MANUFACTURING SLIPS IN 1ST HALF AS INFLATION WEIGHS ON SECTOR By Bianca Cuaresma @BcuaresmaBM
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HE performance of the Philippine manufacturing sector slipped at the end of 2018’s first half, as inflationary pressures remain strong for the sector, international think tank IHS Markit reported. In Monday’s Purchasing Managers’ Index (PMI) release, IHS Markit said the Philippines was still able to record a “strong performance”despite elevated prices for and slower rises in both outWorkers at a manufacturing facility in Laguna do some final quality checks on their products in this file photo. NONIE REYES
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put and new orders for June. The country’s PMI for the month, however, slipped to 52.9 from 53.7 in May. The PMI is a composite index aimed to gauge the health of the country’s manufacturing sector. It is calculated as a weighted average of five individual subcomponents. Readings above the 50 threshold signal a growth in the manufacturing sector, while readings below 50 show deterioration in the industry. The decline in the country’s PMI pushed the Philippine manufacturing sector to the third spot in the rankings of manufacturing sector performance for the month, from its second place
The international think tank said that, while the country’s manufacturing sector continued to grow at a robust
A broader look at today’s business n Tuesday, July 3, 2018 Vol. 13 No. 262
‘BBB,’ income hike seen to yield 7% Q2 growth
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By Cai U. Ordinario
@cuo_bm
HE President’s economic team is hoping the country’s GDP growth in the second quarter will reach 7 percent on account of the “Build, Build, Build” (BBB), according to the National Economic and Development Authority (Neda).
In a briefing on Monday, Socioeconomic Planning Secretary Ernesto M. Pernia told reporters the BBB will boost employment and incomes.
Higher incomes will both boost household spending. This is crucial for a consumption-driven economy like that of the Philippines. “We certainly hope for a 7-per-
cent growth because of the no underspending; and so much spending on the capital goods, on the Build, Build, Build program. There is a lot of activity. Not so many flagship
4 million The number of Filipinos who received unconditional cash transfers in May
projects have broken ground but we’re finishing so many from the previous administration and that’s why there’s so [much activity] in the infrastructure sector,” Pernia said.
Cash transfers
Other growth drivers on the demand side include the completion of the government’s cash transfers, particularly the unconditional cash transfers (UCTs) and the Pantawid
See “Manufacturing,” A2
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The peso Manny B. Villar
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he peso is currently experiencing a bumpy road, with turbulent market conditions playing a major part in its recent depreciation vis-a-vis the US dollar.
Regional and global economic developments, especially the looming trade war between the United States and its European allies and China, are fueling negative sentiments in the financial markets. There are wild swings in the global stock and currency markets because of fears that a trade war among the major economies will eventually result in the contraction of the world economy. Nobody wins in a trade war because trade protectionism through retaliatory tariffs will eventually curb both global exports and imports. Reduced trade, in turn, will result in a downturn in manufacturing output and ultimately the loss of jobs. Continued on A6
DBCC revises exports, imports growth goals By Bernadette D. Nicolas
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By Lenie Lectura @llectura
HE Department of Energy (DOE) is eyeing to issue in the second half of the year a policy that will require distribution utilities (DUs) to unbundle electricity charge components to ensure greater transparency. DOE Undersecretary Felix William B. Fuentebella said last week that the draft circular would have to undergo more public consultations before it is signed by Secretary Alfonso G. Cusi. “There are three more public hearings scheduled...in Palawan, Iliolio and Cagayan de Oro. The
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Unbundled electricity bills mandated by 2nd half
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Higher costs: TRAIN not to blame
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and steady pace, the issue of elevated prices continue to affect the sector. In particular, the Philippine manufacturing sector saw the second sharpest increase of cost inflation. The local manufacturing sector also recorded the quickest pace of inflation in terms of selling prices. But unlike earlier months when the administration’s tax-reform package was one to blame, IHS Markit principal economist Bernard Aw said the rising prices in June seem to be broader based. Aw said their data show that the Philippine manufacturing sector continued to recover from the implementation of the tax reform provisions
in the previous month. Vietnam was, again, the fastestgrowing manufacturing sector in the region in June, with a 55.7 PMI, followed by Singapore at 53.6. Following the Philippines is Indonesia with a 50.3 PMI, Thailand with 50.2 and Myanmar with a 50 PMI. Malaysia was the only country whose manufacturing sector recorded a contraction for the month, with a PMI of 49.5.
Work at the Parañaque Integrated Terminal Exchange, which can accommodate about 200,000 passengers a day, goes on 24/7 to meet a tight completion date, as the government races to finish key infrastructure projects carried over from the past administration and starting work on new flagship projects. The terminal will include passenger terminal buildings, arrival and departure bays, public information systems, ticketing and baggage-handling facilities, and park-ride facilities. NONIE REYES
PESO exchange rates n US 53.4040
“We are optimistic that we will virtually eradicate underspending in fiscal year 2019, as we transition to cash-based budgeting.”—Diokno
@BNicolasBM
HE interagency Development Budget Coordination Committee (DBCC) revised downward Philippine exports and imports growth target for 2018 to 2022, amid increasing concerns among the country’s major trading partners over the looming showdown between the United States and China. The DBCC said on Monday that the expansion of exports this year will settle at 9 percent, while the increase in the import bill would reach 10 percent. These are lower than the previous targets of 10 percent and 11 percent, respectively. The committee revised its exports and imports targets after revenues from the outbound ship-
ments of Philippine goods dropped for the fourth consecutive month this year. Data from the Philippine Statistics Authority (PSA) showed that export receipts dropped by 4.01 percent in January, 5.54 percent in February, 6.77 percent in March and 8.46 percent in April. This resulted in a 6.21-percent year-on-year contraction in earnings from exports in the first four months of the year. Continued on A2
n japan 0.4829 n UK 70.4933 n HK 6.8063 n CHINA 8.0640 n singapore 39.2014 n australia 39.5777 n EU 62.4079 n SAUDI arabia 14.2399
Source: BSP (2 July 2018 )
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A2 Tuesday, July 3, 2018
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Batangas mayor’s slay ups DBCC revises exports, imports the ante in political murders growth goals
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By Rene Acosta
@reneacostaBM
HE Philippine National Police (PNP) remained clueless on the identity of the parties behind Monday’s morning’s brazen killing of controversial Tanauan City Mayor Antonio Halili, hours after he was downed by apparent sniper fire at flag-raising rites at city hall. “As of this time, there is still no development in the shooting that resulted in the death of Mayor Halili of Tanauan. What the regional director there is saying was, he was declared dead at about 8:45 a.m.,” said PNP chief Director General Oscar D. Albayalde. “As of this time, there [are no] results yet as to what type of bullet hit him,” added Albayalde in a news briefing on Monday. Halili was shot while he was attending the flag-raising ceremony at the grounds of the new city hall at Barangay Natatas, Tanauan City in Batangas at around 8:10 a.m. He sustained a lone gunshot to the chest that exited in the back. He was rushed to the CP Reyes Medical Center in the province, but was pronounced dead on arrival by doctors. The mayor first became controversial for parading drug suspects on city streets, but his name later turned up on a list of local politicians with alleged drug links, sparking vigorous protests from Halili. The report was never validated and has not been mentioned since. Initial reports said Halili could have been shot by a sniper from a vantage point estimated at least 100 meters away, a possibility that according to Albayalde was being looked into by probers. “Allegedly, because they saw no one who approached him, they just heard a shot. So that was the assumption or allegations that it could be a sniper shot that hit him,” said Albayalde.
Motive?
As to the motive, the PNP chief said this is part of the ongoing investigation. “As of this time, they could not say anything yet, it is still being investigated,” he said. However, one possible motive being looked into was Halili’s controversial “walk of shame,” wherein he paraded around the city arrested illegal-drugs suspects. Albayalde said they were also ascertaining the type of firearm used in the killing of the mayor. “It is not known yet what type of firearm was used in this. We cannot speculate on that. There is no result yet coming from the crime lab,” he said.
‘Sniper on the loose’
Meanwhile, Senate President
BBB. . .
Continued from A1
Pasada, which are directed toward workers and drivers affected by the Tax Reform for Acceleration and Inclusion (TRAIN). In May the Neda said around 4 million Filipinos, all of whom are CCT recipients, received their P200 worth of UCT each. Another 6 million Filipinos are set to receive their UCTs soon. The aim of the UCT is to augment the incomes of Filipinos belonging to the bottom 50 percent of the population. The computation of the transfer, Neda earlier said, was done using the impact of the TRAIN on incomes of the bottom 50 percent. The Pantawid Pasada is one of the mitigating measures under the new taxreform law to ease the impact
“Batangas province is littered with bodies of victims of political assassinations and unsolved murders, and each unsolved killing emboldens the next, creating a spiral of violence, which authorities cannot seem to stop.”—Recto
Pro Tempore Ralph G. Recto raised an alarm on Monday that a still unidentified assassin suspected behind the spate of killings targeting politicians remain scot-free. “There is a sniper on the loose in Batangas,” Recto warned, citing the case of the latest victim, Mayor Halili. The senator hails from Batangas province, where his wife Vilma Santos-Recto is a congresswoman. In a statement, Recto bemoaned that Batangas province is “littered with bodies of victims of political assassinations and unsolved murders, and each unsolved killing emboldens the next, creating a spiral of violence, which authorities cannot seem to stop.” The senator voiced concern that “when the rule of law is more observed in the breach, including by agents of the state who do it with impunity, it incentivizes people to take the law into their own hands, and indicts the police for failing to stop it.” Recto deplored that when killings are “rewarded by the failure of authorities to solve them, it strengthens the culture of violence, where disagreements are settled by permanently silencing the opponent.” Recto recalled that Halili was “a colorful man who had done many great things” for his people and Tanauan city. “He [Halili] had a governance style that was unconventional in some aspects, but it effectively kept the city he loved safe and prosperous,” Recto added.
Palace vows justice
Malacañang condemned the killing of Halili. Presidential Spokesman Harry L. Roque Jr. also vowed justice for the mayor’s family. “We are sending our condolences to the family of Tanauan Mayor Antonio Halili,” Roque said in a briefing on Monday in Maasin, Southern of the oil excise tax increases on commuters and the land transport sector. The Department of Transportation (DOTr) and several congressmen said the Pantawid Pasada could extend a P5,000 worth subsidy to 179,852 legitimate PUJ franchise holders for the initial implementation of the program. Apart from these, Pernia said other growth drivers include possible increases in investments on account of the revisions made in the Regular Foreign Investment Negative List (RFINL). Based on Memorandum Order 16 released in November 2017, the Duterte administration aims to ease foreign restrictions in eight areas/activities. The list includes private recruitment, whether for local or overseas employment; the practice of certain professions; pub-
Continued from A1
A standee full body portrait of Mayor Antonio Halili is seen outside his office at the municipal hall after he was shot and killed earlier in Tanauan City, Batangas province, south of Manila on Monday, July 2, 2018. Halili, known for parading drug suspects in public but also alleged to have drug ties himself, was shot and killed by a sniper in a brazen attack during a flag-raising ceremony in front of hundreds of horrified employees and village leaders. AP Photo
Leyte. “We are condemning this violent act. We know that Mayor Halili is a mayor of the progressive city of Tanauan, Batangas, and we promise that we will give justice to his death and that there will be a swift investigation and trial for those who will be found responsible for his death.”
Anti-crime bills
Some lawmakers framed the killing of Halili as a new chapter where the drug campaign is now turning into a “real war” and where syndicates are fighting back. On Monday they called for the passage of two measures to significantly improve the administration of justice and raise the certainty of arrest and imprisonment of criminals. Party-list Rep. Ciriaco S. Calalang of Kabayan, a member of the House Committee on Public Order and Safety, said passage of the proposed Criminal Investigation Act (HB 6574), and the proposed Philippine Code of Crimes (HB 6204), will boost the fight against criminality. These bills seek to improve coordination between the law enforcement and prosecution pillars of tthe criminal justice system. The House Committee on Justice recently formed four technical working groups (TWGs) to refine House Bill 6204 or the proposed Philippine Code of Crimes.
Real war
Meanwhile, House Committee on National Defense Chairman Ruffy Biazon of Muntinlupa said the police should conduct a an exhaustive, in-depth investigation to determine the motive a nd t he m a ster m i nd beh i nd Halili’s assassination. “It is very important for the authorities to know if this is connectlic services such as transmission and distribution of electricity; the provisions of HB 4454; retail trade enterprises; and domestic market enterprise. The list also includes easing foreign restrictions in construction and repair of locally funded public works. The Neda said once this is removed from the RFINL, foreign contractors can already operate in the Philippines. On the supply side of the economy, Pernia said the agriculture sector is expected to see better production while the industry sector, particularly manufacturing, will benefit from recent technological innovations. Further, the entry of the third telecommunication player will also benefit the industry and services sectors, particularly telecommunications. With reports from Marc Dela Paz, BM Intern
ed to the antidrug campaign of the government. If it is proven that it is in retaliation for the mayor’s shame campaign against alleged drug personalities, it may be considered an escalation of the campaign into a real war where drug syndicates are fighting back,” Biazon said. “It’s been alleged that the mayor was assassinated by a sniper, a method that is highly unusual. We are used to seeing assassinations with the use of handguns or sometimes explosive devices,” he said. According to Biazon, a sniper who is able to carry out an assassination such as that of Mayor Halili means that he is highly skilled and well trained and armed with a weapon that isn’t easily obtainable by an ordinary gun for hire. “This shows the sophistication of the operation and could be an indication of a well-financed operation,” he added. Party-list Rep. Tom Villarin of Akbayan said while Mayor Halili has been indicted for his alleged involvement in drugs and condemned by the Commission on Human Rights for his walk of shame campaign for drug suspects in Tanauan, “his assassination in broad daylight shows how the rule of law has been abandoned.” “I think the cornerstone of Duterte’s anti-illegal drug policy is the tombstone of suspects and personalities killed without due process. It’s now open season for killers and assassins to ply their trade with impunity,” Villarin said. Party-list Rep. Gary C. Alejano of Magdalo said the killing of Halili in broad daylight—apparently by sniper fire - during a flag ceremony in front of city hall is yet another proof of the culture of violence. With reports by Jovee Marie N. Dela Cruz, Butch Fernandez, Bernadette Nicolas and BM intern Kezhia Maglasang
Manufacturing. . . Continued from A1
implemented at the start of the year. However, input costs still continued to rise sharply during the month, with both domestic and external factors responsible. “Input cost inflation remained steep, as a combination of domestic and external factors were responsible for the upward pressure. The depreciation of the peso, increased taxes, supply shortages, higher global commodity prices, especially for fuel, all contributed to inflation,” Aw said in his commentary following the report. In the first five months of the year, inflation averaged at 4.1 percent, with the peak hitting in May at 4.6 percent. “As a result, factory gate price hikes remained sharp, which could feed through to consumer inflation in coming months, thereby adding to expectations for further rate hikes,” Aw said.
While the Philippine economy would not be directly affected by the escalating trade tension between the US and China, Socioeconomic Planning Secretary Ernesto M. Pernia said the country’s exports could take a hit. “I think [the trade tension] isn’t going to hit the Philippines directly, although it may [affect] global economic growth, which could have an adverse effect on our exports,” Pernia told reporters in a news briefing in Manila. The DBCC has also raised its inflation forecast for 2018 to 4 to 4.5 percent, from 2 percent to 4 percent, while its inflation forecast for 2019 to 2022 remained at 2 percent to 4 percent. “This is in recognition of what happened in the first half of the year; in the first five months,” Budget Secretary Benjamin E. Diokno said, noting that year-to-date inflation is at 4.1 percent. Diokno noted that they expect inflation to taper off in the second half of the year. “That’s how confident BSP [Bangko Sentral ng Pilipinas] is,” he said. The DBCC chairman also noted that they also expect oil prices to stabilize. The DBCC retained its assumption on Dubai crude oil price at $55 to 70 per barrel for 2018 while for the succeeding years up to 2022, the committee expects the price to hit $50 to 65 per barrel. In response to the two interest rate hikes of BSP, Diokno said they have revised their outlook for 364treasury bill rates at 3 percent to 4.5 percent in 2018 to 2022. The peso to dollar exchange rate is also seen to remain at 50 to 53 in 2018 to 2022. Revenue collection is also expected to reach P3.208 trillion in 2019, equivalent to 16.6 percent of GDP. This is also projected to rise to P4.588 trillion in 2022, or 17.7 percent of GDP, as tax policy reforms and improved tax administration will provide a much-needed boost to revenue effort in the medium term. With the shift to the cash-based budgeting, national government disbursements are also expected to hit P3.833 trillion in 2019, equivalent to 19.8 percent of GDP and P5.362 trillion in 2022, or 20.7 percent of GDP. “Government spending will continue to be a growth driver for the Philippine economy, especially as we invest in public infrastructure and human capital development,” Diokno said. “We are optimistic that we will virtually eradicate underspending in fiscal year 2019, as we transition to cash-based budgeting.” The DBM chief said the proposed national budget of P3.757 tr illion w ill be submitted to Congress during the President’s State of t he Nat ion Add ress on July 23. Although this is lower than the P3.8-trillion approved budget this year, he explained that the cashbased appropriation for 2019 is still up by 18.3 percent compared to the cash-based program in 2018. To maintain the aggressive spending strategy to sustain the momentum of the “Build, Build, Build” (BBB) program, the DBCC has also raised its 2019 deficit ceiling to 3.2 percent of GDP, from 3 percent. This is equivalent to P624.3 billion in 2019 and is projected to reach P774.4 billion in 2022. The medium-term financing program will continue to favor domestic borrowings, following a 65-35 mix in 2018, and a 75-25
mix from 2019 to 2022. The debt-to-GDP ratio is also seen to decline from 42.8 percent in 2018 to 38.8 percent in 2022. The government is also confident that the country’s GDP would expand by 7 percent to 8 percent in the medium term. “We remain optimistic and maintain our economic growth target for the medium-term at 7 percent to 8 percent on the back of higher household consumption from job expansion, as well as increased infrastructure spending from the BBB program, and brighter prospects for the tourism sector,” Pernia said. “Moreover, we also ex pect higher public and private investments through a reduction in the cost of doing business and reduced foreign investment restrictions,” he added. The DBCC is one of seven interagency committees that make recommendations to the National Economic and Development Authority (Neda) Board that is chaired by the President. The committee advises the President on the level of annual government expenditures and the ceiling of government spending for economic and social development, national defense and government debt service. It also helps the Neda Board on the proper allocation of expenditures for each development activity between current operating expenditures and capital outlays, and sets the amounts to be allocated for capital outlays broken down into the various capital or infrastructure projects.
‘Decision inputs’
KNOWING the changes in the country’s macroeconomic assumptions is good for businesses and Filipinos in general, because it tells them where the economy is headed, according to local economists. University of Asia and the Pac i f ic Sc hool of Econom ics Dean Cid Terosa said changes in the government’s macroeconomic targets and assumptions can affect current and future business decisions. “Changes in targets are indications of how policy-makers view current and future market conditions,” Terosa said. “These changes are therefore decision inputs.” Unionbank chief economist Ruben Carlo Asuncion added that with this, businesses can align their goals and activities alongside the government’s macroeconomic expectations. For common Filipinos, knowing the macroeconomic targets also gives them firsthand information on the country’s economic prospects, which they can use to guide their financial decisions, Asuncion said. “Keywords are transparency and expectations. Transparency, so that stakeholders are aware. Transparency helps manage expectations,” Asuncion said. Emilio S. Neri Jr., lead economist of the Bank of the Philippine Islands, said knowing about the government’s economic targets can help businessmen and Filipinos in general understand how certain issues affect the economy. Neri cited as example the impact of high oil prices on inflation—or the increase in commodity prices —and interest rates. “It helps businessmen understand why government has to course-correct or make policy adjustments given how surprises or unanticipated external and internal economic developments have come into the picture,” Neri said. With Cai U. Ordinario
BSP25 Anniversary th
A BusinessMirror Special Feature
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Tuesday, July 3, 2018
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BSP: PAVING THE WAY TO CASHLESS PAYMENTS & E-PAYMENTS contracts, lease or own real and personal property, acquire and hold assets and incur liabilities in connection with its functions. It can also compromise, condone, or release any claim of or settled liability, regardless of the amount involved. The Monetary Board determines the terms and conditions under which this may be done, to protect the interest of the BSP.
FUNCTIONS OF THE BSP
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By Leony Garcia
ANGKO Sentral ng Pilipinas (BSP) has earned a reputation as one of the finest central banks in the world over the years. It has been known to steer the Philippine economy through many crises, despite being inevitably under the scrutiny because of its huge responsibilities as an institution. The BSP has welcomed the new ‘captain of the ship’ in Nestor Espenilla Jr. last May 2017. The new governor’s appointment was closely watched, having been long touted as one of the most important decisions to be made by President Rodrigo Duterte. Managing the country’s wealth isn't easy. With numerous threats looming from both internal and external factors, it would take someone with utmost skill and experience to help keep the country afloat. BSP insiders and bank experts have seen these such excellent characteristics in Espenilla. Handling the country’s wealth reserves is even more tedious, and is even becoming more challenging
by the day. Over the years, BSP has had key issues they’ve dealt with that have tested the institution.
INCLUSIVE BANKING
FILIPINOS have learned to take more risks in business, as they have become more exposed and interested in entrepreneurship. Due to this, the need in financial support through bank financial systems for micro, small and medium enterprises has increased too. BSP is faced with the challenge to grow with their consumers’ requirements. Issues of areas with limited to no bank is a whole new issue too. Some rural areas do not have that much banking options, which is a letdown providing there are foreign
investors who show interest to risk their capitals. Lack of bank establishments may contribute to these areas’ citizens less exposure to economic opportunities and financial literacy and stability.
E-PAYMENT SCHEMES
TODAY’S technology allows us to have hassle-free payment schemes. The process of changing our transactions though from cash- and check-based payments to electronic payment ways. The establishment of the National Retail Payment System (NRPS) has been one of the struggles faced by BSP, in order to improve transactions between banks and other entities that provide payments. These services include mobile phones and financial technology companies.
WHAT DOES BSP DO?
ACCORDING to Section 2 of Republic Act (RA) 7653 or the New Central Bank Act, the BSP functions as the Philippines' central monetary authority. The BSP operates as an independent and accountable body that enjoys fiscal and administrative autonomy, despite being a government corporation. Nonetheless, its functions and privileges are established and protected by law. The BSP also enjoys corporate powers. As stated in Section 3 of RA 7653, this means that the central bank is allowed to adopt, alter, and use a corporate seal, which is judicially noted. BSP also enter into
Maybank Philippines, Inc. leads fight vs cybersecurity
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HE cyber threat landscape in Asia is evolving and getting more complex, with financial institutions as primary targets. Maybank Philippines, Inc. as thought leader and change catalyst, is committed to the protection of information as critical asset of any organization, and strives to engage industry cooperation through intelligence sharing with local and international counterparts. Maybank recently organized an executive forum, titled Managing Cyber Security in the Age of Digital Transformation, in cooperation with Financial Services Information Sharing and Catalyst Center (FS-ISAC). The May 2018 forum held at the Maybank Performing Arts
Theater, was attended by Bangko Central ng Pilipinas Deputy Governor Chuchi Fonacier as keynote speaker and over 300 guests attended from the government, including chief executives, senior officers, and other key stakeholders from financial institutions and other industries. This is in support of BSP’s thrust and ongoing initiatives to move the industry to a more resilient state in response to the fast increasing and eveolving cyber threat landscape. The major topic at the forum were: National Cyber Security Plan 2022 by Department of Information and Communications Technology Assistant Secretary Allan Cabanlong Cyber Se-
curity Threat: Artificial Intelleigence & Machine Learning by Carlo Dimarucut, Senior director. SGV & Co./Ernst & Young Cyber Intel Sharing for the Financial Institutions–An Overview of Strength in Sharing by Robert Poh, Certified Information Security Manager (CISM) and Senior Citpm, and is currently the director-Asia, FS-ISAC, based in Singapore Overall, the Maybank forum called for the industry to be always on guard and proactive in managing cyber security risks, to collaborate and share information with concerned stakeholders, and to consider cyber security as not a technical issue requiring full support and attention of every corporate organization.
BSP partners with DepEd, BDO Foundation to Promote Financial Literacy to 47,000 Public Schools Nationwide
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HE Bangko Sentral ng Pilipinas (BSP) led by Governor Nestor A. Espenilla, Jr., Department of Education (DepEd) led by Secretary Leonor Magtolis Briones, and BDO Foundation (BDOF) led by Mario Deriquito, signed a Memorandum of Agreement to
develop financial literacy videos as learning tools to support mainstreaming financial education lessons in the K to 12 curriculum. These videos will reach around 700,000 teachers and non-teaching personnel and 24 million students in more than 47,000
public schools nationwide. This partnership showcases how the public and private sectors can work together to enhance the financial literacy levels of Filipinos, beginning with the youth who go through the formal education system.
RA 7653 states that the primary objective and responsibility of the BSP is to “provide policy directions in the areas of money, banking, and credit.” In line with its vision to promote a strong financial system and maintain price stability, its main functions and operations include liquidity management. It is by way of managing monetary supply with the prime objective of maintaining price stability of basic goods and services. This banking entity can also ex-
tend loans, discounts, and advances to banking institutions for liquidity purposes and only as a last resort. It has financial supervision, as it dictates the rules by which banking institutions operating in the Philippines must play by. It exercises regulatory powers over nonbanking institutions performing quasi-banking functions, and dictates capital requirements, reserve requirements, and deposits guarantees of these financial bodies BSP also determines exchange rate policy – ensure orderly market conditions by adhering to marketoriented foreign exchange rate policy. It also serves as a financial advisor, a banker, financial advisor, and official depository of the government, including government-owned and -controlled corporations.
HOW DOES BSP NAVIGATE THE FUTURE OF FINANCE?
BUSINESSES worldwide can lessen the costs in exchanging goods and services through a secure, reliable
and affordable payment system. Through the smooth functioning of money and capital markets, more revenues are being attracted by companies, as it also attracts more consumers who enjoy stressfree money transfers. In the Philippines, the BSP takes the lead in promoting an efficient payments and settlements system by providing the necessary infrastructure through the operations of the Philippine Real Time Gross Settlement System or the “PhilPaSS”. The National Retail Payment System or NRPS, a policy and regulatory framework, establishes safe, efficient and reliable retail payment system in the country. From a practical perspective on an individual, a lot of time, money and efforts are being saved as they do electronic payments by just taking advantage of BSP’s offerings through their mobile banking via mobile apps or desktop’s website.
A4 Tuesday, July 3, 2018 • Editor: Vittorio V. Vitug
Economy BusinessMirror
‘Dicey’ global trade prompts manufacturers to refocus on domestic market
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By Elijah Felice E. Rosales
@alyasjah
ocal manufacturers are gearing their production targets to supply domestic demand, a development that may not present a brighter prospect for the country’s export sector that has yet to see growth for this year.
Philippine Exporters Confederation Inc. (Philexport) President Sergio R. Ortiz-Luis Jr. said dozens of exporters are shifting their market to the local from the international, due to the growing demand for merchandise goods, as well as the unstable condition of global trade. This sentiment was backed by the Department of Trade and Industry’s Export Marketing Bureau. DTI-EMB Director Senen M. Perlada said the local market is becoming more and more enticing that some exporters are choosing to locate their products here. “The domestic market is slightly more attractive because the supply of domestic materials [used by exporters] is not enough even to meet the export requirements, especially on agriculture-based products. The other thing is the availability of supply,” Perlada told the BusinessMirror. He stated the domestic demand is so strong that the persistent depreciation of peso is not appealing enough for exporters to trade outbound. “In furniture, instead of trying to get contract designs abroad, just with the abundance of contracts here, they survive,” Perlada added.
“It is easier for them [furniture makers] because even in locally held international trade fairs, they already get buyers that they do not even need to export,” he said. However, Ortiz-Luis branded this shift of market as a “sad development,” especially so that the sector performed well last year. “We thought that we had a good year last year, and we thought it will continue, but there are certain developments in the world market that were unexpected, plus the fact that we have certain products that are not doing very well, like agricultural products,” he told the BusinessMirror. Exports have yet to grow this year, as it plunged for the fourth straight month in April—and the decline keeps on swelling by the month. It fell by 4.01 percent in January, 5.54 percent in February, 6.77 percent in March and 8.46 percent in April, resulting to a slower year-todate performance by 6.21 percent. Electronic products expanded by 3.26 percent to $11.75 billion in the January-to-April period, but other manufactured goods fell by 14.5 percent to $1.28 billion at the same stretch. The case was same for machinery and transport equipment; ignition
wiring set and other wiring sets used in vehicles, aircraft and ships; coconut oil; and chemicals—all registered double-digit declines. Ortiz-Luis said the trend will continue that electronics will once again carry the load for exports this year. The others, however, might start to provide for local demand if the situation remains unchanged both on global trade and national labor policies. “Exporters are seeing that demand here is good and that supply [of raw materials] is lacking, and that the price abroad is also not attractive, so they will really sell it here instead,” Ortiz-Luis added. The Philexport chief has long lamented the government’s stringent laws on labor contractualization. For one, he argued President Duterte’s executive order (EO) on contractual employment resulted to exporters holding on to their expansion plans. “We are expecting that it [exports performance] will improve, but the looming problems have yet to be resolved. There are a number of exports [that] have talked to us, and their main concern is the labor laws. They are holding on to their expansion, and some are even laying off workers. They fear they are next to be ordered by the government to regularize all their workers,” Ortiz-Luis said. “I think the labor issues have got to be resolved [first] and not veer [the country] away from what are internationally accepted practices. We are in need of investments that will create jobs,” he added. The President signed in May EO 51 that seeks to implement Article 106 of the Labor Code. The EO hopes to bring security of tenure for workers, as promised by Duterte during the campaign period.
ePrivacy vs GDPR: The differences you need to know
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By Henry J. Schumacher
re you aware that GDPR isn’t the end of stringent regulations for privacy in tech?
As you know, the European Union’s General Data Protection Regulation (GDPR) went into effect on May 25, 2018, and user inboxes (including yours and mine) were flooded with e-mails alerting them of changes to company privacy policies. However, even though the world has (mostly) accepted GDPR and kept moving forward, that isn’t the end of EU privacy regulations for the tech industry. On the heels of GDPR comes the ePrivacy regulation, a separate regulation that focuses on ensuring individual privacy as it relates to electronic communications. While the final draft of the ePrivacy regulation didn’t make it out in time to release with GDPR, it is in the works and expected to release soon. As such, it is important that companies understand the different ways in which the GDPR and ePrivacy regulations will affect their business. Here are the three differences that business leaders and professionals need to know. 1. e P r i v a c y s p e c i f i c a l l y c o v e r s e l e c t ron i c com mu n ic at ion s While the GDPR is the general regulation for personal data stored or used by a company, ePrivacy is a special law to GDPR when it comes to communications. What that means is that, when a data privacy issue is raised regard-
OECD backs production shift, scrapping of rice QR for PHL By Jasper Emmanuel Y. Arcalas @jearcalas
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he Philippines should prioritize investing in high-value crops production rather than focusing its resources on the rice production sector to ensure the country’s food security in the long run, according to the Organization for Economic Co-operation and Development (OECD). In its study, titled “Agricultural Policy Monitoring and Evaluation 2018,” the OECD also recommended that the government should scrap the quantitative restriction (QR) on rice to allow the freer entry of foreign imports to augment the country’s supply. Furthermore, the organization supported the proposal to convert the National Food Authority (NFA) into a “market-neutral agency managing emergency stocks” so as not to distort the prices of rice in the market. “The Philippines could improve the country’s food security through policies, such as diversification of pro-
duction, consumption and income by removing commodity specific incentives; gradual removal of restrictions on rice imports; and transformation of the National Food Authority’s into a market-neutral agency managing emergency stocks,” it said in the study, which was published in end-June. The OECD noted that the country’s objective of reaching food security through a stable supply of staple at affordable prices is being achieved at the expense of producing more profitable high-value crops. “The goal of self-sufficiency in rice has driven a range of policy measures supporting rice producers—in contrast to diversification towards higher value commodities typical of other countries in the region—while contributing to the undernourishment of poor households that are net rice consumers,” it said. The OECD report said the Philippine farm sector’s total factor productivity (TFP) growth “ is slower than the world average and slower than in most countries in the region,” due to
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improper fund allocations. “This is the result of decades of underinvestment [or, in some cases, misdirected investment], policy distortions, uncertainties linked with the implementation of agrarian reform and periodic extreme weather conditions,” it said. The Philippines’s average TFP growth from 2001 to 2014 is just 1.7 percent, which was lower than the 1.71 percent global average TFP growth. The country’s 10-year average TFP growth was also below the average TFP growth recorded by Asian countries (except Western Asia) and the developing nations at 2.61 percent and 1.93 percent, respectively. TFP determines a farm sector’s productivity by taking the amount of output against the total production inputs employed (land, labor, capital and material resources), according to the United States Department of Agriculture (USDA). If total output is growing faster than total inputs, we call this an improvement in total factor productivity (factor—input), according to the USDA.
ing communications, regulators will default to ePrivacy for that given instance. The two are meant to complement one another. The ePrivacy regulation is an update to the standing ePrivacy Directive, which was originally put into place to guarantee “right to privacy in the electronic communication sector,” according to the directive. The directive originally focused mainly on e-mail and SMS messages, but the proposed regulation would also address data privacy in services like WhatsApp, Facebook Messenger and Skype, along with Internet of Things (IoT) devices. Additionally, the ePrivacy regulation will also protect metadata associated with electronic communications, as well. 2. ePrivacy includes nonpersonal data GDPR is laser-focused on the protection of personal data, but the ePrivacy regulation is focused more broadly on the confidentiality of communications, “which may also contain nonpersonal data and data related to a legal person,” the proposal states. The original ePrivacy Directive is often referred to as the “cookie law” because it imposed the need for informed consent before a firm could track an Internet user with cookies. The regulation will add new clarifications and simplifications for the consent rule, along with other new tools for protecting against unwanted communication tracking and more. 3. They have different legal precedents Both GDPR and the proposed ePrivacy regulation reflect similar aspects of privacy, but they do so from the perspective of different legal charters. As noted in the proposal itself, the basis for the ePrivacy regulation are Article 16 and Article 114 of the Treaty on the Functioning of the European Union. However, it also reflects part of Article 7 of the Charter of Fundamental Rights: “Everyone has the right to respect for his or her private and family life, home and communications.” GDPR, on the other hand, is based on Article 8 of the European Charter of Human Rights, which states: “Everyone has the right to respect for his private and family life, his home and his correspondence.” However, for ePrivacy, the proposal notes that the meaning and scope of Article 7 of the Charter of Fundamental Rights shall be regarded in the same way as Article 8 from the European Charter of Human Rights. Clear? Well, the lawyers will have “fun” with it. As mentioned many times, compliance becomes more difficult for companies and compliance management is going to play a bigger role in company policies in future. As mentioned in last week’s column: “Compliance Management without Process Automation? Never!”, luckily, there are software tools to make the implementation and monitoring of compliance processes in companies easier. If you need assistance, let me know—contact me at Schumacher@eitsc.com.
Duterte economic, police officials told: Go back to the drawing board By Butch Fernandez
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@butchfBM
wo years into his six-year term, President Duterte’s economic team was told to review the administration’s centerpiece Tax Reform for Acceleration and Inclusion (TRAIN) law, and “go back to the drawing board and reassess” the administration’s drive to wipe out crime and corruption, and improve the economy. “On the revenue side, the TRAIN law needs to be revisited and amended, and the President, with all his strong influence over Congress, must put his foot down on vested interests of some members of both houses,” Sen. Panfilo M. Lacson Sr. said on Monday. The lawmaker suggested “it may be wise and prudent for his [Duterte] top advisers to go back to the drawing board and reassess what they did wrong and what they are doing right, not only in the fight against crime and corruption, which is the centerpiece of the Duterte administration’s deliverables, but in the economic sector, as well.” L ac son , l i k e w i se, l a me nte d t h at Duterte’s peace-and-order strategy was found to be “long on crime suppression and short on prevention.”
“It should be the other way around: We prevent crimes, and those that cannot be prevented from being committed must be suppressed with solid solution through efficient investigative work and techniques,” Lacson, who served as former National Police chief before his election to the Senate, said. The senator recalled that, during the 2016 presidential campaign, Duterte “persistently pitched for a six-month deadline to solve the drug problem in the country,” even as Lacson pointed out “it was impossible.” “It remains as impossible as saying he can stop crime,” he added. In a news statement issued on Monday, Lacson pointed out that, on the expenditure side, also known as the national budget, the “same influence is suggested to minimize wastage of the government’s hard-earned resources by strictly adhering to the existing jurisprudence outlawing pork barrel.” He noted the practice “remains evident among selected members of Congress,” a few of whom enjoyed as high as nine-figure insertions during the last two budget years under the Duterte administration.
Davao, President’s turf, is also the new ‘mecca’ for consulate offices By Manuel T. Cayon @awimailbox Mindanao Chief Bureau
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AVAO CITY—The People’s Republic of China has established its own consulate general here, while Japan has upgraded its consular office, bringing to four the “career” consulates operating in this city, a top-ranking executive of
the Department of Foreign Affairs here said. China has designated Mr. Li Lin as its consul general, a position that accords the designated officer the important functions in the embassy, said Foreign Assistant Secretary for Mindanao, Robert O. Ferrer. Its consulate general here was the first to be established outside of the national capital, making it “historic”
for China, he added. Japan, on the other hand, has its own diplomatic upgrading from its erstwhile status of being a consular office of the Embassy of Japan to a consulate general, Ferrer also told a regular Monday news conference at the SM Ecoland here. “That makes it four regular, or career, consulate offices in
Davao,” he said. Aside from the two countries, Indonesia and Malaysia had long maintained their consulate general offices, catering to the sizeable Indonesian and Malaysian communities here. Ferrer said the twin moves of China and Japan indicate the growing importance of the city in the consular operations of the two
countries, aside from having a big population of their nationals living or working here. Davao City has claimed to have the largest Chinatown area in the Philippines, tour guides routinely tell visitors. Ferrer, however, said it was not about the current President Duterte being a resident here and holding office during the end of
the week and most of his weekends. “China and other countries have long thought about it, not only for about one of two years,” he said The upgraded consulate of China and Japan would allow their nationals to apply or renew their passports, apply for a visa and other travel documents, as well as other important documents.
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Trade war begins: Canada slaps retaliatory tariffs on US goods M
Editor: Angel Calso • Tuesday, July 3, 2018
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Mexico gives leftist Lopez Obrador big presidential win
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TTAWA, Ontario—Canada began imposing tariffs Sunday on $12.6 billion in US goods as retaliation for the Trump administration’s new taxes on steel and aluminum imported to the United States. Some US products, mostly steel and iron, face 25 percent tariffs, the same penalty the United States slapped on imported steel at the end of May. Other US imports, from ketchup to pizza to dishwasher detergent, will face a 10-percent tariff at the Canadian border, the same as America’s tax on imported aluminum. Trump had enraged Canada and other US allies by declaring imported steel and aluminum a threat to America’s national security and therefore a legitimate target for US tariffs. Canada is the United States’s second-biggest trading partner in goods, just behind China. Speaking on Sunday in Leamington, Ontario, Prime Minister Justin Trudeau thanked Canadians for standing united against
President Donald Trump’s sanctions. He urged Canadians to “make their choices accordingly” in considering whether to buy American products. The selection of Leamington, known as Canada’s tomato capital, was no accident. The town is home to a food-processing plant that supplies tomato paste and other products to French’s, a major competitor of Kraft Heinz. Heinz left Canada and sold its Leamington plant in 2014, after 105 years of Canadian operations. T he new Canadian tar iffs, which took effect at 12:01 a.m. on Sunday, are hitting a long list of US consumer goods, including ketchup and other Kraft Heinz products. As part of his combative America First approach, Trump has re-
In this May 31, 2018, file photo, Canadian Prime Minister Justin Trudeau speaks during a news conference in Ottawa, Ontario. Canada announced on June 29 billions of dollars in retaliatory tariffs against the US in response to the Trump administration’s duties on Canadian steel and aluminum. Patrick Doyle/The Canadian Press via AP
peatedly attacked the trade policies of the United States’s northern neighbor, citing Canada’s tripledigit tariffs on dairy products, which account for only about 0.1 percent of US-Canada trade. The United States, in fact, last year enjoyed a $2.8-billion overall trade surplus with Canada. Trump has also tried to pressure
Canada and Mexico into agreeing to rewrite the 24-year-old North American Free Trade Agreement to shift more auto production and investment to the United States. But that effort has stalled, and Trump said on Sunday that he didn’t expect a deal that he could support until after the US midterm elections in November. AP
EXICO CITY—Angry and frustrated over corruption and violence, Mexican voters delivered a tidal wave presidential election victory to leftist Andres Manuel Lopez Obrador, giving him a broad mandate to upend the political establishment and govern for the poor. An official quick count from electoral authorities late Sunday forecast that Lopez Obrador would win with between 53 percent and 53.8 percent of the votes, a remarkable margin not seen in the country for many years. Early Monday, with about 20 percent of the votes counted, Lopez Obrador’s advantage was close to the quick count’s statistical sample. A prominent exit poll predicted his party allies were poised to score big victories in congressional races, possibly winning absolute majorities in the Senate and the Chamber of Deputies. L opez Obrador, who c a mpaigned on vows to transform Mexico and oust the “mafia of power” ruling the country, rode widespread voter anger and discontent with the governing Institutional Revolution Party, or PRI, of President Enrique Peña Nieto and had led opinion polls since the beginning of the campaign. The PRI, which dominated Mexican politics for nearly the entire 20th century and recaptured the presidency in 2012, was set to suffer heavy losses not just for the presidency but in other races, as well.
In brief remarks at a hotel in central Mexico City, Lopez Obrador called for reconciliation after a polarizing campaign and promised profound change but with respect for the law and constitutional order. “I confess that I have a legitimate ambition: I want to go down in history as a good president of Mexico,” said Lopez Obrador, who won after losses in the previous two elections. “I desire with all my soul to raise the greatness of our country on high.” The president-in-waiting, whose term will begin on December 1, devoted much of his speech to appealing to citizens of all stripes and seeking to reassure those who have eyed his candidacy nervously. “This new national project will seek to establish an authentic democracy and we do not intend to establish a dictatorship,” Lopez Obrador said. “The changes will be profound, but in accordance with established order.” Conservative Ricardo Anaya of a right-left coalition and the PRI’s Jose Antonio Meade acknowledged defeat shortly after polls closed nationwide. The quick count had them around 22 percent and 16 percent, respectively. Lopez Obrador’s supporters began wild celebrations in Mexico City, cruising up and down the central Paseo de la Reforma boulevard honking horns to the tune of “Viva Mexico!” and waving Mexican flags from car windows and moon roofs. AP
A6 Tuesday, July 3, 2018 • Editor: Angel R. Calso
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editorial
Don’t give up on the BRT
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ill there be a bus rapid transit (BRT) system in Metro Manila and Cebu? A recent story by the BusinessMirror reporter Rea Cu said the Department of Finance (DOF) had given the Department of Transportation (DOTr) until the end of June to make up its mind. “I said you have until the end of June to settle it because I don’t want this argument to go on forever. I told [the DOTr] to settle it. Make up your mind. I don’t want these long arguments,” Finance Secretary Carlos G. Dominguez III reportedly said. Well, it’s already July, and we wonder if transportation officials can confirm that the BRT projects have been shelved forever. The DOF chief said narrow roads and right-of-way issues are some of the problems cited by the DOTr for withdrawing the BRT proposal. He added that financial issues are not expected to hamper the BRT’s implementation since the previous administration has already evaluated the project. Transportation Secretary Arthur P. Tugade had previously voiced out concerns that assigning a dedicated lane for the BRT projects could worsen traffic congestion in crowded Metro Manila and Metro Cebu, which has only three lanes. Tugade said the DOTr has not entirely ruled out BRTs, adding that the system is more effective in areas that are not yet congested. The idea for a BRT came from Curitiba, Brazil. Jaime Lerner, an architect and urban planner, then in his early 30s, took over as mayor of Curitiba in 1971. He quickly proved that it doesn’t take a lot of money to solve a city’s problems, which included traffic and congestion brought on by a surging population. Hampered by budget constraints, Lerner, instead of building an expensive subway system or rail system or more roads, used buses and made them operate in the same way trains do. He made Curitiba buses run like our LRTs and MRTs, only on the ground and more efficiently. They were unimpeded by traffic signals and congestion because they had their own “tubes” or lanes, which are so unlike the yellow lanes of buses on Edsa that bus drivers routinely ignore. Fares are collected prior to boarding. There is quick passenger loading and unloading. The buses, which run on environment-friendly compressed natural gas, have their own reliable, convenient and well-designed stations. They also come along frequently—some as often as every 90 seconds (a lot faster than our LRT and MRT trains). Curitiba now has one of the most heavily used yet low-cost transit systems in the world. Around 70 percent of Curitiba’s commuters use the BRT to travel to work or wherever, resulting in less congestion and pollution-free streets. As it did in Curitiba, the BRT system is expected to address traffic and pollution problems and make Cebu City and Metro Manila more sustainable. A pre-feasibility study conducted by a World Bank (WB) consultant, Integrated Transport Planning of England, showed the viability of the BRT system for Cebu and Manila, where the city government could put up the BRT structure but the private sector would manage the bus service operations. It would be nice to have a BRT system for Edsa, for instance. Metro Manila’s main thoroughfare suffers from an oversupply of buses but they don’t operate like a BRT. Competing for passengers and with no fixed bus stops, Edsa buses operate instead like jeepneys, often with deadly results. They have made our roads more dangerous, as these buses would kill, at times literally, to get passengers. A previous WB study said it takes an average of five hours to complete a round trip along the 24-kilometer Edsa, at an average speed of about 15 kilometers per hour and one-minute stop at each of the more than 15 designated bus stops (if they could, indeed, be called such). This is by no means as efficient as a BRT system, and the condition of these smoke-belching buses is another aggravating matter. To our transport officials, please do not give up on the BRT system. Curitiba has shown us what an exemplary BRT system can accomplish together with good urban planning and traffic management, and Cebu and Manila can learn more than a thing or two from Curitiba’s experience.
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THE Entrepreneur Continued from A1
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he peso is also understandably under pressure because of the demands of the growing Philippine economy and has sunk below 53 to $1. Consumer demand in the Philippines is rising as explained by the relatively high inflation rate. In addition, the imports of raw materials as well as of capital equipment are increasing significantly because of the “Build, Build, Build” program of the Duterte administration, while exports are slowing down.
The Philippines’s trade deficit as a result has swollen to a cumulative $12.2 billion in the first four months of 2018 after imports rose 10.5 percent, while exports fell 6.2 percent. The balance of trade position implies that the Philippines shelled more dollars than it earned from exports during the four-month period, weakening the peso in the process. But the ordinary entrepreneur and consumer should not be alarmed by the peso’s temporary weakness. The Bangko Sentral ng Pilipinas (BSP) still has about $80 billion in gross international reserves, which I
consider ample. The reserves are being replenished by remittances from Filipinos working overseas, tourism receipts and earnings from the business-process outsourcing sector. The country’s economic fundamentals have not changed and, in fact, are getting stronger. The peso’s movement is not a cause for panic—it is gradually depreciating at the moment and there is no abrupt change in its value so far. What we do not want to see are sharp movements in the peso-dollar rate because these movements could mean speculators are trying
John Mangun
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The ordinary entrepreneur and consumer should not be alarmed by the peso’s temporary weakness. The Bangko Sentral ng Pilipinas still has about $80 billion in gross international reserves, which I consider ample. The reserves are being replenished by remittances from Filipinos working overseas, tourism receipts and earnings from the businessprocess outsourcing sector. to manipulate the local currency. The BSP, of course, is in control of the situation. It may tighten the domestic liquidity by way of increasing the interest rates to make the peso more attractive to foreign fund managers. The peso may weaken further after the US Federal Reserve Board said it would likely raise US interest rates twice more this year and four times in 2019. I still believe, however, that the current market turmoil that is negatively affecting the peso and the local stock market will not last. Fund managers and currency traders will soon realize that the Philippine economy has strong fundamentals that can weather the storm and the panic in the global markets.
Greater potential for the Makati subway
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The peso
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ongestion problem has plagued major urban centers around the world for many decades. Metro Manila’s congestion, however, may be one of the worst.
Urban planning is defined as “a process concerned with the development and design of land use in an urban environment.” In other words, it is a blueprint to make the city more livable. However, after decades of neglect, a city can only be made more livable through urban renewal, which is “the process where an urban neighborhood or area is improved and rehabilitated, typically involving the clearing of large sections of existing property.” There are hundreds of barangays in the metropolis that are made up of narrow, usually dirty and run down streets and alleyways and old, often dark and dank homes way past their expiration date that are also often unsafe.
These are not necessarily inhabited by people we call the urban poor. It is just that the buildings are old and should be replaced or rehabilitated. The public sector has not had the funding or the political will to do this. The private sector faces massive public relations problems and costs that usually make building new homes in old urban areas impossible. The answer then has been to create suburban areas. Singapore, since 1973, built townships in areas that were sparsely populated or uninhabited and tried to make them self-sufficient. However, there was always the problem that the jobs were located someplace else. In Metro Manila, the private sector—sometimes through a joint venture with the government—has
created such places as Eastwood City, Filinvest City, Bonifacio Global City and the under construction Ayala Land project Arca South on the site of the former Food Terminal in Taguig City. Job creation in these areas is still a problem but the nightmare is transportation. It takes steel determination as well as a critical reason to go from Filinvest in the south to Eastwood in the north. While these “suburbs” are great, it does not solve the urban renewal and transportation problem of the rest of Metro Manila. Beginning in 1987, Singapore began connecting its townships to the central area by subway. However, what transpired as the system grew was that the route of the subway created more townships as more lines were constructed. The proposed Metro Manila subway may do the same thing. More exciting may be the proposed Makati subway, which will initially run underneath Ayala Avenue up to the Circuit, before going through JP Rizal Avenue up to the other end in Comembo past Bonifacio Global City. This will certainly help to ease traffic congestion in and around the Makati Central Business District (CBD).
The Philippine economy is still expected to grow by about 7 percent this year. The World Bank in a recent report sees the Philippines outperforming China and other major Asian economies this year and next. The bank sees the Philippines expanding 6.7 percent in 2018 and another 6.7 percent in 2019. It said the country would likely continue to outperform some of the major economies in Asia, such as Indonesia (5.2 percent in 2018 and 5.3 percent in 2019), Malaysia (5.4 percent, 5.1 percent), Thailand (4.1 percent, 3.8 percent) and China (6.5 percent, 6.3 percent). Only Vietnam and Cambodia are expected to grow faster than the Philippines this year at 6.8 percent and 6.9 percent, respectively. With strong fundamentals, the Philippines and the peso, for that matter, are expected to survive the current market turbulence. Our team of economic managers, led by Finance Secretary Carlos G. Dominguez III, is more than capable to drive economic growth, while President Duterte’s popularity rating remains high. We should stay calm and chillax, and wait for the storm to pass away. For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.
However, perhaps the greater potential may be that there will be increased residential and commercial development both at the stations and along the proposed line. This is a great opportunity for Makati to undertake “urban renewal” for middle and working class neighborhoods like it did for the high-end residential development around the CBD. If you examine the amount of affordable housing in Makati, most units are old and decrepit. It is easy to buy a luxurious P50-million condominium along Ayala Avenue but it is virtually impossible to find a new condominium for under P2 million that could be financed through Pag-IBIG. If the Makati subway is going to really perk up the city, it must not only provide transportation. It should spark a genuine urban renewal process for the not-so-rich. We have many upscale townships in the metropolis but what we need is much more affordable housing for people who are going to use the Makati subway system. 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.
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Trump’s tariff plan is a car crash for Germany
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Cory Aquino herself spread fake news One trillion pesos
By Chris Bryant | Bloomberg Opinion
f Donald J. Trump had his way, the US wouldn’t import any German cars at all. “Build them here!” he barked in a recent tweet threatening 20 percent tariffs on European automakers.
No matter that the Germans have invested billions of dollars in US plants and their employees build hundreds of thousands of cars in the country annually, many of them for export. Until every last BMW, Mercedes or VW sold in the US is also built there by an American worker, it probably won’t be enough. Trump’s tariff threats are an attack on the German automakers’ business model, compounding the challenge from the decline of diesel and the rise of electric and autonomous vehicles. They may need to become less ambitious, and less profitable. Little wonder VW shares are down 25 percent from their peak this year and BMW 20 percent. Perhaps, Trump’s latest spat will end in some kind of grand bargain. Perhaps, Europe and the US will agree to eradicate all automotiverelated tariffs and trade barriers (BMW CEO Harald Krueger is among those openly pushing the idea). But don’t hold your breath. Trump is an economic nationalist who thinks European companies are out to raid America’s “piggy bank.” He also appears to have spent too much time roaming the car parks of his upscale country clubs and seems to think German carmakers have a stranglehold over the US market. In reality, they account for about 8 percent of it. And if Europe scrapped its 10-percent tariff on car imports in return for the US giving up its 2.5-percent tariff on cars and 25-percent levy on commercial vehicles and light trucks, the Germans would probably benefit most. Former Vice Chancellor Sigmar Gabriel had it right when he quipped last year that the way to fix America’s trade deficit in autos was not by reducing tariffs but for the US to “build better cars.” Instead, GM and Ford are lowering their ambitions, choosing to focus more of their efforts on selling trucks to American consumers. These have become a cash-cow for US manufacturers over the years, in part because that 25-percent tariff protected them from foreign competition. Until now, Germany’s automakers have been deft at navigating the protectionist impulses of foreign governments. In China they entered costly technology- and productionsharing joint ventures to gain access to the massive local market. In India, Russia and elsewhere they ship kits of components for assembly by local workers, thus circumventing high import tariffs on finished autos. Efficient? Hardly. Yet, even with these compromises the trio generated a combined €30 billion of net income last year, far more than their more Europe-focused French rivals.
Trump’s tariff threats are an attack on the German automakers’ business model, compounding the challenge from the decline of diesel and the rise of electric and autonomous vehicles. They may need to become less ambitious, and less profitable. Little wonder VW shares are down 25 percent from their peak this year and BMW 20 percent. And unlike Detroit, the Germans didn’t require a bailout in 2008. Central to Germany’s success was a strategy of setting up factories in regions where they sell most cars and where they could benefit from free-trade agreements and crossborder supply chains. The US is a big car market and is part of the North American Free Trade Agreement, so it was a natural home for BMW and Mercedes-Benz’s sport utility vehicles production. The various tariffs and retaliatory actions that have been proposed could cost BMW almost a fifth of next year’s estimated operating profit, estimates Max Warburton, analyst at Bernstein Research. For Mercedes and VW the hit could be about one-tenth. Building every single model locally—as Trump seems to want—would add yet more pain. “If production plants need to be split and tooling duplicated, it will harm margins significantly,” according to Warburton. Making more lower-margin sedans in the US, where labor costs are high and the vehicles aren’t that popular anyway, would only squeeze margins further. That’s why VW builds so many of them in Mexico. Typically, about 40 percent of the components of a vehicle imported from Mexico are made by US workers, according to the Association of Global Automakers. Not that Trump cares about that. Hence, the US president is really advocating that Germany’s carmakers invest in a lot more robots and/ or make less money. Meanwhile, for consumers, his tariffs spell higher prices and less choice. In theory, the beneficiaries will be those carmakers who haven’t been as successful expanding overseas, like Peugeot, or those that focus on a couple of very large regional markets, like GM. But GM’s warning on Friday that tariffs would also undermine its competitiveness suggests such benefits are illusory in practice. As an economic vision, “Build them here!” is a bleak one.
Cecilio T. Arillo
database
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HILE the “yellows” and their inveterate followers are relentlessly bashing President Rodrigo R. Duterte “for spreading fake news,” President Corazon Cojuangco Aquino, unknown to many, herself spread fake news in 1990 to save her plummeting popularity, according to former Sen. Juan Ponce Enrile. President Aquino claimed in her State of the Nation Address in July 1990 before a joint session of Congress that her administration built a total of 3,365 kilometers of major roads and 18,120 kilometers of feeder roads from 1986 to 1990. Rebuffing Aquino for dishing out fake news, Enrile said: “The kilometers of roads should be easily visible, for the greatest length of the archipelago north to south is 1,851 kilometers only.” “Perhaps, the President and her Cabinet members should tell us where these new roads are. Frankly, I have not seen any in my travels in the countryside. Of course, some could be located inside Hacienda Luisita, as one Commission on Audit report disclosed.” Aquino also claimed that “27,530 more hectares of farmlands were irrigated in 1989, benefiting 18,500 more farmers.” “Where are these irrigated farmlands located?” Enrile asked. “Could these be in Tarlac or some planet like
Mars? If this claim is true, why are we still importing rice and corn?” In 1988 the Aquino administration imported 187,154 metric tons of rice and 172,263 MT of corn— figures that, Enrile said, disproved the truth of what the administration claimed. The same is true with the Aquino claim that “51,820 water-supply projects” benefited “nearly 7,000,000 more Filipinos.” It was all fake news, said Enrile. “People in the rural areas often ask me for public funds to provide them with safe drinking water. With 51,820 water-supply projects, each of our 41,000 barangays should have at least one [water supply] project. But where are these water-supply projects?” he asked. “When told about these “watersupply projects,” barangay residents reacted in disbelief. Could it be that our barangay folks, ordinary mortals like us, are blind and do not see what the exalted officials of the Aquino administration see?”
Bloomberg Opinion
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rban transportation is undergoing a revolution. Offerings, such as Uber and Lyft as well as car- and bike-sharing services, are widely believed to reduce congestion and generally make urban dwellers more mobile; driverless cars are expected to provide further benefits. Yet, the notion that these innovations always make things better is far from a given: The new services are a net good only if they complement traditional public transportation systems rather than compete with them. In May Nashville residents voted against funding a transit system built around light rail. The proposal’s opponents argued that the ride-hailing services provided a preferable solution for many, and that it was worth waiting for self-driving taxis rather than funding obsolete modes of transport that are losing customers in many US cities.
The declining number of people using public transportation isn’t just a US trend. For the first time in 20 years, the London Underground experienced a drop in ridership last year. “Demand for mass public transport has weakened in so many richworld cities at the same time that oneoff explanations are seen inadequate,” the Economist asserted recently. The prevalence of ride-hailing services is often held up as a reason for the decline. In a poll of passengers of a “transportation network company” (read, Uber and Lyft) in Boston in late-2017, 40 percent of respondents said they would have taken mass transit if such services hadn’t been available. About a third of riders surveyed in San Francisco in 2016 gave a similar answer. Academic work on whet her Uber and Lyft complement or compete with mass transit is scarce. In June the University of Toronto’s Jonathan Hall and his collaborators concluded that the net effect of in-
This is the enormous amount of money spent by the Cory Aquino administration from 1986 to 1990, said Enrile, who was among the very few who unmasked the alleged myth and lies of the Aquino presidency. “One trillion pesos staggers the imagination,” said Enrile in an August 1, 1990, report to the Philippine Senate on the real state of the nation. “Congress has generously made available to the Aquino administration a huge sum of money—almost one trillion pesos—from 1986 to this day.” The Aquino administration availed itself of P114.5 billion in 1986; P154.9 billion in 1987; P190.7 billion in 1988; P230.4 billion in 1989; and P246.6 billion in 1990, or a total of P937.1 billion. If the budgetary request of P301 billion for 1991 is included, the aggregate amount would have added up to P1.238 trillion. When distributed among the 60 million Filipinos at that time, adults and children alike, the venerable senator pointed out, each citizen would have received P16,677 or equivalent to half a year’s minimum salary of the average working man. Enrile said: “If that sum of money were judiciously used, we would be seeing today immense and dramatic improvement in the quality of our life. And yet, in terms of visible physical and structural infrastructure achievement, the Aquino administration pales in comparison with the regime it replaced.” “If we sum up all the money granted to the Marcos regime from 1966 to 1985, a period of 20 years, as against the four years of the Aquino
China’s foreign investment door opens By David Fickling Bloomberg Opinion
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hen is a loosening of foreign investment rules not really a loosening of foreign investment rules? When China’s doing it in the face of a brewing trade war. The country’s latest so-called negative list issued last week, which comprises a group of industries where foreign businesses are either prohibited from investing or restricted to joint ventures with a degree of Chinese control, boasts an eye-catching headline number: The number of sectors is down to 48, from 63 last year and 120 back in 2011. In theory, that means large swathes of the Chinese economy that were once closed off to overseas competition are finally opening up. In practice—as we argued when President Xi Jinping first promised the changes back in April— the difference is mostly cosmetic. The core list of industries where offshore investment is altogether prohibited is more or less unchanged from last year. The most striking alteration is likely to provoke guffaws in foreign capitals: International arms manufacturers now appear to be allowed to set up shop, should Raytheon Co. or BAE Systems Plc. be looking to test how
robust their protections against Chinese industrial espionage are these days. That change is typical of one of the major ways the negative list numbers have been gamed in recent years: By removing industries from the list whenever foreign investment is vanishingly unlikely, Beijing has been able to proclaim a more open market while, in practice, making little tangible difference. Some of the key eliminations from the forbidden list in recent years have been in sectors such as ivory-carving, tiger bone-processing, gambling and the sex industry. I’m no lawyer, but if you’re looking for Beijing’s permission to set up a casino-brothel with a sideline in endangered-species trade, my guess is that it’s not just the negative list standing in your way. Another trick has been to permit investment in sectors where local players are so dominant that only the foolhardy would dream of trying to compete. Fancy taking on China Petroleum & Chemical Corp. and PetroChina Co. in the fuel-retail market; or State Grid Corp. of China and China Southern Power Grid Co. in the electrical-grid business; or China Rail Construction Corp. to build new railways? Last year you needed a local majority shareholder, but now you can knock yourself out—the market is wide open,
Innovation can’t fix urban transport’s woes By Leonid Bershidsky
Tuesday, July 3, 2018 A7
creases in Uber penetration in the US results in a gain in public transportation ridership. The averages hid a lot of variation: “Uber has the biggest complementary effects on the public transit systems that had the lowest ridership before Uber’s entry,” the researchers wrote. “However, Uber seems to be decreasing ridership on larger systems, and the effect on these systems could counteract the increase on smaller systems.” That makes sense: Uber has the ability to deliver more people to mass-transit stations from suburbs and inconvenient locations, so lessdeveloped mass-transit systems get a boost. To more developed ones, Uber is a competitor. Regardless of these differences, Hall and his collaborators found, Uber tends to increase traffic congestion. That could change if most people agreed to give up private cars and use ride-sharing options, but there’s no evidence of that happening in the US, where 76 percent of commuters
drive to work alone, a level that hasn’t budged in the last decade. Self-driving cars could make congestion even worse. On June 27 the World Economic Forum published a report it produced with the Boston Consulting Group predicting that once these vehicles become widely available for shared rides, travel time in the Greater Boston area would improve by about 4 percent. But congestion in downtown Boston would worsen because the vehicles “will be chosen as substitutes for short public transportation trips,” increasing travel times in the area by 5.5 percent. When London’s public transport authority recently decided to reinstate Uber’s operating license, it acted in response to apparent improvements in the service’s compliance with city rules. The regulator’s focus on Uber’s driver background checks, audits and violence prevention is not misplaced. But it would have made more sense to look at the bigger picture, and particularly the drop in Underground rider-
administration, the total would not come anywhere near the fabulous amount of one trillion pesos. “One trillion pesos could have created 20 million classrooms for children, complete with teaching aids; constructed 10 million modest homes for the poor; obtained 1 million passenger buses for weary commuters; or established one health center for each of the country’s 41,000 barangays. “One trillion pesos could have erected one emergency hospital each for 1,600 towns, one general hospital for every congressional district, and one medical complex in every city and province—all of them equipped with the most modern medical facilities rendering free medicines and medical services to 60 million Filipinos. “One trillion pesos could have irrigated 24 million hectares of rice land, sufficient to produce 2.4 billion cavans of palay per harvest, which would not only reverse the country’s plight as a rice-importing nation, but also place the Philippines as the No 1 rice producer in Southeast Asia,” Enrile said. Finally, Enrile pointed out, “a capital investment of P30,000 per worker means one trillion pesos could have created 33 million jobs, enough to employ the country’s entire labor force, with each worker placed in a full-time and technologically rewarding job.” “The amount could have also built a network of 1 million kilometers of farm-to-market roads,” he concluded. To reach the writer, e-mail cecilio.arillo@ gmail.com.
according to the latest list. Anyone who wants to take on state-owned oligopolies in operating rail services, trading most farm products or building ships is also welcome to try their luck—but the core rule of antitrust has always been that when the market share of the incumbent players is that high, it’s all but impossible for new ones to break in. The most dramatic changes are those to financial-services companies and automakers, which will have foreignownership caps abolished eventually. But those changes have been promised long before now, and won’t take effect until 2021 and 2022, respectively. Ownership caps on aircraft manufacturing firms are out, too—but Airbus SE and Boeing Co. have already established final assembly plants in China under joint-venture agreements, and aerospace companies tend to keep their main facilities close to home for political reasons. That’s not to downplay the real changes that are taking place behind the scenes. China is working to improve its lax enforcement of intellectual-property protections and to codify its array of ambiguous and inconsistently enforced rules, though progress has been so grindingly slow that it’s little surprise some in Washington have dismissed the whole
thing as a con-job. The changes in auto manufacturing, finance and aerospace are real, although it remains to be seen how they will play out in practice. At least China is moving in the right direction. It remains one of the most restrictive countries in the world for foreign investment, according to an Organisation for Economic Co-operation and Development-compiled index, but it’s improved dramatically in recent years while the US has slipped behind the organization’s average. For all that China’s negative list is gamed, it does give foreign investors a clear indicator of which industries are most protected. That’s a contrast to the vague “national security” or “national interest” grounds that have allowed other nations to protect lightbulb manufacturers, cattle ranches and yogurt makers from takeovers, not to mention President Donald J. Trump’s on-againoff-again pledges to further crack down on foreign investment by China. Still, at this point the fan-dance over the negative list is becoming increasingly pointless. Maybe next revision we’ll see the long-protected market for traditional rice paper and ink-blocks opened up, just as the ones for lacquerware and cloisonne enamel have been set free in recent years.
ship, which is costing the city transportation agency hundreds of millions of pounds a year in lost revenue. Ride-hailing and ride-sharing, both in their current form and in their probable self-driving one, can improve mobility in some cities, or parts of big cities. But these services are equally capable of making existing problems worse. Regulators ought to think about promoting solutions that complement existing, mass-transit systems such as subways, not those that poach their passengers. Expanding bicycle rental networks could be a solution. The number of rental bikes in Berlin increased from about 2,000 two years ago to about 10,000 at the beginning of 2018, even as public-transportation ridership kept growing. In 2017 it increased 1.8 percent, while the city’s population grew 1.1 percent. Bikes don’t really compete with the subway and buses, but they do help people reach the station faster, and, when used for short trips, don’t increase congestion in a
city with plenty of bike paths. But even such a harmless-looking innovation can become a problem. Since the beginning of the year, the number of rental bikes has increased by 8,000, to more than 18,000. The bikes are beginning to clutter up sidewalks, and the city authorities are starting to worry. Perhaps, Uber and similar services shouldn’t be allowed to operate in crowded city centers or provide short rides; perhaps, self-driving vehicles don’t make sense everywhere and perhaps, the number of bicycles and cars available for sharing should be capped. Sometimes it might make more sense to invest more money in the subway system or cut fees than to let a ride-hailing service take away business. Letting the market decide is not really an option for modern cities, where it’s easy to worsen the quality of life and much harder to make it better again. Innovation for its own sake isn’t worth pursuing.
2nd Front Page BusinessMirror
A8 Tuesday, July 3, 2018
Con-com vote on proposed federal constitution set today
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By Bernadette D. Nicolas
@BNicolasBM
HE consultative committee (Con-com) created by the Duterte administration to revise the charter on Monday said it will vest power in the country’s regions to establish their own regional economic zones (ecozone) once the country shifts to a federal system under the proposed federal constitution. Con-com Spokesman Conrado I. Generoso said in a news briefing that the committee will give this power to the federated regions to boost their capability to generate their own revenues. “ The regions have [will be vested with the power] to establish their own economic zones, but of course it does not stop the federal government from having its own economic zones,” Generoso said, adding that it would be better if the ecozone is established by the regional government to have rationalized economic zones “where all provinces may contribute.” With this proposal, the Concom envisions every province will
grow with the establishment of regional ecozones, instead of having an ecozone in one province, while other provinces are left out. The Philippine Economic Zone Authority in January also urged local government units to develop their own ecozones to empower and enrich them in time for the shift to federal form of government, noting that this will bring economic investments, provide job opportunities for residents and higher revenue generation among LGUs. While conceding there might be differences in the speed of setting up regional ecozones, what is essential, Generoso said, is that the regions were given the
power—and the option—to do so since setting up an ecozone is based on a particular regions’ capacity, competence and needs. He added the regions may also seek financial assistance from the federal government, through the equalization fund to be administered by the Federal Inter-Government Commission (FIGC). The Con-com is likewise proposing that the equalization fund be equivalent to 3 percent of the general appropriations of the federal government. Under the Con-com proposal, the FIGC will administer an equalization fund to federated regions that may be in need of financial assistance in achieving economic viability and sustainability. The 15-member body is also in charge of formulating programs and policies for grants-in-aid and fund transfers to address economic needs of the regions, ascertain the effectiveness and efficiency of the fiscal administration and management of the regional governments, assess the sufficiency of the regional governments in raising revenues, determine and reduce causes of financial imbalance, and promote friendly and cooperative relationship among regions through conciliation and mediation of disputes, and to provide for a system of equitable allocation of resources that will achieve the goals of the Federal Republic under the Constitution. “[If there] is one region that doesn’t generate [enough] to be able to support an economic zone,
then they can ask for financial assistance or grant from equalization fund to put up an economic zone,” Generoso said, noting that this may include assistance for putting up infrastructures within economic zones. The Con-com cannot say yet, however, if the equalization fund will be administered on the longer term, but if the regions already have already achieved fiscal sufficiency, then the federal government may consider cutting off the aid. Aside from putting up regional economic zones, the regional government will also be vested with exclusive powers within their regional territory over: socioeconomic development planning, creation sources of revenue, financial administration and management, tourism, investment and trade development, infrastructure, public utilities and public works, land use and housing, justice system, local government units, business permits and licenses, municipal waters, indigenous people’s rights and welfare, culture and language development, sports development, and parks and recreation. The Con-com said it is already 100-percent done with its proposed constitution, and is on track to submitting it to the President on July 9 after the committee has subjected the draft to final review. Its final en banc session is scheduled today (July 3), Con-com members are expected to vote on the adoption of the entire draft federal constitution.
Electricity. . . Continued from A1
target issuance of the circular is in the second quarter,” Fuentebella said. The agency issued last month a draft circular adopting the framework for a uniform monthly electricity bill format. “The DOE takes cognizance of the need to empower electricity end-users with greater understanding and transparency on the charges in monthly electricity bills by unbundling the electricity charge components, including those components that are not part of the unbundled rates but were collected from the consumers for security and reliability of services,” the draft circular stated. The agency wants the DUs to reflect all corresponding charges they collect from all electricity end-users, including but not limited to generation, transmission, distribution, supply and metering charges, bill and meter deposits, including interest and any other charges that the Energy Regulatory Commission may approve. It said the electricity bill should be prepared in a simple and easy-to-understand format. It said that subject to ERC regulation, all distribution utilities should use a uniform bill format prescribed by the ERC. “Except for competitive services components such as generation and supply, no charges shall be reflected in the bill and collected from the electricity end-users without the approval of the ERC,” the circular stated. Section 25 of the Electric Power Industry Reform Act requires every DU to identify and segregate in its bills to end-users the components of the retail rate. The circular, once approved, will apply to all distribution utilities, including privately owned utilities; electric cooperatives; local governmentowned utilities; entities authorized to operate within economic zones; and other entities authorized by law to distribute electricity to end-users. The bill should contain the generation charge, transmission charge, system loss, distribution charge, supply charge, metering charge, other charges, subsidies or discounts, senior citizen discount, government taxes, local taxes, universal charge, missionary electrification charge, environmental charge, stranded debts and contract costs of National Power Corp., feed-intariff allowance and other charges, among others. The bill should also contain the bill deposit including interest and the meter deposit including interest, billing summary, among others.
www.businessmirror.com.ph
WITH COLLAPSE OF TALKS WITH REDS, GOVT REVIVES ‘TERRORIST’ TAGGING BID By Rene Acosta
@reneacostaBM
& Joel R. San Juan
@jrsanjuan1573
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HE defense/military establishment has recommended the termination of the peace talks with the National Democratic Front of the Philippines (NDFP), citing “insincerity” on the part of the Communist Party of the Philippines (CPP) and its armed wing, the New People’s Army (NPA), Defense Secretary Delfin N. Lorenzana said. This developed as the Department of Justice (DOJ) on Monday said it would now be pursuing its petition before the court that will declare at least 600 communist guerillas in the country as terrorists.
Terrorist tag Justice Secretary Menardo I. Guevarra made the assurance following the cancellation of the peace talks between the government peace negotiators and their counterparts in the CPP and its armed wing, the NPA, which was supposed to take place in The Netherlands last week. “We will continue with our petition in the court, unless and until the President and the government peace panel direct us otherwise,” Guevarra told reporters.
Lost chance Lorenzana cited eight reasons they asked President Duterte to end the peace negotiations with the NDFP, which was supposed to have formally started on June 28, and postponed by the Commander in Chief. While Duterte decided to move the peace gab by another three months, CPP founder and NDFP chief political consultant Jose Ma. Sison had recommended to the NDFP to just scuttle the talks and prepare to hold it with his successor. “They [the CPP-NPA] have been tagged as a terrorist organization locally and internationally. They had their chance to work for peace when President Duterte appointed four of their members to the Cabinet. But they betrayed the government when they used their positions to advance the CPP’s revolutionary movement,” Lorenzana said. Among the reasons he gave in recommending the termination of the talks were the alleged holding by the CPP and the NDFP of the largest and second People’s Congress from October up to November 2016 and the CPP’s Central Committee plenum in December 2016. “During these two occasions they crafted a three-year plan to advance the revolutionary movement that included the planning for the oustDuterte movement if PRRD [President Duterte] will not agree to a coalition government,” Lorenzana said. The meetings were reportedly held while the government and the NDFP were observing a unilateral cease-fire from 2016 up to January 2017. Lorenzana said the National Military Commission of the CPP/ NPA reinforced the plenum agenda and even used the lull in the fighting to consolidate and recover their lost mass base and expand their influence. “Based on the foregoing deliberate actions of the CPP/NDF/NPA, it is obvious that they are not sincere to talk peace and end the armed conflict. They are employing the revolutionary dual tactics to show semblance of peace, but continually conduct violence and terror acts on the ground,” he said. Lorenzana said the Left cannot also comply with the four preconditions of Duterte before returning to the negotiating table, which the President considered as indicative of insincerity. The four conditions: There should be “no coalition government; no attacks and no collection of revolutionary taxes; no recruitment and mass
“It is obvious that they [CPP/NDF/NPA] are not sincere to talk peace and end the armed conflict. They are employing the revolutionary dual tactics to show semblance of peace, but continually conduct violence and terror acts on the ground.”—Lorenzana mobilization;” and the NPA must stay in safe areas of their choice.
Resolution In response, the CPP said Lorenzana’s statement only confirmed that he has “been defining the Duterte regime’s true anti-peace policy based on his one-track militarist mind-set.” “To Lorenzana and his ilk of fascists, including Duterte himself, the only solution to the civil war in the country is the military solution. This is the old 1930s dogma promoted by the US military, who sees profit in every war it instigates and foments,” it said. The CPP also tagged Lorenzana as a “war promoter and consummate militarist.” “He wants no nonmilitary end to the civil war in the Philippines. He fears losing significance if the present civil war in the country is settled politically through peace negotiations. To him, the only solution is to recruit more and more soldiers to the AFP [Armed Forces of the Philippines] in order to lay siege on thousands of barrios nationwide and sow terror among the people. To the broad masses of workers and peasants, Duterte, Lorenzana and the AFP are the real terrorists,” the CPP said.
The list It may be recalled that a petition has been filed by the DOJ before the Regional Trial Court of Manila City last March seeking to declare communist leaders and their armed members as terrorists. The justice department provided the court with a list of more than 600 personalities, which include CPP founding chairman Jose Ma. Sison, former Bayan Muna Rep. Satur Ocampo and United Nations special rapporteur on the rights of indigenous peoples Victoria Tauli-Corpuz. Also on the list are CPP leaders Benito and Wilma Tiamzon; NDFP consultant Rafael Baylosis, former peace panel chief Luis Jalandoni, human-rights lawyer and former Baguio City Councilor Jose Molintas and Cordillerans Joanna Carino, Windel Farag-ey Bolinget, Sherwin De Vera, Beverly Sakongan Longid and Jeannette Ribaya Cawiding. The petition was filed following the termination of the peace talks between the government and the CPP in November last year. The DOJ, through Senior State Prosecutor Peter Ong, sought the terrorist tag on the said individuals based on the provisions of Republic Act 9372 (The Human Security Act of 2007).
Communist agenda In the petition, the DOJ accused those in the list of planning to impose a totalitarian regime in the country. “The CPP and NPA are merely buying time by deceiving the Philippine government in entering into peace talks, while their main purpose is to mobilize all their forces in preparation for the people’s war aimed at overthrowing the duly constituted authority, seizing control of the Philippine government and imposing a totalitarian regime,” the DOJ said. The DOJ is also asking the court to recall the bail earlier granted to communist leaders with pending criminal cases before various courts, which allowed them to participate in the peace talks.