton in 2003 and amid rapid technological changes. “As we started the new affiliation in 2003, we knew we had to strengthen our strategy and business development activities and produce thought leadership initiatives. We did successfully, with the strong commitment of the partners of the Firm and its people, and the support of our clients,” said Ms. Españo. Today, P&A Grant Thornton has more than 900 employees and 21 partners in audit and assurance, tax advisory and compliance, advisory services, and business process solutions.

Transforming Financial Leaders of the Future

Thornton in 1997. “I fell in love with tax practice! I found the challenging work that I was searching for in P&A, as there was so much room for me to grow and continuously improve. Our founders, Benjamin R. Punongbayan and Jose G. Araullo, have created an environment where people can thrive and flourish,” she shares. “Dealing with clients that share the same growth mindset is also inspiring.”

Rebuilding for Success

Ms. Españo joined P&A Grant Thornton as a tax manager more than 20 years ago at the height of the Asian financial crisis. It was a challenging time

Ms. Españo said her transformational leadership experience in P&A comes in handy in wearing her new hat as the new president of FINEX, the country’s premiere organization of finance professionals and business leaders advocating financial expertise and good corporate governance. She also leans on her vast experience in a number of professional memberships, including being elected to the global Board of Governors of Grant Thornton International Ltd. in 2015 (where she is still a member), and a member of highly influential organizations such as the

Management Association of the Philippines, Women’s Business Council (WBC), Shareholders’ Association of the Philippines (SharePhil), Makati Business Club, and the Association of CPAs in Public Practice. She is also a fellow of the Institute of Corporate Directors and a member of the Board of Directors of the Philippine Institute of Certified Public Accountants (PICPA), where she is serving a three-year term until June 2020, and will be the chair of the PICPA Metro Manila Council by July 2018. Businesses are transforming and preparing for the so-called Fourth Industrial Revolution. Ms. Españo shares: “I have seen how FINEX, as the leading national organization of finance professionals and practitioners, contributes to the advancement of financial knowledge and expertise. Through the able leadership of our past presidents and the multitude of members who have actively participated and supported its different initiatives over the past 50 years, the Institute has made significant achievement in supporting the development of finance executives, strengthening our government institutions and building a stronger Philippine economy.” She sees FINEX’s significant role in the transformation. “It’s necessary to encourage a growth mindset in our professionals, especially the new blood, no matter what level they are in. Let’s develop them, not just technically but holistically: think critically and creatively, collaborate and support initiatives outside of their job description,” the new FINEX president said. For the young and the restless who will map out the workplace of the future, Ms. Españo has this piece of advice: “Look at every opportunity as a chance to grow rather than merely something you need to do because it’s work. Get going and make things happen. Transform things, now.”


Economy

A4 Thursday, January 18, 2018 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

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DBM to set standard pay for govt workers

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By Rea Cu

@ReaCuBM

he Department of Budget and Management (DBM) will commission a study by 2019 to benchmark the salaries of public-school teachers and other government employees.

Budget Secretary Benjamin E. Diokno also reiterated that there will be no additional increases in the salary of public-school teachers this year. Diokno said any increases in the salaries of government employees would be considered after the

fourth and last tranche of compensation adjustment under the Salary Standardization Law (SSL) has been given in 2019. “By 2019 [we’ll] commission a new study to benchmark the salaries of teachers and other personnel,” he told reporters in a news

briefing in Manila on Wednesday. The DBM will commission an independent firm to do a benchmarking on the salary of teachers and other government personnel, such as doctors, nurses and lawyers, by the first quarter of 2019. Based on the results of the study, the DBM will propose the appropriate level of compensation for government workers. He said public-school teachers will also get additional take-home pay due to the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, on top of the third tranche of the SSL this year. The SSL mandated the grant of pay hikes for government workers in four tranches. This year the third tranche will be implemented by the

government, with the last tranche to be given in 2019. “Let the SSL run its course, plus the combination of the TRAIN. We will evaluate where we are by January next year for possible budget proposal in 2020,” he added. Under the 2018 General Appropriations Act (GAA), a budget of around P24 billion was allocated for the SSL for government employees, including public-school teachers. “It’s a reasonable program and we are continuing it. We have done the first two and we will continue, if we are thinking of adjusting it now we cannot do it,” he said. Diokno mentioned that he is “not opposed to the increasing the salaries of our teachers” but the government should complete the SSL first.

By Jovee Marie N. dela Cruz @joveemarie

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By Lorenz S. Marasigan @lorenzmarasigan

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he National Telecommunications Commission (NTC) has exceeded its collection target in 2017, resulting in almost P500 billion in revenues, data from the agency showed. The regulator collected roughly P4.803 billion last year, 12 percent higher than its P4.341-billion target. The target was set by the Development Budget Coordination Committee composed of the Department of Budget and Management, the Department of Finance and the National Economic Development Authority.

In a statement, NTC Commissioner Gamaliel A. Cordoba said this is the second straight year of the Duterte administration that the agency exceeded its collection target. “The NTC management will continue rallying the agency to achieve the same results for 2018,” he said. He attributed the “achievement” from the commission’s efforts to strictly enforce stakeholders’ compliance in remitting spectrum users’ fees, supervision and regulation fees and penalties. Stakeholders regulated by the NTC include cable and commercial television operators, broadcast radio stations, telecommunications companies and two-way radio operators. “We realize the need for the commission to help contribute in its own little way to the various national government public-service programs pushed by President Duterte—priorities of which are on infrastructure, agriculture and rural development, and peace and order,” Cordoba said.

implying a financing requirement of P343.7 billion. The budget chief cited that the budgetary impact as the reason behind previous statements in which he cautioned against the doubling of teachers’ salaries. He clarified that the President’s instruction is “to look into increasing their salaries, not doubling them.” “We have to ensure that our public-sector def icit remains m a n a ge a ble. Fi n a nc i n g t h i s P343.7 billion may require hiking the deficit from 3 percent of GDP to 5 percent of GDP, and it may put at risk the excellent international financial standing the Duterte administration has built over the past 18 months,” Diokno added.

House panel OKs bill institutionalizing 4Ps

NTC collection of nearly P500B exceeds target for 2017

We realize the need for the commission to help contribute in its own little way to the various national government publicservice programs pushed by President Duterte—priorities of which are on infrastructure, agriculture and rural development, and peace and order.”— Cordoba

The combined effect of the increase in salary from the SSL and lowered tax rates due to the implementation of TRAIN will result in an additional take-home pay of P43,363 per year. In 2019 annual tax savings will increase to P37,262 as it is indexed to salary, with the additional take home pay due to SSL and TRAIN increasing to P45,312. The DBM estimated that doubling the salaries of teachers in 2018 will require an additional P343.7 billion in Personnel Services (PS) costs. In the 2018 GA A, the programmed PS costs for teaching positions is set at P381.1 bi l lion. Doubling the salaries of teachers will require PS costs of about P724.8 billion,

TRAVELING SALESMAN

A vendor pushes his cart full of bananas while crossing Ayala Bridge in Manila. According to him, he roams around the Metro with his cart so he could reach more potential buyers. ALYSA SALEN

Govt told to stop spending bulk of relief fund for repair of houses By Cai U. Ordinario

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@cuo_bm

sing public funds to finance the repair of housing in disaster-affected areas could jeopardize funding for other public goods, according to a paper released by the Philippine Institute for Development Studies (Pids). In a policy note, Pids Consultant Deanna T. Villacin, former Research Assistant Tatum P. Ramos and Vice President Marife M. Ballesteros said public funds are already insufficient in financing post-disaster projects and programs. “Given that the housing sector is largely private, the fact that it is receiving the bulk of resources may possibly be at the expense of more critical projects,” the authors said. “Instead of allocating huge f unds to it, t he gover nment should consider strengthening the role of the private sector in addressing damaged properties,” they added. The researchers said out of the P10.5 billion for landslide-affected areas in the aftermath of Typhoon Pablo (international code name Bopha), the government spent P8.3 billion for housing projects. This is composed of the P4.2 billion used for in-city housing projects of the Department of Social Welfare and Development (DSWD) and P4.1 billion to the resettlement projects of the National Housing Authority (NHA).

In the case of Supertyphoon Yol a nd a (i nter n at ion a l code name Haiyan), the government had a total budget of P170.9 billion, and P75.7 billion of this was spent for resettlement. Apart from the huge funding, the national government also experienced problems implementing these housing projects. In areas affected by Pablo, the only housing projects that were completed were those undertaken by the DSWD with provincial governments. As of September 2016, the authors found that the NHA has only completed 15,979 out of a total 17,480 target units. Of this number, only 5,891 units have been awarded and 3,696 units have been occupied. In the case of Yolanda, merely 30,000 out of the 205,000 required housing units have only been completed. About 73,000 have yet to be started and the rest are still under the procurement process. In the Eastern Visayas report, the authors said, the resettlement cluster noted a completion rate of merely 16.4 percent in the last three years. Of this figure, only about 40 percent are currently occupied. “Fund insufficiency is apparently not the main issue for the shelter sector. Instead, its issues revolve around the poor quality of housing units and unsuitable sites of resettlement projects, the lack of basic facilities at resettlement sites of NHA and DSWD, the weak coordi-

nation among NHA, LGUs and endusers during project planning and implementation and the finding of suitable land for low-cost housing and titled lands for procurement purposes,” they said. The authors also urged the NHA to revisit its traditional policies and build on the lessons learned in the experiences of other countries in post-disaster shelter programs. However, in 2016 the President announced that the government will render all the housing units built by the government for the victims of Yolanda free of charge. This means that those who will receive housing in Yolanda-affected provinces, will not be charged any fees. NHA General Administrator Jun Escalada said this will also be the policy of the Duterte administration for all future housing projects for typhoon victims. This full grant of around P50 billion covers 205,000 houses and 205,000 beneficiaries. The grant will be financed through the national budget. Escalada said this is a significant help to victims of the typhoon because it has been difficult for them to cope and get back on their feet. He said this is the same thing the government did for victims of Pablo in Davao Oriental and Davao del Norte.

he House Comm it tee on Pover t y A l lev i at ion has recent ly approved a bi l l t hat seek s to inst it ut iona l i ze t he gover nment ’s a nt ipover t y prog ra m, dubbed as Pa nt aw id Pa m i lya ng Pi l ipino Prog ra m (4Ps). The proposed “Pantawid Pamilyang Pilipino Program Act” aims to reduce poverty and promote human capital development in the country by breaking the intergenerational cycle of poverty, promoting gender equality and ensuring inclusive and equitable quality education. The 4Ps is a major anti-poverty program of the government, which started during the term of former President Rep. Gloria Macapagal-Arroyo of the Second District of Pampanga. Under the bill, each qualified household beneficiary gets a conditionalcash transfer equivalent to P500 per month for health and nutrition expenses totaling P6,000 per year. It also said a maximum of three children per qualified household beneficiary shall be given conditional cash grants for education expenses of P300 per month per child enrolled in day care, kindergarten elementary for a 10-month school year, and P500 per month per child enrolled in secondary school for a 10-month school year. The measure mandates the Department of Social

Welfare and Development (DSWD) to choose qualified household beneficiaries using a standardized targeting system and revalidate the targeting of beneficiaries ever y three years. The bill said a Local Verification Committee (LVC) shall be created in every municipality or city to ensure that the initial list of beneficiaries satisfies the eligibility requirements set forth under the Act. The LVC will be composed of two local government unit representatives; a midwife from the barangay, a representative of a DSWDaccredited civil-society organization and a school head as designated by the Department of Education. The funds necessary to carry out the provisions of the Act shall be charged against those authorized in the current and subsequent General Appropriations Act. The appropriation shall continue until the program has covered 60 percent of the total number of extremely poor households in the country, as may be determined by the Philippine Statistics Authority at the time of the enactment of the Act. The bill penalizes any person conspiring with public officials to receive the cash grant. The penalty is imprisonment of one month to six months, or a fine of P10,000 to P20,000, or both imprisonment and fine, at the discretion of the court.

PCC to put up regional offices By Elijah Felice E. Rosales @alyasjah

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he Philippine Competition Commission (PCC) is looking into setting up regional offices in the Visayas and Mindanao as part of efforts to make the nascent agency accessible to complainants in the provinces. PCC Commissioner Johannes R. Bernabe said the agency is mulling over establishing offices in the regions to allow consumers with complaints concerning market competition pursue cases. “We have thought about it internally—the need to have somewhere down the line or at some point—to have regional offices to make PCC more accessible to consumers. At the end of the day, they are the primary beneficiaries of the competition law,” Bernabe said in a news briefing on Wednesday. He pointed out it is stressing for consumers based in the Visayas

and Mindanao regions to furnish documents to Metro Manila just to come up with a remedial measure on anticompetitive practices by businesses. Bernabe said the idea is not to relocate the commissioners to the provinces, but to assign them to handle cases from certain regions that they will need to focus on. He added they are considering deploying staffs to the regions that will receive the verified complaints up for preliminary inquiries. This way, he said, consumers will be able to fully benefit from the competition law and there will be no discrimination on proximity. Either way, Bernabe vowed the PCC will continue to explore other options on how to make the nascent agency accessible to consumers. Now approaching its second year, the PCC is mandated to look into industries that might be engaged in anticompetitive practices.


Agriculture/Commodities BusinessMirror

www.businessmirror.com.ph

Editor: Jennifer A. Ng • Thursday, January 18, 2018

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PHL chicken supply down 30 percent By Jasper Emmanuel Y. Arcalas

NMIS data showed chicken purchased abroad accounted for more than half of the inventory as of January 1 at 8,922.42 MT. The figure was 1.71 percent lower than the 9,077.53 MT imported a year ago. The remaining volume consisted of locally produced chicken, according to NMIS data. The volume of locally produced chicken in cold storages fell by 46.79 percent to 8,066.63 MT, from last year’s 15,160.96 MT. On a monthly basis, local-

chicken inventory during the period was 42.9 percent lower than the 29,752.89 MT recorded last December 4. The volume of dressed chicken in the market usually declines after the Christmas season, when cold storages are full to meet the increase in demand, according to industry sources. The NMIS said it surveyed only accredited cold-storage facilities. Fresh-chilled chicken and mechanically deboned meat were not included in the NMIS data.

Data from the attached agency of the Department of Agriculture also showed the volume of frozen pork in cold storages as of January 1 expanded 10.73 percent to 24,443.76 MT, from 22,074.043 recorded in the same period last year. Imports also accounted for the bulk of the frozen-pork inventory. According to the NMIS, pork from abroad reached 23,742.56 MT and accounted for 97.13 percent of total inventory. The volume of frozen-pork imports is 12.65 percent higher than the 21,076.18 MT recorded a year ago. Local pork in cold storages declined by almost 30 percent to 701.20 MT, from 997.85 MT recorded on January 2. On a monthly basis, local-pork inventory as of January 1 was 8.17 percent lower than the 26,618.89 MT recorded last December 4. For the frozen-pork data, the NMIS said it included stock inventory in accredited commercial and in-house cold storage in slaughterhouses and meat-processing plants.

By Cai U. Ordinario

cancellation of titles, default on land payments by agrarian-reform beneficiaries (ARBs). The Pids also urged the government to focus its efforts on programs to modernize agriculture accompanied by adequate provision of support services to small farmers. This includes giving smallholder farmers direct access to new technologies, credit, infrastructure, value chains and markets. The government think tank also said that the Department of Agriculture (DA) can work with the DAR to consolidate farm operations for economies of scale and the development social enterprises. The Pids cited DAR data that showed about 4.8 million hectares have been awarded to 2.8 million ARBs since CARP’s implementation. The program had a total expenditure of P286 billion, or an annual average of P9.87 billion, from 1987 to 2016, which PIDS found to be a “hefty sum” over a long period of implementation. In 2009 former Socioeconomic Planning Secretary Arsenio M. Balisacan said the CARP is very costly and that the government can resort to alternative means to reduce poverty without resorting to land reform. Balisacan added that compared to the government’s conditionalcash transfer (CCT) program, the government seems to have spent twice as much for the CARP based on 2007 prices. The former DA official said that

the government spent P235.74 billion for 2.259 million beneficiaries since the CARP started in 1988. This translated to a cost of P144,377 per beneficiary. In terms of the CCT, the government spent P20.025 billion for 321,000 beneficiaries since 2008, which amounted to P63,382 per beneficiary. Balisacan also said that based on his independent assessment of the benefits of CARP, the increase in the average capita consumption increase in agrarian-reform communities due to the CARP is only 1.1 percent. This is lower compared to the survey of the Institute of Agrarian urban Studies (IARDS), which showed that the average capita consumption increase was 42 percent. Balisacan noted that the data used by the IARDS may not be comparable that is why they arrived at a 42-percent increase. Balisacan also added that there are inherent problems with the CARP. He said the government, under the CARP, has distributed only Collective Certificate of Land Ownership Award, which cannot be used as collateral to access credit facilities. He explained that apart from that, being a recipient of the CARP even acts as a disadvantage for farmers looking to tap credit facilities since banks immediately consider them “risky” borrowers simply because they are poor and may not have enough means to repay loans.

T

@jearcalas

he country’s dressed-chicken inventory at the start of the year declined by nearly 30 percent to 16,989.06 metric tons (MT), from 24,238.49 MT recorded a year ago, according to the National Meat Inspection Service (NMIS).

bloomberg

Who’s afraid of genetically modified chickens?

D No need to revise CARP law, Pids says @cuo_bm

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evising the Comprehensive Agrarian Reform Program (CARP) law is unnecessary to achieve true land reform in the Philippines, according to the Philippine Institute for Development Studies (Pids). In a paper, titled “Land Reform: What Has Been Its Impact After 30 Years?,” the Pids said that instead of revising the CARP, the government should focus on resolving long-standing issues, such as landownership conflicts. One of the recommendations of the Pids is for the Department of Agrarian Reform (DAR) to adopt a progressive land-taxation scheme to deal with land-ownership issues. “While the implementation of the program may have been flawed, revising the law is unnecessary as there are only a few large sizes of agriculture lands left for distribution,” the paper read. “[The DAR] should also adopt a progressive land-taxation scheme to deal with issues on land-ownership concentration. The said scheme can be supported by ongoing process improvements [e.g., digitization of records] in agencies that handle land administration, such as the Land Registration Authority and the Department of Environment and Natural Resources,” it added. This can also help deal with land-ownership issues, such as the

Milk imports in Jan-Sept declined by 2.25%

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he country’s purchases of imported milk in January to September fell by 2.25 percent as the recovery of global prices made dairy products from abroad more expensive. The latest figures from the National Dairy Authority (NDA) showed that the country’s nine-month dairy import volume reached 2.024 million metric tons in liquid milk equivalent (MMT-LME), lower than last year’s 2.070 MMT-LME. However, the NDA noted that the value of the total imports during the reference period rose by 27.74 percent to P35.912 billion, from P28.114 billion a year ago. “Milk powder constituted the bulk of imports contributing 61 percent to the total milk and dairy products imports,” the NDA said in its quarterly report, titled “Philippine Dairy Updates,” published recently. “Skimmed milk powder comprised 37 percent, whey powder at 13 percent, whole milk powder at 3 percent and buttermilk powder at 8 percent of milk imports,” it added. The NDA, an attached agency of the Department of Agriculture (DA), said the hike in the total import value

indicated a per unit cost increment of more than a third. The average import cost of milk products during the reference period was pegged at P17.74 per liter, 34 percent higher than the P13.23 per liter recorded in January to September 2016. Food-price monitoring by the Food and Agriculture Organization (FAO) showed that global dairy prices in 2017 peaked in the third quarter after registering a 224.2 dairy price index last September. FAO dairy price index indicated that global dairy prices sustained growth in January to September, ending the third quarter with an increase of 15.2 percentage points, from 209 recorded in June. The FAO attributed the increase in global dairy prices to the tightening supply of milk in the world market, particularly in Australia, New Zealand and the European Union. Skimmed milk powder was the top milk product imported by the Philippines during the period. Imports reached 957,360 MT-LME, valued at $292.04 million, according to NDA data. However, the volume was 8.3 percent lower than the 1.044 MMT-LME

imported in 2016, while the value was 16.75 percent higher than the $250.14 million recorded a year ago. Data from the NDA showed that the bulk of the country’s dairy imports came from the United States, which accounted for 30 percent, overtaking New Zealand as the country’s top source of milk products. Dairy imports from the US during the nine-month period reached 607,190 MT-LME, valued at $165.63 million, while those imported from New Zeland reached 586,540 MT-LME and valued much higher at $290.20 million. A Global Agricultural Information Network (Gain) report, published last October, projected that Philippine dairy imports in 2017 would decline by almost 10 percent as imported milk becomes more expensive as global prices started to recover. The Gain report, which was prepared by the United States Department of Agriculture Foreign Agricultural Service in Manila, indicated that the country’s total dairy milk imports in 2017 would reach 2.5 MMT-LME, from a record high of 2.77 MMT-LME in 2016. Jasper Emmanuel Y. Arcalas

ealing with controversies can be stressful and migraine inducing. Still, I welcome heated discussions over certain topics if only because it will give light and popularize what was once obscure but nonetheless important issues. Take for instance the recent decision of the Securities and Exchange Commission (SEC) to revoke the incorporation papers of online media site Rappler. Overnight, my social-media feeds are filled by posts of corporate law experts talking about Philippine Depositary Receipts and media ownership. Each posts will generate responses—and not just from lawyers or law students— either criticizing, defending or clarifying the SEC’s decision. This is why I welcome the controversy—and the public debates—over the cultivation and consumption of genetically modified (GM) crops in the Philippines. And this is one longr unning cont roversy, whic h started in 2001 when farmers and environmental groups protested the field-testing of Bacillus thuringiensis (Bt) corn in South Cotabato. The debate over the benefits and dangers over Bt corn, a GM crop that’s resistant to t he A sian cor n borer, has seen all stakeholders—lawyers, scientists, nongover nmenta l organizations (NGOs), consumers, journalists, government officials and corporate executives—weighing on the issue. But more than sparking a nationwide debate, the controversy over Bt corn has made more people aware of genetic engineering, biotechnology and the hard science behind food production. Albeit strong opposition, the Philippine government allowed the commercial propagation of Bt corn starting December 2002. From just 6.03 million hectares planted with Bt corn, the area has expanded to over 800,000 hectares in 2016, making the Philippines among the world’s biggest producers of GM crops, according to the International Service for the Acquisition of Agri Biotech Applications (ISAAA). The commercial success of Bt corn, however, didn’t offer any free pass to those who want to field-test and cultivate other GM crops, such as the pest-resistant Bt eggplant and vitamin-enrinched Golden Rice in the Philippines. In 2010 farmers and NGOs uprooted Bt eggplant that were being grown in UP Mindanao and has led to a lawsuit, which saw the Supreme Court ruling in December 2015 that suspended

Prime Sarmiento

prime commodities field trials of Bt eggplant owing to the nullification of the Department of Agriculture Administrative Order (AO) 08-2002 as the AO was found insufficient in enforcing biosafety protocols. The high tribunal reversed its ruling in August 2016, granting the motions for reconsideration filed by the ISAAA, Environmental Management Bureau, Crop Life Philippines, University of the Philippines Los Baños Foundation and University of the Philippines. Last year the Philippine Rice Research Institute and the International Rice Research Institute have applied to the Bureau of Plant Industry (BPI) for a biosafety permit for the direct use in food, feed or for processing of Golden Rice. As of this writing, the research agencies are still waiting for BPI’s approval, but those who back Golden Rice are also facing stiff opposition from some environmental groups. According to a report published by the BusinessMirror last September, legislators belonging to the Makabayan bloc filed a resolution seeking to conduct an inquiry on the development of Golden Rice in the country. House Resolution 1294, filed last September 7 by Partylist Reps. Arile Casilao of Anakpawis, Carlos Isagani Zarate of Bayan Muna, Emmi de Jesus and Arlene Brosas of Gabriela, Antonio Tinio and France Castro of Act Teachers and Sarah Jane Elago of Kabataan, have directed the Committee on Agriculture and Food to conduct an inquiry to determine Golden Rice’s impact on health, environment and farmers’ rights. T he protests aga i nst GM crops may be a big headache for its proponents, but as an observer and concerned consumer, I welcome them if only because I can at least be assured that what I’m consuming is not only safe to eat but also safe for farmers to cultivate. This is crucial if only because we might have to deal with more complex products of genetic engineering in the future, such as genetically altered animals. That may sound weird for you for now as there’s no GM animal here in the Philippines, yet. But in other countries like the United States, genetically altered animals are now being raised. As early as 1999, the

US Food and Drug Administration has approved the raising of genetically modified goats that can make a drug in their milk that prevents blood clots. In 2015 the US FDA has also approved genetically modified chickens that can produce eggs that can treat lysosomal acid lipase deficiency—a rare genetic condition that prevents the body from breaking down fatty molecules inside cells. Last year a Massachusetts-based company sold its first batch of transgenic salmon to Canada. In India scientists at a research institute in Mysore are developing diseaseresistant GM silkworm. I have yet to hear of any local company or research agency venturing into GM livestock, but as what I learned from one of the talks organized by the Department of Science and Technology during the National Biotech Week held in November 2017, it’s important for the Philippines to develop biosafety measures for transgenic animals if only because we might import them in the future. According to Claro Mingala, scientist at the Livestock Biotech Center of the Philippine Carabao Center, the Philippines has no regulatory framework yet for GM animals. However, there are now efforts to draft regulations on animal biotech products and these include insects, such as GM silkworm. Several meetings so far have been conducted, but Mingala said that such regulatory framework is important to ensure public safety. “We don’t want to jeopardize safety. But our [regulatory framework] should always be based on science,” he said. Indeed, Mingala’s statement best sums up what I think should be the major consideration in whether approving or halting the field-test, cultivation and importation of GM crops, animals and insects. And that is— strong, verifiable, science-based data that can guarantee that the benefits far outweigh whatever losses incurred from the production and/or importation of GM crops/animals/insects. Prime Sarmiento is a longtime business journalist who specializes in food, agribusiness and commodities-trade reporting. Her stories have been published in both local and international publications, including Nikkei Asian Review, China Daily, Science and Development Network and Dow Jones Newswires. Comments and ideas are welcome at prime.sarmiento@gmail. com.


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TheBroa

Business

Thursday, January 18, 2018

Private sector powers energy financing By Cai Ordinario & Lenie Lectura

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ULTILATERAL development banks (MDBs) have been financing various energy projects in the Philippines for many years. These efforts are done through various sources, including their internal sources, or in partnership with other MDBs or financing institutions. The Washington-based World Bank Group currently has four active projects that are related to energy, particularly on generation, power plants and renewable energy. These projects are: the $44-million “Philippines Renewable Energy Development,” the $23.24-million “Access to Sustainable Energy Project,” the $10-million “Methane Recovery from Waste Management Project” and the P6.76-million “Northern Negros Geothermal Power Project.” However, all these projects are not funded by the World Bank directly. As an MDB, the World Bank can only act as a repository or conduit for certain global funds. “The power sector in the Philippines is mostly privately owned and operated. Power generation has become highly competitive and new investments are made exclusively by the private sector,” Yuriy Myroshnychenko, the World Bank’s senior energy specialist based in Singapore, told the BusinessMirror via e-mail. “If private-sector investments are not available, the World Bank could cofinance, potentially together with other bilateral and/or multilateral financiers, rehabilitation of existing or construction of new state-owned assets,” he added.

Climate fund

THE Philippines Renewable Energy Development will be financed using the Clean Technology Fund (CTF), which is one of the four funding programs under the $8.3-billion Climate Investment Fund (CIF). The CIF was created in 2008 and provides concessional financing to 72 developing and middleincome countries to help manage their climate-change challenges and reduce their greenhouse-gas emissions. The $5.6-billion CTF, which has the largest allocation among the CIF programs, provides middle-income countries like the Philippines financial resources to scale up the demonstration, deployment and transfer of low-carbon technologies in renewable energy, energy efficiency and sustainable transport. The other programs under the CIF are the $1.2-billion Pilot Program for Climate Resilience (PPCR) for public- and privatesector investments in climate resilience; the $780-million Scaling Up Renewable Energy in Low Income Countries Program (SREP) for energy access and economic growth for poor countries; and the $775-million Forest Investment Program (FIP) for projects that seek to reduce deforestation.

Kyoto Protocol

THE Access to Sustainable Energy Project is funded by the European Union, as a portion of its total support to the Department of Energy amounting to €60 million (about P3.723 billion at current exchange rates). The Global Partnership for Output-Based Aid, a partnership that funds initiatives for improving the delivery of basic services to the poor in developing countries, is also contributing $3 million, specifically for the solar home systems component of the project. The Philippines Methane Re-

covery from Waste Management Project will be financed by the Spanish Carbon Fund lodged at the World Bank under the Kyoto Funds and Facilities. The Spanish Carbon Fund was created in 2004 in an agreement between the World Bank and the Ministries of Environment and Economy of Spain. This fund was established to purchase greenhouse-gas emission reductions from projects developed under the Kyoto Protocol. The pooled money goes in projects that aim to mitigate climate change while promoting the use of cleaner technologies and sustainable development in developing countries, and countries with economies in transition. The Fund has a total capital of $278.6 million. The Northern Negros Geothermal Power Project is financed by the Prototype Carbon Fund (PCF), which is also under the Kyoto funds and facilities. The PCF is a partnership between 17 companies and six governments and managed by the World Bank. The PCF became operational in April 2000. As the first carbon fund, its mission is to pioneer the market for project-based greenhouse-gas emission reductions while promoting sustainable development and offering a learning-by-doing opportunity to its stakeholders. The Fund has a total capital of $180 million.

Pooled cash

DOCUMENTS available on the World Bank website showed that since 2010, around 130 development partners, including countries and organizations, have contributed to the World Bank trust funds in support of a shared commitment to specific development outcomes. As of December 30, 2016, the World Bank was stewarding $11 billion in trust-fund resources. There are many energy financing opportunities in the Philippines, according to Myroshnychenko. He said many of these opportunities sprung from the enactment of the Electric Power Industry Reform Act (Epira) in 2001. “However, relatively small developers and electric cooperatives [ECs], who are interested in building renewable generation sources, such as small hydro, wind and solar, may face constraints with respect to borrowing from the banking sector,” the World Bank said. The World Bank has approved the Philippines Renewable Energy Development Project that aims to provide a partial credit guarantee to ECs to help them secure commercial financing.

ADB window

THIS is probably one of the reasons why the Manila-based Asian Development Bank (ADB) has resorted to financing certain energy projects through nonsovereign means. The ADB has both sovereign and nonsovereign operations. Its sovereign operations help governments of developing-member countries like the Philippines finance various projects and programs, while its nonsovereign operations help private or stateowned firms finance projects and programs. In the case of these energy projects, these are financed

through ADB’s Private Sector Operations Department (PSOD), which funds projects and/or investments in privately held and state-sponsored companies in developing Asia. The PSOD finances private-sector transactions in infrastructure, financial services, clean energy, agribusiness, and other core sectors via debt and equity investments. It also aids in mobilizing third-party capital credit via credit enhancement products and risk transfer agreements, investing in private equity and other structured funds and managing institutional capital in such funds on behalf of clients, and actively manages ADB’s private-sector portfolio to ensure strong financial performance, high development impact, and strong compliance with environmental, social and governance safeguards. “The emphasis is on commercially viable transactions that generate financial returns while also delivering on ADB’s organizationwide mission to promote environmentally sustainable and inclusive economic growth,” the ADB said.

Major projects

THE ADB is financing four major energy projects on power genera-

tion and renewable energy worth $140.63 million (about P7.137 billion at current exchange rates). Two of the projects are already active, while the other two projects have recently been approved. The active ones are the $0.4-million worth Waste to Energy Project Preparatory Technical Assistance (PPTA) of the Procter & Gamble Co. and the $20-million worth 150-megawatt (MW) Burgos Wind Farm Project. According to PPTA project documents, the project aims to improve sustainable environmental infrastructure in highly urbanized areas where economic gains can be maximized. It will also incentivize private-sector participation in addressing the municipal solid waste (MSW) problem. The PPTA is a renewable energy generation project through biomass and waste energy apart from being an urban solid-waste management project.

North, South

THE 150-MW Burgos Wind Farm Project, which is financed by a loan secured by the EDC Burgos Wind Power Corp., involves the construction and operation of a 150-MW wind farm project in the province

of Ilocos Norte, in the municipality of Burgos. The wind farm will cover an area of approximately 686 hectares across three barangays— Saoit, Poblacion and Nagsurot. Once completed, the project may be eligible for a fixed tariff under the governments’ Feed-inTariff (FIT) system. The project will be built in two phases, both are currently under way. The components of Phase 1 are the installation of 29 wind turbine generators (WTGs) from Vestas with a generation capacity of 87 MW, the construction of a wind farm substation, and the construction of an approximately 42-kilometer-long transmission line. Phase 2 of the project consists of the installation of an additional 21 WTGs from Vestas with a generation capacity of 63 MW. The $120.22-million worth active projects, meanwhile, include the $120-million worth Visayas Base Load Power Project and the $0.225-million worth Bacolod City Municipal Solid Waste Management. The Visayas Base Load Power Project is funded by a loan secured by the Kepco SPC Power Corp., while the Municipal Solid Waste Management project of the local government of Bacolod City is funded by techni-

cal assistance support.

China funders

THE newest multilateral, the China-led Asian Infrastructure Investment Bank (AIIB), currently does not finance energy projects in the Philippines. Its only project in the country since its establishment eight years ago was the $500-million worth Metro Manila Flood Management Project. The project is cofinanced by the AIIB and the World Bank with a share of $207.60 million each. The Philippines shouldered $86.79 million as counterpart funding. However, there are 10 active energy projects being financed by the AIIB. These are for energy projects in China, India, Egypt, Tajikistan, Bangladesh, Azerbaijan, Myanmar and Pakistan. The AIIB is financing two energy projects in Bangladesh and India. There are also proposed energy projects at the AIIB from Turkey and Georgia. These are Turkey’s $2.5-billion worth Tuz Golu Gas Storage Expansion Project and Georgia’s $1.03-billion worth 280MW Nenskra Hydropower Plant.

Supply deals

FINANCING energy projects in


aderLook

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www.businessmirror.com.ph | Thursday, January 18, 2018

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as PHL grapples with regulatory issues cision of the Office of the Ombudsman to suspend four Energy Regulatory Commission (ERC) commissioners for one year will surely have an impact on financing new power projects. Francisco said this recent development would have an impact on lending, saying the loan would likely not be disbursed or would take a very long time to process due to the suspension of the ERC commissioners. “We can give conditional approval, but usually conditions to lend are based on the ERC-approved contracts,” he said.

Effects to ERC

ERC Commissioners Asirit, Alfredo Non, Gloria Yap-Taruc and Geronimo Santa Ana were found administratively liable for conduct prejudicial to the best interest of the service, aggravated by simple misconduct and simple neglect of duty. “The debilitating impact of the Ombudsman’s decision to suspend the four incumbent ERC commissioners will render the operations of the agency in severe paralysis,” ERC Chairman Agnes VST Devanadera explained. “As a collegial body, the presence of at least three members of the Commission is needed to constitute a quorum to enable the ERC to adopt any ruling, order, resolution, decision or other acts of the Commission in the exercise of its quasi-judicial and quasilegislative functions.” She said the absence of a quorum in the ERC will make it unable to perform any of its quasi-judicial and quasi-legislative functions. Among others, hearings will not be conducted as notices and schedules are set by the Commission and there would be no deliberation on applications for approval of PSAs, capital expenditure of the distribution utilities and the National Grid Corporation of the Philippines (NGCP), for rate adjustments and pass-on charges. Devanadera added that consumer complaints and violations of industry players of existing laws, rules and regulations would not be acted upon.

JITTAWIT21 | DREAMSTIME.COM

Debilitating effect

the country has become more difficult because these are tied to the regulatory approval of their power supply agreements (PSAs), which are deemed crucial by most power producers. In most cases, the total project cost is 70 percent financed by debt, via bank loan, and 30 percent through equity. In the power sector, without an assured buyer of electricity, banks are hesitant to process loans being sought by power firms. The Manila Electric Co. (Meralco), for instance, has seven PSA applications covering a total of 3,551 megawatts (MW) with seven generation companies that are pending with the ERC. ERC Commissioner Josefina Magpale-Asirit had said three Meralco PSAs with Redondo Peninsula Energy Inc. (RP Energy), Saint Raphael Power Generation Corp. (SRPGC) and Atimonan One Energy Inc. are currently undergoing procedural processes. The other three PSA contracts—with Central Luzon Premiere Power Corp. (CLPPC) and Mariveles Power Generation Corp. (MPGC) of the San Miguel Group, and Global Luzon Energy Development Corp. (GLEDC) of Global

Business Power Corp.—are not yet being deliberated on since they still lack environmental compliance certificates (ECCs). The other PSA with Panay Energy Development Corp. (PEDC) was already given a provisional authority by the ERC in July 2016. Magpale-Asirit said it was necessary to issue a provisional authority to PEDC to meet demand requirements in view of the frequent yellow-alert status of power reserves at that time.

Delays cost

THE Meralco said a delay in the approval of these applications and the consequent delay in the financial close and subsequently the commercial operations date of the power projects will adversely affect the utility firm’s ability to meet demand growth in its franchise and overall energy security in the Philippines. Meralco President Oscar Reyes underscored the urgency for the regulators to act on the applications. Reyes said delays will likely affect consumer benefits and will have an impact on project cost if these are not approved soon. “We will see the cost impact over time. The cost impact will mainly be on escalations on the

EPC [engineering, procurement, construction] cost tucked on to the price of EPC,” Reyes said. “Definitely, there is cost-impact to the project; cost-impact to Meralco.” Reyes emphasized the difficulty in putting up a power project. “We have invested substantially already and some negotiations have been as early as 2011 and 2012. So, these are fully negotiated PSAs. And time is money,” Reyes explained. “Every month of delay means higher EPC costs, higher financing costs, higher exchange rates, so it is very detrimental to consumers.” RP Energy and Atimonan 1, for instance, have already shelled out P3.5 billion in development costs alone. An official of Meralco PowerGen Corp. (MGen), the power-generating arm of Meralco, could not emphasize enough the importance of PSA approval, saying that without the PSAs, everything would be at a standstill. “The rates that were locked in for the EPC and those with the lenders will expire soon. This means that if we don’t get PSA approvals as soon as possible, then there will be another new round of negotiations, which means the rate

will likely go up,” MGen President and CEO Rogelio Singson said. “If we can’t agree with existing lenders and prospective EPC contractors, then we may look for another one. So, as much as possible, we want to avoid these external delays.” Reyes claims the PSAs, if implemented, will redound to consumer savings in their electricity bills. For instance, the rate impact of its PSA with RP Energy is projected to be less P0.1327 per kilowatthour (kWh), P0.7799 per kWh for its PSA with Atimonan, P0.2589 per kWh with SRPGC, P0.4678 per kWh with CLPPC, P0.3464 per kWh with MPGC, P0.0188 per kWh with PEDC and P0.5308 per kWh with GLEDC.

ERC mess

BDO Capital & Investment Corp. has already noted a slowdown in the development of power projects, mainly on account of oversupply of capacity. Compared to previous years when there was notably a strong investment appetite in power projects, BDO Capital and Investment Corp. President Eduardo Francisco said the situation now is different. As such, there were fewer bank loan applications. But more important, the de-

ACCORDING to Devanadera, other functions that are on the line include the issuance or renewal of Certificates of Compliance (COCs) or Provisional Authorities to operate power plants. Market suspension will not be declared when warranted, and decisions and resolutions cannot be promulgated and released. She said the operations of the ERC will be affected as personnel actions could not be undertaken. Procurements could not be awarded, especially the ERC meter seals and stickers being placed on electric meters of the distribution utilities, among others. “The Ombudsman’s decision to suspend the four ERC Commissioners will have a substantial impact for the whole country and presents a dangerous regulatory risk that will severely affect the economic and financial environment of the country. That is contrary to the President’s pro-poor policy as the 73.6 million Filipinos will be adversely affected by any nonaction on the part of the ERC,” Devanadera emphasized.

Private sector

ABOITIZ Power Corp. President Antonio Moraza could not agree more. He said there must be an immediate solution soon. “Projects, applications and any other permits or rates from the ERC cannot be decided on, so things will stand still until a resolution is found,” he said in a text message. DMCI Holdings Chairman Isidro Consunji is hopeful that issues will be resolved at the soonest time possible “so they can function properly.” Meanwhile, AC Energy Holdings Inc., the Ayala Group’s business arm in the energy sector, said the ERC commissioners’ suspension “adds a layer of difficulty.”

“Project financing has been a challenge lately due to scarcity of long-term PPAs [Power Purchase Agreements],” said AC Energy President Eric Francia in a text message. “Lenders will likely be looking for sponsor support to enable power investments, and sponsors will need to have rock-solid balance sheets to do this.”

Invest more

DESPITE the setbacks, the government continues to encourage the private sector to invest in the energy sector. An annual investment forum organized by the Department of Energy-Investment Promotion Office (DOE-IPO) was held last December 6. This was the final leg of the series of investment forums held last year. The Energy Investment Forum is meant to provide local and international stakeholders updates on the different investment opportunities, available incentives, financing mechanisms and regulatory framework in the energy sector. Resource persons are distinguished speakers from the DOE, the Philippine National Oil Co., the ERC, the Board of Investments and the financing sector, among others. The event also serves as an opportunity to interact with the different energy stakeholders. “The Energy Investment Forum is an opportunity to share with partners and stakeholders the updates on the DOE’s undertakings, including policy directions and investment opportunities in the energy sector. We are supporting the advancement of the Philippines’ national social and economic agenda, by undertaking policy and market reforms complemented by an active stewardship of the public interest in the country’s energy resources and industries,” Energy Secretary Alfonso G. Cusi said. In his presentation, Cusi discussed the current situation and investment opportunities in the power, upstream and downstream oil and gas, coal, renewable, coal, alternative and biofuels and energy efficiency and conservation. Specifically, he highlighted the DOE’s efforts in crafting a comprehensive and responsive energy mix policy to support and sustain the growing economy while also guiding energy developers on the business environment.

Investor potentials

IN the power sector, for instance, Cusi mentioned about having to classify power plants into base­load (running on 24/7 basis), mid-merit (running on long hours but not 24/7) and peaking (with easy start-up and can be used during peak hours). In this regard, power developers can compete with one another accordingly and can picture the situation in each of the main grid for the kinds of investment needed. According to Cusi, “The Philippine energy sector offers a number of investment opportunities, especially that incentives, sound policy mechanism and regulatory framework are in place,” Cusi stressed. The DOE-IPO has been holding energy investment forums for 12 years now. The Philippines, he added, is attuned with the Asean’s vision of being the bright spot for energy investments and development in the global arena. Cusi stressed the Philippine government is committed to ensure necessary assistance to all energy investors from cooperation partners, and uphold to the government commitments for the benefit of both parties—consumers and the private sector. Meantime, the message is loud and clear: power plants ensure adequate electricity supply to keep up the Philippine economy’s momentum of growth. If these are not built fast enough, the economy and the consumers will likely pay the price.


Banking&Finance

A8 Thursday, January 18, 2018 • Editor: Jun B. Vallecera

BusinessMirror

Moody’s: Asian high-yield market shows record rated issuance in 2017

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oody’s Investors Service said the Asian high-yield bond market has shown record levels of rated issuance across all markets in 2017, with momentum set to carry into first quarter of 2018. “A total of $34.5 billion was issued in 2017—up significantly from $11.4 billion in 2016 and well above the previous record high of $23.3 billion in 2013,” said Annalisa DiChiara, a Moody’s vice president and senior credit officer. “Investor tolerance for low credit quality and issuers’ refinancing needs contin-

ued to drive rated issuance in the Asian high-yield market,” DiChiara said. “And the ratio of companies rated B3 and below fell to 14.8 percent last December 31, 2017 from 15.4 percent last September 30, as the number of corporate family ratings [CFRs] climbed to 149, from 143 in this period,” DiChiara added.

Is branding for associations?

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his was exactly the question t h at C h r i s D i ngcong , HongKong-based Filipino brand consultant, founder and creative director of Springtime Design, asked around 20 0 associat ion members who attended his plenary session at the Fifth Philippine Council of Associations and Association Executives (PCA AE) Associations Summit (AS5) held recently at the Philippine International Convention Center. At a follow-up small group session entitled, “Why your logo is not a brand?” during the Quarterly Quorum event of the PCAAE on January 11, Chris reemphasized what branding is and is not. He started by saying that branding, among other things, is about “stories to tell.” It is not entirely just about the graphic representation of an association in the form of a logo. The visual representation of a logo as a brand becomes more meaningful and valuable if it encapsulates and communicates effectively the association’s core identity: its brand voice, mission, vision, values, goals and brand story. Surrounding and supporting this core identity are the brand components and applications that capture the identity of the association’s brand in the form of a brand identity system. Brand components, such as the logo, tagline, imagery, colors, shapes, tone of voice, layout, style and font type are ingredients in creating the unique identity system of an association’s brand communication. They include corporate stationery, web site, videos, office environment, brochure, social media, etc. All these, Chris mentioned, are relevant in designing and building a brand. “Branding is a process” and brands should be nurtured, he continued. T he design process from research, brand strategy formation to the creative expression of the logo are part of the big idea of a brand. Chris added that creating a brand entails incorporating five essential components into one coherent communication, as follows: n People—the association’s main asset. Whether a volunteer or an employee, they provide time, expertise and contacts. n Belief—reflects the association’s

Newly assigned CFRs also maintained momentum at 11 in the fourth quarter of 2017, helping drive the number of firsttime CFRs assigned during the year to a record of 41.   Moody’s conclusions are contained in the latest edition of its “Asian High Yield Interest Chartbook.”  The report said that refinancing risks remain manageable as, absent any exogenous shocks, the market has the capacity to absorb upcoming maturities.  Meanwhile, the Asian Liquidity Stress Indicator decreased to 26.2 percent on December 31, 2017, from 27.3 percent last September 30, indicating refinancing risk remains for some existing issuers. Although the reading remains above the long-term average of 23.1 percent, it marks the strongest year-end reading since December 2014.  A total of $5.1 billion of rated bonds will mature by December 31, 2018, and $162.3 billion of rated and unrated bonds will mature through to 2021.  A total of 10 issuers accounted for 37.5 percent of the $76.7 billion of rated debt outstanding on December 31, 2017.

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Fraud-proof excise-tax stamp program seen completed soon M uch-improved and more secure excise-tax stamps for cigarettes and alcohol products are scheduled for rollout within the first three months of the year, according to the Department of Finance (DOF). Finance Undersecretary Antonette C. Tionko said the new tax stamps for the various “sin” products are to be printed by Apo Production Inc., the service provider for printing government tax stamps. “I think the BIR [Bureau of Internal Revenue] is still reviewing it. They target [the rollout] in the first quarter,” Tionko said. The BIR is responsible for the collection of excise tax on cigarettes and alcoholic beverages. According to Finance Assistant Secretary Mark Dennis Y.C. Joven, the new tax stamps for cigarettes will come out ahead of the tax stamps for alcohol. “Most likely, the tax stamps for cigarettes will come first,” Joven said. Finance Secretary Carlos G. Dominguez III acknowledged the design of the bottles used for alcohol are more complex than that of cigarette packs and that this has

somewhat delayed the signing of a memorandum of agreement between the DOF and the tax-stamp printers. “It’s complex. We have three different kinds of alcoholic drinks and there are several levels of alcohol proof,” Dominguez said of the practical problems that need careful consideration. Based on DOF data, the government expects to collect an estimated P56.231 billion from the excise on alcoholic beverages this year alone. For tobacco products, the government said some P126.969 billion is expected. The government’s medium-term revenue program takes into account the passage of the Tax Reform for Acceleration and Inclusion Act that was signed into law by President Duterte last December. In 2016 total excise-tax collection rose to P163.5 billion, from P158.3 billion in 2015. The DOF previously said the Internal Revenue Stamps Integrated System program for alcoholic drinks would be pursued this year to help curb the illicit trade of alcoholic beverages in the country.

‘LandBank entry saves PostalBank from bankruptcy’ Association World Octavio Peralta core values, which drive its people to achieve positive and progressive outcomes. n Cause—describes the organization’s mission and is a fundamental part of the brand story. n Stor ies — re present t he m a ny “voices” of the association and its members. Woven together, they are powerful ingredients of the brand. n Advocacy—is about the association’s purpose, which is the core and reason for being. Finally, there’s brand management which is a critical part in nurturning brands and requires the commitment of the organization’s leadership, involvement of the staff and identification of those who will champion the brand. How does an association start to brand itself? He suggests the following tips: n Discover who you really are. n What is the essence of who you are? n Focus on relationships. n Tell your story. n Be consistent. So, is branding for associations? For me, the answer is rather obvious. If countries do branding (for tourism, etc.), companies do it, too (to sell their products) and people, as well (for personal equity), so why not associations? “Associations touch lives,” Chris said. It is at best imperative for them to do so! The column contributor, Octavio Peralta, is concurrently the secretary-general of the Association of Development Financing Institutions in Asia and the Pacific and the CEO of the PCA AE. PCA AE enjoys the support of Adfiap, the Tourism Promotions Board and the Philippine International Convention Center. E-mail obp@adfiap.org.

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he Department of Finance (DOF) said the launch of the Overseas Filipinos Bank (OFB) on Thursday was in fulfillment of a campaign promise of President Duterte to the Filipinos. According to Finance Secretary Carlos G. Dominguez III, the OFB launch made possible by the combined efforts of the DOF and the Land Bank of the Philippines (LandBank), was separate from another campaign promise that pertained to the passage of the Tax Reform for Acceleration and Inclusion Act (TRAIN) into law. “We are just fulfilling his [President Duterte’s] campaign promise one by one. First, the tax reform then this new bank,” Dominguez said. He added all obstacles to the opening of the bank that caters to

management of the bank’s balance sheet, capital, funding and liquidity. He also runs the Treasury Group, which is responsible for forecasting and managing the bank’s cash position, executing its borrowing program in the domestic and international capital markets, and investing its liquid asset portfolio. This is a welcome challenge for me. Treasury’s role is certainly a critical one, and I’m glad to be in an ideal position to evaluate and optimize the bank’s balance sheet and capital allocation strategies to support our ongoing business plans,” Chan said. Chan has 20 years of trading and portfolio management, with consistent profitable track

the needs of all overseas-based Filipinos have been removed following last week’s approval by the Philippine Competition Commission (PCC) of the acquisition by the LandBank of the Postal Savings Bank (Postalbank). The PCC approval on January 11 for LandBank to acquire PostalBank followed the Monetary Board’s go signal the previous December. Apart from fulfilling a campaign promise, the conversion of PostalBank into the OFB also saved the lender from bankruptcy, Dominguez said. Both the DOF and LandBank also plan to secure a license in countries with large concentrations of overseas Filipinos so that the OFB can provide financial advi-

sory services to the Filipino communities in those areas. A key feature of the OFB is the provision of remittance service for OFWs and a loan program for Filipinos returning to the Philippines to start businesses or build their homes, according to the DOF. The LandBank and the Bureau of the Treasury (BTr) are also exploring ways of mobilizing the savings of overseas-based Filipinos for investment in the local capital markets, according to Dominguez. Last year the President issued Executive Order 44 ordering the Philippine Postal Corp. and the BTr to transfer their PostalBank shares to LandBank at zero value. Rea Cu

Diokno not opposed to teachers’ salary hike India cuts

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udget Secretary Benjamin E. Diokno on Wednesday said he is “not opposed to increasing the salaries of our teachers” in a news conference held at the main offices of the Department of Budget and Management (DBM). “I understand the crucial role teachers have in nation-building and I do believe they should be rewarded accordingly,” he said. According to the budget chief, the takehome pay of teachers has already increased this year with the implementation of the third tranche of salary standardization law (SSL). Furthermore, government personnel, including teachers, may expect another round of salary adjustments with the fourth tranche of SSL set to be implemented in 2019. Currently, an entry-level public-school teacher (Teacher 1), having Salary Grade 11 under tranche three of the SSL, earns a monthly salary of P20,179. Annually, he or she will enjoy bonuses and allowances of P74,358. This rounds up the monthly compensation package of teachers to P26,375. By 2019, their monthly salary will increase to P20,754 and their total annual bonuses and allowances will increase to P75,5081, rounding up their monthly compensation package to P27,046, or P671 more a month. At the same time, the significant reduction in taxes with the lower personal-income tax rates imposed by Tax Reform for Acceleration and Inclusion Act (TRAIN) will significantly

Benedict Chan now treasurer at China Bank hina Banking Corp. (China Bank) has appointed Benedict L. Chan as treasurer and head of the Treasury Group as part of the senior management changes optimizing the strength of the bank’s executive team. He succeeded Romeo D. Uyan Jr., now COO. “Benny is the ideal person to step into the role of treasurer. He is a strategic thinker and brings a wide range of skills to the position. In a short amount of time, he has proven to be an invaluable asset to the bank,” China Bank President William C. Whang said. Chan joined China Bank in October 2016 as first vice president and trading head of the Treasury Group. In his new role, Chan directs the

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increase the take-home pay of teachers. In fact, a Teacher 1 is tax exempt under the TRAIN law as his or her annual taxable income falls below P250,000. Additional take-home pay due to lower taxes for Teacher 1 will amount to P35,537, 176 percent of his or her monthly salary. The combined effect of the increase in salary from the SSL and lowered tax rates due to the implementation of TRAIN law will result to an additional take-home pay of P43,363 per year. In 2019, annual tax savings will increase to P37,262 as it is indexed to salary. Additional take-home pay due to SSL and TRAIN increase to P45,312.          The DBM estimates that doubling the salaries of teachers in 2018 will require an additional P343.7 billion in personnel services (PS) costs. In the 2018 General Appropriations Act, the programmed PS costs for teaching positions is set at P381.1 billion. Doubling the salaries of teachers will require PS costs of about P724.8 billion, implying a financing requirement of P343.7 billion. The DBM secretary cited the budgetary impact as the reason behind earlier statements in which he cautioned against the doubling of teachers’ salaries. He clarified that the President’s instruction is “to look into increasing their salaries, not doubling them.” “We have to ensure that our public sector deficit remains manageable,” the budget chief said.

record in both the international and local trading markets. He previously worked with Trinitus Asset Management Hong Kong, BNP Paribas Singapore and London and ING Bank Singapore, Hong Kong and Manila. In 2016 Chan passed the Licensing Examination for Securities and Futures Intermediaries Paper 1 on securities regulations conducted by the Hong Kong Securities and Investment Institute. Prior to that, he received his Financial Markets Regulatory and Practice Certificate from The Institute of Banking and Finance in Singapore in 2013. Chan graduated from the Ateneo de Manila University with a bachelor’s degree in management engineering. CHAN

planned extra borrowing to $3.1 billion

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ndia said it would cut back on planned additional borrowing for the current fiscal year, providing relief to the nation’s sovereign bond market battered by concerns about rising inflation and worsening public finances. The government will sell 200 billion rupees ($3.13 billion) of debt, down from 500 billion rupees extra announced less than a month ago, the finance ministry said in a statement on Wednesday after a “review of trends of revenue receipts and expenditure pattern.” The yield on bonds due in January 2028—the new 10-year bond—dropped 11 basis points to 7.28 percent as of 11:25 a.m. in Mumbai. The yield on notes due May 2027 also declined 11 basis points to 7.44 percent. The rupee gained 0.1 percent to 63.9675 per dollar, after falling 0.9 percent on Tuesday. Tr imming bond sa les w il l reduce supply-side pressu res a nd “prov ide breathing space to the market,” said Sandeep Bagla, associate director at Trust Capital Services Pvt. in Mumbai. “Investors were bleeding due to the surge in yields and would shy away from making further commitments unless offered a higher yield, which may not have been in line with the current growth-inflation scenario.” Benchmark 10-year sovereign yields advanced for a fifth month last December, the longest stretch since 2000. Sovereign bonds have been spooked by higher supply of debt by the central and state governments, and as worries over accelerating inflation and a wider budget deficit soured sentiment.


Agriculture/Commodities BusinessMirror

www.businessmirror.com.ph

Editor: Jennifer A. Ng • Thursday, January 18, 2018

A9

PHL chicken supply down 30 percent By Jasper Emmanuel Y. Arcalas

NMIS data showed chicken purchased abroad accounted for more than half of the inventory as of January 1 at 8,922.42 MT. The figure was 1.71 percent lower than the 9,077.53 MT imported a year ago. The remaining volume consisted of locally produced chicken, according to NMIS data. The volume of locally produced chicken in cold storages fell by 46.79 percent to 8,066.63 MT, from last year’s 15,160.96 MT. On a monthly basis, local-

chicken inventory during the period was 42.9 percent lower than the 29,752.89 MT recorded last December 4. The volume of dressed chicken in the market usually declines after the Christmas season, when cold storages are full to meet the increase in demand, according to industry sources. The NMIS said it surveyed only accredited cold-storage facilities. Fresh-chilled chicken and mechanically deboned meat were not included in the NMIS data.

Data from the attached agency of the Department of Agriculture also showed the volume of frozen pork in cold storages as of January 1 expanded 10.73 percent to 24,443.76 MT, from 22,074.043 recorded in the same period last year. Imports also accounted for the bulk of the frozen-pork inventory. According to the NMIS, pork from abroad reached 23,742.56 MT and accounted for 97.13 percent of total inventory. The volume of frozen-pork imports is 12.65 percent higher than the 21,076.18 MT recorded a year ago. Local pork in cold storages declined by almost 30 percent to 701.20 MT, from 997.85 MT recorded on January 2. On a monthly basis, local-pork inventory as of January 1 was 8.17 percent lower than the 26,618.89 MT recorded last December 4. For the frozen-pork data, the NMIS said it included stock inventory in accredited commercial and in-house cold storage in slaughterhouses and meat-processing plants.

By Cai U. Ordinario

cancellation of titles, default on land payments by agrarian-reform beneficiaries (ARBs). The Pids also urged the government to focus its efforts on programs to modernize agriculture accompanied by adequate provision of support services to small farmers. This includes giving smallholder farmers direct access to new technologies, credit, infrastructure, value chains and markets. The government think tank also said that the Department of Agriculture (DA) can work with the DAR to consolidate farm operations for economies of scale and the development social enterprises. The Pids cited DAR data that showed about 4.8 million hectares have been awarded to 2.8 million ARBs since CARP’s implementation. The program had a total expenditure of P286 billion, or an annual average of P9.87 billion, from 1987 to 2016, which PIDS found to be a “hefty sum” over a long period of implementation. In 2009 former Socioeconomic Planning Secretary Arsenio M. Balisacan said the CARP is very costly and that the government can resort to alternative means to reduce poverty without resorting to land reform. Balisacan added that compared to the government’s conditionalcash transfer (CCT) program, the government seems to have spent twice as much for the CARP based on 2007 prices. The former DA official said that

the government spent P235.74 billion for 2.259 million beneficiaries since the CARP started in 1988. This translated to a cost of P144,377 per beneficiary. In terms of the CCT, the government spent P20.025 billion for 321,000 beneficiaries since 2008, which amounted to P63,382 per beneficiary. Balisacan also said that based on his independent assessment of the benefits of CARP, the increase in the average capita consumption increase in agrarian-reform communities due to the CARP is only 1.1 percent. This is lower compared to the survey of the Institute of Agrarian urban Studies (IARDS), which showed that the average capita consumption increase was 42 percent. Balisacan noted that the data used by the IARDS may not be comparable that is why they arrived at a 42-percent increase. Balisacan also added that there are inherent problems with the CARP. He said the government, under the CARP, has distributed only Collective Certificate of Land Ownership Award, which cannot be used as collateral to access credit facilities. He explained that apart from that, being a recipient of the CARP even acts as a disadvantage for farmers looking to tap credit facilities since banks immediately consider them “risky” borrowers simply because they are poor and may not have enough means to repay loans.

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@jearcalas

he country’s dressed-chicken inventory at the start of the year declined by nearly 30 percent to 16,989.06 metric tons (MT), from 24,238.49 MT recorded a year ago, according to the National Meat Inspection Service (NMIS).

bloomberg

Who’s afraid of genetically modified chickens?

D No need to revise CARP law, Pids says @cuo_bm

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evising the Comprehensive Agrarian Reform Program (CARP) law is unnecessary to achieve true land reform in the Philippines, according to the Philippine Institute for Development Studies (Pids). In a paper, titled “Land Reform: What Has Been Its Impact After 30 Years?,” the Pids said that instead of revising the CARP, the government should focus on resolving long-standing issues, such as landownership conflicts. One of the recommendations of the Pids is for the Department of Agrarian Reform (DAR) to adopt a progressive land-taxation scheme to deal with land-ownership issues. “While the implementation of the program may have been flawed, revising the law is unnecessary as there are only a few large sizes of agriculture lands left for distribution,” the paper read. “[The DAR] should also adopt a progressive land-taxation scheme to deal with issues on land-ownership concentration. The said scheme can be supported by ongoing process improvements [e.g., digitization of records] in agencies that handle land administration, such as the Land Registration Authority and the Department of Environment and Natural Resources,” it added. This can also help deal with land-ownership issues, such as the

Milk imports in Jan-Sept declined by 2.25%

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he country’s purchases of imported milk in January to September fell by 2.25 percent as the recovery of global prices made dairy products from abroad more expensive. The latest figures from the National Dairy Authority (NDA) showed that the country’s nine-month dairy import volume reached 2.024 million metric tons in liquid milk equivalent (MMT-LME), lower than last year’s 2.070 MMT-LME. However, the NDA noted that the value of the total imports during the reference period rose by 27.74 percent to P35.912 billion, from P28.114 billion a year ago. “Milk powder constituted the bulk of imports contributing 61 percent to the total milk and dairy products imports,” the NDA said in its quarterly report, titled “Philippine Dairy Updates,” published recently. “Skimmed milk powder comprised 37 percent, whey powder at 13 percent, whole milk powder at 3 percent and buttermilk powder at 8 percent of milk imports,” it added. The NDA, an attached agency of the Department of Agriculture (DA), said the hike in the total import value

indicated a per unit cost increment of more than a third. The average import cost of milk products during the reference period was pegged at P17.74 per liter, 34 percent higher than the P13.23 per liter recorded in January to September 2016. Food-price monitoring by the Food and Agriculture Organization (FAO) showed that global dairy prices in 2017 peaked in the third quarter after registering a 224.2 dairy price index last September. FAO dairy price index indicated that global dairy prices sustained growth in January to September, ending the third quarter with an increase of 15.2 percentage points, from 209 recorded in June. The FAO attributed the increase in global dairy prices to the tightening supply of milk in the world market, particularly in Australia, New Zealand and the European Union. Skimmed milk powder was the top milk product imported by the Philippines during the period. Imports reached 957,360 MT-LME, valued at $292.04 million, according to NDA data. However, the volume was 8.3 percent lower than the 1.044 MMT-LME

imported in 2016, while the value was 16.75 percent higher than the $250.14 million recorded a year ago. Data from the NDA showed that the bulk of the country’s dairy imports came from the United States, which accounted for 30 percent, overtaking New Zealand as the country’s top source of milk products. Dairy imports from the US during the nine-month period reached 607,190 MT-LME, valued at $165.63 million, while those imported from New Zeland reached 586,540 MT-LME and valued much higher at $290.20 million. A Global Agricultural Information Network (Gain) report, published last October, projected that Philippine dairy imports in 2017 would decline by almost 10 percent as imported milk becomes more expensive as global prices started to recover. The Gain report, which was prepared by the United States Department of Agriculture Foreign Agricultural Service in Manila, indicated that the country’s total dairy milk imports in 2017 would reach 2.5 MMT-LME, from a record high of 2.77 MMT-LME in 2016. Jasper Emmanuel Y. Arcalas

ealing with controversies can be stressful and migraine inducing. Still, I welcome heated discussions over certain topics if only because it will give light and popularize what was once obscure but nonetheless important issues. Take for instance the recent decision of the Securities and Exchange Commission (SEC) to revoke the incorporation papers of online media site Rappler. Overnight, my social-media feeds are filled by posts of corporate law experts talking about Philippine Depositary Receipts and media ownership. Each posts will generate responses—and not just from lawyers or law students— either criticizing, defending or clarifying the SEC’s decision. This is why I welcome the controversy—and the public debates—over the cultivation and consumption of genetically modified (GM) crops in the Philippines. And this is one longr unning cont roversy, whic h started in 2001 when farmers and environmental groups protested the field-testing of Bacillus thuringiensis (Bt) corn in South Cotabato. The debate over the benefits and dangers over Bt corn, a GM crop that’s resistant to t he A sian cor n borer, has seen all stakeholders—lawyers, scientists, nongover nmenta l organizations (NGOs), consumers, journalists, government officials and corporate executives—weighing on the issue. But more than sparking a nationwide debate, the controversy over Bt corn has made more people aware of genetic engineering, biotechnology and the hard science behind food production. Albeit strong opposition, the Philippine government allowed the commercial propagation of Bt corn starting December 2002. From just 6.03 million hectares planted with Bt corn, the area has expanded to over 800,000 hectares in 2016, making the Philippines among the world’s biggest producers of GM crops, according to the International Service for the Acquisition of Agri Biotech Applications (ISAAA). The commercial success of Bt corn, however, didn’t offer any free pass to those who want to field-test and cultivate other GM crops, such as the pest-resistant Bt eggplant and vitamin-enrinched Golden Rice in the Philippines. In 2010 farmers and NGOs uprooted Bt eggplant that were being grown in UP Mindanao and has led to a lawsuit, which saw the Supreme Court ruling in December 2015 that suspended

Prime Sarmiento

prime commodities field trials of Bt eggplant owing to the nullification of the Department of Agriculture Administrative Order (AO) 08-2002 as the AO was found insufficient in enforcing biosafety protocols. The high tribunal reversed its ruling in August 2016, granting the motions for reconsideration filed by the ISAAA, Environmental Management Bureau, Crop Life Philippines, University of the Philippines Los Baños Foundation and University of the Philippines. Last year the Philippine Rice Research Institute and the International Rice Research Institute have applied to the Bureau of Plant Industry (BPI) for a biosafety permit for the direct use in food, feed or for processing of Golden Rice. As of this writing, the research agencies are still waiting for BPI’s approval, but those who back Golden Rice are also facing stiff opposition from some environmental groups. According to a report published by the BusinessMirror last September, legislators belonging to the Makabayan bloc filed a resolution seeking to conduct an inquiry on the development of Golden Rice in the country. House Resolution 1294, filed last September 7 by Partylist Reps. Arile Casilao of Anakpawis, Carlos Isagani Zarate of Bayan Muna, Emmi de Jesus and Arlene Brosas of Gabriela, Antonio Tinio and France Castro of Act Teachers and Sarah Jane Elago of Kabataan, have directed the Committee on Agriculture and Food to conduct an inquiry to determine Golden Rice’s impact on health, environment and farmers’ rights. T he protests aga i nst GM crops may be a big headache for its proponents, but as an observer and concerned consumer, I welcome them if only because I can at least be assured that what I’m consuming is not only safe to eat but also safe for farmers to cultivate. This is crucial if only because we might have to deal with more complex products of genetic engineering in the future, such as genetically altered animals. That may sound weird for you for now as there’s no GM animal here in the Philippines, yet. But in other countries like the United States, genetically altered animals are now being raised. As early as 1999, the

US Food and Drug Administration has approved the raising of genetically modified goats that can make a drug in their milk that prevents blood clots. In 2015 the US FDA has also approved genetically modified chickens that can produce eggs that can treat lysosomal acid lipase deficiency—a rare genetic condition that prevents the body from breaking down fatty molecules inside cells. Last year a Massachusetts-based company sold its first batch of transgenic salmon to Canada. In India scientists at a research institute in Mysore are developing diseaseresistant GM silkworm. I have yet to hear of any local company or research agency venturing into GM livestock, but as what I learned from one of the talks organized by the Department of Science and Technology during the National Biotech Week held in November 2017, it’s important for the Philippines to develop biosafety measures for transgenic animals if only because we might import them in the future. According to Claro Mingala, scientist at the Livestock Biotech Center of the Philippine Carabao Center, the Philippines has no regulatory framework yet for GM animals. However, there are now efforts to draft regulations on animal biotech products and these include insects, such as GM silkworm. Several meetings so far have been conducted, but Mingala said that such regulatory framework is important to ensure public safety. “We don’t want to jeopardize safety. But our [regulatory framework] should always be based on science,” he said. Indeed, Mingala’s statement best sums up what I think should be the major consideration in whether approving or halting the field-test, cultivation and importation of GM crops, animals and insects. And that is— strong, verifiable, science-based data that can guarantee that the benefits far outweigh whatever losses incurred from the production and/or importation of GM crops/animals/insects. Prime Sarmiento is a longtime business journalist who specializes in food, agribusiness and commodities-trade reporting. Her stories have been published in both local and international publications, including Nikkei Asian Review, China Daily, Science and Development Network and Dow Jones Newswires. Comments and ideas are welcome at prime.sarmiento@gmail. com.


A10 Thursday, January 18, 2018 • Editor: Angel R. Calso

Opinion

BusinessMirror

www.businessmirror.com.ph

editorial

Enforcing the law

A

day after the Securities and Exchange Commission (SEC) revoked the registration of Rappler, which allegedly used a “deceptive scheme” to violate constitutional rules that require media companies to be fully owned by Filipinos, international groups came to the online news organization’s rescue. Condemning the SEC’s decision, they said “the order to close Rappler amounts to a direct assault on freedom of the press in the Philippines.”

The National Press Club of the Philippines, however, said the legal troubles faced by Rappler do not constitute media repression. In a statement released on Tuesday, the press club agreed with the SEC, which ruled that Rappler violated constitutional restrictions on foreign ownership of media companies in the Philippines. In our quest to find the best analysis of the corporate watchdog’s decision, we came across Atty. Peter Michael Dizon’s breakdown of the case. (Read “Why did the SEC revoke Rappler’s registration?” at https://pmdizon.com). The lawyer said SEC revoked Rappler’s registration as a Philippine corporation because it disobeyed the rules on foreign participation in media companies. The 1987 Constitution provides that a media company must be owned and controlled 100 percent by Filipinos. This was what happened to Rappler: Rappler’s board of directors and shareholders are 100 percent Filipino. In 2013 and 2014 Rappler got commitments from foreign investors. In December 2014 Rappler needed to legalize the receipt of foreign money. But it could not issue shares of stock or seats at its board. It spun off a new corporation called Rappler Holdings for the purpose of issuing Philippine Depositary Receipts (PDRs). The PDRs are derivative instruments that derive their value from equity. Rappler Holdings bought the shares of Rappler in 2015 and then issued PDRs to North Base Media and Omidyar Network. Dizon said there’s nothing wrong with issuance of PDRs. And the SEC found nothing wrong with the PDRs issued to North Base Media. The problem lies with the PDRs issued to the Omidyar Network, or what Rappler called the “ON PDRs.” The ON PDRs had provisions that granted a measure of control over both Rappler Holdings and Rappler Inc. The provisions included a condition that Rappler and Rappler Holdings cannot alter, modify or change their Articles of Incorporation and Corporate By-Laws without discussion with ON PDR holders, and obtaining the approval of at least two-thirds of holders of all issued PDRs. Dizon said: “Philippine foreign equity restrictions require that Filipino control should be 100 percent. If a foreigner gets greater than zero-percent control over the company, then there is a violation of Philippine law on ownership and control of a media corporation. With the provisions on the ON PDR’s, there was definitely more than zero-percent control of foreigners. This is a violation of Philippine law on media companies.” The SEC said that control isn’t just about ownership of stock. The Securities Regulation Code (SRC) has a very broad definition of control, which goes beyond ownership of shares. In the case of PDRs, they are derivative instruments covered by the SRC, so the law’s provisions govern any transaction in connection to PDRs. And the SEC found that Rappler has control issues. The SEC said that it does not matter when the foreigner exercises control, or in what instances the foreigner would step in. What matters is that there be none. Rappler defended itself, saying that the PDR provisions are not enough to be considered as “control” of the corporation. Also, it said that control is actually defined as ownership of shares, not simply management control. On this, the SEC declared that any control is control. One of Rappler’s defenses is that it is not a media company. It stated that what it does is not part of mass media. The SEC threw this defense out the door. Rappler also submitted on December 22, 2017, a piece of paper saying that the holders of the PDR are waiving their rights to the control provision of the PDR. The piece of paper was ignored because it was not even authenticated. In the end, there was enough basis for the SEC to conclude that Rappler issued the PDRs to illegally skirt the strict ownership and control requirements of Philippine law. Because of this, the ON PDRs were declared void and Rappler’s Certificate of Registration with the SEC was revoked. The PDRs are not evidence of foreign ownership because it is the contractual provisions in the PDR that will determine foreign control and/or ownership. In Rappler’s case, the PDRs granted its investors some control. The Philippine Constitution prohibits any control. That’s why the SEC revoked Rappler’s registration. After this case, we urge the SEC to continue looking into other companies that may have been abusing the PDR technicality.

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John Mangun

OUTSIDE THE BOX

W

ith all the excitement—bordering on raging hysteria as usual—regarding the Securities and Exchange Commission (SEC) decision regarding the online news site Rappler, let me give this as my final word for the moment.

In my more than 40 years in the financial and investment business, this is the first time I can remember the general public taking any interest whatsoever in securities law. That may not be any sort of big deal to you. But understand that clear, specific, enforceable and enforced laws governing the structure and capitalization of a big or small business is the only thing that allows the free market system to function. If business enterprises are going to be privately owned—as opposed to government ownership—then there must be transparency and responsibility to the rules.

Government-owned businesses can get away with almost anything because public accountability is only at the convenience and whim of the government. It cannot be allowed to happen in the private sector. The best analysis of the SEC decision comes from Atty. Peter Michael Dizon. You can find his clear breakdown and discussion at his PM Dizon Law web site pmdizon.com. I strongly encourage you to take the time to read “Why did the SEC revoke Rappler’s registration?” Now, on to a less “The End of Civilization As We Know It” topic —investing. What is the difference in value

between the Leonardo da Vinci painting Mona Lisa and a bag of frozen carabao dung? The answer is nothing. Both are “priceless” because there is no suitable “price tag” that you can put on either, so, therefore, they are “worthless.” Value is only determined by the amount of money, goods or services that someone is willing to exchange in return for possession of an item. How much money would the French government be willing to take in exchange for the Mona Lisa? Supposedly the Mona Lisa is insured for almost a billion dollars. But the French government probably makes that much each month or so from tourists who visit France to see the painting. Likewise, how much “value” would you be willing to give me for my bag of carabao dung? In fact, if you gave me P100 for my bag of dung, that would make its market value larger than that of the Mona Lisa. Thus, value is determined by the market price and— more important—value is relative to something else. Stock-market investors are always looking for value in the quest to find a stock that has a “market price” lower than its true value.

A test case for the newly created PACC

T. Anthony C. Cabangon

Editor in Chief

Senior Editors

Buying stock market value

Cecilio T. Arillo

database

H

ERE’S a test case for the newly created Presidential AntiCorruption Commission (PACC): the unlawful release of P38.807 billion from the proceeds of the Malampaya natural gas project officially reported by the Commission on Audit (COA) last October to President Duterte. A copy of the report was also submitted earlier to the office of Budget Secretary Benjamin E. Diokno on August 31, 2017.

As of June 30, 2013, a total of P173.280 billion was received by the government as its share from the net proceeds of the operations of the Camago-Malampaya gas plant in Palawan, and of this amount, the Department of Budget and Management (DBM) released a total of P38.807 billion, or 22.41 percent of the amount, to various national government agencies, governmentowned and -controlled corporations and the Provincial Government of Palawan between January 20, 2004, and May 21, 2012. The DBM secretaries under former President Gloria MacapagalArroyo were the late Emilia Boncodin

(from January 23, 2001, to July 8, 2005), Romulo Neri (from July 19, 2005, to February 15, 2006), Rolando Andaya Jr. (February 15, 2006, to February 24, 2010) and Joaquin Lagonera (in acting capacity from March 8, 2010, to June 30, 2010). Serving as budget secretary under former President Benigno S. Aquino III’s term was Florencio B. Abad from June 30, 2010, to June 30, 2016. The fund releases “were not intended for energy resource development and exploitation programs and projects of the government,” a COA Special Audit Team (SAT) composed of Grace de Castro, overall team leader; Maria Luisa Gutay and

Michelle Ceras, co-team leaders; and Ray Christopher Pio Roda and Pater Jigo Boado, members. The SAT reported three major findings based on violations of the fund releases. The table provided in the SAT report showed the following implementing agencies (IAs) that received the biggest amounts of fund: n the Department of National Defense (Armed Forces of the Philippines-General Headquarters)— P7.268 billion; n the Department of Finance (DOF)-Bureau of Treasury (BTr) (National Power Corp.)—P6.624 billion; n the Department of Agriculture—P5.824 billion; n the Department of Public Works and Highways (DPWH) (Office of the Secretary)—P2.99 billion; n the Department of Interior and Local Government (DILG) (Philippine National Police [PNP])—P2.14 billion; n the DOF-BTr (National Electrification Administration)—P1.922 billion; n the DOF-BTr (National Housing Authority)—P1.399 billion; n the Department of Agrarian Reform—P900 million; n the DPWH-Regional Office 1—P759.362 million; n the Department of Health

But almost all measures of a company’s value as it relates to stock price are bogus. A stock trading at P5 when the company has a “book value” of P10 is supposed to be cheap and a good buy. But that assumes that the company is going to liquidate all of its hard assets, close down, and distribute the proceeds to the shareholders. How many times has that happened? In the United States, a company called Long Island Iced Tea Corp. changed its name to “Long Blockchain Corp.” and the price rose 200 percent in one day. Nothing had changed in its business except the name. Here is the secret then. Quit wasting your time looking for value. Stock prices do not increase on value. They increase on people buying. So, if a lot of investors think the value of Long Island Iced Tea Corp. is greater because of a name change and buy the stock higher, ride along and do not ask any questions like “Why?”  

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.

(DOH)—P745.926 million; n the Department of Energy (DOE)-Provincial Government of Palawan—P560 million; and n the DOE—P550 million. The team said the rest of the IAs identified in the report received well below P500 million. “The DBM failed to properly evaluate and establish the basis for the release of Malampaya funds to 62 IAs due to the absence of the mandatory documentary requirements prescribed under existing laws, rules and regulations, which contributed to the irregular disbursement of public funds,” the audit team said.  

Lack of mandatory documents

Based on the report, P36,287, 503,000 of the total P38.807 billion funds were released to 62 government IAs through 184 special allotment release orders (Saros). The COA said the fund releases were made by the DBM despite the absence of the mandatory documents, such as formal request from the IAs, approval from the Office of the President, endorsement from the DOE and DBM evaluation reports. The COA said fund releases totaling P7.103 billion covering 15 Saros were made by the DBM See “Arillo,” A11


Opinion

www.businessmirror.com.ph

BusinessMirror

Sweet tax for health

The Santo Niño and little children

Atty. Septfonette Fe D. Balusdan

Msgr. Sabino A. Vengco Jr.

Tax Law for Business

Alálaong Bagá

T

he Comprehensive Tax Reform Program (CTRP) under this current administration is one of the major amendments in the Philippine Tax Code since the 1997 Tax Reform. One of the amendments brought by the CTRP is the enactment of Republic Act (RA) 109631, or the Tax Reform for Acceleration and Inclusion (TRAIN), which finally became effective on January 1, 2018, creating eight new sections in the Tax Code. One of the newest source of revenue for the government this 2018 is the new Section 150-B of the Tax Code, or the imposition of excise taxes or the so-called sweet tax upon the manufacturers or owners or importers of sweetened beverages. By virtue of RA 109631, the government shall now collect excise taxes of P6 per liter or P12 per liter from sweetened beverages, depending on the type of sweetener used in said beverage, to wit: Because of the said imposition of sweet tax, manufacturers, owners or importers of sweetened beverages will have the burden of paying the corresponding sweet tax. This additional burden shall correspondingly result to certain increases on the retail prices of sweetened beverages intended for consumption of the public.

current tax reform, worker “B,” a minimum-wage earner, earns a yearly income of P120,720. After the necessary deductions, his net annual income is P113,500.56. He also consumes two liters of Coca-Cola in a week, costing him P2,976 in a year. After the tax reform, his annual net income is still P113,500.56; yet he still consumed the same amount of Coca-Cola costing him P4,032. It is at this point that we now consider one of the visions of the government in passing the law, which is for health and wellness, reducing the victims of

PRODUCT

TAX RATE (per liter of volume capacity)

Using purely caloric sweeteners, and purely noncaloric sweeteners, or a mix of caloric and noncaloric sweeteners

Using purely high-fructose corn syrup or in combination with any caloric or noncaloric sweetener

P12

Using purely coconut sap sugar and purely steviol glycosides

Exempt

By the definition of sweetened beverages under RA 109631, it includes soft drinks, soda, fruit drinks, punches, sports drinks or energy drinks, which are being consumed by the average Filipino, 80 percent of which are lowincome earners, basing it on the data from market research firm AC Nielsen. Further, according to the AC Nielsen Establishment Survey, it shows that there were over 1.3 million micro entrepreneurs operating sari-sari stores in the country, representing 91 percent of the retail stores in the Philippines. These sari-sari stores contribute 36 percent of the sales of fast-moving consumer goods, which include sweetened beverages. Based on the forgoing data, it would be the low-income earners who will be most affected by the price hikes brought by the sweet tax. Under the TRAIN, individuals who earn P250,000 annually shall now be exempted from income tax. In comparison, before the TRAIN, only those minimum-wage earners, or those annually earning P120,000 (based on the 2017 highest minimum-wage rate, issued by the Philippine Wage and Productivity Commission) and below are exempted from income tax. So now, those who were originally earning annual income of above P120,000 to P250,000 shall now be exempt from income tax. However, we should clarify that only the minimum-wage earners who were originally exempt from income tax will be affected; since they will not benefit from the new income taxation, yet they will be spending more. To illustrate, prior to the TRAIN, worker “A” earns P168,000 a year and has an annual net income of P142,208.52, after taxes and necessary deductions. He consumes two liters of Coca-Cola in a week, costing him P2,976 (at P31 per liter) in a year. After the TRAIN, his new net-income tax is P158,385.60, having increased to P16,177.08; and then he will be paying P4,032 (at P42 per liter) for his annual Coca-Cola consumption. The increase in his annual net income is actually way more than the increase in the payment of his yearly consumption of Coca-Cola. Thus, the price increase of the sweetened beverages by virtue of the sweet tax was compensated by the new income taxation. On the other hand, prior to the

P6

obesity and diabetes, by imposing the sweet tax on carbonated drinks and beverages with high sugar contents, which are not part of the basic food component of the average Filipino. It is noteworthy, though, that the sweet tax was not imposed on healthy sweetened beverages, which are the very part of the basic food component of an ordinary income earner and/or minimum-wage earner, such as coffee and milk. Under the TRAIN, the exclusions in the impositions of sweet tax include all milk products, 100-percent natural fruit juices, 100-percent fruit juices, meal replacement and medically indicated beverages and ground coffee and prepackaged powdered coffee products. By virtue of these exclusions, even the 3-in-1 coffee products, which is highly demanded by the consuming public, will still be within the reach of the low income earners who were not benefited by the new income taxation. At any rate, we have yet to experience the real effects of the sweet tax since the old stocks of manufacturers, owners and importers of sweetened beverages are not covered by the sweet tax, and need to be disposed first. Upon effectivity of the TRAIN, the manufacturers, owners and importers of sweetened beverages are required to submit inventories of their old stock and new stocks of the sweetened beverages for purposes of the imposition of sweet tax. On a final note, due to the new income taxation brought by the TRAIN and the exclusions to the imposition of sweet tax; the effects of the imposition of sweet tax, as far as the public and the business owners are concerned, would be minimal since the sweet tax is only imposed on sweetened beverages, which are not part of the basic food consumption of the average Filipino.

The author is a junior associate of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm 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 septfonettefe.balusdan@bdblaw.com.ph or call 403-2001, local 170.

A

feast proper to the Philippines is our celebration of the Santo Niño every third Sunday of January. Jesus as a little child images to us the love of Jesus for little children (Mark 10:13-16). As a child is a promise for tomorrow and an opportunity for today, the Santo Niño is a challenge for us now and a glimpse of our future.

Children as the measure The words of Jesus that “the kingdom of God belongs to such” as the little children must challenge us to reflect why so. The quality of children here highlighted is that of dependence and obedience. It is not the denial of freedom and responsibility that is meant here by child-like dependence, but the truth of one’s limitedness and the readiness to accept and thrust the loving care of God. It is freedom truly appreciated as only human but summoned to a transcendent fullness in God. Fatal anywhere is the proud blindness to one’s imperfections and shortcomings, and the absurd refusal of all outside assistance and guidance. The incarnate Son of God as the Santo Niño, like a snapshot of that

Little children are part of the humanity already saved by Jesus and are not corrupted yet by any sinful use of human freedom. There is no need to consign them to some limbo upon dying without Church sacraments; such a construct would manifest more our lack of appreciation of God’s saving love, as well as our neglect of the dignity of children. Jesus was literally angry with those who would turn little children away from Him. all-too-fleeting period of human childhood, reveals to us the depth of his willingness to obey his Father’s will to identify with us and be there for us. In the utter dependency of a child, in the littleness of a small boy,

Thursday, January 18, 2018 A11

he personally showed us a measure of the true relationship with God. He has begun God’s kingdom on Earth because he was even as a child already the proclamation of humankind’s need to confess dependence on God and to live in obedience to the divine wisdom. The Kingdom of God obtains among those who accept that humanity needs saving and who listen to God’s word for the way to eternal life. “Whoever does not accept the Kingdom of God like a child will not enter it.”

Children as already saved

Precisely as children who are open to God’s grace and as yet incapable of the abuse of human freedom, little children, likewise, illustrate to us the nature of the salvation made available to us in Jesus Christ. It is a gift, not bought nor merited, solely offered and humbly to be accepted. Throughout history, children are variously considered as actually worthless because workless or without achievements. Such a viewpoint fails to consider that in God’s design what counts is not what we can do on our own, but what God shares with us. Where God’s action is primary, little children especially picture to us divine goodness. Little children are part of the humanity already saved by Jesus and are not corrupted yet by any sinful use of human freedom. There is

no need to consign them to some limbo upon dying without Church sacraments; such a construct would manifest more our lack of appreciation of God’s saving love, as well as our neglect of the dignity of children. Jesus was literally angry with those who would turn little children away from Him; little children in His loving arms would be more appropriate to let happen. The little ones represent God’s presence in the world; what is done to them is done to Him. Abuse of children is an act of desecration. One is rightly horrified by the current and widespread violations of the children’s rights and dignity. Alálaong bagá, we are actually in direct contact with the mystery of God’s saving love for humankind, when we uphold a community of respect and loving care for little children, especially as parents and teachers. Anytime and anywhere, the little ones are an incarnation of divine grace. The love we pour upon them is sanctifying, just as any abuse of them is condemnable. The Santo Niño, beyond the sights and sounds of the festivities, pictures to us God’s irrevocable commitment for our salvation and our proper response of filial fidelity to the Father. Join me in meditating on the Word of God every Sunday, from 5 to 6 a.m. on DWIZ 882, or by audio streaming on www.dwiz882.com.

SMC’s ₧700-B airport project grounded by the ICC

I

The P700-billion “aerotropolis” SMC is proposing spans 1,168 hectares, which excludes a city complex to be built on a 2,500-hectare site along Manila Bay in Bulakan town. It will have six parallel runways with an estimated primary yearly volume of 100 million passengers, or more than three times that of Naia’s.

I hope that this is just part of the government’s normal due diligence on unsolicited project tenders, as what Undersecretary Rolando G. Tungpalan says. Indecision could cause the project to be caught in a bureaucratic web. Such delays usually jack up the project cost. That there is an urgent need for state-of-the-art airport is an understatement. The Ninoy Aquino International Airport (Naia) is currently on life-support system, practically on its deathbed. Plans to revive it jointly by the country’s biggest corporations are also still under “close scrutiny,” even as the country’s airport traffic is at saturation point. While lawmakers are busy crafting ways on how to stay in power forever, the public suffers from utter government neglect. Traffic gridlock in Edsa has gotten to be nauseatingly choking, and Metro Rail Transit’s woes have turned for the worst. No worries though, Spox Harry L. Roque Jr. says, because President Duterte still enjoys public support based on

I’m reminded of a controversial project to rehabilitate the Caliraya, Botokan, Kalayaan (CBK) hydroelectric facilities in the late-1990s. Argentinean company Industrias Metallurgicas Perscarmona Sociedad Anonimo (Impsa) made an unsolicited bid to bring back the facilities to their original functioning state. The Lopez firm First Philippine Holdings Corp. made an offer higher than that of Impsa’s, the latter matched it, but still had to go through the wringer of a court battle before it finally got the project done. The Impsa saga started during the term of former President Fidel V. Ramos and ended during former President Joseph E. Estrada. By then, the project cost had gone up to the detriment of the government. At that time, the BOT still had a sovereign guarantee clause, which mandated that the government must pay the excess power that Impsa was producing but which was not bought. The P700-billion “aerotropolis” SMC is proposing spans 1,168 hectares, which excludes a city complex to be built on a 2,500-hectare site along Manila Bay in Bulakan town.

Val A. Villanueva

Businesswise T looks like the plan of San Miguel Corp. (SMC) to build a P700-billion airport project will have to wait a little longer. The Investment Coordination Committee (ICC) of the National Economic and Development Authority (Neda) needs more time and is asking the conglomerate for its tack on how it will proceed with this big-ticket project.

Arillo . . .

continued from A10

“without first establishing the propriety of the projects to be funded and the reasonableness of the amount being requested by the IAs.” The 15 Saros were released between 2004 and 2009 under the term of Arroyo. The COA report showed that P5.824 billion of the fund went to the DA; P900 million to the DAR; P745.926 million to the DOH; P200 million to the DOE; P100 million to DOE-Second District of Palawan; and P100 million to DOE-First District of Palawan  “In the absence of specific documentary requirements, the DBM does not have an idea on whether the project was necessary or not. This

latest surveys. This present dispensation can ill afford to pass up SMC’s proposal. Under the build-operate-transfer (BOT) scheme, which this project is going to be undertaken, the government spends nothing. SMC puts up the funding, builds the airport, gets paid by operating it for 50 years and turns over the project to the government. The risk that SMC faces for the unwanted delay is that competition may have been alerted to the huge investment return in building an airport in Bulacan, a place virtually unnoticed until SMC saw the province’s huge potential. Since BOT allows other bidders to make an offer for the project under the so-called Swiss Challenge, competition can map up its own proposal partly based on the feasibility study SMC has already diligently crafted and spent for. Of course, SMC can always match the bid offer of the competition. Technically, it gets the project if it does. But it doesn’t always happen that way. clearly manifested that the DBM released the funds without thorough evaluation,” the COA report read.

Illegal fund releases

The COA said Saros amounting P2.171 billion were released by the DBM “for purposes other than those for which the funds were approved for release by the President.” The COA said the fund releases were in clear violation of Section 8 of Presidential Decree 910 signed by the late President Ferdinand E. Marcos on March 22, 1976, which states that a special fund shall be used “only to finance energy resource development and exploitation.” The COA report said this specific provision of the law was not strictly observed, particularly on 24 fund releases made from 2004 to 2009, to wit:

n P584 million released to the DILG-PNP for “procurement, transport, storage and distribution of supplies and materials, including maintenance of equipment and facilities;” n P375 million released to the DILG-PNP for “conduct of operations and other related confidential activities against dissidents, subversive lawless elements and organized crime syndicates;” n P293.63 million released to the DILG-PNP for “procurement, transport, storage and distribution of supplies and materials, including maintenance of equipment and facilities...to enable the PNP to respond immediately in times of natural calamities;” n P185.39 million released to the DND-AFP for “internal secur it y operations—air and

It will have six parallel runways with an estimated primary yearly volume of 100 million passengers, or more than three times that of the Naia’s. You can just imagine the positive economic impact the SMC project can have not only on Bulacan province but the entire country. Airports are a great economic stimulant. We’ve seen how they arouse and drive economic development worldwide. Dr. John Kasarda and Greg Lindsay, who collaborated in their recent book Aerotropolis-The Way We Live Next, are two of the most preeminent scholars, authors and experts on airports, urbanization and the economic impact of airports. Kasarda and Lindsay have documented that Class A office space in and around new airports often exceeds that of comparable space in the metropolitan cities they support, and that retail-shopping space returns revenues per square meter of floor space up to six times that of comparable malls in the nearby cities. Airports produce jobs, inflate the tax base and excite the economy. The country’s leaders should realize that times have evolved; the economy has been altered. The sooner they understand the demographics and effects of urbanization, the better they could respond to the needs of the times. There are now more prosperous families that can afford domestic and international air travel. With the country’s craving for greater contribution of tourism to the country’s coffers, where-oh-where will these planes land?

For comments and suggestions, e-mail me at mvala.v@gmail.com.

ground combat services;” n P160 million released to the DILG-PNP for “conduct of intelligence and counterintelligence activities;” n P114.8 million released to the DILG-PNP for “conduct of operations and other related confidential activities against dissidents, subversive lawless elements and organized crime syndicates”; and n P100 million released to DOE for “Coron waterfront development project.” “Clearly, the specific purpose for which the fund was released…was no longer aligned with the purpose for which the fund release was approved by the President,” the COA pointed out.    To reach the writer, e-mail cecilio.arillo@ gmail.com.


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BOC clears Hari on shipment Sustainability 101 of ₧3.8-B knocked down units Continued from A1

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By Jovee Marie N. dela Cruz

@joveemarie

he Bureau of Customs (BOC) on Wednesday told lawmakers that there’s nothing wrong with the importation of P3.8 billion worth of knocked down (KD) units of Hyundai Asia Resources Inc. (Hari). 

During the House Committee on Ways and Means hearing on the Motor Vehicle Development Program (MVDP), District Collector Reynaldo Galeno said the BOC conducted inspections on the containers of Hyundai at the Batangas port and found no violation in its importer’s declaration. “As stated by the collector of Batangas, there was no misdeclaration in this case.  We also checked the records at the Port of Batangas,” he said.   The House Committee on Ways and Means continued its probe after the Board of Investments (BOI) cancelled  Hari’s MVDP assembly license for allegedly failing to comply with the requirements set under Executive Order (EO) 156. Following appeal, the penalty was downgraded to a six-month suspension during which the BOI gave Hari the opportunity to add more painting and welding activities to its assembly processes. Hari counsel Alex Cabrera said the importation of Hyundai KD units and its participation in the

MVDP were made in “good faith.” “Our [units] could be easily done in Vietnam, but the CEO of Hyundai Philippines fought for these to be supplied and assembled in the Philippines. Vietnam is actually saying that they could mobilize in six months,  but Hari’s CEO said she can do the same, and that is why they opted for a merger with an existing MVDP licensee in order to facilitate the entry into the [MVDP] program,” Cabrera said. In the same hearing, the BOI said it has granted Hari enough time to address its “violations.” BOI Governor Henry Co said after the cancellation of Hari’s MVDP certificate that the BOI granted Hyundai time to enhance its assembly facilities in the country.   For its part, Hari committed to invest more than P2 billion in the next two years and enhance its assembly facilities in the Philippines. Under the MVDP, incentives and reduced importation duties are given to car manufacturers that bring into the country completely knocked down kits or automobiles

₧2B The fresh investment committed by Hyundai Asia Resources Inc. for the upgrade of its Philippines assembly facilities in next two years

that must first be assembled locally before it can be sold. Meanwhile, lawmakers asked the BOC and BOI to provide a clear definition of KD and completelybuilt units (CBU) as the two agencies have adopted different definition of KDs and CBUs. Deputy Speaker Sharon Garin of Aambis-OWA urged the BOI to exercise “prudence” by clearly defining the difference between knockdow n parts, completely knocked down and CBUs. “MVDP is a beautiful legislation to encourage investments here to develop the motor industry and provide employment for Filipinos. I hope we can improve MVDP; let’s try to encourage more [participants]. Like, for example, Hari, they tried to assemble here, they invested here. If we want other carmakers, let’s make the most clear-cut [law] and be fair. Let’s clean up the image of BOI,” Garin stressed. “If international companies want to do business here, let’s be fair. Give them time until they comply with

the requirements. Let’s make this industry work,” she added. Rep. Dakila Carlo E. Cua of the Lone District of Quirino, the Ways and Means Committee chairman, said the two government agencies should set clearer rules for investors and advocate a “level playing field.” “In our desire to provide better and cheaper vehicles, government must set a criteria that will be applicable and clear to all players,” he said. Earlier, lawmakers urged the BOI to set clearer rules and regulations in implementing the MVDP to attract new industry players. Party-list Rep. Rodel Batocabe of Ako Bicol said the government should clear the ambiguity in the implementation of rules and regulations of the MVDP. Rep. Manuel F. Zubiri of the Third District of Bukidnon said  conflicting  rules and regulations will only drive investors away.    During the first hearing,  Cabrera said it is operating under the BOI authority granted under EO 877A,  or the Comprehensive Motor Vehicle  Development Program, which governs the manufacture of knocked down vehicles. Cabrera said EO 877A is an amendment to EO 156.  According to Cabrera,  Hyundai has already submitted all requirements to BOI, including the technical license agreement with Hyundai Motors Corp. of Korea, showing Hari’s assembly process, including the complete list of knocked down car parts and components for importation. 

NGCP. . .

Continued from A1

Based on these, Alabanza said “there’s no outage” expected because there is enough supply. However, barring unforeseen circumstances, the NGCP could not guarantee that there won’t be any blackout incidents. “A lot of factors that can’t be determined this early, such as La Niña. The new plants coming on line may be delayed or on time. So, there’s a lot of factors considered throughout the year. But now, we see no problem,” she added when asked to comment on  ERC Chairman Agnes Devanadera’s comment on Tuesday. According to Devanadera, there is a need to beef up the reserves to avert incidents of power outage. Power producers need the green light of the ERC before they can proceed with their power projects. But, since four ERC commissioners were suspended for a year, the agency could not act on critical applications. Devanadera said  43 new certificates of commerciality (COC) equivalent to 2,977.89 MW renewal of 47 expired COCs worth 1,971.49 MW and 29 expired power-supply agreements (PSAs) that cover 544 MW in supply are awaiting ERC approval. The Philippine Independent Power Producers Association Inc., meanwhile, said that, without a working commission and putting a pause on the important work of the ERC, “we will find ourselves without the needed approvals for PSAs, connection agreements, price determination regulation, compliance certificates and licenses.” “These are all dependent on the ERC and will negatively impact everyone—from the generators, distribution utilities and, ultimately, the consumers. As such, we cannot afford any delay on these activities, as it will be detrimental to, not only the industry but to each and every consumer who relies on energy security.” The DOE has already  asked Malacañang to designate acting commissioners so the ERC can continue its functions.  “We wish to assure all stakeholders that the suspension will not cause any debilitating effect to the power supply and services in the Philippines.  The suspension may cause further delays in power projects, which require approval from a collegial commission.  However, we will see to it that this will not have any significant impact in the short and medium term. The execution of the Power Development Plan covering the medium and long term up to 2040 will continue unhindered,” Energy Secretary Alfonso G. Cusi said.

GREEN BUILDINGS The skyscrapers rising in Taguig City comply with the “green building code.” The Philippines and the International Finance Corp. have teamed up in creating the country’s first-ever green building code to help private firms reduce electricity consumption, cut greenhousegas emissions and help preserve the environment. NONIE REYES

However, the application of the term “sustainable development” has widened. It is used in describing the limits in other areas of human endeavor. If there is unsustainable environmental exploitation, there is also unsustainable economic progress and unsustainable sociocultural development. On unsustainable economic development, the 1997-1998 Asian financial crisis and the 2008-2010 global financial crisis have educated the world that exuberance over markets that are not backed up by real production creates bubbles and is simply not sustainable. On the other hand, overproduction can also lead to unsustainable economic development if there is no sustained consumption from a populace with limited incomes or wages. As to social sustainability, this refers largely to the stability of supporting social institutions, especially governance structures and processes, obtaining in a given society. If the gap between the rich and the poor is so huge, and if the social and economic arrangements prevent the poor from getting their grievances redressed or addressed, then social and other conflicts naturally develop. Thus, the “Arab Spring” broke out in 2010 in Tunisia when the pleas for vending space and justice of a jobless Tunisian went unheeded, forcing him to commit self-immolation. Unfortunately, the movement for Arab democracy was hijacked by Islamic fundamentalists, who resorted to the promotion of terror and sectarian violence. In the West and countries in the developing world, deep social inequality and exclusion have spawned anger and revolts, such as the Occupy Wall Street Movement, Kilusan ng 99 porsyento and numerous strikes and uprisings by workers, farmers, indigenous peoples and other marginalized segments of society. Sometimes, workers are pitted against workers, as what seems to be happening in some European countries, where migrant workers are portrayed as job snatchers when the real problem is the failure of some governments to create a sustainable program of job creation and social integration. The point is that society can never be stable or enjoy sustained peace amid so much inequality, ghettolike exclusion of large segments of society and disempowerment of the many through political rules favoring governance by a few. This is why the 2005 World Summit on Social Development and the 2012 UN Conference on Sustainable Development raised all the three pillars of sustainability—environment, economic and social—as crucial to global and national development. The two international meetings also pointed out that these three dimensions of sustainability are interrelated or interdependent. For example,

the excessive reliance on fossil fuel due to the unabated production of car guzzlers exacerbates climatechange risks, which often affect the poorest the most. More and more sectors in society are paying attention to the triple sustainability challenges. In the business sector, there is an increasing number of firms seeking CSR certification on sustainability. They submit their products and services to certifying or auditing bodies so that these goods and services can be marked “environmentally friendly” and “trade fair”. A number also seek certification on the “social acceptability” of their operations insofar as the local or host community and other stakeholders are concerned. In short, companies that take corporate social responsibility try to balance the profit requirements of their shareholders with the development needs of society’s stakeholders. Thus, the CSR “3Ps” battlecry—people, planet and profits. However, the most significant global response to the triple sustainability challenges is the SDG Agenda, which integrates all aspects of sustainability into a holistic program of inclusion and sustainable development for all. Instead of the three Ps of the CSRconscious companies, the SDG Agenda talks of the five Ps: people, planet, peace and prosperity through partnership. For the Philippines, meeting all the three sustainability challenges are critical if we have to grow and develop as a nation. Our environment is fragile, as reflected in various indicators—balding forest lands, declining mangrove stock, urban congestion and pollution, and so on. The sustainability of the economy is also problematic given our weak industrial and agricultural base and our overwhelming reliance on two major sources of national income—OFW remittances and call center/BPO business. Escalating tensions in the Middle East and rising xenophobia in developed countries are weakening the demand for OFWs, while robotics and artificial intelligence are threatening the manpower market for the call center/BPO sector. As to social sustainability, the nation is now divided on so many political issues, pitting the different political groups and segments of society against one another. The World Bank warned that inequality in the Philippines is most worrisome compared to our neighboring countries. The Marawi crisis also shows that extreme Islamic fundamentalism has taken roots in Mindanao and, God forbid, in other parts of the archipelago. The list of issues dividing the nation is fairly long, and solutions are not easy to find. The triple sustainability challenges are complex and formidable. There are no easy answers or solutions. And all three have to be addressed in an integrated and coherent manner. Can the Duterte administration do it?

Central Bank faces inflation dilemma in cutting reserve requirement

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entral Bank Governor Nestor A. Espenilla Jr. said it’s getting harder to cut the reserve requirement ratio for lenders as he had pledged to do when he took office six months ago, with inflation set to pick up. “We have to be careful that we don’t send the signal that we are lowering the guard in terms of fighting inflation and keeping to our targets,” Espenilla, 59, said in an interview at his office in Manila on Tuesday. Large banks in the Philippines are required to hold 20 percent of their deposits in reserve, one of the highest ratios in Asia. Espenilla made it one of his key

objectives to lower the ratio as part of wider market reforms. While he still wants to bring the rate down—as early as this year and, eventually, to below 10 percent so it’s comparable to peers in Southeast Asia—he said he can’t risk confusing the market. “The timing for lowering the reserve requirement is getting harder because of the perception that, perhaps, inflation might be on the rise,” he said.

Caution

Espenilla is taking a cautious approach on raising interest rates, declining to say whether polic- makers are ready to tighten monetary

policy as early as the first quarter, as some economists predict. The Central Bank is still studying the

possible effect of higher taxes on inflation projections, he said. “I wouldn’t put it as if we’re

itching to raise interest rates,” he said. “Right now, staff are busy doing surveys and assessing the impact of recent developments to determine if there are secondary effects and evidence of inflation expectations becoming more elevated. It’s a datadriven exercise.” The governor has fended off calls since last year to raise rates amid a booming economy and a new tax law that raised levies on oil and sugary drinks. He’s been aided by inflation remaining inside the bank’s 2-percent to 4-percent target, but price pressures are rising. “It may be too early to think of any policy adjustment in the Continued on A2

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