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Friday, July 7, 2017 Vol. 12 No. 267

Season-based tariffs likely to replace rice-import cap

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By Elijah Felice E. Rosales

@alyasjah

hile the Philippines is set to give up its privilege to regulate the entry of imported rice through the quantitative restriction (QR) scheme, Manila will still use its flexibility under the World Trade Organization (WTO) to impose higher tariff rates on a seasonal basis to protect local farmers from import surge, Finance Secretary Carlos G. Dominguez III said on Thursday.

35%-50%

The range of the tariff rates being considered by economic managers to be slapped depending on the season in lieu of the rice QR “One idea is that [we slap] low tariff rates during the lean months and high tariff rates during harvest season. Under that, maybe [we can impose] 35 percent during the lean months and 50 percent during harvest season,” Dominguez told Palace reporters.

Continued on A2

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Teachers need help: Who will help them?

Dr. Jesus Lim Arranza

Make Sense

T

he opening of classes for school year 2017-2018 brings to fore the important role of teachers in helping shape the future of the nation as they help mold our chldren to be productive and responsible Filipinos in their adult lives. As the black American civil-rights activist Malcolm X once said, “Education is our passport to the future, for tomorrow belongs to the people who prepare for it today.” And teachers definitely play an important role in helping our school children prepare for their future.

With dedication and commitment to their jobs, some teachers walk mountain trails just to get to their classrooms each day.

While in the congested streets of Metro Manila, many teachers have to be up before dawn to beat the morning traffic to be at school by 7 a.m. But how much are our teachers getting per month for their take-home pay? Are they getting enough pay to take home after deductions for their various loans?

Senators eye simplified tax Resorts World Manila laws to plug aims to win back trust, revenue leaks Continued on A10

By Butch Fernandez

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has become a good dollar earner,” Escalona added.

PFA Chairman Emeritus Samie Lim said franchising can easily be billed as part of the top 10 dollar earners in the economy.

He added a local Filipino brand can earn as much as $30,000 in franchise fees alone per store. If

enators eyeing to raise bigger revenue to bankroll government projects are moving to simplify existing tax laws in a bid to “plug leaks” under the existing taxcollection setup.

The Senate Ways and Means Committee, chaired by Sen. Juan Edgardo M. Angara, on Thursday opened public hearings on pending tax-reform bills amending the estate and donor’s tax, and imposition of 8-percent grossreceipts tax on self-employed and professionals in lieu of the value-added tax and percentage tax.

“We are working to simplify taxation to also encourage the growth of micro, small and medium enterprises,” Angara told reporters during a break in the hearing.

Angara added the committee is also “studying additional benefits for small businesses”, even as he confirmed the senators’ consensus that a simplified tax-collection system is seen to boost business growth.

In a separate interview, Sen. Sherwin T. Gatchalian, economic affairs committee chairman, confirmed that the Senate

See “Franchisers,” A2

See “Senators,” A2

Samie Lim (from left), chairman emeritus of Philippine Franchise Association (PFA); Jose Magsaysay Jr., expo chairman of Franchise Asia Philippines 2017; Sherill Quintana, overall chairman of Franchise Asia 2017; Alan Escalona, president and director, External Relations and Advocacy of PFA; Sam Christopher Lim, conference chairman of Franchise Asia Philippines 2017; and Elizabeth Pardo-Orbeta, marketing and promotions chairman of Franchise Asia Philippines 2016 organizing committee, graced the media launch of the Franchise Asia Philippines 2017 in Makati City. Franchise Asia Philippines 2017, Asia’s biggest 4-in-1 franchise show, will be held at the SMX Convention Center in Pasay City from July 19 to 23. NONIE REYES

‘Franchisers can be top dollar earners’

By Cai U. Ordinario

T

@cuo_bm

he franchising industry has the potential to become the country’s top dollar earner, according to the Philippine Franchise Association (PFA).

In a press briefing on Thursday, PFA President Alan Escalona said it is not enough for franchisers and

Filipino entrepreneurs in general to merely sell their products and raw materials abroad.

“Bringing local brands abroad is not only a pride but it has increased the dollar-earning potential of the Philippines, which contributes a big portion to the GDP. Aside from the OFWs [overseas Filipino workers] and the call centers, franchising

PESO exchange rates n US 50.5210

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expand after fatal fire

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esorts World Manila (RWM), the Philippine casino where 38 people died after an arson attack last month, aims to complete a new gaming zone this year as it seeks to win back customers and rebuild its brand.

“We’re spending a lot of time enhancing the overall security of the place and learning about what had happened,” said Kingson Sian, 55, CEO at Travellers International Hotel Group Inc., which owns and operates the integrated casino

resort, in an interview on July 3. “We obviously have to gain back the trust of our guests and the public.”

Travellers, a venture of billionaires Andrew Tan from the Philippines and Lim Kok Thay of Malaysia, is facing its toughest challenge since opening the integrated gaming facility eight years ago. On June 2 a former patron burned gaming tables, with fumes asphyxiating dozens, before killing himself.

The company is under probe for See “Resorts World,” A2

n japan 0.4461 n UK 65.3590 n HK 6.4707 n CHINA 7.4261 n singapore 36.5961 n australia 38.3960 n EU 57.3615 n SAUDI arabia 13.4726

Source: BSP (6 July 2017 )

A2 Friday, July 7, 2017

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www.businessmirror.com.ph

PHL, Vietnam rising as Asean’s new car hubs

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o get a taste of Southeast Asia’s burgeoning 600 millionstrong consumer base and what it means for economic growth, take a look at the car industry.

Carmakers are racing to steal a big ger sl ice of t he market attracted by rising incomes and young workers looking to buy their first set of wheels.

The Philippines and Vietnam will be the two fastest-growing production hubs from 2017 to 2021, according to BMI Research.

Output will surge 300 percent in

the Philippines to 359,000 units and almost double in Vietnam to 112,000 units, it forecast in June.

Toyota Motor Corp. and PSA Group are among those swooping in to take advantage of both nations’ increasingly richer populations—many of whom are firsttime buyers given existing car ownership is low. They also boast

economic growth rates that exceed 6 percent—among the fastest in the world.

“Vehicle production in the Philippines and Vietnam will remain largely geared toward domestic consumption,’’ Fabrice Gatwabuyege, a Johannesburg-based automobiles analyst at BMI, said in an e-mail.

To boost their competitiveness as a manufacturing destination, governments must strengthen infrastructure, the business environment and automotive policies, he said.

Car ownership

Only 6 percent of households in the Philippines own a car and 2 percent in Vietnam, according to Pew Research Centre using 2014 data.

Season-based tariffs likely to replace rice-import cap Continued from A1

Agriculture Undersecretary for Policy and Planning Segfredo R. Serrano said rice is not included in the commodities that have bound rates under the WTO multilateral trading system. This, Serrano said, means that the Philippines can slap any duty on rice, depending on what Congress will pass.

In a news briefing on Thursday, Dominguez said economic managers are still deciding on the tariff rate to be slapped on rice imports, following the expiry of the country’s rice-import cap. However, what is certain is that it will be between 35 percent and 50 percent, Dominguez said. “I think what’s being discussed is something like 35 percent or 50 percent. [It’s] around that range,” Dominguez said.

The finance chief added economic managers are “thinking about a number of things” to ensure they cover all possible options on resolving the matter. Dominguez said they are open to the idea of a season-based tariff rate for rice imports.

Dominguez said this might be

the best way to balance the interest of local farmers and consumers. “[As much as] we have to protect the local farmers from [the] dumping of foods, we also have to protect the consumers and hope the prices [of rice] will be moderate,” the finance chief said.

Fact is, Dominguez added, prices of local rice are higher than those of imported rice, especially if the staple is produced by a fellow Asean nation.

In a 2015 study commissioned by the Department of Agriculture (DA), it was found out Thailand and Vietnam have the lowest production cost of a kilo of rice.

Thailand spent P9.12 to produce a kilo of rice, while Vietnam recorded the lowest cost at P6.69. On the other hand, the Philippines needed P10.03 to produce a kilo of rice.

In an earlier interview with the BusinessMirror, Trade Secretary Ramon M. Lopez said the Committee on Tariff and Related Matters (CTRM) is just awaiting the recommendation of the DA on the tariff rate to be slapped on rice imports. “We are still awaiting the recommendation of the DA chief [because] that should come from

him, [so] for now, it stays at 35 percent,” Lopez said.

Lopez added the CTRM will only get to discuss the tariff rate to be imposed on rice imports in their next meeting. Dominguez said the CTRM is scheduled to convene “in the next couple of weeks”.

The Philippines’s waiver on the special treatment for rice lapsed last Friday. However, Manila in April informed the WTO it was not able to convert its QR on rice into tariff, citing delays in the amendment of Republic Act (RA) 8178, or the Agricultural Tarrification Act. Amending RA 8178, according to agriculture officials, is necessary in order to convert the QR on rice into tariff because under the law, rice is the only agriculture commodity with an import cap and it did not specify a termination date for it. Without the amendment, the Philippines has to enforce reduced rates on agricultural goods covered by the Philippines’s tariff commitments to the WTO. President Duterte in May issued Executive Order 23, extending for another three years concessionary rates for certain agricultural imports.

6%

The percentage of households in the Philippines that own a car, as of 2014 data The ratio is 82 percent in Malaysia and 51 percent in Thailand. Car purchases will rise an average 15 percent a year in the Philippines and Vietnam over the next five years, BMI predicts.

Senators. . .

Continued from A1

is “in the process of reconciling” the government’s need to raise revenues for state projects and services even as it encourages the growth of business enterprises.

“Tax reform is needed to plug leakages, so we will simplif y everything,” Gatchalian said, adding that under a simplified tax system “mas madali makakakolekta at mas malaki ang [it is easier to collect and there will be higher] revenue collection.”

Among the other tax bills being reviewed by the senators are: an estate-tax amnesty, repeal of the estate tax, simplification of estatetax rate and increase in nominal values of estate tax.

Gatchalian pointed out that a key feature of tax reform is “simplification and equity, dahil alam naman natin na maraming leakages na nangyayari dito sa atin [because we are aware that there are many leakages in our system], and one of the suggestion really is

Franchisers. . .

The Philippines has offered more than $500 million of incentives for manufacturers who commit to produce at least 200,000 units of a model over six years, and Mitsubishi Motors Corp. and Toyota have signed up. Mitsubishi, which will open a metal-stamping plant in the Philippines in 2018, has forecast a 50-percent increase in its output.

Vehicle sales are rising rapidly as the economy booms. Purchases increased 18 percent from a year earlier in the first five months of the year, after gaining 25 percent in 2016.

But there are risks ahead.

President Duterte is pushing for a sweeping change to tax laws that to simplify everything.”Still, he cautioned against rushing the remedial legislation, saying: “This needs to be studied carefully because there are many self-employed who have bigger income.

We risk sacrificing what we call progressiveness. This is what we are discussing now. So far, we’ve seen efforts to simplify our tax system.

Sen. Franklin M. Drilon suggested a “flat rate” tax system, saying this would result in “easier tax administration”.

“Because a system where there is a graduated rate depending on the income of the professional usually results in a very tedious examination of whether a deduction is allowed, because you try to reduce your taxable income,” Drilon said.

The senator added, “if it is just a flat rate, then your deduction is immaterial because your basis is your gross income. It is easier for purposes of tax administration.

That is easier tax administration and better collection.” At the same time, Senator Frank Drilon proposed a uniform 8 percent tax for self employed professionals.

Continued from A1

the brand has 100 stores in a foreign country, this could easily reach $300 million. He added that franchisers can also earn 5 percent to 8 percent of sales in these stores.

They can also earn dollars from markups on products they sell abroad, as well as 2 percent to 3 percent more on advertising. The PFA leader said the key in franchising is the “multiplier effect”, which allows businesses to earn more from various stores worldwide.

Franchise Asia Philippines Expo Chairman Jose P. Magsaysay Jr. added that franchisers can also earn extra in placement fees.

Magsaysay said that based on their experience at Potato Corner, some franchisees seek their help securing workers for their stores abroad.

“We have several revenue streams when we go franchising abroad. And that’s a good opportunity because we not only earn royalty, we earn from supplies, we earn from franchise fees and then you earn from profits,” Magsaysay said.

“Some of our franchise adventures outside the Philippines are joint ventures, some are master franchise, some are single stores, so there’s so many ways you can cut a pie when you go abroad. It’s so exciting,” he added.

Apart from the revenue potential, local franchisers can also create more employment for Filipinos. PFA Director and Oryspa founder Sherill Quintana said their company would refuse clients proposing to manufacture their products elsewhere.

Quintana said this is the company’s way of showing its commitment to the quality of Filipino products. They said Filipinos are capable of creating worldclass brands. “We created millions of jobs, we are going to create millions of jobs and more entrepreneurs in the coming years,” Escalona said.

In 2016 cash remittances from Filipinos working and living abroad reached a record $26.9 billion, up 5 percent. The business-process outsourcing industry, meanwhile, is seen to rake in $38 billion in export revenues by 2022, from its projected $25-billion earnings in 2016.

includes higher levies on cars.

Meanwhile, French manufacturer PSA, which owns brands such as Citroën and Peugeot, and Hyundai Motor Co. are boosting production in Vietnam with a goal of selling to the region. Chinese billionaire Li Shufu is buying a stake in Malaysia’s unprofitable national carmaker Proton Holdings Bhd. But all the new investment won’t be enough to dethrone Thailand and Indonesia as kings of the automotive industry in Southeast Asia. The two each boast of annual outputs of more than a million units, with manufacturers lured by strong supply and logistics c ha ins a nd better t ra nspor t infrastructure. Bloomberg News

Resorts World. . .

Continued from A1

the security breach that led to the attack and its gaming license was suspended for almost a month.

Closure of Resorts World Manila’s casino facility cost the company about P60 million ($1.2 million) a day in lost gaming revenue, Sian said, with customers to the complex, which has a shopping mall, cinemas and restaurants, dropping by as many as 10,000 a day to 20,000. Hotel occupancy plunged to 40 percent, from 90 percent and is now at about 60 percent. When the casino reopened on June 29, traffic was half of that before the attack.

“While many of its mass-based patrons are loyal and will probably come back, the stigma from this tragedy is a setback for further growth,” said Manny Cruz, an analyst at Asiasec Securities. “Travellers must take this opportunity to improve its image, recalibrate its business and think of its future.”

Sian, who met with the families of those killed and attended victims’ wakes, said Travellers will hold off cutting jobs, as it speeds up completion of a new gaming area. The company is compensating families and will pay for the education of victims’ children.

Travellers is trying to woo customers with cheaper movie tickets, food discounts and free parking. Its security team has been replaced, an overseas group hired as a consultant and, within a month, it plans to unveil an enhanced “containment style” defense system, Sian said.

Getting back to business is crucial as the venture of Tan’s Alliance Global Group Inc. and Lim’s Genting Hong Kong Ltd. aims to open by year-end a casino floor larger than the one destroyed on June 2, six months earlier than scheduled, while the damaged area will be converted into a retail zone, Sian said.

Travellers’s earnings have fallen in seven of the previous nine quarters, while those of its rivals including Bloomberry Resorts Corp. and Melco Resorts & Entertainment Philippines Corp. have been steadily growing as they attracted more foreign players and high rollers. Competition among Manila casinos is intensifying, as Universal Entertainment Corp., the casino venture of Japanese tycoon Kazuo Okada, ramps up operations.

Travellers holds one of four integrated casino licenses issued by the Philippines government in 2008 to develop Manila’s Entertainment City and grab a bigger share of Asia’s rising gambling revenue.

The company has spent $1.2 billion since opening Resorts World Manila in 2009 and is scheduled to operate a $1-billion complex in Manila’s gaming hub by early 2021.

“It’s one of the sad events in our history but, nevertheless, we believe in the long-term potential of the industry,” Sian said. “We believe in the future of both tourism and gaming. We have a long view and we are committed to this.”

Bloomberg News

Economy

A4 Friday, July 7, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

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Slight power-rate increase likely this month–Meralco

O

By Lenie Lectura

@llectura

verall power rates for July are expected to remain flattish to a single-digit increase, the Manila Electric Co. (Meralco) said on Thursday.

Meralco is expected to release its July electricity rates on Friday.

As of Thursday noon, initial figures point to “single-digit movement”, Meralco Spokesman Joe Zaldarriaga said in a text message.

“The final figures are still being finalized, but based on our projections, movement will be flattish.

Any movement will probably be single digits only,” Zaldarriaga said.

“Even if nothing changes from June, foreign-exchange impact alone would have pushed rates higher.”

For a 200-kilowatt-hour (kWh) customer, whose bill was around P1,635 in June, this month’s bill will “most probably stay within that range”, the Meralco official added.

Last week Zaldarraiga said there were events in the June supply month that led to an upward pressure on generation costs, an electricity bill’s major component.

There were two factors that are

expected to push generation charge up for the supply month of June.

These are the Wholesale Electricity Spot Market (WESM) price and the depreciation of the peso.

In particular, he said Unit 2 of the Sual power plant, with a 600megawatt (MW) capacity, went on forced outage beginning June 14, coinciding with the absence of Santa

Rita Module 40 (250 MW), which was on scheduled maintenance.

“This 850-MW reduction in supply may have affected spot-market prices. For another, the peso depreciated in recent days to more than 50 to the dollar, versus 49.765 in May. Both factors may have pushed up generation costs that may affect the July generation charge,” Zaldarriaga explained.

Last month generation charge stood at P3.8586. This was lower by P1.0253 per kWh, from P4.8839 per kWh in May. The decline in generation charge largely contributed to a lower June overall rate by P1.43 per kWh to P8.17 per kWh. At P8.17 per kWh, the June overall rate is the second lowest since December 2009.

The final figures are still being finalized, but based on our projections, movement will be flattish. Any movement will probably be single digit only. Even if nothing changes from June, foreign-exchange impact alone would have pushed rates higher.”—Zaldarriaga

Sniper’s nook

A hasty glance from passersby may give the wrong impression that the construction worker in the photo could be a sniper waiting for a kill shot while perched behind the window of a tall building. A closer look, however, will show that he’s not a sniper at all, but a building worker in Pasay City brandishing a power drill, rather than a gun. Alysa Salen

Expert outlines North Korea risk factor for SEA workers

By Recto Mercene @rectomercene

S

EOUL—A Korean expert on Asean and Oceania affairs has told visiting journalists from the Philippines, India and Indonesia that the 300,000 workers from Southeast Asia (SEA) are bound to suffer if the current problem with North Korea becomes unmanageable.

“Southeast Asia is our No. 2 trading partner. We have invested a lot in SEA and 300,000 SEA people in the Korean peninsula…would be in danger if we stop our trade, our investment. There will be damage to the region, as well, if there is a ‘situation’,” according to Lee Jaehyun sr. fellow and a PhD holder on Asean and Oceania Studies Program.

Currently, the Philippines has 63,000 Filipinos living mostly in Seoul out of a population of 50.6 million, according to a 2015 estimate.

Lee, speaking before foreign journalists invited by the Korea Press Foundation, is urging SEA nations to be assertive and tell South Korea what they want Seoul to do for them. “[The] Southeast Asian region has not shown much interest in South Korea,” he noted.

“I don’t hear much about SEA voice [saying]: ‘Hey South Korea, you have to do this for Asean,’” Lee said.

He added there should be some inputs from Asean countries on what they want from the Korean government or what South Korea can do for the region.

From his perspective, he sees that Asean looks at South Korea as a second-tier partner, not seeing their contributions to the region and the wider East Asia.

“It is time you guys have to raise your voice. Hey Korea, you have this much economic power, you have this much and you have to do this and this for the whole region,” Lee insisted, adding, “it will be much easier for South Korean government to follow up whatever Asean wants”.

“It is just six hours away from Korea to SEA [by plane] but still we don’t really know what SEA thinks for those in South Korea. It will be better

if you come up with your own voice first. We’re just waiting what South Korea can do, [for you],” he said.

Lee said he has many friends from the Philippines, Malaysia and Indonesia in the diplomatic and security sector, “but I never heard from them what South Korea has to do with SEA or the whole region.”

At the same time, he added that Seoul had made friends with SEA only “during rainy days but not in sunny days”.

“True cooperation and partnership should not be like that. We always have to be friends in rainy and sunny days,” he added.

Lee had proposed that, if Seoul wants SEA to be a part of this North Korean peninsula question, “then we have to provide our proper seat for SEA countries to be a part of the Napci [Northeast Asia Peace and Cooperation Initiative]”.

The Sejong Institute said South Korea has to face the rise of China, the historical revisionism in Japan and mounting nationalistic responses from its neighbors, the return of assertive Russia, and an anachronistic North Korea with its nuclear ambitions.

“It is against this backdrop that the [previous] Park Geun-hye government is pursuing the Northeast Asia Peace and Cooperation Initiative to promote sustainable peace and cooperation.

When asked about the prospect of reunification with North Korea, Lee said 10 years ago “100 percent of South Korea is in support of reunification.”

However, he said about 50 percent of the younger generation have different ideas about reunification today.

“The young generation is worried about the cost of unification. We have to spend a lot for North Korea to elevate the economy and then it means the social welfare for Seoul will decrease and we have to pay more taxes.”

“And if North Korean people come to the South, they have to compete for already scarce things, like good jobs, but the most dangerous jobs are done by imported workers,” Lee added.

He said there are a total of 1 million foreign workers in Seoul “and those foreign workers are filling the gap.”

“I can’t blame the young generation if they want more prestigious jobs, they want more well-paying jobs, they want to move up and the bottom would be filled by foreign workers.”

Asked whether they are still for reunification even if the United States attack North Korea, Lee said: “Then it means the last day of North Korea. They can’t compete against the US military.”

“And even if there’s sign the US is attacking North Korea, just imagine what they can do. Definitely, if they use one of their weapons against the US, South Korea and Japan, it is not the last day of North Korea but it could be potentially the last day for South Korea,” Lee said.

However, he qualified that North Korea would start military action against Seoul or Tokyo or the US only under an “extreme crisis”.

Asked what would constitute extreme crisis for North Korea, Lee said it would be “economic collapse or if they are extremely threatened by the US”.

If that happens, however, Lee said, “Then it might be the last day of North Korea, then we have to do whatever we can do”.

On the other hand, if the North’s aggressive leader suddenly dies, whether by natural causes, such as a heart attack or assassination, Lee said, “There will be serious turmoil in North Korea”.

“Because every power is concentrated in Kim Jung-on and so when Kim is gone, who is going to make the decision and who knows what?”

He added: “And therefore, it will create some serious trouble for regional countries if Kim is suddenly gone.”He said maybe China will get itself involved and grab any nuclear materials, like what happened in the collapse of the Soviet Union.

“Other countries will be serious about the misuse of nuclear weapons and this can happen in North Korea, prompting China to get into North Korea.”

Budget hotels eye expansion in Davao City

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AVAO CITY—Davao City is being eyed for expansion by hotel owners and operators, as inquiries on the city’s business environment continue to pour in.

This was disclosed by Jane Salanga, assistant manager for Property Investments, Acquisition and Disposal of Prime Philippines, saying five hotel operators and developers from the Asean member-countries are exploring the possibility of a joint venture or partnership with local capitalists.

“There is a rise in the hotel industry and not just acquisition for land but from hotel operators wanting to

locate here under a joint-venture partnership,” she said.

Salanga did not disclose the name of the investors, but five of them, however, have placed inquiries with their office about Davao. In fact, one investor will be coming next month to look at locations and feel the market.

Prime Philippines, which is a commercial real estate-consultancy firm, makes feasibility studies for their clients, market-situation briefings, conducts market study and provides other data, including pricing and ideal location for investments.

Salanga noted that property in-

quiries are moving up again despite the declaration of martial law. She added that prices of real property has increased, which is a good sign.

Based on their study, she said, there will be more projects by the end of the year.

“We are positive with the real-estate industry here, and the spike in land value is a good sign too,” she added.

Salanga said inquiries from business-process outsourcing investors are high not just for new locators but also for those already operating here looking for more spaces for future development. PNA

Agriculture/Commodities BusinessMirror

news@businessmirror.com.ph

Editor: Jennifer A. Ng • Friday, July 7, 2017

PHL eyes ban on Brazil meat imports

By Jasper Emmanuel Y. Arcalas

T

@jearcalas

he Philippine government may ban meat imports from Brazil after salmonella was detected in some of the shipments from the Latin American country, according to an official of the Bureau of Animal Industry (BAI).

BAI Assistant Director Simeon S. Amurao Jr. told the BusinessMirror that the government is mulling over two options to restrict the entry of meat products from Brazil.

“The options at hand that we will present to [Agriculture Secretary Emmanuel F. Piñol] are to either ban the individual plants or impose a blanket ban. We are still deliberating our recommendation,” Amurao said in an interview.

The BAI official said they will meet and present these options to Piñol next week, when he arrives from Rome, Italy, to chair the 40th session of the Food and Agriculture Organizaiton (FAO) Conference.

Amurao added that the Department of Agriculture chief will have the final say on what course of action the government would take.

He said the BAI considered the blanket ban after some meat imports from Brazil that were inspected by the National Meat Inspection Service (NMIS) tested positive for salmonella.

Amurao said the government is cognizant of the possibility that either of the two options would have an impact on the meat-supply situation of the country, considering the high price of imported pork.

“Brazil accounts for around 6 percent of our annual meat imports.

So in a way, we will be affected [by the possible ban] because we source some of our meat products there,” he said.

“But you cannot sacrifice health safety over profit. This is due to health reasons, or what we call sanitary and phytosanitary concerns,” Amurao added.

T he BA I official, however,

Employees work in a butcher shop in Brasilia, Brazil, Monday, March 20.

assured that there is no rotten meat being sold in Philippine markets today. Amurao said meat imports tainted with salmonella have been confiscated by the NMIS. In an earlier interview, Amurao said the BAI would immediately impose a total ban on Brazil meat imports if it finds out that “rotten” beef was able to enter the Philippines.

The government had subjected all meat imports from Brazil to

NFA to spend P5.63 billion for 250,000 MT of imported rice T

he National Food Authority (NFA) is spending P5.638 billion to import 250,000 metric tons (MT) of rice to prop up its dwindling buffer stock during the lean months, when rice harvest goes down significantly.

On July 6 the NFA published the terms of reference (TOR) for the purchase and supply of maximum 250,000 MT of 25-percent brokens well-milled long grain white rice of omnibus origin under a government-to-private (G2P) procurement scheme.

“The Approved Budget of the Contract [ABC] is estimated at P5.63 billion for the 250,000 MT. Bases of the computation were the prevailing FOB price, expense rates of freight, insurance and other incidental/dispersal costs and foreign-exchange rate at $1=P50,” the TOR read.

Under the TOR, the NFA said prospective bidders will bid for the imported volume on a lot basis.

“Prospective bidders may bid for any of the lots, provided that the bid must be the minimum /ma x imum of t he impor ted r ice a l lo cated per lot but the maximum quantity to be awarded per supplier must not be higher than 50,000 MT,” it read.

“The opening of the bids and award of the contract to the bidder with the lowest calculated responsive bid shall be on a per lot basis. Rice must be shipped in break bulk,” it added.

The NFA said it will hold a prebid conference on July 13 and that the proper bidding is scheduled on July 25.

The government’s purchase of rice through the G2P scheme is covered by Republic Act 9184, or the Government Procurement Reform Act, which provides that the lowest bidder would be named as supplier.

The NFA has broken down the 250,000 MT into eight lots with corresponding funding allocation, volume quantity and designate port of discharge.

The NFA said the ABC per lot would be the ceiling for the acceptable bid, thus, any bid higher than the allotted ABC per lot will not be accepted.

Two lots have allocations of 50,000 MT while the remaining six were allotted 25,000 MT. Each 50,000-MT lot has an ABC of P1.127 billion, while each 25,000-MT lot has a maximum bid cost of P563.85 million.

The NFA also divided the delivery of the 250,000 MT into two periods: August and September. The NFA said 120,000 MT of rice should arrive within August, while the remaining 130,000 MT should arrive by September.

“Early shipment shall be allowed, provided arrival dates of all vessels are within the required arrival period of the disports,” the NFA said.

“However, the buyer [NFA] may reschedule arrival period as it may deem necessary without additional cost to the buyer in accordance with the provisions of this terms of reference, provided that the other party is duly notified thereof,” the TOR read.

The NFA has desginated eight designated ports with corresponding quantity: San Fernando, La Union (20,000 MT); Batangas City (30,000 MT); Tabaco City (25,000 MT); Cebu City (25,000 MT); Cagayan de Oro City (25,000 MT); Davao City (25,000 MT); General Santos City (10,000 MT); and Manila (100,000 MT).

NFA Spokesman Marietta Ablaza said the food agency is confident that winning suppliers for the 250,000 MT of rice will comply within the scheduled date of arrival.

“If they will not follow the provision they will be penalized. I think they will do everything to follow the arrival schedule because these are businessmen, they don’t want to be fined,” Ablaza told reporters in an interview on Thursday.

She said the arrival of rice imports per lot will vary as it will depend on the winning supplier.

“The nearest would be Vietnam while the farthest would be India. It doesn’t matter who wins the bidding but what is important is that it enters the country during the prescribed arrival period,” Ablaza said.

She added that the NFA Council decided to schedule the import arrivals before the end of September so as not to affect the price of palay when the harvest season begins in October. The lean season for palay in the Philippines is from July to September.

Philippine Institute for Development Studies (PIDS) senior research fellow Roehlano Briones said the importation will not affect the price of palay as the expected volume will just beef up the NFA’s inventory.

However, Briones noted that prices could move due to speculation.

“The importation will not affect the market unless there is perception that the NFA has a lot of stock and they do not want to unload it,” he told the BusinessMirror.

Briones said the move of the NFA to shift to a G2P scheme would give the government elbow room to get a better deal.

“Of course, this is good because you are not in a hurry, there’s no immediate need or emergency.

It’s better because it’s more transparent than G2G [government to government] and you would know more the better price,” he said.

Briones also said the price of rice in the world market will not go up, as the volume being imported by the Philippiunes is “too small”. Jasper Emmanuel Y. Arcalas

AP Photo/Eraldo Peres

mandatory inspection and laboratory tests to ensure that these are safe for consumption.

This was done after Brazil’s federal police raided companies that allegedly bribed government inspectors to allow the shipment of rotten meat and meat tainted with salmonella.

Foreign news reports indicated 21 meat-packing plants were targeted by the police in an operation dubbed as “Operation Weak

Flesh”, while three meat-packing plants have been shut down by the Brazilian government.

A report from Reuters revealed that BRF, the world ’s biggest poultry exporter, and JBS, the world’s top beef producer, were part of the dozens of firms targeted in the police probe. However, both companies have denied any wrongdoing and assured consumers that their products meet rigorous quarantine standards, the

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Reuters report added.

The scandal forced major buyers of Brazilian meat to either suspend imports or impose more restrictions on shipments.

Data obtained from the BAI showed that the Philippines imported 20,716.616 metric tons (MT) of meat and meat products from Brazil from January to May. Beef imports accounted for 31.62 percent, or 6,551.453 MT, BAI data showed.

Chicken imports accounted for more than half of the meat and meat products purchased from Brazil, or about 62.64 percent. The Philippines imported 12,977.167 MT of chicken meat and products from Brazil during the five-month period.

In 2016 Brazil exported a total of 55,581.853 MT of meat and meat products to the Philippines. The figure was 5.86 percent higher than the 52,505.429 MT recorded in 2015.

Beef accounted for 33.3 percent of meat purchases from Brazil.

Government data showed that beef imports reached 18,524.966 MT, 69.04 percent higher than the 2015 record of 10,959.168 MT. More than half of the country’s meat imports from Brazil were mechanically deboned meat (MDM) of chicken. Chicken MDM imports last year reached 30,557.036 MT, 18 percent lower than the 37,314.374 MT posted in 2015.

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The World BusinessMirror

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Moon’s ‘abstract’ red line on Kim puts Seoul in back seat

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Students learn to use gas masks in an event of chemical or biological attacks, at a training center next to the War Memorial of Korea in Seoul, South Korea, on April 21. Lam Yik Fei/The New York Times

Grim option: Neutralizing N. Korea

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EOUL, South Korea—The standoff over North Korea’s nuclear program has long been shaped by the view that the US has no viable military option to destroy it. Any attempt to do so, many say, would provoke a brutal counterattack against South Korea too bloody and damaging to risk.

That remains a major constraint on the Trump administration’s response even as North Korea’s leader, Kim Jong Un, approaches his goal of a nuclear arsenal capable of striking the US. Last Tuesday, the North crossed a threshold, testing an intercontinental ballistic missile that analysts said had the potential to hit Alaska.

Over the years, as it does for potential crises around the world, the Pentagon has drafted and refined multiple war plans, including an enormous retaliatory invasion and limited preemptive attacks, and it holds annual military exercises with South Korean forces based on them.

Last Wednesday, the Trump administration made a point of threatening a military response.

Gen. Vincent K. Brooks, commander of the American forces that conducted a missile exercise with South Korea, said the US had chosen “self-restraint” with the North.

Nikki R. Haley, the US ambassador to the UN, said her country’s “considerable militar y forces” were an option. “We will use them if we must, but we prefer not to have to go in that direction,” she told the Security Council.

But the military options are more grim than ever.

Even the most limited strike risks staggering casualties, because North Korea could retaliate with the thousands of artillery pieces it has positioned along its border with the South. Though the arsenal is of limited range and could be destroyed in days, the US defense secretary, Jim Mattis, recently warned that if North Korea used it, it “would be probably the worst kind of fighting in most people’s lifetimes”.

Beyond that, there is no historical precedent for a military attack

50 miles The distance to the demilitarized zone where half of South Korean residents live, including the 10 million people in Seoul aimed at destroying a country’s nuclear arsenal.

The last time the US is known to have seriously considered attacking the North was in 1994, more than a decade before its first nuclear test. The defense secretary at the time, William J. Perry, asked the Pentagon to prepare plans for a “surgical strike” on a nuclear reactor, but he backed off after concluding it would set off warfare that could leave hundreds of thousands dead.

The stakes are even higher now.

US officials believe North Korea has built as many as a dozen nuclear bombs—perhaps many more—and can mount them on missiles capable of hitting much of Japan and South Korea.

Earlier in his term, Trump tried to change the dynamics of the crisis by forcing the North and its main economic benefactor, China, to reconsider Washington’s willingness to start a war. He spoke bluntly about the possibility of a “major, major conflict” on the Korean Peninsula, ordered warships into nearby waters and vowed to “solve” the nuclear problem.

But Tr ump has backed off considerably in recent weeks, emphasizing ef for ts to pressure China to rein in K im with sanctions instead.

After all, a preemptive US attack would very likely fail to

wipe out North Korea’s arsenal, because some of the North’s facilities are deep in mountain caves or underground, and many of its missiles are hidden on mobile launchers.

The North has warned that it would immediately retaliate by launching nuclear missiles. But predicting how Kim would actually respond to a limited attack is an exercise in strategic game theory, with many analysts arguing that he would refrain from immediately going nuclear or using his stockpile of chemical and biological weapons to avoid provoking a nuclear response from the US. Assuming Kim is rational and his primary goal is the preservation of his regime, he would only turn to such weapons if he needed to repel a full-scale invasion or felt a nuclear attack or other attempt on his life was imminent, these analysts say.

But a nt icipat ing what t he North might do with its conventional weapons in the opening hours and days after a US attack is like tr ying to describe a “ver y complex game of threedimensional chess in terms of tic-tac-toe”, said A nthony H. Cordesman, a national security analyst at the Center for Strategic and International Studies in Washington.

The problem, Cordesman added, is that there are many ways and reasons for each side to escalate the fighting once it begins.

Stopping it would be much more difficult.

Opening salvos

North and South Korea, separated by the world’s most heavily armed border, have had more than half a century to prepare for a resumption of the war that was suspended in 1953.

W hile the North ’s weaponr y is less advanced, the South suffers a distinct geographical disadvantage: Nearly half its population lives within 50 miles of the demilitarized zone, including the 10 million people in Seoul, its capital.

“You have this massive agglomeration of everything that is important in South Korea—government, business and the huge population—and all of it is in this gigantic megalopolis that starts 30 miles from the border and ends 70 miles from the border,”

said Robert E. Kelly, a professor of political science at Pusan National University in South Korea.

“In terms of national security, it’s just nuts.”

North Korea has positioned as many as 8,000 artillery cannons and rocket launchers on its side of the demilitarized zone, analysts say, an arsenal capable of raining up to 300,000 rounds on the South in the first hour of a counterattack. That means it can inflict tremendous damage without resorting to weapons of mass destruction.

Kim could order a limited response, by hitting a base near the demilitarized zone, for example, and then pausing before doing more. But most analysts expect the North would escalate quickly if attacked, to inf lict as much damage as possible in case the US and South Korea were preparing an invasion.

“North Korea knows it is the end game and will not go down without a fight,” said Jeffrey W. Hornung of the RAND Corp., adding: “I think it is going to be a barrage.”

The North has often threatened to turn Seoul into a “sea of fire”, but the vast majority of its artillery has a range of 3 to 6 miles and cannot reach the city, analysts say.

The North has deployed at least three systems, though, that can reach the Seoul metropolitan area: Koksan 170-millimeter guns and 240-mm multiple-rocket launchers capable of hitting the northern suburbs and parts of the city, and 300-mm multiplerocket launchers, which may be able to hit targets beyond Seoul.

There are perhaps 1,000 such weapons near the demilitarized zone, many hidden in caves, tunnels and bunkers. But under a traditional artiller y strateg y, the North would not fire them all at once. Instead, it would hold some in reser ve to avoid giving their positions away and to conser ve munitions.

How much damage an initial attack would inf lict depends on how many are used and on how much of the ordnance explodes. In 2010 North Korean forces fired about 170 shells at an island in the South, killing two civilians and two soldiers.

Analysts later concluded that about 25 percent of the North ’s shells failed to detonate.

New York Times News Service

f ter N o r t h K o r e a launched an intercontinental ballistic missile (ICBM), new South Korean President Moon Jae-in warned Kim Jong Un “not to cross the red line”, vowing a stern response should he step over it. The problem is it’s unclear where that line is.

North Korea’s move toward a rocket capable of reaching the US mainland would justify tougher sanctions after consultations with the US, a presidential official told reporters last Tuesday. But he added Moon’s red line was an “abstract concept” for now.

On the flip side, it would be hard for Moon to move quickly toward talks with Kim as that is premised on a freeze in North Korea’s weapons program, said the official, who asked not be identified due to the sensitivity of the topic.

The lack of a clear plan from the new administration leaves Moon, a former human-rights lawyer in office since May, in danger of playing a lesser role over his reclusive, nuclear-armed neighbor.

Kim has already directed his recent rhetoric at the US, promising to send more “gifts” Donald J. Trump’s way.

Moon will meet with other leaders at the Group of 20 summit in Germany this week, where collective condemnations are expected of Kim’s actions, while South Korea and the US conducted a joint missile drill last Wednesday. Meeting with German Chancellor Angela Merkel in Berlin last Wednesday, he said the pace of Pyongyang’s weapons development was a concern.

Still, his attempts to sound forceful against North Korea while also urging caution against rash action, and the lack of clarity on his red line, risk appearing wishywashy at home. With popularity ratings around the 80 percent mark, expectations are high domestically for Moon to improve on the prior administration, where the president was impeached.

“The ICBM test has put both Moon’s popularity and his North Korea policies on a test board,” said Lee Jae-mook, who teaches political science at Hankuk University of Foreign Studies in Seoul.

Kim’s advances in weapons technology “create a lot of homework for Moon”, particularly if the tensions spill over to South Korea’s economy or people start to feel less safe, said Kim Yuncheol, who teaches political science at the Humanitas College of Kyung Hee University. Moon is already facing some pressure.

C hou ng Tae - ok , t he f loor spokesman for the main opposition Liberty Korea Party, said that Moon would end up doing “nothing” if he sticks to his dual approach of sanctions and dialogue. Lee Hye-hoon, leader of the opposition Bareun Party, called on Moon to conduct a “fundamental review” of his policies.

Support ratings

Just 1 percent of those who approved of Moon in a Gallup Korea poll last week said they support him for his North Korea policies, while a further 1 percent favor him for his diplomacy.

Among those who disapproved, a combined 17 percent said they did so for his North Korea policies, diplomacy, or a controversy over a US missile shield.

“Moon’s desires notwithstanding, Pyongyang has no interest in discussing nuclear matters with the South,” said Ralph Cossa, president of the Pacific Forum CSIS in Honolulu. Kim wants to talk with the US as “one nuclear power to another”, he said.

“Moon has been willing to talk tough to keep Trump on his side, but I’m not sure he is prepared to play the kind of hardball that would be required to really bring Kim to his senses.”

Just two days before the missile test, Moon returned from Washington after meeting with Trump. Moon said the US leader had handed him the keys to lead a push against K im’s nuclear ambitions, allowing him to embark on “a long journey to build an eternal peace system” on the Korean peninsula.

‘Proposed conditions’

But Shin Beomchul, a professor at the Korea National Diplomatic Academy, said the chances of inter-Korean talks are fading.

“With the success of the ICBM, the North will ask for a higher level of compensation and Moon would find it difficult to meet all of the proposed conditions,” Shin added.

Namkoong Young, who has taught inter-Korean politics at Hankuk University of Foreign Studies for more than 25 years, said one of the few choices left for Moon is to stress and strengthen South Korea’s alliance with the US. “ There are few things we can do alone,” other than “asking the friend with the muscle to do something for us”, Namkoong said. Moon’s hope to resolve the nuclear issue through talks with K im “sounds too idealistic to me”. Bloomberg News

UK finance firms seek flexible immigration to ease Brexit pain

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he UK’s biggest banks, asset managers and insurers placed flexible immigration rules among their top priorities for a Brexit deal, as the industry seeks to mitigate the potential impact of leaving the European Union, according to a lobby group.

Changes to Britain’s visa and immigration system to help financial firms hire foreign nationals, a deal on market access and other measures could help generate €43 billion ($55.5 billion) of economic gains by 2025, according to a report by TheCityUK published on Thursday. While the plan helps regain some lost ground from Brexit, it still won’t bring as many benefits as remaining in the EU, it added.

“We need to make the argument to [the] government of the need to continue to allow people from overseas to come and work in the sector,” former UK Treasury minister Mark Hoban, who led the publication of the report for TheCityUK, said in an interview. “It’s particularly important given the global nature of the sector that we have a global workforce.”

Prime Minister Theresa May is under pressure to focus on the needs of the economy rather than reclaiming sovereignty over immigration and law-making as Britain negotiates its divorce from the EU. Business leaders have complained about potentially losing access to international

talent, as her government seeks to curb the inflow of migrants to the tens of thousands annually. “In the absence of a deliberate strategy to counter the effects of Brexit and other challenges, the industry is expected to stagnate,” Hoban’s team wrote in the report, produced with accounting firm PricewaterhouseCoopers Llp. The study’s 35-point package of recommendations can help the finance industr y “return to growth—albeit moderate—after a period of considerable adjustment”, it said.

May’s government should ensure continued movement for European citizens coming to Britain for work, including for some individuals without immediate employment prospects, according to the report.

Net migration to the UK fell by a quarter to 248,000 in 2016, driven by an increase in EU citizens leaving the country, while British rules around immigration have tightened, the report said. The cost to employers of sponsoring a five-year general visa has increased 250 percent between 2016 and 2017, and now totals 7,000 pounds, while the minimum salary threshold for workers has risen 44 percent since July 2015 to 30,000 pounds a year, according to the report.

Bloomberg News

www.businessmirror.com.ph

The World BusinessMirror

Friday, July 7, 2017

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China-US trade talks near 100 days with N. Korean jolt

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or China, the most important achievement of the 100 days of trade talks with the US now coming to a close might be keeping its counterpart at the table.

Negotiations due to end on July 16 have yielded some progress already, such as getting American beef back in Chinese stores, a small step toward addressing the $347-billion US deficit on $578.6 billion in trade last year.

But even amid continued engagement, major breakthroughs look less likely with President Xi Jinping complaining of a “negative” turn in relations just before his expected meeting with Donald J. Trump this week, and escalating tension over North Korea that the US links to trade.

For the world ’s second-largest economy, the talks are a goodwill gesture to maintain friendly economic ties and avoid W hite House ire, sa id Wa ng Youxin, an analyst at Bank of China’s Institute of Inter national Finance in Beijing. “We make some concessions, give them a sweetener,” he added.

The lifting of China’s 14-year ban on US beef imports is one of the initial deals, dubbed “early harvests”, that allow both sides to say they’re making progress.

Related benefits include a surge in US crude-oil imports since April and an increase in the purchase of American liquid natural gas.

In add it ion, C h ina has ap proved 2 out of 8 biotec hnolog y product appl icat ions f rom t he US, a nd t he cent ra l ba n k s a id t h i s we e k it wou ld a l low foreig n- ow ned f i n a nc i a l ser v ices f ir ms to compi le a nd issue cred it rat ings in t he do mest ic bond ma rket. “ The talks show China understands US concerns—we’re paying attention, we’re willing to cooperate and we’re determined to produce deliverables,” said Wei Jianguo, a former vice commerce minister and now vice chairman of the China Center for International Economic Exchanges, a Beijing-based think tank. The negotiation style fits Trump’s temperament and can help send positive messages, he added.

Still, that dialog is being interrupted by the standoff between the US and North Korea over the latter’s nuclear program. After

Pyongyang’s testing of an intercontinental ballistic missile this week, Trump has linked his frustration over the regime to his willingness to compromise on trade with China. “ Trade between China and North Korea grew almost 40 percent in the first quarter. So much for China working with us—but we had to give it a try!” Trump said on Wednesday on Twitter.

Ministry of Commerce data show trade with North Korea rose 13.7 percent in the first five months from a year earlier. Exports rose 32 percent, while imports contracted 9.3 percent.

‘Good start’

“Trump and China have had a good start, but now it’s hit a bump on the North Korea issue,” said Wang Huiyao, director of Beijingbased think tank China Center For Globalization.

“There are opportunities for China and the US to sit down and talk to find a way out as the 100day trade talks are still ongoing, Xi and Trump are set to meet at G-20 [Group of 20], and Trump is going to visit China this year.

China-US trade is the basis of bilateral relations and none can afford a trade war. The world can’t either.”

Positive sign

Early results from the 100-day talks are a positive sign that both sides can cooperate and sort out

differences with negotiation, MofCom Spokesman Gao Feng said at a briefing on Thursday.

“China’s economic relations with North Korea have actually been declining in recent years due to a variety of factors,” Gao said in an interview after the briefing. “We’ll seriously fulfill international obligations while engaging in economic cooperation with North Korea.”

Some Chinese analysts share the view that what truly matters about the 100-day talks is keeping both sides together at the negotiation table and avoiding a trade war, according to Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai.

Agriculture and energy are the trade domains most likely to show additional progress, according to Lester Ross, a partner in the Beijing office of US law firm WilmerHale who also leads the policy committee of the American Chamber of Commerce in China.

China’s commerce ministry said in a May report that it wants to increase US agricultural imports, such as soybeans and cotton, along with energy products including liquid natural gas, crude oil and refined oil, plus aircraft, integrated circuits and machine tools.

Such gains are less impressive in a broader context of the world’s largest trading nation: China’s customs data show total beef imports stood at $2.5 billion in 2016, while crude purchases

tot a le d $116. 5 bi l l ion — a nd machinery imports came in at $771.4 billion. Allowing foreign credit rating firms to compete in the domestic market was a long-awaited step that’s part of a broader reform plan to open up the financial system.

Asymmetric access

T he t rade pl a n cou ld erode some of China’s trade sur plus with the US, and to a larger e x tent i f t he i mpor t s boost expands to more sectors, said Wang. But the bigger challenge in the negotiations will be to persuade China to further open ser vice sectors, including education, finance and health care, he added.

R oss s a id A mer ic a n bu sinesses are more worried about asymmetric market access, in w h ic h t he y ’re blo c k e d f rom operating or acquiring in large swathes of the economy, while Chinese companies are mostly unencumbered in the US Bigger Chinese commitments are needed to lower barriers for the US firms, he said, calling the new foreign investment guidelines “ limited progress” toward leveling the playing field. “ T he 10 0 - d ay t r a d e p l a n could very well be a trap for the US,” said James McGregor, China chairman of business advisory firm Apco Worldwide Inc. and a former AmCham chairman. “After a few concessions on each side,

then China may consider that things are back to business as usual with the various industrial and technology policies that are very threatening to the future of the US businesses.”

In the lead-up to Xi meeting Trump on the sidelines of the G-20 summit in Hamburg, old disputes are resurfacing and cooling the warmth that followed their Florida summit.

The US has in recent days made a naval patrol past a Chinese-controlled islet, announced an arms sale to Taiwan, ranked China among major human-trafficking offenders, and called on Beijing to let ailing Noble Peace Prize winner Liu Xiaobo seek cancer treatment abroad.

“Ties are also affected by some negative elements, and the Chinese side has already expressed our stance to the US,” Xi told Trump, state television reported on Monday.

Those issues aside, economic relations are still a long way from the worst-case scenario. Trump, elected last year after more than two decades of criticizing China’s trade policy and a campaign full of promises to fight it, has eased off threats since meeting Xi at Mar-a-Lago.

“Reversals in Trump’s attitude are like a negotiation tactic, or bluff, to get a better deal,” said Lu. China and the US may “draw their swords”, he added, but won’t really fight. Bloomberg News

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The World BusinessMirror

Friday, July 7, 2017

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

Japan’s economy gains momentum in struggle to escape deflation

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President Donald J. Trump and first lady Melania Trump prepare to board Air Force One en route to Europe, at Joint Base Andrews in Maryland, on July 5. Trump has plans to meet Russian President Vladimir Putin face to face this week on the sidelines of the Group of 20 economic summit gathering in Hamburg, Germany. Stephen Crowley/The New York Times

‘Potential risks’ of Putin meeting give Trump’s advisers worries

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ARSAW, Poland—President Donald J. Trump arrived in Europe on Wednesday for three days of diplomacy that will culminate in a meeting with President Vladimir Putin of Russia, which has the potential for global repercussions and political fallout back home.

Even his top aides do not k now pre c i se ly wh at Tr u mp will decide to say or do when he and Putin meet face to face on Friday on the sidelines of the Group of 20 (G20) economic summit gathering in Hamburg, Germany. And that is what most worries those advisers, as well as officials, across his administration as Trump begins his second foreig n tr ip as president, stopping first in Warsaw to give an address on Thursday and then heading to Hamburg.

T he highly anticipated conversation with Putin is in many ways a necessity, given the critical disputes separating the US and Russia. But it a lso poses r isks for Tr ump, who faces a web of investigations into his ca mpa ig n’s possible l in k s to Russia, as wel l as quest ions about his w il ling ness to ta ke on Moscow for its militar y aggression and election meddling on his beha lf.

The air of uncertainty about the meeting is only heightened by the president’s propensity for unpredictable utterances and awkward optics.

And it is not the only charged encounter awaiting Trump this week. Following North Korea’s launch on Tuesday of an intercontinenta l ba l listic missi le, he also faces new pressure to act on a threat from Pyongyang that has long confounded US presidents, and that he has few appealing ways to address. He is scheduled to meet in Hamburg with President Xi Jinping of China, as he complains that Beijing has not done enough to rein in North Korea.

If Trump’s first foreign trip, in May, was a chance for him to escape turmoil at home—staff infighting, a stalled agenda and the

Russia-related investigations— his second will thrust him into the maelstrom. And at the center of it, Putin awaits. “ There’s a fair amount of nervousness in the W hite House and at the State Depar tment about t his meeting and how they manage it because they see a lot of potentia l r isks,” said Steven Pifer, a former ambassador to U kraine who has worked for the National Security Council and the State Depar tment. “ There is this gray cloud for the president of the investigations about col lusion, so any k ind of a deal is going to get the microscr utiny of, ‘Is this a g iveaway to the Russians? ’” Trump himself does not appear to be troubled by the meeting. He has told aides he is more annoyed by the prospect of being scolded by the German chancellor, Angela Merkel, and other leaders for pulling out of the Paris climate accords and for his hard line on immigration.

Trump’s team said he might bring up Russia’s documented meddling in the 2016 election, but he is unlikely to dwell on it: Doing so would emphasize doubts about the legitimacy of his election.

Aides expect him to focus on matters involving Syria, including creating safe zones, fighting the Islamic State and confronting Putin’s unwillingness to stop the government of President Bashar

al-Assad from using chemical weapons against civilians.

Before the meeting bet ween the US and Russian presidents, Secretar y of State Rex W. Tillerson said late on Wednesday the US “ is prepared to ex plore t he possibi l it y” of e x panded cooperat ion w it h Moscow in Sy r ia, including a discussion of establishing no-f ly zones.

The official statement listed several potential “ joint mechanisms” with Russia, including “nofly zones, on the ground cease-fire observers and coordinated delivery of humanitarian assistance.”

Tillerson cautioned, though, that the US and Russia “certainly have unresolved differences on a number of issues”, regarding Syria, and warned that no faction— presumably including the Assad government—be allowed to “illegitimately” retake or occupy areas liberated in the current offensives.

A day before Trump left Washington, the W hite House announced that the meeting would be a formal bilateral discussion, rather than a quick pull-aside at the economic summit gathering that some had expected.

The format benefits both. Putin, a canny one-on-one operator who once brought a Labrador to a meeting with Merkel because he knew she was afraid of dogs, will be able to take the measure of Trump.

Tr ump’s a ides are seek ing str uct ure and pred ictabi l it y.

T hey hope that a for ma l meeting, w ith aides present and an agend a, w i l l leave less room for improv isation and relegate Russia’s medd ling in the campa ig n to a second a r y topic , behind more pressing pol ic y concer ns that the president is eager to address.

“Nobody has found the slightest evidence of collusion, any evidence the vote was tampered with, so now they have turned their obsession to Russian ‘interference’,” said Kellyanne Conway, the president’s senior counselor

I expect an Olympian level of macho posturing between these two leaders, who both understand the power of symbolism.”—Chollet

and former campaign manager. “I don’t think that’s what the American people are interested in.”

Still, lawmakers in both parties are pressing the president to stand tough. They signaled their wariness last month with a 98-2 vote in the Senate to codify sanctions against Russia and require that Congress review any move by the president to lift them, a step the White House is resisting.

“Let’s be clear: The Russians interfered in our election and helped elect Donald Trump president,” said Sen. Jack Reed, Democrat-Rhode Island, the ranking member of the House Armed Services Committee. “ There is a serious, ongoing criminal investigation into this matter. And President Trump must refrain from any unilateral concessions to Russia.”

Cog n i z a nt of t he per i l s, the W hite House has planned Tr ump’s itinerar y to counter the perception that he is too friendly with Moscow. In Warsaw on Thursday he will deliver a major speech and meet with Central and Eastern European allies, activities calculated to demonstrate his commitment to North Atlantic Treaty Organization (Nato) in the face of Russian aggression.

But there, too, Trump will be under pressure to do what he refused to in Brussels during his first trip: explicitly endorse, on European soil, the Article 5 collective defense principle that undergirds Nato.

His advisers say he is eager to meet with President Andrzej Duda of Poland, a center-right politician who shares Trump’s skepticism about migration, and that he sees a chance to make lucrative energy deals with Duda’s government—perhaps at the expense of Russia.

But t he subst a nce a nd body l a ng u age of h is encou nter w it h P ut in w i l l d raw t he most scr ut iny.

“I expect an Olympian level of macho posturing between these two leaders, who both understand the power of symbolism,” said Derek Chollet, a former assistant secretary of defense. “Putin will be very prepared for this meeting. He’s someone who is a master at manipulation.”

New York Times News Service

apan’s economy is running the hottest relative to capacity since the global financial crisis. More than four years after the Bank of Japan (BOJ) launched its radical monetary easing, key conditions are aligning in its long battle to truly escape from deflation.

The latest reading of the nation’s output gap, released on Wednesday, is another milestone on the journey to that escape, economists say.

“The positive output gap shows Japan is making progress toward becoming a normal economy,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley in Tokyo. “We are now in a similar situation as before the Lehman shock in 2008, when Japan enjoyed a prolonged recovery, thanks to a global economic expansion.”

The BOJ’s output gap, a measure of the balance between supply and demand in the whole economy, rose for a third straight quarter during the first three months of this year, reaching the highest level since 2008, the central bank said on Wednesday. That means demand now clearly exceeds supply in an economy undergoing its longest expansion since before the crisis.

Yet, Japan is among countries around the world that are seeing inflation lag behind economic growth. Core consumer prices are rising only slowly—by 0.4 percent in May—and remain well below BOJ Governor Haruhiko Kuroda’s 2-percent target, prompting expectations that the BOJ will lower its inflation forecast when it releases its quarterly outlook at this month’s policy meeting.

Still, the tightest labor market in decades is expected to get even tighter, helping drive long-awaited wage gains.

And Japanese consumers, hammered by a sales-tax increase in 2014, are showing signs of returning to health.

“The continuing positive output gap is a step toward ending deflation and the BOJ must be gaining confidence because of it,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Seeking escape

While Prime Minister Shinzo Abe has said Japan is no longer in deflation, he hasn’t declared the end of deflation. The Cabinet Office defines the latter as reaching the point where there is no risk of returning to deflation, or continuous price declines, and measures it according to four criteria: the output gap, consumer prices, the GDP deflator and unit labor costs.

Recent poor price readings stem mainly from temporary factors, while the stable recovery in domestic demand and the growing labor shortage are expected to change company pricing behavior, with core inflation reaching 1 percent in the next 12 months, UBS analysts, led by economist Daiju Aoki, said in a research report last week.

“We think Japan can and will overcome deflation,” they said.

The positive output gap shouldn’t be taken as a sign of a sharp acceleration in inflation, said Hiroshi Ugai, chief economist at JPMorgan Chase and Co. Japan’s low potential growth rate, which is under 1 percent, makes it easier to achieve a positive output gap, while companies remain unconvinced about the nation’s growth prospects in the longer term, he said.

“I expect the output gap to stay in positive territory while creating inflationary pressure only little by little,” Ugai said. “That’s because companies are very concerned about higher business costs so they don’t want to raise wages without having confidence in the outlook for the economy.”

The Cabinet Office’s own estimate of the output gap, released last month, was positive for the first quarter and will likely widen ahead, with inflation eventually accelerating, Takeshi Yamaguchi, chief economist at Morgan Stanley MUFG Securities, said in a research note last month.

“We see a risk that the government may declare an exit from deflation by the end of this fiscal year, before the end of BOJ Governor Kuroda’s term in April next year,” he said. Bloomberg News

Some US states haven’t fully recovered from recession

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s the US economy enters its ninth year of expansion this month, many Americans feel the recovery has been incomplete—and the numbers back them up.

Five states—Arizona, Connecticut, Mississippi, Nevada and Wyoming—still haven’t regained their levels of GDP from before the financial crisis, more than five years after the country as a whole hit that milestone.

Eight states are below prerecession levels of employment. And 15 have home prices that have yet to rebound fully.

While each of the states has individual obstacles, they illustrate how growth has lagged outside of the nation’s largest cities in New York, California and Florida.

And though President Donald J. Trump won some of the states last November after highlighting sectors and regions that have lagged for years—including, f o r e x a m p l e , c o a l m i n i n g i n We s t Virginia and manufacturing jobs in the Midwest—the pain hasn’t been limited to Republican territory.

“The hallmark of the recovery is that it is being driven by the nation’s largest metro areas,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “Metro areas have attracted millennials and boomer empty-nesters and are globally oriented, benefiting from global capital inflows. Rural economies that are dependent on commodity-based activities have suffered.”

Wyoming’s dependence

Wyoming—which has the second-smallest economy and depends on mining for onefourth of GDP—is a prime example, having suffered the biggest percentage decline in payrolls from the start of the recession in December 2007.

The state, which went for Trump, is likely to be among the final two to return to peak employment, in 2022, according to forecasts

by IHS Markit economists.

The state’s tourism business, including the Jackson Hole resort and park area, was also slow to recover in the wake of consumers’ household wealth dropping, said Anne Alexander, a University of Wyoming economist. While tourism has since bounced back, the state’s huge energy sector has slumped since 2014.

“There’s been a significant slowdown in the past couple of years,” she said. “Natural gas prices fell first, then oil, and then coal production took a dive.”

The recent energy downturn has taken a toll on a number of states. Moody’s Analytics considers Alaska and West Virginia—both big producing states— now the only two in recession. Even so, energy states have been leaders in increasing production and employment since 2007, including North Dakota, South Dakota and Texas, which benefited from earlier booms in prices, as well as new lower-cost production techniques.

Nevada bust

Nevada has also had a tough road back, having failed to reach prerecession levels of GDP and home prices. It was among a handful of states, also including Florida, Georgia, California and Arizona, where the 2006 housing bust was particularly severe. Las Vegas hotels, restaurants and casinos suffered when consumers bolstered savings in the wake of the 2007-2009 downturn.

In northwestern Nevada, business at 600-employee Q&D Construction Inc. is growing again but hasn’t returned to 2006 levels when it employed 1,100 people. The company builds roads, hospitals, schools and airport facilities, as well as housing.

“Things are coming back,” but Nevada “has not gotten back to where it once was,” said Lance Semenko, Sparks-based Q&D COO. The 4.7-percent unemployment rate in Nevada, though below the 5.1-percent level when the recession began, remains above the housing-boom figure of 3.9 percent last seen in early 2006.

Nevada, which voted for Clinton, had the highest percentage of homes with mortgages in excess of the value of homes, or negative equity, at 12.4 percent, followed by Florida, Illinois, New Jersey and Connecticut, according to real-estate researcher CoreLogic Inc. “Our recession was longer and deeper so naturally it will take us longer to recover,” said Stephen M. Miller, director for the Center for Business and Economic Research at the University of Nevada at Las Vegas. Bloomberg News

The Regions BusinessMirror

news@businessmirror.com.ph

Duterte awards Gold Cross medals to 2 PAF pilots

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LARK FIELD, Pampanga—Two pilots of the Philippine Air Force (PAF) were awarded the Gold Cross medal by President Duterte on Tuesday during the service branch’s 70th anniversary.

Lt. Col. Rolando Conrad Peña III and Maj. Melkie Tadeo were honored as a reward or their gallantry in action and heroism in the face of gravedangeragainstlocalandforeignterrorists.

PAF commander Lt. Gen. Edgar Fallorina also commended the two PAF pilots.

Peña, from the General Staff Core of the Air Defense Wing, was conferred the Gold Cross for serving as Pilot-in-Command of the FA-50 jet fighter, conducting a series of bomb runs, which led to the destruction of local and foreign terrorist groups in Butig, Lanao del Sur, from January 23 to 26. He also conducted day-and-night air operations in Marawi City from May 23 to 27, causing casualties among enemy ranks, which paved the way for the safe evacuation of civilians and saved the lives of troops on the ground despite unfavorable weather condition alongside enemy fire in the area.

Tadeo, from the 15th Strike Wing, was given the medal for serving as the pilot of AgustaWestland-109 attack air helicopter during the conduct of day-and-night battle air interdiction, intelligence-surveillance reconnaissance and close-air support that destroyed the local and foreign terrorist groups in the vicinity of Sitio Pagalongan, Barangay Gacap, Pigapo, Lanao del Sur, on April 22 and 23 through the accurate delivery of air strikes.

Ashley Manabat

Editor: Efleda P. Campos • Friday, July 7, 2017 A9

SC rules Duterte can declare martial law anywhere in PHL to fight terrorism

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By Joel R. San Juan

@jrsanjuan1573

HE Supreme Court (SC) has declared the President has the discretion to put the entire country, or any part of it, under martial law.

In an 82-page majority ruling of the Hgh Tribunal penned by Associate Justice Mariano del Castillo, the SC upheld the constitutionality of President Duterte’s Proclamation 216 placing the entire Mindanao under martial law and suspending the privilege of the writ of habeas corpus following terrorist attacks led by the Maute Group.

The Court also urged the Filipino people to unite in the fight against any form of terrorism.

“At the end of the day, however ardently or passionately we may believe in the validity or correctness of the varied and contentious causes or principles that we espouse, advocate or champion, let us not forget that, at this point in time, we, the Filipino people, are confronted with a crisis of

such magnitude and proportion that we all need to summon the spirit of unity and act as one undivided nation, if we are to overcome and prevail in the struggle,” the Court said.

Associate Justice Teresita Leonardo de Castro concurred with the majority decision, saying the government had shown that the series of violent acts and atrocities in Marawi City were “intended to lay the groundwork for the eventual establishment of a Daesh wilayat or province in Mindanao.”

The Court noted the siege in Marawi City has entered its second month and had left more than 400 persons dead.

“Can we not sheathe our swords and pause for a while to bury our dead, including our differences and

prejudices?” the SC said.

In junking the three consoldiated petitions assailing the constitutionality of Proclamation 216, the Court found sufficient factual basis for its proclamation.

Among the parameters for detemining the sufficiency of the factual basis for the procmalation and/or suspension of martial law include the concurrence of actual rebellion or invasion and the necessity to public safety of the proclamation and/or suspension.

There should also be a probable cause for the President to believe there is actual rebellion or invasion.

The SC noted there is also no provision in the 1987 Constitution that confines the declaration of martial law in the particular place where the armed public arising actually transpired.

It said limiting the proclamation and/or suspension of the writ of habeas corpus to the place where there is actual rebellion “would not only defeat the purpose of declaring martial law; it will make the exercise thereof ineffective and useless.”

In upholding the consitutionality of Proclamation 216, the Court

gave weight to the report submitted

by Duterte to Congress on the public rising in Marawi pertpetrated by the Maute Group and the Abu Sayyaf Group (ASG).

In his report, the President said the acts of violence perpetrated by the Maute Group and ASG were directed not only against the government forces or establishments, but also against civilians and their properties.

He said the armed hostilities, bomb threats, road blockades and checkpoints, burning of schools and churches, capture and killing of hostages, targetting of non-Muslims, hampering of medical services, all of which led to the conclusion of the President the security of the entire Mindanao was compromised.

The Court acknowledged the President’s duty to maintain peace, and public safety is not limited to the place where the actual rebellion is happening. It said it can be extended to other areas where the present hostilities is in danger of spilling over.

“Clearly, the power to determine the scope of territorial application belongs to the President. The Court

cannot indulge in judicial legislation without violating the principle of separation o f powers and, hence, undermining the foundation of our republican system,” the SC said.

It also noted that the Court is not equipped with the competence and logistical machinery to determine the strategical value of other places in the military’s efforts to quell the rebellion and restore peace.

“It would be engaging in an act of adventurism if it dares to embark on a mission of deciphering the territorial metes and bounds of martial law,” it explained.

With regard to reports of human-rights violations happening in Mindanao under martial rule, the SC said the issue should be resolved in a separate proceedings since its jurisdiction under Article VII, Section 18 of the 1987 Constitution limits its review on the sufficiency of the factual basis for martial-law proclamation.

“Finally, there is a risk that if the Court wades into these areas, it would be deemed as trespassing into the sphere that is reserved exclusively for Congress in the exercise of its power to revoke,” the SC said.

Vizcaya students devise eco-pot for urban gardening

By Suzanne June G. Perante Special to the BusinessMirror

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AYOMBONG, Nueva Vizcaya—Enter prising students of the Nueva Vizcaya State University (NVSU) in this capital town have pioneered what they describe as a project that combats decreasing volume of agricultural crops harvested in urbanized municipalities of Nueva Vizcaya and the increasing factors that contribute to the worsening problem of solid wastes, like plastic bottles, plastic bags, tarpaulins and Styrofoam containers.

The NVSU Enactus Team in-

troduced Project Eco-Pot for Urban Organic Gardening (EPUOG).

Project Eco-Pot for Rural-urban Organic Gardening seeks to alleviate poverty through its socialentrepreneurship program.

“Project EPUOG is geared toward the promotion and implementation of urban gardening to uphold a food-production scheme with the use of organic fertilizer and lessen problems on food security and malnutrition. It also offers the consumers of the garden set-grown vegetables a healthy lifestyle as they nurture their own organic garden,” NVSU-Enactus Team Leader Eljoehara B. Millares said.

BOUND for the Enactus Philippines National Finals slated on July 7 and 8 at the SMX Convention Center in Pasay City, the Nueva Vizcaya State University (NVSU) team, in the upper right photo, shows their thumbs-up sign. Upper left photo shows Enactus Philippines Chairman Dr. Jose P. Leviste Jr. Middle photo shows NVSU team leader Eljoehara B. Millares (center) joining a women’s group in Solano, Nueva Vizcaya, on how to convert used tarpaulin into eco-pots, while lower photo shows her attending to a garden set loaded with eco-pots. SUZANNE JUNE G. PERANTE

The project will be launched in Poblacion, Bambang, Barangay Salvacion, Bayombong and Barangay Osmeña in Solano. Women clubs or organizations in these three villages will be trained to craft an eco-pot with used tarpaulin materials to planting pots. This is a potential source of income for the clubs as their products such as eco-pot, organic fertilizers and organic vegetables will be sold at reasonable prices.

This project also aims to be replicated in the different urban areas not only in the province of Nueva Vizcaya but to the entire country.

“Enactus is an international nonprofit organization dedicated to inspiring students to improve the world through their entrepreneurial skills. It provides platforms for teams of outstanding students to create community development projects that put people’s own ingenuity and talents at the center of improving their livelihoods,” Enactus Philippines Chairman Dr. Jose P. Leviste Jr. said.

Guided by educators and supported by business leaders, students take the kind of entrepreneurial approach that empowers people to be a part of their own success. The move transforms both the lives of the people it serves and the lives of the students as they develop into more effective, valuesdriven leaders.

An annual series of regional and national competitions provides a forum for teams to showcase the impact of their outreach efforts and to be evaluated by executives serving as judges. National champion teams advance to the prestigious Enactus World Cup to experience excellence in competition, collaboration and celebration.

Finance Secretary Carlos G. Dominguez III will be the guest of honor and keynote speaker at the opening ceremony of the annual Enactus Philippines National Finals on July 7 and 8 at the SMX Convention Center in Pasay City.

This year’s competing teams include Adamson University, Columban College (Zambales), Holy Trinity College of General Santos City, Nueva Vizcaya State University, Sultan Kudarat State University’s Access, Isulan and Tacurong Campuses, Tarlac Agricultural University and University of Antique.

Enactus is sponsored by EEI

Corp. (Red Diamond Sponsor); OceanaGold (Philippines) Inc. and AG&P (Diamond Sponsors); Unilever and Philippine Airlines (Platinum Sponsors); Saudi Ara-

mco, AES Philippines and Orica Philippines Inc. (Silver Sponsors).

KPMG (RG Manabat & Co.), Quisumbing Torres (member-firm of Baker & McKenzie International),

Asian Corporate Network Inc., Philippine Eagle Foundation and the Philippine Chamber of Commerce and Industry are institutional partners.

A10 Friday, July 7, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

Can we afford to spend more?

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nless, like some people, you are only driven by a political agenda—“The administration is always wrong/right”—it is important to try to understand what the government is doing.

When we try to comprehend something that is complex, we attempt to bring it down and simplify the situation in terms of our own experience. This is particularly true of government finances, which can be like trying to learn a foreign language.

If we spend more money than we earn, that creates a deficit, a budget deficit. In order to make up that shortfall, we borrow money.

Borrowing money from a bank, which will not tolerate any excuses for late or nonpayment, is like the government borrowing from foreign sources. Borrowing money from your relatives is more like a government’s domestic borrowings, which can be paid in local currency that is created through simple accounting “tricks”.

There is concern with the Philippine government’s efforts to ramp up its infrastructure program in that the necessary funding will not be available without increasing its budget deficit, which will be met with borrowings. It is important that the public be aware and knows exactly how much, to whom and at what price any additional debt will be added.

However, perhaps driven by politics, there seems to be an extreme, and maybe unnecessary, concern over the government increasing both its budget deficit and its external borrowings.

When you look around the world, you see two different conditions that are striking in their difference. There are economies like the Philippines that are growing and those that are not. The reason is obvious on closer observation. You cannot have a healthy national economy if the government’s “economy” is unhealthy.

For two decades the Philippine economy was a “basket case” because the government’s finances were in the same basket, depending on debt and handouts. This changed because—in the words of a recent speech at the United Nations by Ambassador Teddy Locsin Jr.—President Gloria Macapagal-Arroyo saved the economy “in the Wall Street global financial crisis”.

In 2008 the government debt as a percentage of GDP was 54.7 percent. It is now 23 percent lower at 42.1 percent. Back then the government budget deficit as a percentage of GDP was 3.7 percent. In 2015 it was 0.9 percent. The Aquino administration took advantage of those facts to increase spending in 2016 as supposedly the Duterte administration will in 2017 to increase the deficit to over 3 percent again. But is that a problem?

Compare this with other nations. Brazil’s debt-to-GDP ratio is now at 17 percent. The US and Japan are both over 4 percent. While a plus 3-percent Philippine deficit will be higher than Canada, Australia, France and the UK, there are two big differences.

The Philippine economy is growing much faster than in those nations and can handle a 4-percent budget deficit much more easily. Further, those countries are using their deficit to support their failing economies while the Philippines will use the money to build infrastructure to increase growth.

We must be vigilant that the government does not borrow and spend foolishly. That is our job. But there is a sound financial foundation to justify more spending to build for our future.

Since 2005

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I

The Comelec welcomed this plan, as it will give the public the opportunity to see what’s available in terms of election technologies.

More important, this fair will be a perfect opportunity for local talent to showcase what it can do.

The Comelec chairman himself gave the assurance that “locally made and assembled technology” was not being ruled out.

First, Congress is in recess, and will remain so until nearly the end of July; second, upon Congress’s return, the most logical first order of business will be the President’s State of the Nation Address (Sona); and third, by the time those two things happen—the end of Congress’s recess and the Sona—the Commission on Elections (Comelec) will have already begun printing the ballots for the barangay and SK polls. At this point, I might as well—and with equal effect—be screaming into a gale force wind.

And to continue doing so would be to ignore the fact that, as we get closer to October 2017, another

the preparatory activities needed for the conduct of the next national elections. Under the manual elections regime prior to 2010, those 20 months provided lots of time; under the automation model those 20 months are, at best, a snug fit.

And since we’re now coming up to August—barangay elections or not —the start of that 20-month period relative to the 2019 polls is bearing down on all of us very, very quickly.

Thankfully, the Comelec Advisory Council has stepped up and is now in the process of crafting its technology recommendation for the 2019 elections—basically, the council’s advice to the Comelec on what automated elections system should be used in the coming polls, based on its study of how previous

James Jimenez

spox

F I had read aloud all the opinion articles I’ve written about the 2017 Barangay and Sangguniang Kabataan (SK) elections— not even including this one—my voice would be as raw and ragged as the Dark Knight’s in those Christopher Nolan movies, only not as menacing. And yet, for all that effort, some inescapable facts have to be faced. countdown clock is ticking with ever-growing urgency: the 2019 midterm elections.

For the longest time, elections in the Philippines followed a threeyear cycle, with Year One being the year national elections are held.

In the same year, barangay and SK elections are conducted; the following year—Year Two—elections for the Autonomous Region in Muslim Mindanao (ARMM). Since the ARMM polls take place in August, this electoral calendar frees up the remaining four months of Year Two, the 12 months of Year Three, and the first four months of the new Year One—or 20 months in total, for all

automated elections went. This year early reports have it that the council is considering the possibility of recommending the purchase of the vote counting machines used in the 2016 elections. Needless to say, the final decision on the matter rests with the Commission en Banc, but the council’s recommendation— coming, as it does, from a panel of acknowledged experts in the field— carries a lot of weight.

The council has, likewise, announced plans to hold a technology fair sometime in July. The Comelec welcomed this plan, as it will give the public the opportunity to see what’s available in terms of election technologies. More important, this fair will be a perfect opportunity for local talent to showcase what it can do. The Comelec chairman himself, last week, gave the assurance that “locally made and assembled technology” was not being ruled out.

These developments make for a good start to the preparations for the 2019 National and Local Elections. All that remains now is for everyone with an interest in prepping the automated system for 2019, to come forward and be a constructive part of the process. Consider this an invitation.

Teachers need help: Who will help them?

Dr. Jesus Lim Arranza

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

Online Editor Social Media Editor

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

An invitation

Continued from A1

F

or a family of four today, where the breadwinner is a teacher, sending two kids to school could be a huge financial stress.

This makes going to the loan sharks a very tempting option for teachers in need of immediate cash. And although this would significantly reduce the purchasing power of their paycheck since a significant part of it would be used to pay for usurious loan interests, many teachers still fall into the clutches of loan sharks nonetheless.

After which, many of them would resort to selling whatever items at school to offset their lost income due to their added cost for interest payments. Although this has been banned by the Department of Education (DepEd) because it distracts the attention of teachers, there are still those who take the risk for survival reasons.

The current loan interest rates of banks range from 4 percent to 6 percent per year. And some teachers’ cooperatives and teacher organizations have availed and continue to avail themselves of these loan rates from the banks for relending to their members and the teach-

ing community. I am saddened, however, by the lending rates being offered by the teachers groups to their teacher borrowers, which go as high as 15 percent per year.

While this interest rate is definitely lower than what the usurers are charging for their loans, I find the

10-percent interest spread being charged by the teachers’ groups to teacher borrowers unreasonable.

On a personal note, I find the 10-percent spread too much for several reasons. For one, while teachers’ cooperatives or associations do not require collaterals for the loans, they require, however, the teacher borrowers to sign an authorization to automatically deduct from their paychecks their monthly payments for their loans. This payment guarantee is even better than the collaterals being required by banks for their loans as the process of foreclosure and disposal of collaterals to recover unpaid loans are long and tedious.

Second, while teachers’ cooperatives and teachers’ organizatons, as lenders, say their interest rates are lower than what the usurers are charging for their loans, I find the comparison unthinkable. While I understand that teachers’ cooperatives and teachers’ organizations have administrative costs to cover for their operations and, therefore, must charge a spread between the interest rates they are paying for their loans with the banks and the interest rates they are charging their teacher borrowers, perhaps, the teachers’ cooperatives and teachers’

organizations can consider reducing their 10-percent spread to 5 percent.

That should lower their loan interest rates to teachers to only 10 percent per year and still have a spread of about 4 percent to 5 percent from their loans with the banks.

Meanwhile, as teachers struggle with their finances and loan payments, they can only resort to other sources of income to offset the money lost from their paychecks to pay off their loans, including interests. These interest payments could have been used to buy more food for their families. But it seems like the teachers are helpless in their situation, especially if and when they need immediate cash.

Who will then look after the welfare of the teachers? Can the Bangko Sentral ng Pilipinas do something about it? Can the Bureau of Cooperative Development intervene on the teachers’ behalf? Or can the Department of Education do something to help its teachers in this regard? Teachers, after all, help secure the future of the nation through the children they mold to be productive and responsbile Filipinos in their growing up years.

Why, then, can’t we help them secure their future, as well?

Opinion BusinessMirror

opinion@businessmirror.com.ph

Friday, July 7, 2017 A11

Conflict in Philippine political economy and the chain-store paradox Noel P. De Guzman

EAGLE WATCH

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he late American microeconomist, Jack Hirshleifer, once delivered a speech, entitled “The Dark Side of the Force”. In this speech, he calls the attention of economists to the important issues of “war, crime and politics” that are seldom tackled in conventional economic discourse. He points out that humans have two basic economic functions: the productive and the appropriative. And while much of mainstream economics deals with the first (as demonstrated by the profession’s obsession with issues of efficiency and economic growth), the second—the propensity for conflict—lies submerged.

Quoting Hirshleifer: “The appropriative struggle can also take more energetic forms, for example strikes and lockouts, bank robbery, revolutionary warfare, and international confrontations.

In short, the dark side is no mere outlying peninsula but rather an intellectual continent on the map of economic activity.” and “The bottom line is that nations with wealth-enhancing laws and institutions will not be able to enjoy the fruits thereof, unless, when challenged, they can put up a tough fight.”

These passages ring true today in the Philippines. Indeed, our government continues to face a sequence of potential and actual conflict situations: the territorial dispute with China, confrontations with local militant groups, such as Kadamay, and the ongoing crisis in Marawi City. As the most powerful entity in any nation, a government’s response to any security challenge is crucial.

Economics, and in particular, industrial organization and game theory can offer some insights.

First, the government is the only institution in any nation that has a monopoly on the legitimate use of force. As “customers”, citizens pay taxes to ensure their protection from crime and invading armies. A government is therefore, first and foremost, a monopolist in the “protection industry”. However, over the years, governments have evolved and taken on multiple roles, such as the provision of public services, macroeconomic policy, disaster assistance and others. Hence, the government is also like a multiproduct firm that practices “bundling”. In addition, a government also practices price discrimination when it levies different tax rates to different citizens. There is, however, one other parallel that is quite relevant today: strategic entry deterrence.

China, the Maute Group and Kadamay all represent challenges to the present Philippine government, albeit in varying degrees.

They all have appropriative motives and such cannot be realized unless the government surrenders some of its monopoly power over the use of force. In each situation, the government basically has two options: fight (or deter “entry”) or accommodate.

The theory of strategic entry deter-

rence from industrial organization describes why an incumbent monopolist may choose one or the other of the two actions.

In the language of game theory, the present government seems to be involved in what is called the “chainstore game”. Introduced into economics by Nobel Prize-winning game theorist Reinhard Selten, the chainstore game gives rise to a celebrated paradox. In the game, an incumbent monopolist faces a sequence of competitors in different markets. The number of competitors is finite and the monopolist must devise a strategy that maximizes its welfare. The so-called chain-store paradox arises because the rational solution via backward induction (also known as the subgame perfect equilibrium) is for the monopolist to accommodate entry all the time. The simple logic is that when the monopolist decides whether to fight or accommodate in the last market, it chooses to accommodate since there is no more reputational gain to be had and fighting is costly. However, this situation is repeated in the second-to-the-last market if it is common knowledge that the monopolist accommodates in the last market. The game unravels backward until it doesn’t pay to fight any competitor.

The paradox is that choosing not to fight all the time does not seem natural. Looking at the Philippine government’s actions in recent months, it chooses to accommodate when it comes to China, fight the Maute Group and accommodate Kadamay. What explains this pattern of behavior? There have been several attempts to provide resolution of the chain-store paradox, including the roles played by uncertainty and asymmetric information. For example, economists, such as Kreps and Wilson, and Milgrom and Roberts, break the paradox by assuming that the competitor faces uncertainty about the strength and/ or preferences of the incumbent.

This uncertainty allows entry deterrence (or occasional display of aggressiveness) to be rational even if, in fact, the monopolist is weak.

It is also possible for a government to randomize its actions (i.e., play a mixed strategy) to gain advantage.

Whatever the case may be, establishing a reputation for toughness (whether real or imagined) should take top priority.

Promises at the fast-food restaurant and café Tito Genova Valiente

annotations

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here is a new thing in town: marketing in places like fast food restaurants and café. The approach is old; in fact, it is known already by that term “network marketing”.

What is new is how these business encounters are surreptitiously done.

Again, the sense that fast-food and café owners are not aware of what is going on under their noses is questionable. At best, perhaps, they tolerate the actions.

The technique is to go to a fast food or café. Any place where one can nurse a drink will do. Thus, a fast food will do so long as you order coffee or any drink. You cannot order sandwiches and pasta; they wilt under the talk of money, which can be long. A coffee shop is perfect; it offers things that can remain untouched for a long time. In cafés, remember, we touch each other

B

Congo, for instance, had their last censuses in 1979 and 1984, respectively. Estimating future fertility rates is especially hard; earlier demographers did not anticipate the success of China, India and Bangladesh in reducing birth rates, skewing global projections for 2000.

That said, it’s unlikely that the margin of error in UN projections would materially change the facts on the ground in many African countries. Consider Burundi. Even if its population doesn’t quintuple by 2100, as the UN predicts, it already has a fertility rate of 6.1 births per

given to another partner.

Lies are lovelier in cafés and fastfood. Sweet words are made more sentimental over cups and cups of coffee or glasses of Coke zero.

Last Sunday, at the table beside me in a café, a man promised P15,000 in less than a month. At a table right in front of mine, a young, lovely girl was looking at her latte.

Were those tears streaming down her cheeks? The old man with her looks sad and serious. He must be the father of the girl. He is a sweet father, holding the tiny hand of the girl who would not look up.

I have actually witnessed (or eavesdropped on) breakups in fastfood restaurants. One was messy, with the woman throwing the hamburger at the face of the man who, I believe, broke her heart.

Every time I order my cheeseburger in that fast food, my day is quickly turned into a one-act play of love lost and buns and mayonnaise wasted. It makes my day. The memories make me smile. The happiness is not about percentage and profit, and that is good.

E-mail: titovaliente@yahoo.com.

Radio Veritas intensifies public service through new program, ‘Good Samaritan’ Rev. Fr. Antonio Cecilio T. Pascual

SERVANT LEADER

R

adio Veritas, the leading faith-based AM station in Mega Manila, intensifies its commitment to charity and public service through the new program Good Samaritan.

The Good Samaritan replaces Caritas sa Veritas, and serves as a platform for those in need to make on-air appeals for legal or spiritual advice, medical, material and financial assistance, and link them to “Good Samaritans”. It airs every Monday to Thursday from 1 to 2 p.m.

In this program, the station accepts requests for an on-air appeal of those who are in need and

Africa’s demography is not its destiny

y 2050, more than one-quarter of the world’s population will live in Africa—up from about one-sixth today. Even if these projections are slightly off, that fact should serve as a call to action for a continent whose long-term promise is equaled by wide-ranging perils.

The numbers come from the latest United Nations report on population trends, which projects an overall increase in world population to 9.8 billion in 33 years, from 7.6 billion today. Such projections are not an exact science. Data can be patchy and unreliable—Afghanistan and

through words and gazes, lengthy words and extended gazes.

The noisy fast food is not a bad place for business proposition one realizes. The noise may distract the potential agent but it also covers the nature of the conversation. The manager of the place can be led to think there is just a heated dialogue about martial law in some places in the country.

The quiet in the café can be ideal for business partnerships to coagulate and form into something thicker than blood and chocolate. But in cafés, one can encounter cranky legit customers who are there for the coffee. When this type enters a

café, the manager should make sure there is a seat, a fine place near the window, or else this person will turn around and point to tables where there is only one cup of coffee and three persons staring down at it.

That is a sign that something less than poetic and more commercial is going on. The one cup is the only contract holding the table. The network marketing man has ordered it an hour ago and it has enabled three people in succession to listen to a business pitch.

Perhaps, it is not my business to mind other people’s business. Or maybe, I am a traditional person.

For me, be it fast food or cafés, these places are meant for food to be taken and coffee or tea to be drunk.

There can be conversations but they should either be about the weather— social, atmospheric or political.

Proposals or promises can be made, but they should not be about commerce and profit. They should be about how to live with each other forever, even if the proposal has a bit of bitterness in the cup of coffee witnessing the pact. Promises should be about love, even if one knows half of it has already been

woman and one of the continent’s highest population densities. A festering political conflict there has sent more than 300,000 refugees fleeing into neighboring countries.

Although fertility rates have been dropping across Africa, the populations of 26 of its countries are expected to at least double by 2050. Sub-Saharan Africa’s cohort of youths aged 15 to 24—seekers of education and jobs—is growing far faster than the same cohorts in Latin America and Asia.

Meeting the needs of their swelling populations is not just a challenge

will find Good Samaritans to help them. These pleas will be heard in the daily afternoon program, and will also be announced to other programs of the station to reach those Good Samaritans who will give their help and support as a concrete faith response.

The program features Dennis “Ka Dune” Geron as anchor, and is joined

by Sr. Cielo Matuloy of the Religious

Although fertility rates have been dropping across Africa, the populations of 26 of its countries are expected to at least double by 2050. Sub-Saharan Africa’s cohort of youths aged 15 to 24—seekers of education and jobs—is growing far faster than the same cohorts in Latin America and Asia. Meeting the needs of their swelling populations is not just a challenge for Africa’s leaders.

of the Good Shepherd to help address the social concerns of the poor.

Matuloy was born in Batangas and graduated from the University of Santo Tomas with a Bachelor of Arts in Philosophy. She worked with the Armed Forces of the Philippines, and had her foreign mission experience in Hong Kong with the Diocesan Pastoral Care for Filipinos.

She is now the vocation directress of the Religious of the Good Shepherd Province of the Philippines-Japan, as well as handling the residential care for disadvantaged children and women.

Let us all be part of our new program, Good Samaritan, that we may be instruments of God’s grace to those who are in need. Through the radio, we will strive to help the disadvantaged help themselves to alleviate their situation and experience change through giving.

To all those who want to make an

appeal or send help, you may visit the Radio Veritas station at 162 West Avenue corner Edsa, Quezon City, or you may call the kapanalig hotline 925-7931 to 40 or e-mail at kapanalig@veritas846.ph, or through the station’s Facebook page, www. facebook.com/Veritasph.

Radio Veritas 846 is owned and operated by the Archdiocese of Manila. Established in 1969, the Ramon Magsaysay-recipient Catholic radio station continues to be the leading social communications ministry for truth and evangelization in the country today.

for Africa’s leaders. It also implicates the rest of the world, not least because smart management of government and the economy will help grow a market already worth $4 trillion.

Militarizing aid to African nations to fight terrorism, and bribing them to block migrants, won’t help to stabilize their populations or economies. Neither will turning a blind eye to corruption and humanrights abuses in order to exploit their mineral resources.

Instead, the US, the European Union, China and Japan need to focus on development. Investing in

girls’ education, for instance, can reduce both fertility rates and infant mortality. Sustaining HIV/AIDS prevention and treatment programs has extended life expectancy and eased a drag on economic growth. And the most recent UN projections for African population growth would be even higher if funding for reproductive health efforts were cut.

The UN’s statisticians would be the first to admit that their projections are just that. Ultimately, Africa’s destiny is less a question of demography than of leadership.

To know more about Caritas Manila, visit www. caritasmanila.org.ph. For your donations, please call our DonorCare lines 563-9311, 564-0205, 0999-7943455, 0905-4285001 and 0929-8343857.

Make it a habit to listen to Radio Veritas 846 in the AM band, or through live streaming at www.veritas846.ph. For comments, e-mail veritas846pr@ gmail.com.

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