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O’er hills and seas, Pinoys abroad under CFO watch By Recto Mercene

United nations

2015 environmental Media Award leadership award 2008

Conclusion

ECADES ago an actor got into trouble after suggesting that, instead of discipline, bicycles are required for the country’s progress: “Sa ikauunlad ng bayan, bisikleta ang kailangan.” Decades later, the Commission on Filipinos Overseas (CFO) offers this recipe to address the social costs of migration: counseling. The aim of this counseling is “to mitigate the social costs of migration by improving the ability of Filipino migrants to integrate in their host country through CFO-conducted multicultural orientation sessions, and also to provide psychosocial services

This July 10 photo shows a mother and child in line at the immigration counter of the Ninoy Aquino International Airport Terminal 1. NONIE REYES

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for the migrants and their families they left behind”. Returning Filipinos also have to undergo counseling to facilitate the reintegration by assisting them in identifying opportunities for engagements in livelihood generation, investment, and to provide for a secure and meaningful retirement, thereby transforming the so-called brain-drain to brain gain. A d o c u me nt b y t he C FO s a id , “ W h i le predeparture services of all types of Filipino migrants have been developed and improved throughout the years, there is a gap in the program and services that are afforded to these Filipino migrants upon their return to their homeland.” The CFO has proposed a framework to strengthen Continued on A2

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Wednesday, July 12, 2017 Vol. 12 No. 272

DOF, BOI start harmonizing positions on fiscal incentives

By Catherine N. Pillas

@c_pillas29

he Board of Investments (BOI) and the Department of Finance (DOF) are starting to chip away at the sticking points that will likely emerge in the efforts to harmonize fiscal incentives, which will be the main feature of the second tranche of President Duterte’s taxreform program. Continued on A2

The Peza’s preferential tax rate based on gross income earned and imposed after the income-tax holiday period

GDP likely grew 6.4% in Q2–Neda

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PHL firmly committed to solve drug problem Teddy Locsin Jr.

free fire Statement delivered by H.E. Teodoro L. Locsin Jr., permanent representative of the Republic of the Philippines to the United Nations, during the Launch of the 2017 World Drug Report at the UN Headquarters in New York City on June 22, 2017.

e have just received the 2017 World Drug Report from the United Nations Office on Drugs and Crime (UNO-DC). We have yet to study the full report in the hope of a better understanding of the drug situation in the rest of the world and, hopefully, also in the Philippines—so we can craft the appropriate responses to the problem. Continued on A11

May trade deficit hits record high on jump in equipment imports

he country’s GDP likely expanded by 6.4 percent in the second quarter, slower than the 7.1 percent recorded in the same period last year, due to the absence of election spending, according to the National Economic and Development Authority (Neda). Socioeconomic Planning Secretary Ernesto M. Pernia told reporters in a news briefing that GDP growth in the April-to-June period would be the same as the 6.4 percent recorded in the first quarter due to the so-called high base effects. Pernia said candidates during the elections last year spent the bulk of their funds in the second quarter, allowing the economy to grow faster during the period. “I have to be more conscious now because it’s after election year,” Pernia said. “I am being more modest this time on the forecast. Hopefully, growth in the second quarter could approximate the performance in first quarter.” The Neda chief added manufacturing output and exports would boost GDP growth in the April-toJune period, as well as the government’s infrastructure spending. Earlier, Neda Undersecretary for Planning and Policy Rosemarie G. Edillon told the BusinessMirror that the country is on track to meet its target, after the World Bank said it slashed its growth estimate for the Philippines to 6.8 percent, from 6.9 percent. See “GDP,” A2

2016 ejap journalism awards

By Cai U. Ordinario

T anniversary ringing President Duterte rings the bell to mark his inaugural visit at the Philippine Stock Exchange (PSE) on the occasion of the 10th listing anniversary of Phoenix Petroleum. With him are (from left) Finance Secretary Carlos G. Dominguez, Phoenix Petroleum Chairman Domingo Uy, Phoenix Petroleum President and CEO Dennis Uy and PSE Chairman Jose T. Pardo. ALYSA SALEN

Slash rice tariffs to cut poverty in Asean–OECD By Jasper Emmanuel Y. Arcalas @jearcalas

he Philippines and other Asean countries would be able to cut poverty faster if they would cut tariffs on rice and eliminate trade barriers, according to the latest study released by the Organisation for Economic Co-operation and Development (OECD). In its recent study, titled “OECDFAO Agricultural Outlook 2017-2026”, the OECD said an Asean integrated rice market, where tariffs are scrapped and

PESO exchange rates n US 50.6630

nontariff barriers are reduced, would ensure food security among developing countries in Southeast Asia. “The development of the Asean Economic Community [AEC] extends well beyond agriculture and aims to allow for the free flow of goods, services, investment and skilled labor across the region, along with the free flow of capital,” the study read. “As such, it has the potential to significantly impact growth opportunities in the region, agricultural competiveness [within countries and for the

region globally], along with important policy focuses, such as food security,” it added. In this kind of trade environment—where free flow of commodites are assured within the regional bloc— the 10 member-countries will ensure that they will be food secure in the mid- to long-term run, according to the OECD. “Free trade in rice and maize, enhanced by improved trade-facilitation measures and the harmonization of Continued on A12

@cuo_bm

he country’s trade deficit swelled to a record-high $2.75 billion in May due to a significant increase in payments for imported capital equipment used by factories, according to the National Economic and Development Authority. Data released by the Philippine Statistics Authority (PSA) on Tuesday showed the country started posting a trade deficit of $2 billion and above in January 2016. Prior to May 2017, the highest trade deficit recorded by the Philippines was at $2.58 billion in April 2016. Socioeconomic Planning Secretary Ernesto M. Pernia told reporters in an interview that the increasing trend in the trade deficit could be sustained and can be good for the economy in the long run. “I think the trade deficit is caused by the importation of capital equipment, intermediate goods for production. It’s actually a positive thing when import growth is caused by capital goods. In fact, that has been the trend. A

$2.75B

The total trade deficit recorded by the Philippines in May

bigger part of imports now is accounted for by capital imports,” Pernia said. PSA data showed that in May, raw materials and intermediate goods accounted for 38.9 percent of the total import bill, while the share of capital goods was at 33.6 percent. For January to May, total trade grew by 13.9 percent to $63.3 billion, with exports and imports growing by 16.3 percent and 12.3 percent, respectively. Pernia noted the 15.4-percent hike in total trade in May was supported by the sixth consecutive double-digit growth of exports since December 2016, and by the recovery of imports from its 0.1percent decline in April. “Our country’s trade growth is See “Trade deficit,” A2

n japan 0.4443 n UK 65.2691 n HK 6.4851 n CHINA 7.4472 n singapore 36.5930 n australia 38.5292 n EU 57.7609 n SAUDI arabia 13.5094

Source: BSP (11 July 2017 )

A2 Wednesday, July 12, 2017

BMReports BusinessMirror

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O’er hills and seas, Pinoys abroad under CFO watch Continued from A1

the current reintegration program for all types of Filipino migrants. They provide more comprehensive package of services and opportunities to returnees regardless of their status abroad. They could be dual citizen, second-generation or third-generation Filipinos, overseas Filipino workers (OFWs) and their families, as well as irregular migrants. Although the counseling itself is free of charge, the CFO charges P400 ($7.87 at current exchange rates) for a sticker and “other related costs”. CFO lecturer Janet Ramos said special guidance and counseling last three hours although the regular program is for two hours. Ramos said counseling for an au pair runs for four to five hours because it takes time to teach cultural integration.

‘Culture shock’

THE CFO has a different level of counseling for marriage of a Filipino and a foreigner, which

could be by groups or one-onone encounter. “Sometimes, following a grueling hours of talking, we discover that many of the candidates need further counseling,” said Ivy D. Miravalles, officer in charge of the CFO Migrant Integration and Education Division. M i r av a l l e s s a i d t he C FO employs about a hund red people, most of whom are trained for s pec i f ic cou n se l i ng pro grams. During counseling they discover sometimes the many problems that a candidate would face abroad, and this could be gleamed from the background of their future spouses. Miravalles said they require applicant to submit documents and, from these, they could gather information about the profile or background of their future bride or groom. “Many of the candidates are surprised to learn, when they are already undergoing counseling, that they do not realize how different is the reality of the place they are

going to from their expectations,” Miravalles said. Usually, it is “culture shock”, she said, which is defined as “the feeling of disorientation experienced by someone who is suddenly subjected to an unfamiliar culture, way of life, or set of attitudes”. There are countries that encourage matching, especially Asian countries, although this practice is accompanied by risks. “Sometimes, brokers and marriage bureaus take advantage of the situation, especially if the subject is a very young bride-to-be,” Miravalles said. “They earn from the transaction, treating the matching game as a business.”

Shady past

RAMOS said when the bride is turned into a slave, a caregiver or is sexually abused, the relationshipmatching is categorized as a failed marriage. This happens if the background of the would-be partner is lacking, not knowing they are sexual predators, pedophiles or simply criminals.

“That is why it is very important that brides-to-be have documents of their would-be partners because from this, we would be able to know the grooms’ educational background, how they met, where they met and their friends abroad, among others,” she added. She said the CFO is also alarmed when the groom has a shady record, is on the watch list of the Bureau of Immigration or has engaged previously in fraudulent transactions. “Because of the skills of the CFO counselor, sometimes the interviewee opens up and gives away information that reveals a ‘red flag’,” Ramos said, adding these are clues that tell them the candidate is to be dreaded and needed to be further investigated. She added there were cases when their own parents sell their children, “even the educated ones”, because of the prospect of remittances. “Nakakalungkot man [It’s sad], but this CFO counseling program is very important, especially for the vulnerable sector.” According to Miravalles, the

CFO has access to database provided by sources, such as the Bureau of Immigration, to verify records of grooms.

More counseling

FOR the last five years, the CFO registered an average of 220 emigrants per day. Fi l ipi nos goi ng abroad a s spouses and partners of foreign nationals are required to attend the CFO guidance and counseling program. The counseling program is meant to provide adequate information regarding intermarriage and migration, cultural and social realities abroad, as well as available support networks for migrants, especially for women in distress, among others. Since 2014, attendance in the country-specific guidance and counseling sessions is confirmed via online appointment system. For the last five years, an average of 60 fiancées, spouses or partners of foreign nationals attend counseling sessions per day. Ramos said long before the

DOF, BOI start harmonizing positions on fiscal incentives Continued from A1

For instance, BOI Managing Head and Trade Undersecretary Ceferino S. Rodolfo said they are amenable to the DOF’s proposal to unify the preferential tax rate and base offered by investmentpromotion agencies. “What the DOF wants—and which I see value in—is harmonizing the special tax rate and base offered right now. Investment promotion agencies offer different rates after the income tax holiday: a special tax rate on either gross income earned [GIE] or special rates on net income. [We’re open] to just one rate and one base,” Rodolfo told the BusinessMirror. Aside from synchronizing this

incentive, Rodolfo said they are also open to talks on capping the special tax rate given to registered projects to a specific period. Currently, the Philippine Economic Zone Authority (Peza), the second major investment promotion agency in the country is offering a perpetual 5-percent preferential tax rate based on GIE after the income-tax holiday period. Regional/area operating headquarters of foreign entities are also given a preferential income-tax rate of 10 percent compared to the Philippine branch tax of 30 percent. “As much as possible, we want to approximate the incentives relevant for companies. Not all companies have projects that are perpetual after all.

So you look at the lifetime of a project and if they are currently enjoying the rate based on gross income earned, we’ll see what’s the equivalent rate and period in terms of net income. We’ll make it equitable,” he added. The agencies are now discussing which base will be used, as well as the corresponding rate. Rodolfo clarified that there should be a menu of other incentive tools to offset the effect of this harmonization, depending on the investors’ need, such as double deduction on particular expenses or net operating loss carry-over. T he Duter te ad m i n ist rat ion’s second package of reforms focuses on corporate taxation and entails

streamlining fiscal incentives to plug revenue leakage. The government intends to enact five tax packages before the midterm polls in 2019 so it can generate additional funds for its massive infrastructure program. The DOF wants to scale back on incentives given to new projects. Revenue-depleting fiscal perks, the DOF said, must be “time-bound, focused, performance-based and transparent”. The agency intends to reduce corporate income tax in exchange for the rationalization of incentives. In the second package, the DOF wants the GIE offered by investment promotion agencies replaced by a reduced corporate income-tax rate of 15 percent.

GDP. . .

United States allowed same-sex marriage, the CFO has already been counseling same-sex couples bound for the US, Australia or Europe. The CFO conducts nine sessions lasting two hours every working day, with and each session comprising 15 candidates. The sessions are “country specific”, meaning those bound to the US receives the American version and those for Japan the Japanese version, each of which is three hours of counseling, according to Ramos. The CFO averages 300 to 400 candidates a day, according to her. Counseling is also provided to promote entrepreneurship among overseas Filipinos. “A more aggressive campaign to tap overseas Filipinos as source of capital shall be pursued,” a document by the CFO said. “Government shall utilize the media and various forms, including presidential and official trips, in encouraging entrepreneurship among overseas Filipinos and their dependents.”

Continued from A1

“The target growth rate is still 6.5 percent to 7.5 percent. So, the 6.8 percent is within target. On the underspending, all agencies are required to come up with a catch-up plan,” Edillon said. World Bank lead economist for the Philippines Birgit Hansl said in a statement that it is imperative for the government to support its infrastructure program to boost the economy. Based on data released by the Department of Budget and Management in May, public spending on infrastructure declined by 2.5 percent to P142.1 billion in the first quarter of 2017. The World Bank said it still expects private consumption and export earnings to be robust this year. The World Bank added consumption is forecast to grow at 5.6 percent in 2017 and 6.1 percent in 2018. This is, however, slower than the 7.2 percent in 2016. Growth of private consumption is expected to be fueled by the increase in overseas Filipino worker remittances in the medium term.

Flagship projects Pernia said the government has set its sights on rolling out more flagship projects to boost economic growth. However, the bulk of the Duterte administration’s flagship projects are still pending at the interagency Investment Coordination Committee (ICC) for review and the Neda for approval Data released by the Neda showed that only 18 of the 75 flagship projects have been approved by the President for implementation. These approved projects have a price tag of P462.74 billion. There are two projects that are pending for Neda Board approval worth P285 billion. These are the P151 billion worth Philippine National Railway (PNR) Long-haul from Calamba to Bicol and P134 billion worth PNR South Commuter Line from Tutuban to Los Baños. Of the 75 flagship projects, some 55 projects are still pending at the ICC. But only 33 projects have cost estimates, which amounted to P831.44 billion, while the remaining 22 projects still do not have cost estimates as of press time. The projects pending with the ICC that have the highest costs are the P230 billion worth Manila Metro Line 9 under the Mega Manila Subway ProjectPhase 1 followed by the P72.06 billion worth Bohol-Leyte Link Bridge, which is included in the Nationwide Island Provinces Link Bridges. Other big-ticket flagship projects with cost estimates are P57.65 billion worth Luzon-Samar Link Bridge under the Nationwide Island Provinces Link Bridges program and the P57.6 billion worth Clark-Subic Railway project. Among the flagship projects approved by the President, the one with the highest cost is the P211.46 billion worth PNR North 2, or the Malolos-Clark Airport-Clark Green City Railway project. Cai U. Ordinario

Trade deficit. . .

Continued from A1

consistent with the global pickup. We are striding forward with world trade performers and we intend to match this growth with sound macroeconomic policies,” he said. In terms of markets, Pernia said countries in East Asia remained as the country’s strongest trade partners, with a 48.3-percent share in export revenue and a 46.2-percent share in imports. Trade with Asean was also robust as the region accounted for 15.7 percent in export receipts and 26.1 percent in inward shipments. PSA data also showed that exports to the European Union continued its third consecutive month of double-digit growth at 38.5 percent. Exports to the Asean also posted a growth of 25.6 percent in May. The Neda said the government targets to increase the country’s export receipts by about $100 million annually in the next five years. The government is confident that this could be achieved as travel goods, such as bags and wallets, can enter the US market at zero tariff starting July 1 after Washington expanded the Generalized System of Preferences. “As we aim to diversify our markets, we are also pleased to note that our exports to Malta, the United Arab Emirates [UAE] and India grew significantly,” Pernia said. He said exports to Malta, India and UAE grew by 130.6 percent, 71.9 percent, 211.9 percent, respectively, and that this is the fourth month this year that exports to the UAE have almost tripled. Trade with other Asian countries also posted double-digit growth rates led by Vietnam (25.8 percent), Indonesia (24.1 percent), Malaysia (23.4 percent) and India (22 percent).

news@businessmirror.com.ph

The Nation BusinessMirror

Lawmaker to Imee: Come clean on cash-advances controversy By Jovee Marie N. dela Cruz @joveemarie

deputy speaker has asked the province of Ilocos Norte to submit to the House of Representatives all the documents on alleged cash advances it had made to purchase vehicles using its share from excise taxes collected from locally produced Virginia-type cigarettes. In a news statement, Deputy Speaker and Rep. Mylene Garcia-Albano of Davao City said original documents showing all the transactions are needed if the province, particularly Gov. Imee Marcos, wants to clear her name. “She [Marcos] can bring documents along with her to prove her claim that all the transactions related to the purchase were aboveboard and cleared by the COA [Commission on Audit],” Albano said. “As an elected public official, it behooves Governor Marcos to abide by the highest standards of transparency and accountability. We call on her to attend the next hearing of the committee so that she could prove her claim that all the transactions were aboveboard and cleared by the COA,” the lawmaker added. However, citing COA officials, Albano said the use of cash advances in government procurement violates provisions of COA Circular 92-382. “On this aspect alone, Governor Marcos has a lot of explaining to do. She was already in government when this COA circular was issued, so she must have been aware that the use of cash advances are limited only to certain expenses and cannot involve procurement of goods and services amounting to tens of millions of pesos,” Albano said. In the first hearing held on May 2, the committee members were surprised to learn that all the original documents pertaining to the cash advances for the purchase of the buses and minitrucks were “missing” from the COA storeroom in Ilocos Norte. The inquiry into the alleged irregularities will resume on July 25. A subpoena has already been issued to Marcos to compel her to attend the hearing. Albano also questioned why six Ilocos Norte provincial officials and employees involved in facilitating the cash

advances, worth P66.45 million, were suddenly afflicted with “collective amnesia” when they testified before the House Committee on Good Government and Public Accountability. Six provincial executives have been detained at the House since May 29 “for their contemptuous act of giving evasive answers, tantamount to refusal to answer” questions about the money meant for the benefit of tobacco farmers, but supposedly misused as cash advances for the purchase of motor vehicles sans the benefit of competitive public bidding. The committee earlier cited for contempt and ordered detained at the House premises six officials of the Ilocos Norte, namely, provincial treasurer Josephine Calajate; Encarnacion Gaor and Genedine Jambaro of the Office of the Provincial Treasurer; budget officer Evangeline Tabulog; Bids and Awards Committee Chairman and Provincial Planning and Development Office head Engr. Padro Agcaoili; and Eden Batulayan, OIC of the Provincial Accounting Office. The committee has been probing the provincial government’s alleged misappropriation of P66.4 million in public funds representing Ilocos Norte’s share of excise-tax collections from locally manufactured Virginia-type cigarettes, following the filing of resolution by House Majority Leader and PDP-Laban Rep. Rodolfo C. Fariñas Sr. of Ilocos Norte. Under Republic Act 7171, the 15 percent share of Virginia tobacco-producing provinces shall be allotted for livelihood projects and infrastructure projects as a special support for tobacco farmers. The lower chamber has already subpoenaed Marcos to its hearing on July 25. Moreover, Albano said, Marcos’s refusal to appear before the committee and “the silence of these [officials] have only bolstered public perception that there were anomalies involved in the acquisition of the vehicles in three tranches over the 2011-2012 period.” She added that Marcos’s signatures were on most of the documents pertaining to the cash advances made to procure the buses and minitrucks, from the purchase requests to the obligation requests and even the disbursement vouchers.

PET holds preliminary hearing on Bongbong-Leni poll protests By Joel R. San Juan

@jrsanjuan1573

HE Supreme Court, sitting as Presidential Electoral Tribunal (PET), on Tuesday proceeded with the conduct of a preliminary hearing on the election protest filed by the camps of former Sen. Ferdinand “Bongbong” Marcos Jr. and Vice President Maria Leonor G. Robredo in connection with last year’s vice-presidential polls. Prior to the hearing, Marcos paid the remaining P30 million of the P66.22 million that the PET earlier ordered him to shell out for his electoral protest against Robredo before July 14, covering 132,446 precincts in 39,221 clustered precincts covering 27 provinces and cities The payment was contained in two checks—one for P15 million and another one for P15.2 million. Marcos initially paid the amount of P36.2 million on April 17. Robredo won the 2016 vice-presidential race with 14,418,817 votes, or 263,473 more than Marcos, who got 14,155,344 votes. The PET originally set the preliminary conference on the protest of Marcos and counterprotest of Robredo on June 21, but reset it to July 11 to give way for the oral arguments and resolution of petitions against President Duterte’s martial-law declaration in Mindanao. During a preliminary conference, parties in an electoral protest set the issues to be tackled and resolved by the tribunal. The PET earlier designated hearing officers to assist in the reception of evidence. Appointed as hearing officers were retired Associate Justice Jose C. Vitug as the chairman of the panel of commissioners. His members are lawyers Angelito C. Imperio and Irene Ragodon-Guevarra. The panel of commissioners, the PET said, shall assist in the reception of evidence pursuant to Rule 55 to 62 of the PET rules.

Under the rules, the panel shall set the date for the reception of evidence of all the parties involved in the protest and counterprotest. The same panel shall receive the affidavits of witnesses and hear their direct testimonies of witnesses, as well as their cross, redirect and recross examination. The hearing commissioners also has the authority to rule on the objections made in the course of the cross examination, subject to review by the PET. After the hearing, the commissioners shall submit all the evidence presented as well as the transcripts of the proceedings before the PET. The PET has set just one preliminary conference for the protest and counterprotest, citing Rule 3 of the 2010 PET Rules that allows adjustment in rules “to achieve a just, expeditious and inexpensive determination and disposition of every contest before the tribunal.” The PET has scheduled the hearing upon plea by Marcos, only son of the late strongman Ferdinand E. Marcos, after it denied the motion of Robredo questioning the cash bonds set by the tribunal for the protest and counterprotest. In his election protest filed on June 29 last year, Marcos claimed that the camp of Robredo cheated in the automated polls in May also last year. He sought annulment of about a million votes cast in three provinces—Lanao del Sur, Basilan and Maguindanao. Robredo, on the other hand, sought the dismissal of Marcos’s election protest and filed a counterelection protest questioning the results in over 30,000 polling precincts in several provinces where Marcos won. The PET junked Robredo’s plea and proceeded with the case after finding of sufficiency in form and substance in the protest. The preliminary hearing was still ongoing as of this writing.

Editor: Vittorio V. Vitug • Wednesday, July 12, 2017 A3

DND’s Lorenzana cool on proposal to extend martial rule in Mindanao

By Rene Acosta

@reneacostaBM

he defense department is lukewarm to the proposal from the House of Representatives for the extension of martial rule in Mindanao, saying the Constitution has prescribed limits to the iron-fisted rule in order to prevent it from being abused.

The reaction was issued by Defense Secretary Delfin N. Lorenzana on Tuesday after a number of congressmen, including House Speaker Pantaleon D. Alvarez, said they favor the extension of martial law for five years. “While we respect the position of our lawmakers and laud their support to the military, we believe that the declaration of martial law is an extraordinary power of the President, as Commander in Chief, that must be resorted to only when warranted by our national security circumstances,” Lorenzana said. “Our Constitution has prescribed limitations precisely to prevent its being abused, as it has implications to the country’s peace and order, economy, trade, tourism and our

people’s way of life,” he added. While businessmen supported the imposition of martial rule in Mindanao in order to quell terrorism in Marawi City, they have also complained of business losses. Still, Lorenzana said they will follow whatever decision the national government would make on the issue of the martial-law extension. “As the administrator of martial law in Mindanao, we will follow whatever path will be laid out by the national government,” he said. He also assured that the military will not abuse the measure once it is decided that it would be extended.

“The Filipino people can rest assured, however, that if martial law is extended, they can continue to trust their defense and security establishments since every decision we make and operation we undertake is anchored on the rule of law and respect for human rights,” Lorenzana said. “They can trust their Armed Forces to protect them and advance the people’s best interest,” he added. Lorenzana, likewise, debunked reports that at least 2,000 civilians have been killed in the ongoing operations against the MauteIslamic State group in Marawi, which already entered its 50th day. “These are unverified reports. Operations are still ongoing and the proper authorities are still assessing, consolidating and verifying data from Marawi City,” the defense chief said. “For now, we once again call on the people to be more cautious and discerning. Do not accept any information as fact. Avoid sharing unverified data and figures, and stop the proliferation of fake news that only cause undue alarm, panic and confusion among our people. Such information is not only detrimental to our ongoing operations. It also hurts our economy and our international image as a nation,” he added.

Economy

A4 Wednesday, July 12, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

news@businessmirror.com.ph

Neda: Infra buildup to sustain manufacturing-output growth

By Cai U. Ordinario

@cuo_bm

he country’s manufacturing output slowed to 5.8 percent in May 2017, according to the latest Monthly Integrated Survey of Selected Industries (Missi) released by the Philippine Statistics Authority (PSA) on Tuesday. The PSA said this was slower than the 7.4 percent posted in May 2016. However, the National Economic and Development Authority (Neda) pointed out that this was higher than the 4.3-percent year-on-year growth posted in April 2017. Neda Undersecretary for Plan-

ning and Policy Rosemarie G. Edillon said the slowdown in the volume of production index was due to the elections. “May 2016 was an election year, hence, many election-related demand [that] is not present this year,” Edillon told the BusinessMirror.

“In our full technical report, we presented a moving average. This is a better gauge of change for shorter periods of data.” Neda Secretary Ernesto M. Pernia said the growth in manufacturing output in May 2017 was largely driven by the increase in production of construction and exportoriented products. Pernia added construction products are expected to grow further toward the end of the year, backed by the government’s massive infrastructure-development spending. These include the continuing implementation of major infrastructure projects, such as the North Luzon Expressway—Southern Luzon Expressway Connector Road; the Cavite-Laguna Expressway; and the Philippine National Railway North South Commuter Rail. “Manufacturing output is ex-

pected to sustain its growth toward the end of the second quarter, driven by buoyant domestic demand and optimistic business outlook,” Pernia said. “Seventy-five flagship projects have been identified by the administration to address our huge infrastructure deficit,” he added. Pernia, likewise, said it is important to streamline efforts across all levels of government to ensure inclusive innovation, which will benefit the manufacturing sector. He added the Philippine Development Plan 2017-2022 aims to increase the country’s growth potential by involving greater use of science and technology, and promoting innovation. “Bureaucratic procedures at the national and local levels should be simplified across the country,

Manufacturing output is expected to sustain its growth toward the end of the second quarter, driven by buoyant domestic demand and optimistic business outlook. Seventy-five flagship projects have been identified by the administration to address our huge infrastructure deficit.”—Pernia

from urban centers to far-flung areas. Market-driven research should also be made available to everyone so that firms, whether small or large, can expand production and reach larger markets,” he said.

New toll booths expected to decongest Nlex traffic

House leader assures ample funding for ‘Dutertenomics’ By Jovee Marie N. dela Cruz

@joveemarie

he chairman of the House Committee on Appropriations on Tuesday assured funding support for the infrastructure modernization program of the Duterte administration. In a news statement, PDP-Laban Rep. Karlo Nograles of Davao City vowed that the government would have enough funds to make this happen. “To hasten national economic development, we have to build and modernize the needed infrastructures nationwide. We anticipate that the President, in his State of the Nation Address [Sona], will spell out his crucial public infra-building program that will boost the country’s economy,” Nograles said. President Duterte, the lawmaker added, has laid down a three-year rolling infrastructure program that would cost at least P1.13 trillion for 2018, P1.18 trillion for 2019 and P1.29 trillion for 2020. These infrastructure projects form the core of the government’s new economic master plan called “Dutertenomics”. Most of these projects are intended for transportation projects in Metro Manila and other major urban centers. “The logic of Dutertenomics [is that] if we modernize our infrastructure, we will modernize the economy down to the farthest municipality. And everything else will follow,” Nograles added. The lawmaker said Dutertenomics, which focuses on building the needed infrastructures, will also bring balanced development nationwide, especially in longneglected regions in Mindanao and the Visayas. He added his panel would also prioritize the Duterte government’s “Build, Build, Build” program, as this will have cascading effects on all aspects of development, such as health care, education, job and investment generation, poverty alleviation and even peace and order. “We cannot waste time. The time to build critical infrastructures, like railways, bridges, expressways, subways and other infrastructures, is now,” Nograles said. Earlier, Duterte has approved the 2018 budget proposal of the Department of Budget and Management amounting to P3.767 trillion, which is 12.4 percent higher than the 2017 national budget and equates to 21.6 percent of the GDP. Budget Secretary Benjamin E. Diokno said his agency is eyeing to submit the 2018 budget on the day of the President’s second Sona on July 24. Personnel services will continue to receive the largest chunk of the pie at 29.4 percent. Infrastructure and capital outlays come second in priority with 25.4 percent, significantly boosting the government’s “Build, Build, Build” campaign. This was followed by local government units at 16 percent and maintenance at 14.5 percent. Debt burden and government-owned and -controlled corporations will obtain the lowest allocations at 9.8 percent and 4.5 percent, respectively. The education sector remains to be the top recipient of the national budget, while the Department of Public Works and Highways maintains its spot as second priority.

ONGESTION at the toll booths of the North Luzon Expressway (Nlex) is expected to be tempered, as the operator of the thoroughfare opened on Tuesday two new exits in Meycauayan, Bulacan and Valenzuela City. Nlex Corp. President Rodrigo E. Franco said the company invested P31.5 million to build the two exits, which are intended to decongest certain parts of the tollway, particularly the interchange in Valenzuela.

₧31.5M

kitchen warriors

While some of their much younger counterparts are busy fighting terrorists in strife-torn Marawi City, these retirement-bound military personnel are learning some basic livelihood skills, like cooking, as part of the Philippine Army's (PA) program for servicemen and women just about to return to civilian life. Photo shows the soon-to-retire soldiers being taught how to make spring rolls at the PA’s 4th Infantry Division headquarters in Barangay Patag, Cagayan de Oro City. PNA/Jigger J. Jerusalem

D.O.E., DPWH agreement eases ROW acquisitions

O fortify the Duterte administration’s aggressive infrastructure development, the Department of Public Works and Highways (DPWH) and the Department of Energy (DOE) inked on Monday a joint circular to ease right-of-way (ROW) acquisitions. The joint circular, according to Public Works Secretary Mark A. Villar, aims to provide a standard set of guidelines for the payment and relocation of improperly located Electric Cooperative (EC) facilities within government’s property. “The joint circular with [the] DOE is just and systematized way of addressing ROW conflicts between two entities that promote development. We aim for timely implementation of government projects [and], at the same time, aid electric cooperatives that play critical role in household

electrification,” Villar said. Under the new guidelines, programming and planning of upcoming publicworks projects shall be coordinated with the National Electrification Administration (NEA) and ECs to address ROW concerns. The DPWH and the EC shall then cooperate in determining the compensation for the affected facility by participating in a joint survey, estimate and approval of relocation or compensation cost. After determining the compensation, the DPWH and the EC will draft the “relocation agreement”, which contains terms of payment of compensation for the affected facility, details of affected facility and approved relocation site, project implementation schedule, target date of completion and

remedy in case of disagreement. Upon issuance of the agreement, the DPWH shall create the final program for its project that includes the budget for the electric cooperative affected. The EC will receive half of the cost of compensation prior to the removal of the facility. In the event of a disagreement or failure to execute the relocation agreement, the DPWH will deposit half of the cost to NEA. The EC will then receive a deposit notice from the DPWH that will force them to remove said facility within seven days. Failure to comply to the removal will give the DPWH the right to remove the facility. Last month Villar said that quick and efficient acquisition of ROW for infrastructure projects will be his department’s “trademark”. Katrina Mina

Energy dept compiling comments on power-resiliency program draft By Lenie Lectura

@llectura

he Department of Energy (DOE) is soliciting comments from industry stakeholders on a draft policy that seeks to implement a resiliency program in the energy sector. The agency noted that while there are efforts to address disasters, most resources are directed to emergency response. Thus, it is necessary that planning and invest-

Missi is a report that monitors the production, net sales, inventories and capacity utilization of selected manufacturing establishments to provide flash indicators on the performance of the manufacturing sector.

ing are required to ensure that the country’s energy-infrastructure can continue to deliver. “Ensuring resilient energy infrastructure is now more pronounced and there is a need to institutionalize the development, promotion and implementation of a resiliency compliance plan [RCP] to strengthen the capacity, safety culture and disaster preparedness and response capability of the energy sector,” stated the draft circular-entitled

“Adoption of Resiliency Planning and Program in the Energy Industry to Mitigate Adverse Effects Brought About by Disaster”. The draft circular also stated that all energy industry participants shall submit to the DOE their respective RCPs within 60 days upon effectivity of the circular. The RCPs must be updated every three years. “All energy-industry participants are hereby enjoined to provide full cooperation, prepare

and implement their respective RCP and to comply such that the objectives set out in this circular are attained.” The policy shall apply to all energy-industry participants in the energy resource, renewable energy, power, oil and energy utilization. The RCP must contain adaptation measures to gauge infrastructure and human resource preparedness during and in the aftermath of disruptive events.

To monitor the participants’ compliance, a DOE Task Force on Securing Energy Facilities will be created. The DOE shall, within one year from effectivity of the circular, coordinate with other concerned agencies and industry participants, for the issuance of appropriate guidelines for the implementation of the circular. The agency will accept comments until September 1.

The total MPIC investment to build Meycauayan, Bulacan and Valenzuela City expressway tollway exits

“ The new Lingunan Exit aims to decongest the Valenzuela Interchange, which caters to approximately 13,000 vehicles coming in and out of the city via [the] Nlex,” he added. Franco adv ised that motor ists from the nor th may ta ke the Ling unan Exit when going to Va lenzuela Cit y, instead of proceeding to Paso de Blas and K ar uhatan exits. “Aside from providing travel convenience, the new exit will also make the industrial hubs and subdivisions in Barangay Lingunan and nearby areas more accessible,” he said. In Bulacan, the company opened two additional exit ramps at the northbound portion of Barangay Libtong and the southbound portion of Barangay Pandayan to make the travel in Meycauyan City more convenient. “The new exits hope to relieve rush-hour traffic congestion at the Meycauayan Interchange,” Franco added, pointing out that “more than improving traffic flow, these new exits also aim to make commercial activities in the city more efficient”. The company is one of the tollways arm of Metro Pacific Investments Corp., which is the largest expressway operator in the Philippines.

Charlotte Furigay

The Regions BusinessMirror

news@businessmirror.com.ph

Editor: Efleda P. Campos • Wednesday, July 12, 2017

SBMA keeps growth momentum in Jan-May

By Henry Empeño Correspondent

UBIC BAY FREEPORT— With the continuing increase in the number of companies investing in this free port, the Subic Bay Metropolitan Authority (SBMA) reported more good news in the first five months of the year in terms of revenue, dividends, investments, exports and even visitor arrivals.

SBMA Administrator Wilma Eisma, who sent the agency’s financial report to President Duterte for his first State of the Nation Address on July 24, said the Subic agency posted increases in all aspects of its performance from January to May this year. “Apparently—and this cannot be denied—the SBMA has continued well in its growth path in the last few years and we are actually breaking old records here,” Eisma said in a statement on Tuesday. Ticking off the favorable indicators, Eisma said the SBMA recorded a 7.7-percent growth in revenue from P1.16 billion in the first five months last year to P1.25 billion from January to May 2017. This was coupled by

3.4-percent increase in operating income for the same period, she added. “But the most revealing item here is SBMA’s net income, which went up by more than 126 percent, because from the P106.27 million recorded from January to May 2016, we’re now at P240.21 million in just the first five months this year,” Eisma said. She said because of the upsurge in its income, the SBMA managed to contribute bigger shares to the government than ever before: A 30.58-percent increase in the 2-percent revenue shares to local government units, and a 30.42-percent increase in the government’s 3-percent share from the gross income earned in the Subic Bay Freeport. Before this, SBMA figures

Davao biz wants end to armed conflict, reduced ML coverage

AVAO CITY—The business community here expressed its wish to a speedy end to the Marawi City crisis, or even a gradual decrease in the area under martial law, even as the government is trying to end the reign of terror in that central Mindanao city. In a statement posted in a social-networking group, Ronald Go, president of the Davao City Chamber of Commerce and Industry Inc. (DCCCII), said he “understands the pressing need to quell any threat that tends to inhibit our right to a peaceful and productive society,” adding the business community here “supports the President in his efforts to eradicate the elements that resort to violence and perpetuate atrocities to bring about their selfish interests.” “Yet, we cannot deny the slowdown, especially in the tourism industry when martial law was

declared in Mindanao,” he said. As to the extension of martial law, Go said, “We hope for an expeditious conclusion to the conflict or a scenario where the area covered by martial law is reduced so that we can continue attracting tourists and investors as we have experienced for the first part of this year.” Defense Secretary Delfin N. Lorenzana said that, “while we respect the position of our lawmakers and laud their support to the military, we believe the declaration of martial law is an extraordinary power of the President as Commander in Chief that must be resorted to only when warranted by our national security circumstances.” “Our Constitution has prescribed limitations precisely to prevent its being abused as it has implications to the country’s peace and order, economy, trade, tourism and our people’s way of life,” he said. Manuel Cayon

20 schools damaged in Leyte quake

ACLOBAN CITY—At least 20 schools were damaged in the strong earthquake that rocked Leyte province last Thursday, affecting the studies of over 10,000 pupils in the province’s elementary and high schools. Leyte Division Superintendent Ronilo Al Firmo said damaged were 18 schools from the towns of Kananga, Barugo, Jaro, Inopacan, San Isidro, Merida and Albuera. Two schools were also reported damaged in Ormoc that are under the Ormoc City division. Firmo said that of these schools, 10 were totally damaged and may no longer be safe for classes. He added those with totally damaged schools will look for excess classrooms in the nearest school to hold their classes while those with partially damaged schools will have a shifting of classes to avoid a total disruption of the students’ schooling. In a Cabinet meeting on Monday in Ormoc City, Firmo requested the Department of Education to allocate P120 million for the immediate repair and rehabilitation of dam-

aged school buildings. Classes in elementary and high schools in Tacloban and Ormoc City, and the towns of AlangAlang, Jaro, Carigara, Capoocan and Kananga were suspended on Monday and Tuesday after a strong aftershock of magnitude 5.4 occurred on Monday morning. Firmo said the decision to suspend classes in each municipality will be left to the discretion of the local chief executive based on their assessment of the situation. The Philippine Institute of Volc a nolog y a nd Sei smolog y conducted an on-site inspection to check the possibility of any school along the fault line where the strong earthquake originated, but found there was none so there was no need to transfer to a different school. Edgar Posadas, regional director of the Office of Civil Defense in Eastern Visayas, recommended to the DepEd for a more thorough investigation on the structural integrity of school buildings as an aftermath of the quake. Elmer Recuerdo

placed SBMA’s local government unit shares at P115.22 million in the first half last year. This rose to P150.46 million this year. The government’s share stood at P178.37 million from January to May last year, but this time, reached P232.63 million in the same period. Eisma also reported a 352.7-per-

cent increase in the dividends paid by the SBMA to the national government through the Bureau of Treasury: P660.69 million this year, compared to P145.91 million in 2016. The SBMA’s rosy financial report also covered investment generation, business expansion, and job creation.

Eisma said new investment commitments surged by 642 percent, from P5.6 billion from January to May 2016, to P40.55 billion from January to May 2017. She said the number of new business locators also increased by 58, thereby bringing the total number of Subic-registered businesses to 1,527.

Meanwhile, expansion projects by existing locators jumped by 85 percent, from 13 projects last year to 24 this year. Because of these, the number of active workers in the Subic Bay Freeport also shot up by 16 percent, from 103,425 in May 2016 to a total of 119,647 in May this year.

The World BusinessMirror

Wednesday, July 12, 2017

www.businessmirror.com.ph

For Kremlin, ‘adoptions’ means ‘sanctions’

Nicole Castillo, 7, of East Boston, holds a sign while standing with her brother Diego, 4, and mother Elsa, who is originally from El Salvador, during a “Here to Stay” rally at the Irish Famine Memorial in Boston, on July 6. Immigration activists and labor groups gathered in Boston in opposition to President Donald J. Trump’s crackdown on illegal immigration. AP/Charles Krupa

US deportations of Europeans could exceed last fiscal year

OSTON—Europeans often hid in plain sight as Latin Americans, Asians and others living illegally in America were sent packing. But now they’re starting to realize they are not immune to President Donald J. Trump’s crackdown on illegal immigration, and they’re worried.

The number of Europeans deported this federal fiscal year from the United States could surpass last fiscal year’s total, according to figures provided to The Associated Press by Immigration and Customs Enforcement (ICE). From October 2, 2016, through June 24, more than 1,300 Europeans have been removed, compared with 1,450 during all of federal fiscal year 2016—the last under President Barack Obama. The agency didn’t provide estimates broken down by calendar year. In San Jose, Ca lifor nia, an HI V-positive Russian asylumseeker faces possible depor tation after overstay ing his v isa. In Chicago, Pol ish and Ir ish communit y groups say they’re seeing inquir ies about immigration and citizenship-related ser v ices surge as people seek lega l protections. A nd in Boston, John Cunningham, a well-known Irishman who had overstayed his visa by 14 years, was sent back to Ireland last week, sending shivers through the city’s sizable Irish expat community.

1,300 The number of Europeans who have been deported from October 2, 2016, through June 24, 2017

“People are very, very concerned and lying low,” says Ronnie Millar, of the Boston-based Irish International Immigrant Center. “ The message is that if it can happen to John, it can happen to anyone.” Europeans compr ise about 440,000 of the estimated 11 million people living illegally in the US, according to the Migration Policy Institute. Since just before Trump was elected last November, the US has deported 167,350 foreigners, compared with 240,255 in all of fiscal year 2016. Immigrants from Latin America make

up the most by far, with Mexico leading the way at about 93,000. A mong Eu ropea n s, R om anians ma ke up the largest sha re, w it h 193 depor t at ions so fa r in f isca l yea r 2017. Be h i n d a r e S p a i n at 1 17; t h e United K ingdom at 102; Russia at 81; a nd Pol a nd at 74. T hose cou nt r ies were a lso tops l ast f isca l yea r; Roma ni a had 176; UK 160; Poland 160; Spain 115 a nd Russi a 94. I m m i g r a nt ad vo c ate s s ay they’ve been urging individuals to know their rights if they’re stopped and for parents to make arrangements for their children in the event they’re detained. “ The worst aspect of these numbers from our perspective is that our community organizations do not know who is being deported and why, and are unable to send immigration attorneys to assist them,” says Dmitri Daniel Glinski, president of the RussianSpeaking Community Council of Manhattan and the Bronx. In California San Jose resident Denis Davydov was detained for more than a month after returning from a vacation in the US Virgin Islands. He was eventually released after his lawyer argued Davydov was legally allowed to reenter because he’s currently seeking political asylum for being gay and HIVpositive. But he could be forced to return to Russia if his request is denied. Davydov says the experience of being detained—and the uncertainty it has thrust into his asylum application—has left him feeling vulnerable. “Before this, I thought I was

doing everything right, but I’m afraid now that doing everything right is not enough. I don’t know what else I can do,” he said. “I feel like it can happen again to me anywhere. In the airport or in the street.” At the Polish American Association in Chicago, Executive Director Magdalena Dolas said her organization has been asked to give talks about what residents should do if immigration officials show up at their doorstep. “People are worrying about their rights,” she said. “It shows there is awareness but that there is also anxiety.” The Chicago Irish Immigrant Support Center has been receiving triple the number of inquiries on immigration and legal ser vice matters these days as it did a year ago, said Michael Collins, executive director. There have been 18 deportations among Irish nationwide in the current fiscal year, compared with 26 in all of last fiscal year, according to the ICE data. Cunningham’s case has still become a cautionary tale among Irish expats in Boston’s Irish com mu n it y. “ T he r umor has gone around, ‘Don’t go in any courthouses, and if you hear a knock on your door and you’re not expecting anyone, don’t answer it,” said Benny Murphy, a 32-year-old bartender in Boston who had been living in this country illegally until about three years ago, when he married a woman who is a US citizen. Many believe Cunningham simply forgot the golden rule of living in the shadows: Keep your head down. AP

resident D o n a l d J . Trump’s son Donald Jr. initially defended his meeting with a Russian lawyer connected to the Kremlin during the 2016 presidential campaign by saying that it was primarily about adoption—a seemingly innocent humanitarian issue. R e i n st at i ng US adopt ion s of Russian or phans certainly seems like a far less serious matter than a meeting about, say, the removal of US sanctions on certain Russian officials. But from the Russian perspective, whether the younger Trump and his associates knew it at the time, the issues of adoptions and sanctions are so inextricably linked as to be practically synonymous. (Trump Jr. said in a later statement that the lawyer, Natalia Veselnitskaya, had also promised to give him compromising infor mation about Hillary Clinton.) Underst a nd ing t he connect ions bet ween adopt ions a nd sanctions offers a lens into the worldv iew a nd foreig n- pol ic y goa l s of P resident V l ad i m i r P ut in of Russi a, a nd into how even a meet ing t hat rea l ly d id foc us pr ima r i ly on adopt ion wou ld a l so h ave been about muc h more. W hat connects the two issues? Leverage. It might not seem obvious what sanctions have to do with American pare nt s ’ a d o p t i o n s o f R u s s i a n children, which is the topic the younger Tr ump initia lly said Veselnitskaya wanted to discuss. Their connection comes down to one word: leverage. The context is the Magnitsky Act, a 2012 US law that freezes the assets held in the United States by Russian officials responsible for human-rights abuses. The law also bars these officials from receiving American visas. It was named after Sergei Magnitsky, a young Russian lawyer who died in pretrial detention after exposing a $230-million tax-theft scam perpetrated by Russian officials. To t he l aw ’s bac k ers, t he Mag nitsk y Act was a way to st r i ke a blow for just ice. But to P ut in, it seemed l i ke a n intolerable attac k by t he US gover nment aga inst t he st abi l it y of h is ow n presidenc y. Putin, t hough power f u l, depend s on t he suppor t of a sma l l circ le of power f u l elites, in and out of gover nment, who bot h keep h im in power a nd help h im enforce h is w i l l. In exchange, Putin sees that they a re t a ken ca re of. T he Mag nitsk y Act, by sanctioning some of those elites, sent a message that Putin might not be able to uphold his end of the bargain. It also called into question whether lower-ranked officials could trust that they would be protected from punishment for tolerating or participating in illegal acts at the behest of Putin or his allies.

A nd t he l aw emba r ra ssed Putin by show ing that his inf luence was not strong enough to prevent the law’s passage, despite his v igorous lobby ing against it. Revoking the law became an important foreign-policy priority for Putin’s government. And he identified adoptions as an area that seemed to offer a way to force the issue. In 2011 the year before the M a g n it s k y A c t w a s p a s s e d , about 1,000 Russian children were adopted by A mer ican families, more than from any other foreig n countr y. Ma ny more adopt ions were st i l l pend ing , some for A mer ica n pa rents who had met t he chi ldren they ex pected to ta ke home. A n adoption freeze wou ld be a g r ievous loss for t hose fa m i l ies. T he Ru ssi a n gover n me nt , sensing that those parents would be a vocal pressure group, proposed a law known as the “antiMagnitsky law”, which would halt all adoptions of Russian children by Americans—including those that were in process. The Kremlin cited the case of Dima Yakovlev, a Russian toddler who died after being adopted by American parents, as a pretext for the rule. But the government also made clear that the new law would be retaliation for the Magnitsky Act. That pressure failed to sway the US gover nment, and the Magnitsky Act stayed in place despite pleas from anguished adoptive parents. But, for Moscow, the issues of adoption and sanctions became seen as linked and have remained t h at way— somet h i ng t h at a Kremlin-connected lawyer, like Veselnitskaya, would surely have had in mind. Lifting of sanctions is a pr ior it y for Putin. Since that time, Russia’s efforts to reverse the Magnitsky Act and lift other sanctions, like those that the US imposed after Russia’s invasion of Crimea, have been a constant throughline of its foreign policy. They remain a critical priority for Putin, who sees the sanctions as one part of a broader effort by Western governments to undermine his presidency. Veselnitsk aya has engaged in a vigorous campaign to reverse the Magnitsky Act, including promoting a documentary film that portrayed William F. Browder, Mag nitsk y’s for mer employer and the main lobbying force behind the act, as the true culprit behind the tax fraud Magnitsky revealed. Mic h ae l Mc Fau l , who wa s the US ambassador to Russia when the Mag nitsk y Act was passed and is now a professor at Stanford, refer red to Veselnitskaya as an “anti-Magnitsky lobby ist” in a tweet, say ing she could only have been raising the adoptions issue in the context of the Mag nitsk y sanctions. New York Times News Service

Researchers: Happiness turns dairy cows into cash cows

AU K C I T Y, W i scon si n— Dairy farmers, take note: The key to turning your dairy cow into a cash cow is udder happiness. Give her a bigger stall, increase air circulation and provide some shelter to prevent overheating. T hat’s according to a University of Wisconsin initiative that focuses on making dairy cows happier so they provide more milk. “I think it’s really important that we give them the spa treatment,” said Nigel Cook, who has directed the Dairyland Initiative at the University of WisconsinMadison’s School of Veterinary

Medicine since 2010. Cook and his team visit farms to give advice about myriad issues, including behavior and easing cow stress. They also provide workshops and have created a web site to share advice with farmers worldwide. Cook said major concerns include leg pain or lameness, especially among cows that stand for long periods without a comfortable resting place. “It impacts the way she rests, the way she milks, the way she eats, her ability to reproduce and ultimately her ability to stay on the farm,” he said. One solution? Take her to the

beach—or at least the farm equivalent. “The deep soft bedding of sand creates an env ironment where cows can rest half the day,” Cook said. Other recommendations inc lude add i ng spr i n k lers a nd feeding cows at the same time— since herd anima ls prefer to do things together. And while you’re at it, regroup cows less around bir t hing t ime to de crease stressors associated with establishing a hierarchy. It ’s adv ice M itc h Breu n ig has been closely following with his 400 cows at Mystic Valley Dairy in Sauk City. He’s spent

over $100,000 in improvements aimed at making his cows happier, and said it’s been worth it. He’s even added an automatic brush in his barn, which he said is constantly cleaning dust off his cows. “If you take away their stress, they actually produce more milk, and the other thing that is actually interesting is they do it by eating less feed,” Breunig said. Breunig has seen milk-production increase from about 13 gallons a milk a day per cow to 15 gallons. He said his cows also have fewer injuries and live about a year longer. AP

Young cows stand in a barn at Mystic Valley Dairy in Sauk City, Wisconsin. The farm’s owner Mitch Breunig has spent over $100,000 to improve his farm to make his cows happier, including making his barn and stalls bigger and adding fans and other air-circulation equipment. AP/Carrie Antlfinger

The World BusinessMirror

www.businessmirror.com.ph

Wednesday, July 12, 2017

Trump admin blocks ‘start-up visas’

he Trump administration said it plans to rescind an Obamaera program that would allow foreign entrepreneurs who launch startup companies in the US to live in the country, in the president’s latest effort to constrict immigration flows. Known as the International Entrepreneur Rule and favored by many in the technology industry, the program would allow non-US citizens who launched companies that won $100,000 in government grants or received $250,000 in venture-capital investment to stay in the US for a renewable 30-month term. Finalized in the last days of the Obama administration, it was set to take effect on July 17. But the Trump administration

on Monday announced it would delay the program until next March as the Department of Homeland Security launches an additional review of the so-called start-up visa. A notice the department issued indicates that in the interim the administration will propose rescinding the program. “Big mista ke,” Steve Case, founder of A mer ica Online and now CEO of the Revolution Llc. investment f und, said in a

Computer programmers Bloomberg

Twitter statement. “Immigrant entrepreneurs are job ma kers, not job ta kers.” T he Nationa l Venture Capit a l A ssoc i at ion, a n indust r y trade group, criticized the step in a statement.

“At a time when countries around the world are doing all they can to attract and retain talented individuals to come to their shores to build and grow innovative companies, the Trump administration is signaling its intent to

$68B reason China may start adding cash again

n onslaught of maturing funds may see China’s central bank reaching for the fire hose. T he People’s Bank of China (PBOC) hasn’t added a net amount of cash in to the financial system via open-market operations for 16 days, the longest drought since March. A combination of curbs on loan issuance, a stronger yuan and seasonality factors meant they didn’t have to, with a rush of liquidity spurring policy-makers to do the opposite, and drain funds. But that situation could reverse as soon as this week, when a total of 459.5 billion yuan ($67.6 billion) of funds issued via reverserepurchase agreements and the PBOC’s medium-term lending facility comes due—the most since the week ending June 5. Further mopping up funds, government issuers and policy banks will sell at least 483 billion yuan of bonds by Friday. And then there’s tax payments, which may see companies hoard cash into the end of July. T he ce nt r a l ba n k a l re ady seems to be shifting. For the first time in 13 days, the PBOC injected 40 billion yuan using repos on Tuesday. The net effect was still neutral given the amount of funds maturing, with no cash additions on a net basis since June 19, but their rhetoric is changing too. The bank comments whenever it refrains from conducting openmarket operations (OMOs), and Monday’s statement referred to a “moderate” level of liquidity in the banking system, a change from the previous 11 trading days when it was described as “relatively high”.

Policy-makers inject funds to maintain stability in the financial system and to relieve pressure on economic growth as they push on with a much-publicized deleveraging campaign. “ P ressu re for l iqu id it y to tighten is building, and the money market rates have reached a f loor,” David Qu, a markets economist in Shanghai at Australia & New Zealand Banking Group Ltd. said in an interview on Monday. The PBOC is likely to roll over the medium-term lending facility funds due this week as a lot of cash has already been drained, he said. “In the future, long-term bond yields

will continue to climb as the deleveraging drive continues.” China Merchants Securities Co. goes a step further, with analysts led by Chief Bond Analyst Xu Hanfei predicting a resumption of OMOs, as well. The author ities “won’t be sting y” when it comes to injecting funds should China’s economy start to slow in the third quarter, said Pan Jie, chief fixed-income analyst at Orient Securities Co. Right now, money-market rates reflect a system still pretty flush with liquidity. While China’s benchmark seven-day repurchase rate edged up 11 basis points as of 9:57 a.m.

in Shanghai on Tuesday, it fell the most last week since May to a 12-week low. Still, yields are creeping higher, with rates on 10-year government bonds nearing their highest level in three weeks. T he ce nt r a l b a n k do e s n’t want liquidity to be too tight because it could hit economic g row t h and f inancia l stabi lity, says Yulia Wan, a banking analyst at Moody’s Investors Ser vice in Shanghai. “Policy-makers will use a combination of tools to maintain neutral and slightly tight liquidity conditions for the rest of this year,” she said. Bloomberg News

Chinese yuan Bloomberg

Emirates to cut number of employees amid streamlining

mirates is letting go of dozens of employees as the Persian Gulf carrier continues a push to streamline after years of rapid growth, according to people with knowledge of the matter. The world’s biggest long-haul airline is scaling back senior cabin crew, as well as the support department work force, including administration and information technology, according to the people, who asked not to be identified as the information isn’t public. The cuts at Emirates, which froze hiring last summer and hasn’t taken on new crew, in months, began in the last few weeks and affect middle and upper-level managers, they said.

Dubai-based Emirates said there is no company-wide program to reduce headcount and that “there is no change in staff turnover rates in the past weeks”. The carrier continues to hire for “critical roles”, a spokesman said in an e-mailed response to questions, noting that “recruitment has slowed down as we streamline our operations, introduce new technologies, and find ways to better deploy existing resources internally”. Emirates Group, which includes the airline and other travel and tourism entities, increased its work force 11 percent in the fiscal year ended March 31 to more than 105,000 employees.

Industry woes

Gulf airlines have had to adapt to tougher business conditions after years of expansion, with challenges ranging from the US ban on travelers from predominantly Muslim countries to reduced spending power in the region due to low oil prices. Emirates, which last year posted its first annual profit drop since 2012, has streamlined operations, and the company has hired an outside consultant to assist in the review, one of the people said. Abu Dhabi-based competitor Etihad Airways PJSC has also cut jobs amid an organizational restructuring, in an effort to reduce costs and improve productivity.

To lift revenue, Emirates has begun charging for seat selection, added fees for its airport lounges and may introduce premiumeconomy seats to boost sales amid waning growth in business class. In a sign that measures taken so far have helped boost performance, Emirates President Tim Clark said in June that first-half earnings could be ahead of the year-ago period. The airline is also considering combining with its low-cost sister FlyDubai, and examining the possibility of cooperating with discount long-haul carriers, whose rapid expansion in Asia and Europe poses a threat to its hubbased model. Bloomberg News

do the exact opposite,” said Bobby Franklin, president and CEO of the trade group. It’s the latest example of the Trump administration taking a step to restrain immigration to the US despite objections from business groups. T he president’s ban on travel f rom si x Musl im-major it y countr ies drew cr iticism from a w ide s w at h of compa n ies, with more than 160 technolog y fir ms, including A mazon.com Inc., Facebook Inc. and Google cor porate parent A lphabet Inc. joining a lega l br ief cr iticizing the executive order. Technology firms have also criticized the administration’s efforts to restrict access to H-1B visas for high-skilled workers. The move is also likely to draw the ire of some of the president’s allies on Capitol Hill. A group of Republican senators last month sent Homeland Security Secretary John Kelly a letter

calling the rule consistent with the administration’s “goals of stimulating the economy and creating job growth at home”. “There is little benefit to losing any more ground in attracting entrepreneurs and their investments,” the senators, which include Arizona’s John McCain and Jeff Flake, Utah’s Orrin Hatch and Jerry Moran of Kansas, said in the letter. Bloomberg News

160

The number of technology companies that criticized the Trump administration’s earlier ban on travel from six Muslim-majority countries

Post-Brexit UK-US trade deal easier said than done

he transatlantic trade deal US President Donald J. Trump is offering UK Prime Minister Theresa May will ultimately prove easy to promise and hard to deliver. That’s the warning of business leaders and trade analysts after Trump told May last week that the post-Brexit accord she hankers after can be lined up “very, very quickly”. The challenge for the UK with talks set to begin this month is that America boasts of more leverage and negotiating know-how than the UK does. That will potentially force May to compromise on areas such as financial regulation and food standards to land the agreement she needs. “The UK must be absolutely desperate to demonstrate that it’s able to get something from the United States,” said Peter Holmes, an economist at the Trade Policy Observatory, a research group. “The US will make demands that even a desperate British government won’t be able to accede to.” While the UK can’t formally sign deals with other countries until it formally leaves the EU in March 2019, it can prepare the groundwork in the hope of ratifying them soon after. Conversations with the US are set to begin on July 24. At stake is trade between the US and the UK, which Britain’s statistics office estimates amounted to a surplus £37 billion ($47.6 billion) a year as of 2015. By contrast, the US Bureau of Economic Analysis calculated a surplus of $11.9 billion in the same year, providing an awkward starting point, with both countries claiming to export more than they import from each other. “The USA has one of the best negotiating teams in the world in terms of trade deals,” Paul Drechsler, president of the Confederation of British Industry, a lobby group, told Sky News. “We don’t want to walk into a bear hug and I would be wary of trying to be too fast. A trade deal is a dog-eat-dog activity; it’s not a diplomatic activity.” The UK may already have a taste of things to come from the inability of the EU and US to agree a trade deal. Those talks have been on hold since Trump took power in January

amid differences over data privacy and the rolling back of financial regulations among other issues. “You’re starting from the same point and the same issues are going to come up,” said Joseph Francois, managing director of the World Trade Institute, a group at the University of Bern. “There are bigger potential gains from doing a deal with Europe than with the UK on its own, just because Europe is a bigger market,” said Thomas Sampson, an economist at the Centre for Economic Performance. “The flip side of that would be that because the UK is just one country rather than a block of 27 countries it should have more flexibility.” The UK is already viewing a pact as a way for Londonbased banks to secure easy access to Wall Street, according to International Trade Secretary Liam Fox. Yet that might require the UK to accept weaker rules on finance, less than 10 years after the financial crisis. A g r ic u lt u re cou ld a l so emerge as a sticking point, according to Holmes. “You can see a Trump administration coming to the UK and demanding a loosening of sanitary regulations on food, demanding that the UK allow hormone-treated beef to be sold in the UK and for the UK to accept GM crops,” he said. “There will be quite a reaction against it.” A not her w r in k le cou ld emerge if the US tries to win access for its companies to Britain’s state-run health service. May declined to say in January whether the National Health Service would be off-limits for a trade deal although June’s election may mean she has less room to maneuver on that now. Still, the effort will be worth it, said Gregor Irwin, chief economist at Global Counsel, a consultancy. He identified the US as one of the UK’s prime targets for striking a deal. He calculated that the total value of US imports expanded faster than those of other major economies between 2010 and 2015 and that although the US has modest average tariff barriers with the UK, the scale of trade means current barriers are still significant. Bloomberg News

Wednesday, July 12, 2017

The World BusinessMirror

Trump aides recruited biz men to devise options for Afghanistan

ASHINGTON—President Donald J. Trump’s advisers recruited two businessmen who profited from military contracting to devise alternatives to the Pentagon’s plan to send thousands of additional troops to Afghanistan, reflecting the Trump administration’s struggle to define its strategy for dealing with a war now 16 years old. Erik D. Prince, a founder of the private security firm Blackwater Worldwide, and Stephen A. Feinberg, a billionaire financier who owns the giant military contractor DynCorp International, have discussed their proposals to rely on contractors instead of US troops in Afghanistan with both Stephen K. Bannon, Trump’s chief strategist, and Jared Kushner, his senior adviser and son-in-law, according to people briefed on the conversations. Last Saturday morning, Bannon sought out Defense Secretary Jim

Mattis at the Pentagon to try to get a hearing for their ideas, a US official said. Mattis listened politely but declined to include the outside strategies in a review of Afghanistan policy that he is leading, along with the national security adviser, Lt. Gen. H.R. McMaster. The highly unusual meeting dramatizes the divide between Trump’s generals and his political staff over Afghanistan, the lengths to which his aides will go to give their boss more options for dealing with it and the readiness

4,000 The number of US troops who were sent by the Trump administration to Afghanistan

of this White House to turn to business people for help with diplomatic and military problems. Soliciting the views of Prince and Feinberg certainly qualifies as out-ofthe-box thinking in a process dominated by military leaders in the Pentagon and the National Security Council. But it also raises a host of ethical issues, not least that both men could profit from their recommendations. “The conflict of interest in this is transparent,” said Sean McFate, a professor at Georgetown University who wrote a book about the growth of private armies, The Modern Mercenary. “Most of these contractors are not even American, so there is also a lot of moral hazard.” Last month Trump gave the Pentagon authority to send more US troops to Afghanistan—a number believed to be about 4,000—as a stopgap measure

to stabilize the security situation there. But as the administration grapples with a longer-term strategy, Trump’s aides have expressed concern that he will be locked into policies that failed under the last two presidents. Feinberg, whose name had previously been floated to conduct a review of the nation’s intelligence agencies, met with the president on Afghanistan, according to an official, while Prince briefed several White House officials, including McMaster, said a second person. Prince laid out his views in an op-ed in The Wall Street Journal in May. He called on the White House to appoint a viceroy to oversee the country and to use “private military units” to fill the gaps left by departed US soldiers. While he was at Blackwater, the company became involved in one of the most notorious incidents of the Iraq War, when its employees opened fire in a Baghdad square, killing 17 civilians. After selling his stake in Blackwater in 2010, Prince mustered an army-forhire for the United Arab Emirates. He has cultivated close ties to the Trump administration; his sister, Betsy DeVos, is Trump’s education secretary. If Trump opted to use more contractors and fewer troops, it could also enrich DynCorp, which has already been paid $2.5 billion by the State Department for its work in the country, mainly training the Afghan police force. Feinberg controls DynCorp through Cerberus Capital Management, a firm he cofounded in 1992. McFate, who used to work for DynCorp in Africa, said it could train and equip the Afghan army, a costly, sometimes dangerous mission now handled by the US military. “The appeal to that,” he said, “is you limit your boots on the ground and you limit your casualties.” Some officials noted that under the government’s conflict-of-interest rules, DynCorp would not get a master contract to run operations in Afghanistan. A spokesman for Feinberg declined to comment for this article, and a spokesman for Prince did not respond to a request for comment. The proposals Prince presented, a former US official said, hew closely to the views outlined in his Journal column—in essence, that the private sector can operate “cheaper and better than the military” in Afghanistan. Feinberg, another official said, puts more emphasis than Prince on working with Afghanistan’s central government. But his strategy would also give the Central Intelligence Agency (CIA) control over operations in Afghanistan, which would be carried out by paramilitary units and hence subject to less oversight than the military, according to a person briefed on it. The strategy has been called “the Laos option”, after America’s shadowy involvement in Lao PDR during the war in neighboring Vietnam. CIA contractors trained Laotian soldiers to fight Communist insurgents and their North Vietnamese allies until 1975, leaving the country under Communist control and with a deadly legacy of unexploded bombs. In Afghanistan until now, contractors have been used mainly for security and logistics. New York Times News Service

briefs Military plane crash kills at least 16 in Mississippi

ITTA BENA, Mississippi—A US military plane crashed into a field in rural Mississippi on Monday, killing at least 16 people aboard and spreading debris for miles, officials said. Leflore County Emergency Management Agency Director Frank Randle told reporters at a late briefing that 16 bodies had been recovered after the KC-130 spiraled into the ground about 135 kilometers north of Jackson in the Mississippi Delta. Marine Corps Spokesman Capt. Sarah Burns said in a statement that a KC-130 “experienced a mishap” on Monday evening but provided no details. The KC-130 is used as a refueling tanker. Andy Jones said he was working on his family’s catfish farm just before 4 p.m. when he heard a boom and looked up to see the plane corkscrewing downward with one engine smoking. AP

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

IS has built in staying power with global jihadis

he Islamic State (IS) group’s mix of a local insurgency and digitally connected global jihadis gives the group staying power and the means to relaunch its future, from small cells of extremists escaping the war zone in Iraq and Syria to those who never went there in the first place. The impending loss of Mosul and Raqqa cuts out the urban heart of its self-proclaimed caliphate, but the extremist organization has built-in plans to endure and has shown a degree of flexibility that will be difficult to counteract. For more than a year, IS has acknowledged the possibility of losing the territory that propelled it to the forefront of the global jihadi movement—and drew thousands of foreign fighters. IS’s goal since then has been to maintain its local and global support base in the face of overwhelming defeat. Whether it succeeds depends on what happens well after today’s battles are over.

Escape cells

A first group of IS fighters from Syria and Iraq numbering more than 100 arrived in Afghanistan at the beginning of February, followed by a smaller group, around 20, at the end of March, according to a United Nations (UN) report released last week. The group is unpopular among average Afghans, but shows traction among the young and, most important, receives ample funding from IS’s central command to pay new fighters triple what the Taliban offers—$500 to $600 a month. The UN report said IS has warned its Afghanistan contingent that it will soon need to be self-financing, an ominous sign for the organization that once pulled in millions of dollars in oil money, ransoms and extortion. Other groups of foreign fighters are feared to be trying to make their way back to Europe or North Africa, to ether plot attacks there or simply await orders. In Europe this has fed fears of extremists hiding among the influx of migrants, while North Africa is “really unstable.... It’s awash in weaponry”, said Colin Clark, an analyst with the RAND think tank. IS is “a global group but it’s more regionally anchored. I don’t see them taking up and traveling wholesale to another place. They’re going to go where they have roots. They’re going to seek out these weak states. They’re going to insinuate themselves in local conflicts,” he said.

Hostile takeover

Al-Qaeda and the IS group split in 2014, driven apart less by ideology than by a dispute over timing and tactics. Now known as Hayat Tahrir al-Sham in its latest rebranding effort, al-Qaeda is on the rise in some parts of Syria and in recent days has begun targeting what it calls “organization cells” of the IS group in Idlib and other Syrian provinces. The two groups have considerable crossover—and both claim the mantle of Osama bin Laden. The al-Qaeda campaign could be a precursor to demands for a merger or hostile takeover, complete with a choice of death or repentance from rank-and-file defectors. “The differences between these groups are more in style and tone than in substance,” said Bruce Hoffman, the head of Georgetown University’s security studies program and author of Inside Terrorism. Many of IS’s foreign fighters, especially those from Europe, headed to Syria with the expectation of joining al-Qaeda’s branch there, then switched to what they believed was the winning side. Changing back will not be very difficult, Hoffman said. “Al-Qaeda has been waiting in the wings and been letting ISIS [Islamic States in Iraq and Syria] take all the heat,” Hoffman said, using an alternative acronym for IS.

Fighting—or hiding—in place

Iraq and Syria themselves offer plenty of safe havens for local extremist fighters biding their time. At its height, IS held vast stretches of territory by promising not just brutality, but a religious government beyond corruption that would protect against arbitrary punishment, theft and graft in the service of a global movement for Sunni Muslims everywhere. The promises tapped especially into the grievances of Iraqi Sunnis, who felt abandoned by the Shiite-led government in Baghdad and were suspicious of the Kurdish government in Irbil. Many in the US have called on the Iraqi government to ensure that Sunnis share in the country’s gains going forward—a step that will prove especially complex, given that Sunni areas have seen widespread destruction in the fight against the extremists. Block after block of shattered homes line the roads of Mosul, Fallujah and Ramadi. “It’s almost at a new level of divisiveness and an unrelenting decade of bloodletting has made any sense of rebuilding a civil society unbelievably challenging,” Hoffman said. IS retains a powerful presence in Iraq’s Anbar province and in the city of Tal Afar. IS’s leadership still has a core of leaders from Saddam Hussein’s Baathist organization, known for their survival skills and the support networks they built—something the group’s spokesman, Abu Muhammad Adnani, noted in a message before he was killed last summer in a US air strike: To survive “whether Allah blesses us with consolidation or we move into the bare, open desert, displaced and pursued”.

Revenge attacks

A major aspect of IS’s propaganda narrative has been to offer a haven to Sunnis worldwide and until recently its videos and photos made a point of tempering extreme brutality with images of abundant harvests, children at play and efficient, free medical care. Recently, however, its videos have depicted air strikes destroying the caliphate, providing a powerful new message—vengeance. Last month’s attack at London Bridge was claimed by IS as revenge against the US-backed coalition, and the group pledged more violence to come. With supporters from around the world linked by social media and thousands of pieces of propaganda, security officials in Europe and the US fear similar attacks are in the offing. At its height, IS had tens of thousands of fighters at its disposal, though estimates varied widely. Air strikes killed a vast percentage, the streams of Europeans heading to the war zone have dried up, and new recruits from the region are growing scarce, but its survival may not depend on numbers alone. AP

ExportUnlimited BusinessMirror

Editor: Efleda P. Campos • Wednesday, July 12, 2017 A9

DTI supports local association on safety of coconut oil

HE United Coconut Association of the Philippines Inc. (Ucap) recently issued a statement clarifying the American Heart Association’s (AHA) advisory against the consumption of coconut oil. In the statement, Ucap said the advisory has gone viral with an adverse effect on coconut oil, since it is considered a saturated fat. Ucap called on readers and users of coconut oil to be discerning of the advisory and news articles drawing conclusion that coconut oil is unhealthy. Dr. Fabian M. Dayrit of the Ateneo de Manila University said the AHA adopted a position that ignores the distinction between medium-chain fatty acid and long-chain fatty acid despite the numerous advances in this certain field of science. Coconut oil—also called lauric oil—is mostly medium-chain saturated fat, the healthy type of fat. Detailed comparison of the fatty-acid composition shows coconut oil is very different from animal fat. Hence, studies that assume they are similar are consequently in error, Dayrit added. The Asian and Pacific Coconut Community (APCC) also highlighted in its recent statement the words of Dr. Bruce Fife, a USA certified nutritionist and doctor of naturopa-

thy medicine, “You cannot say LDL [low-density lipoprotein] is bad and HDL [high-density lipoprotein] is good.” He said there are two types of LDL: One small and dense, while the other is large and soft. The large LDL is the type used in making bile, hormones and vitamin D, which are all good for one’s health. Fife further concluded,“Eating coconut oil [and other saturated fats] increases both HDL and the ‘good’ LDL, thus lowering the risk of heart disease. This is one of the reasons populations that eat a lot of coconut oil have the lowest heart-disease rates in the world.” The Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB) concurs with the stand of industry associations, such as Ucap and the APCC, that the advisory is misleading, as the AHA based its findings on limited studies on saturated fats. “This is not the first time this kind of negative publicity against coconut oil has happened. If we will

look closer [at] historical accounts, this has happened before. It was magnified this time due to social media and technology,” DTI-EMB Director Senen M. Perlada said. In the 1980s consumption of coconut oil in the US suffered because of news reports claiming that coconut oil is high in saturated fat and, therefore, bad for human health. Subsequent scientific studies later on debunked those claims. Many countries in the Asia-Pacific region use lauric or coconut oil in their food preparation. Perlada added the DTI will continue to support the industry in sharing the good news about coconut and its economic contribution to millions of Filipino farmers and exporters. Backed by recent studies and firsthand experiences of its consumers around the globe, the DTI will help sustain the impressive health and economic contribution of coconut products, such as coconut oil, virgin coconut oil, coconut water and coconut sugar, among others, by continued promotion through road shows in various markets that will eventually bring additional jobs and income opportunities for Filipinos, especially in the countryside. The AHA issued a Presidential Advisory on Dietary Fats and Cardiovascular Disease on June 15, which recommended a decrease in consumption of products high in saturated fat, such as dairy fat (butter), lard (pork), beef tallow, palm oil, palm-kernel oil and coconut oil. Kate Bondoc

MARKET DEVELOPMENT UPDATE PHL cites benefits of WTO Information Technology Agreement By Magnolia M. Uy

EXPORT DEVELOPMENT COUNCIL HONORED

During the 2017 Awards Ceremony and Appreciation Lunch for Bangko Sentral ng Pilipinas (BSP) Stakeholders held on July 11 at the BSP Complex in Manila, the Export Development Council (EDC) is honored as the outstanding partner for Source of Information for Balance of Payments projection. Receiving the award for the EDC (from left): are Senen M. Perlada EDC executive director and director of the Export Marketing Bureau of the Department of Trade and Industry (DTI); DTI Trade and and Investments Promotion Group Undersecretary Nora K. Terrado; Philexport President Sergio Ortiz-Luis Jr.; and EDC Deputy Executive Director Emma Mijares.

THE Philippines’s official participants at the recent 20th ITA in World Trade Organization include Seipi President Dan Lachica (from left), Philippine Trade and Investment CenterGeneva Commercial Attaché Magnolia Uy, Board of Investment Governor Lucita P. Reyes and Ionics Vice President for Operations Jay Chavez.

design and by taking manufacturing to the next level through the implementation of smart factory and Industry 4.0 technologies. The ITA was finalized during the 1996 WTO Ministerial Conference in Hong Kong, while the Philippines became a signatory to the agreement in 1997. In 2012 members recognized that technological innovation had advanced to such an extent that many new categories of IT products were not covered by the existing agreement. As negotiations to expand the coverage of the agreement began in 2012, the ITA expansion agreement was concluded during the 2015 WTO Ministerial Conference in Nairobi. The Philippines availed itself of the flexibilities of extended staging of tariff reductions of the agreement. Executive Order 21 mandates the Philippines ITA commitment will enter into force on July 1, 2017. WTO Director General Roberto Azevedo opened the symposium and noted how exports in the products covered by the original agree-

ment tripled from $549 billion in 1996 to approximately $1.7 trillion in 2015, representing an annual growth rate of 6 percent. At present, ITA products account for a remarkable 15 percent of all global manufacturing exports. ITA membership also increased from 29 WTO members in 1996 to 82 today, accounting for over 97 percent of global ICT trade. Magnolia Uy is commercial attaché of the Permanent Mission of the Philippines to the World Trade Organization, Philippine Trade and Investment Center-Geneva. For more information, you can get in touch with the Philippine Trade and Investment Center in Geneva, Switzerland, at +41-22-9097900/ 7906/7915/7917 and Geneva@dti. gov.ph. PTIC Geneva is led by our commercial attachés, TSO Maggie Uy and TSO Ella Burgos, and is located at the Philippine Permanent Mission to the World Trade Organization at Rue de Lausanne 80, 1902 Geneva.

DTI business counselors gear up to assist tech-driven enterprises

ITH the country’s goal of creating a globally competitive and innovative economy, the Department of Trade and Industry (DTI) recently held a session on Startup and Digital Transformation among Negosyo Center business counselors during the Negosyo Center Business Counselors’ Fair at the SM Megatrade Hall, Mandaluyong City. The session, part of the “Road to Slingshot” series, brought together small and medium enterprises to further equip them with business and trade knowledge on addressing and assisting tech-driven businesses across the country. The session provided an overview of the changing business landscape and encouraged business counselors to support budding start-up founders within their regions. DTI Export Marketing Bureau Director Senen M. Perlada presented various initiatives under the DTI’s Startup Ecosystem Development Program in partnership with local and international start-up enablers. “We value the tremendous impact that tech-driven businesses can do to our economy. With the digital revolution happening around the world, we wish to assist them by providing the right trade information, and supporting them through key initiatives,” Perlada said. Brainsparks’s Artie Lopez led an informative and inspiring talk on innovation and start-ups that highlighted industry challenges that tech-start-ups have started to address in various fields, such as health, environment and finance.

UPCOMING EVENTS Compiled by Louise Kaye G. Mendoza

JULY 13

Time: 6 p.m.-9 p.m. Event: QBO BASIQS: Introductory Class on Startups Venue: QBO Innovation Hub, G/F, DTI International Building, 375 Sen. Gil Puyat Avenue, Makati City

JULY 14

Time: 8:30 a.m.-5 p.m. Event: Philippine Export Competitiveness Program (PECP)

• Info Session on PEDP Strategy Update • Strategic Trade Management Act (RA 10697) • Tradeline Philippines • Customs Modernization and Tariff Act Venue: Harold’s Hotel, Cebu City

HE Philippines, through Department of Trade and Industry’s Board of Investments Governor Lucita P. Reyes, Semiconductor and Electronics Industries in the Philippines (Seipi) President Danilo Lachica and Ionics Vice President for Operations Jay Chavez, recently participated in the celebration of World Trade Organization’s (WTO) 20th Information Technology Agreement (ITA) Symposium recently held in Geneva, Switzerland. The event allowed member-countries, industry representatives and academic experts to highlight ITA’s role of providing households and domestic businesses access to more affordable and higher-quality information and communication technologies (ICTs) through tariffs elimination on hundreds of ICT products. The Philippines, as one of the 82 signatories of ITA, has benefited from the initial ITA signed in 1996 and its expansion of list in 2015. The Philippines’s chief ITA negotiator and BOI Reyes said the country’s ITA membership helped lower prices for key ICT hardware inputs that the business-process outsourcing industry depends upon. At present, the country’s ICT services exports account for roughly 70 percent of total services exports, while the ICT goods exports account for more than 35 percent of total exported goods. In terms of ICT goods exports, Lachica said the Philippine semiconductor and electronics industry continues to grow at a steady rate, ranking as the 17th-largest exporter of ICT products in the world valued at approximately $24 billion (out of $29-billion total electronics exports). However, Chavez said to sustain the demand of ICT services enterprises for ICT products, it is imperative for the Philippines to move up the value chain for ICT products by engaging in products and systems

JULY 14

Time: 8:30 a.m.-5 p.m. Event: ASEAN MSME Development Summit Venue: Philippine International Convention Center (PICC), Pasay City

JULY 18

Time: 8:30 a.m.-5 p.m. Event: Doing Business in Free Trade Areas (DBFTA) Info Session Venue: Zamboanga City

JULY 19

Time: 8:30 a.m.-5 p.m. Event: Doing Business in Free Trade Areas (DBFTA) Info Session Venue: Tacloban City, Leyte

A10 Wednesday, July 12, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

₧75-B coconut levy fund can help 3.5M farmers

he coconut is popularly known as the “tree of life” and for good reason. A wide variety of products can be derived from the coconut tree—from its leaves down to its roots. The tree of life provides food, shelter and fuel to millions of consumers all over the world. And some 3.5 million Filipino farmers rely on it for their livelihood.

Data from the Philippine Statistics Authority showed that as of 2015, some 3.51-million hectares are dedicated to coconut production. Of the 81 Philippine provinces, more than half, or 68 are considered coconut areas. Some 330 million fruit-bearing trees are in these coconut areas, according to the PSA 2015 data. The coconut industry contributes significantly to the country’s economy. Of the 2.258 million metric tons (MMT) in copra terms produced by the Philippines in 2015, more than half, or nearly 1.49 MMT were exported that year. Among the products shipped by the Philippines include crude coconut oil, cochin oil, dessicated coconut, crude glycerine, coconut-milk powder, coconut-milk liquid, coconut flour, coconut vinegar and coco peat. Among the coconut-based products being exported by the Philippines, the top dollar earner and top farm export is coconut oil. Data from the PSA showed that in the first four months of the year alone, export receipts from coconut oil have more than doubled to $587.73 million, from $251.67 million recorded from January to April 2016. Revenues from the export of all coconut products during the period reached $664.99 million, more than double the $311.5 million recorded last year. Current efforts by the West via the American Heart Association to paint coconut oil, also known as lauric oil, as bad for the health could adversely affect Philippine shipments of coconut-based products. The decline in demand caused by the revival of attacks against Philippine coconut, which have been launched in the 1980s, would be disastrous to 3.5 million coconut farmers who are considered smallholders tilling less than 2 hectares of coconut farms. The new chief of the Philippine Coconut Authority, an agency attached to the Office of the President, vowed the Philippines would take the lead in fighting what appears to be a concerted effort to vilify the coconut. President Duterte and our lawmakers should help the industry by allocating a portion of the P75-billion coconut levy fund for a sustained marketing and information campaign. The country’s Trade and Agriculture attachés, especially those stationed in countries that are considered top buyers of coconut oil, should take the lead in this campaign. The local coconut industry should close ranks with the government and help educate the public about the benefits of coconut oil. The Asia and Pacific Coconut Community, an intergovernmental organization of coconut-producing countries in Asia Pacific, said the exponential growth of coconut-based products in recent years may have alarmed vegetable-oil producers in the West to again revive the issue against the Philippines’s top farm export. The Philippine government and industry stakeholders should not wait for export receipts to go down drastically, as millions of lives depend on the coconut not for just for profit but for their survival. Since 2005

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A disastrous maiden appearance Edgardo J. Angara

he Group of 20 (G20) Hamburg Summit’s joint communique issued over the weekend clearly stated that all but one of the world’s richest economies would implement the Paris Accord, even if the richest, under President Donald J. Trump, did not sign onto the communique.

German Chancellor Angela Merkel, at a news conference after the summit, openly “deplored” the US’s decision to drop out of the climate accord. She said, “What becomes clear in this declaration [of the G20

summit] is the dissenting view of the United States, but I am gratified to note the other 19 members of G20 say the Paris agreement is irreversible.” Rarely is such a deep disagreement among world leaders made

public. More notably, never before has the US been isolated and painted as an “odd-man out” in such an unequivocal manner. The G20 communique is a clear sign that the developed world no longer turns to the US—at least under Trump—for leadership. It does not help that the former real-estate mogul appears to have fibbed and fumbled about his bilateral talks with Russian President Vladimir Putin. According to US State Secretary Rex Tillerson, Trump opened the meeting by pressing on Putin about alleged Russian interference in the 2016 US elections. Russian Foreign Minister Sergei Lavrov corroborated that account, but added Trump accepted Putin’s claims of innocence. The bilateral meeting between the two resulted in noteworthy de-

velopments, such as a multilateral ceasefire among the US, Russia and Jordan in Southwest Syria, and the dubious creation of a working group on cyber security. The conflicting accounts of what actually transpired put his competence as his country’s top diplomat under serious doubt, and cloud the future of the US as world leader. What is more remarkable, as the UK’s Independent claims, is how Trump does not appear to care that the US is so egregiously out of step with the rest of the world. Trump’s “America First” ironically diminishes America’s prestige rather than advances American influence worldwide. E-mail: angara.ed@gmail.com| Facebook & Twitter: @edangara

Asia’s financial crisis still has 5 things to teach us now Mohamed A. El-Erian

BLOOMBERG VIEW

wenty years ago, I was working at the International Monetary Fund in Washington that would scramble—like almost everyone else—to understand and respond to cascading financial disruptions that would throw Asia into a deep recession. Important lessons were to emerge from an Asian miracle that was taking an unexpected turn for the worse, with frightening systemic implications. Asia painfully learned, and adapted well, and what it taught us remains valid today for other countries, and not just emerging economies. Indeed, had the advanced nations also been more open to these lessons, the global economy could well have sidestepped the even bigger global financial crisis in 2008, whose repercussions are still being felt today. Here are five of the most important economic and financial lessons whose relevance extends well beyond Asia: 1. Self-insurance, although expensive, is the best way to secure resilience Heading into the crisis, the combination of low international reserves, high debt and currency/maturity mismatches made Asia particularly vulnerable, not just directly but also by increasing exposure to domestic capital flight and sudden outflows of foreign funds. Asian countries had no choice subsequently but to build and rely on a big foreign reserve cushion. They also embarked on more prudent debt management, reducing the overall stock, lengthening maturities and lowering foreign-exchange exposure. Despite the passage of time, it hasn’t been easy to wean some Asian economies from this defensive approach. As such, their international reserves have remained well above what would be

warranted by traditional precautionary metrics. To offset the so-called negative carry that results—that is, earning less on the foreign reserves than the cost of associated domestic liabilities—a few took the additional step of segmenting their holdings into two distinct categories: reserves and wealth management. This helps Asia lessen the cost of maintaining a high level of financial resilience. 2. Currency floats aren’t perfect, but they are better than the alternatives As Indonesia, Malaysia and Thailand discovered during the crisis, a fixed exchange rate makes countries even more exposed to the disruptive effects of capital outflows. Yet, such flexible currency arrangements, as important as they are, are no panacea. They need to be managed well, and accompanied by supportive policies. Otherwise, they can become a problem in themselves. With high reserves and better debt management, Asian economies became less exposed to the collateral damage of fluctuating exchange rates—specifically, the extent to which a currency depreciation fuels inflation and raises the domestic cost of servicing foreign denominated debt. As such, the transition to a flexible exchange rate regime became a lot more effective in helping to navigate both domestic and foreign economic cycles. With that, the region

became less vulnerable to the sudden stops in trade and commerce that are associated with dramatic adverse changes in international capital markets (such as the 2008 global financial crisis). 3. Liberalize carefully while tweaking economic and financial management It’s critical to take a measured approach to liberalizing the capital account of the balance of payments, something the “Washington consensus” that prevailed at the time had pressed hard on emerging nations. Rather than an end in itself, the careful and nuanced pursuit of capital liberalization became part of the redefinition of the region’s approach to managing the middle-income transition, one of the most difficult stages of the economic development process. Asia came to understand well that foreign capital flows—and, especially, short-term portfolio inflows as opposed to longer-term foreign direct investment—constitute a double-edged sword. Yes, they help relieve financial constraints on the balance of payments and even the budget; and yes, they can be associated with the transfer of human capital. But they can also turn around suddenly, undermining the financial system and sucking valuable oxygen out of the economy. All of which speaks to the importance of getting the right mix and having contingency plans for sudden outflows. 4. Interact with others, but also build regional institutional backups A shift toward a stronger regional construct became another element of this redefinition. But it was a change that initially faced enormous external opposition and took considerable time to overcome. In the midst of the crisis, several Asian governments felt that the conditional financing available to them from western-dominated institutions took insufficient account of local circumstances. But their attempt to compensate by building regional institutions—back then, centered on a new Asian Monetary Fund—was quashed by

western countries. Although Asia did secure better central bank swap lines, the institutional construct remained heavily western dominated and oriented. Fast-forward 20 years, and the situation has evolved. The west is less able and willing to block the Asian regional initiatives spearheaded by a more confident and assertive China. Witness the creation of the Asian Infrastructure Investment Bank and the “One Belt, One Road” project. These regional arrangements can help Asia navigate the more fluid global economy. But there is nothing automatic about this. It requires careful design and implementation, minimizing political interference and maximizing operational autonomy and technical competency. 5. Your greatest strength can also become your most glaring weakness But, perhaps, the most important lesson of all is not to drink too much of your own Kool-Aid. It was easy for Asian nations to believe they were exceptional; that they were immune from certain laws of finance and economics; and that nothing could derail their impressive economic development. But as problems emerged, they were initially either ignored or papered over with measures that involved their own dangers. (Remember Thailand’s use of short-dated forward foreign exchange swaps?) The same closed-mind-set phenomenon made many advanced countries dismissive of what they can learn from others. Remember the notion that Japan’s economic stagnation “couldn’t happen here”? Or how western experts ignored the important structural insights from Asia’s experience? In a strange way, the Asian crisis—as painful and as damaging as it was in the short run—saw the region emerge stronger, smarter, humbler and more flexible. Let us hope that the West follows course as it continues to deal with the hangover from both the causes and consequences of the 2008 global financial crisis.

Opinion BusinessMirror

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Will Duterte continue the BSP-PDIC bias against small banks? Michael Makabenta Alunan

on the contrary

resident Duterte’s thrusts to wipe out drugs, crime, corruption and poverty are noble goals, but it’s high time he learns the machinations of the banking system and the seemingly systematic staggered closure of small rural banks by the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC), while unfairly bailing out big commercial banks.

Yearly closure of small banks From 2000 to June 2017, wwwbanksphilippines.com reports over 310 small banks, mostly rural banks, were shut down by the BSP and PDIC. In 2000 23 small banks were closed by the BSP and taken over by PDIC; in 2001 19 rural banks, including four cooperative rural banks; 2002, 12 banks; 2003, nine rural banks, including two cooperative banks; 2004, two savings and two rural banks; 2005, 10 banks (eight rural, two savings); 2006, 11 banks (10 rural and one development bank); 2007, 17 banks (16 rural and one savings); In 2008 24 banks were closed and put under PDIC receivership ( 22 rural banks, one co-op and one thrift bank); 2009, 31 banks (27 rural, two savings , two co-ops); 2010, 25 banks (21 rural, one savings, three co-ops); 2011, 29 banks (25 rural and four savings); 2012, 24 banks (22 rural, one commercial and one co-op); In 2013 18 rural banks, including one big co-op rural bank in Bulacan with eight branches; 2014, 15 banks (13 rural, one co-op, one savings); 2015, 14 rural banks; 2016, 22 banks (20 rural, three thrift banks and one savings bank). For 2017, as of June, five rural banks have already been closed. But bail out of big banks? Lopsidedly, while smaller banks are systematically being closed, bigger banks are bailed out from liquidity, or maybe from near insolvency, problems. One classic example is the P7.6billion bailout by PDIC of the Philippine Bank of Communications (PBCom) sometime in 2002. By 2004 Lucio Co, of Puregold chain fame, together with Roberto Ongpin bought PBCom. For Lucio-Ongpin to save PDIC indirectly from its P7.6billion questionable PBCom bailout, PDIC may have offered sweeteners. Ongpin later bolted out for whatever reason, but he finished first the transaction. If PDIC can extend P7.6 billion to PBCom, why can’t it bail out rural and cooperative banks, which extend credit to agriculture that really create physical wealth, benefiting millions of farmers?

Awash with funds, but little for the poor

Perhaps, it is time banking reforms are pushed, starting with a Senate probe on why credit is not flowing to the countryside, where two-thirds of those living below the poverty line reside. Banks are still awash with funds and never had it so good. Records show the domestic savings rate in 2015 was 30.3 percent of gross national income, but gross capital formation rate was only 19.8 percent. This means surplus savings are held unproductively with banks, which could have been invested in rural investments matched with government guarantees to enable banks to lend more liberally. Under the agri-agra loan law, banks are required to allocate 25 percent of their loan portfolio for agriculture projects, but the BSP ostensibly allows them an escape clause by buying T-bills as a form of paper compliance. Banks obviously prefer safer paper investments in government securities over loans to agri-

Perhaps, it is time banking reforms are pushed, starting with a Senate probe on why credit is not flowing to the countryside, where two-thirds of those living below the poverty line reside. Banks are still awash with cash and never had it so good. culture, which is vulnerable to the vagaries of nature and other risks. But you cannot blame banks in the absence of solid guarantees for lending to agriculture, while the BSP also allows them to circumvent but ironically comply with the agriagra loan law. Banks are therefore awash with cash, while trickles go to rural areas.

PHL firmly committed to solve drug problem Teddy Locsin Jr.

Free fire Continued from A1

he Philippines, as everyone knows, is firmly committed to solving the drug problem. The option of just living with the problem is not on the table.

The drug problem in the Philippines has reached alarming proportions: n We have about 4 million drug users. Another figure has it at less than 2 million. Both figures, to borrow a popular expression these days, are huge. n Drug use is prevalent in 47 percent of villages nationwide. n In the capital, Metro Manila, 97 percent of its political subdivisions have robust drug trades. Hundreds of local government officials are involved in it. n In the last 10 months, our law enforcers have confiscated $377.28 million worth of illegal drugs, dismantled eight laboratories and seized two chemical warehouses. A photo of one of the drug labs was

used for illustrative purposes in this week’s Transnational Crime Conference here at the UN. n 28,056 drug personalities have been arrested. n You know the casualty figure. The numbers vary, but the figure given by the anti-drug agencies rest on facts. n A huge number—1,154,000— have surrendered for rehab as of last April. Our Inter-Agency Committee on Anti-Illegal Drugs and our National Anti-Drug Action Plan have said that they want to address the drug problem in a holistic fashion, whatever that means, by 1) reducing the drug supply— self-explanatory; 2) reducing the demand for

Neighbors show way to reduce poverty

While we often brag to have the highest growth rate in the region, we are the worst in reducing poverty and must learn from our more humble, but hardworking Asean neighbors. Thailand pumped credit into agriculture and reduced rural poverty by 73.2 percent in 12 years, from 51.5 percent in 2001 to 13.9 percent in 2013; Indonesia’s rural poverty dropped to 13.8 percent in 2014; Vietnam, 17.4 percent in 2010; and Malaysia to 8.4 percent in 2009. Worst, an Asian Development Bank (ADB) study on 51 developing countries reveals that for every 1 percent increase in income, poverty drops by 1.5 percent or even 2 percent in Asia, except the Philippines. From 2004 to 2009, for instance, Philippine GDP grew by 4.9 percent, but poverty even increased to 26.5 percent in 2009. In short, we brag of high growth, which is more financial growth, while the physical economy is actually collapsing, at least in agriculture, thus explaining massive rural poverty and rural-to-urban migration that breeds slums, criminality, drugs, prostitution, social unrest and other social issues like insurgency and the overseas Filipino workers phenomenon. And the policy bias against small banks may be a major factor. E-mail: mikealunan@yahoo.com.

drugs; pretty much the preferred solution on Friday’s conference on sex-trafficking; which is to say make it punitive for men to enjoy the trade. 3) alternative development— your guess is as good as mine as to what that piece of bureaucratic speak means; 4) a public information campaign that drugs kill and that the public might care to pitch in and help; 5) regional and international cooperation, which is essential given the scale of transnational drug trafficking in Asean as explained in the UN Transnational Crime Conference, where it was shown that the ingredients for crystal meth—shabu in my country, yaba elsewhere—come from the near abroad, specifically north Asia. So diplomacy might help. The government’s efforts against illegal drugs reflect our commitment to keep the peace. Reliable intel shows a robust connection between the drug trade and the unprecedented outbreak of jihadist terrorism in an almost entirely Catholic, yet remarkably tolerant, country. Filipinos don’t do hate like other countries. The government is also committed to promoting the health and well-being of the Filipino people; particularly in the historical light of the British opium trade that left China weak and open to foreign aggression for a

century. It is our belief that we live in such times again. Asean is now developing the Asean Cooperation Plan to Tackle Illicit Drug Production and Trafficking in the Golden Triangle. However, the Transnational Crime Conference revealed that, with regard to crystal meth, the supply—mainly of essential ingredients or precursors—comes almost entirely from farther up north. We look forward to engaging with the UNO-DC in fighting the drug scourge. We hope that our collective efforts will bring about a world free of illegal drugs and spared their destructive effects on individuals, families, societies, and countries across the globe. Legalizing illegal drugs, which is to say legalizing crime, can never be an option, although that is the desire of the drug trade, perhaps so they can do IPOs according to one business model. This may work in small countries, but not in a big sprawling country with 110 million people living close to the Asian centers of the drug trade. To borrow an expression, forgive my Spanish, “Pobre Filipinas, tan lejos de Dios tan cerca de drogas.” This is a struggle the forces of decency cannot stop waging, and in which human society cannot surrender—if it is to stay that way. Human.

Why inequality may be worse than it seems

Capital siphoning worsens rural poverty?

AS rural banks are increasingly shut down, the more credit will not flow to the countryside as the commercial banks replacing them are still allergic to agricultural lending. A commercial bank branch manager in Ilocos revealed many years back that he retained only 2 percent of funds to meet withdrawals and loans, and remits 98 percent to Manila headquarters. Ilocos banks may be an exception as Ilocano overseas migrants continue to send money to their families, who are fairly frugal for saving more and shying away from spending or investing that will boost the local economy. Moreover, the Comprehensive Agrarian Reform Program (CARP) has forced most landowners to abandon agriculture and siphon out their capital away from agriculture, thus explaining why agriculture stagnated for many years, making us more dependent on imports on many agricultural products.

Wednesday, July 12, 2017 A11

Paul Donovan

lobally, income inequality has collapsed over the past 25 years. A lower proportion of the world population live in poverty today than at any time in human history. People doing the same job in different countries are more likely to earn similar wages. However, within economies income inequality has risen. Almost every major economy has seen a growing gap between the richest and poorest in its society. This creates political, social and economic problems. What really matters to most people is not income (as such) but living standards. After all, it is what money can purchase that makes money important. Thinking about living standards means thinking about real or inflation adjusted levels of income. This creates a problem, because alongside income inequality there has also been inflation inequality. Inflation measures the rise in price of the things bought by an average consumer. The problem is trying to decide what “average” is.

What things are important, and what things are more important, when calculating inflation? Most countries simply look at what people spend their money on. If people spend more money on a particular thing, then that thing should be considered more important when calculating the rate of inflation. This all seems very logical. However, if someone has more money to spend (they are rich), they will have more influence about the things that are used to measure inflation. One person with a $100 to

spend is as important as 10 people each with $10 to spend. Inflation, in short, is a plutocratic statistic, not a democratic statistic; one dollar, one vote rather than one person, one vote. Because the calculation of inflation is biased by rich people’s spending, inflation represents the price of the sort of things bought by someone in the richest third of a country. Clearly, if the price of everything rose at the same rate all of the time, this would not be a problem. That never happens. In the real world some things rise in price more than others. In recent years the prices of food, energy and housing have tended to rise faster than average inflation. Energy rose because it is the price of electricity, not the price of crude oil. Low-income people spend far more of their money on food, energy and housing than do high-income people. Health-care prices have also tended to rise faster than average inflation. Older people tend to spend far more of their money on health care than do younger people. Inf lation for lower-income groups and for older people, has tended to be higher than the officially reported inflation data. That means that using the official infla-

How we are ruining America

By David Brooks | New York Times News Service

ver the past generation, members of the college-educated class have become amazingly good at making sure their children retain their privileged status. They have also become devastatingly good at making sure the children of other classes have limited chances to join their ranks.

How they’ve managed to do the first task—giving their own children a leg up—is pretty obvious. It’s the pediacracy, stupid. Over the past few decades, uppermiddle-class Americans have embraced behavior codes that put cultivating successful children at the center of life. As soon as they get money, they turn it into investments in their kids. Upper-middle-class moms have the means and the maternity leaves to breast-feed their babies at much higher rates than high school-educated moms, and for much longer periods. Upper-middle-class parents have the means to spend two to three times more time with their preschool children than less affluent parents. Since 1996, education expenditures among the affluent have increased by almost 300 percent, while education spending among every other group is basically flat. As life has gotten worse for the rest in the middle class, upper-middle-class parents have become fanatical about

making sure their children never sink back to those levels, and of course there’s nothing wrong in devoting yourself to your own progeny. It’s when we turn to the next task— excluding other people’s children from the same opportunities—that things become morally dicey. Richard Reeves of the Brookings Institution recently published a book called Dream Hoarders detailing some of the structural ways the well-educated rig the system. The most important is residential zoning restrictions. Well-educated people tend to live in places like Portland, New York and San Francisco that have housing and construction rules that keep the poor and less educated away from places with good schools and good job opportunities. These rules have a devastating effect on economic growth nationwide. Research by economists Chang-Tai Hsieh and Enrico Moretti suggests that zoning restrictions in the nation’s 220

top Metro areas lowered aggregate US growth by more than 50 percent from 1964 to 2009. The restrictions also have a crucial role in widening inequality. An analysis by Jonathan Rothwell finds that if the most restrictive cities became like the least restrictive, the inequality between different neighborhoods would be cut in half. Reeves’s second structural barrier is the college admissions game. Educated parents live in neighborhoods with the best teachers, they top off their local public-school budgets and they benefit from legacy admissions rules, from admissions criteria that reward kids who grow up with lots of enriching travel and from unpaid internships that lead to jobs. It’s no wonder that 70 percent of the students in the nation’s 200 most competitive schools come from the top quarter of the income distribution. With their admissions criteria, America’s elite colleges sit atop gigantic mountains of privilege, and then with their scholarship policies they salve their consciences by offering teeny stepladders for everybody else. I was braced by Reeves’s book, but after speaking with him a few times about it, I’ve come to think the structural barriers he emphasizes are less important than the informal social barriers that segregate the lower 80 percent.

tion data to calculate differences in living standards understates the true problem. Lower-income people have less money to spend than their richer peers, and the things that they buy rise in price more quickly. Being old is more expensive than being young. The fact that inequality is worse than the official data indicates could help to explain the rise of anti-establishment politics. Countries with greater inflation inequality (like the United States) have tended to experience greater support for anti-establishment politicians. If the world were to experience an increase in food prices later this year (as it did in 2007) inflation inequality would get worse. Rising food prices, or any other driver of unequal living standards, may have wider political and investment implications. Investors also need to realize that their own inflation rate is not the same as official inflation, and that their real investment returns are not what they imagine.

Paul Donovan’s latest book The Truth About Inflation was published by Routledge in April 2015. Visit www.ubs.com/pauldonovan for more research. Paul’s commentaries in the UBS series of documentaries on Nobel Laureates in economics is available at www.ubs.com/nobel.

Recently I took a friend with only a high-school degree to lunch. Insensitively, I led her into a gourmet sandwich shop. Suddenly I saw her face freeze up as she was confronted with sandwiches named “Padrino” and “Pomodoro” and ingredients like soppressata, capicollo and a striata baguette. I quickly asked her if she wanted to go somewhere else and she anxiously nodded yes, and we ate Mexican. American upper-middle-class culture (where the opportunities are) is now laced with cultural signifiers that are completely illegible unless you happen to have grown up in this class. They play on the normal human fear of humiliation and exclusion. Their chief message is, “You are not welcome here.” In her thorough book The Sum of Small Things, Elizabeth Currid-Halkett argues that the educated class establishes class barriers not through material consumption and wealth display but by establishing practices that can be accessed only by those who possess rarefied information. To feel at home in opportunity-rich areas, you’ve got to understand the right barre techniques, sport the right baby carrier, have the right podcast, food truck, tea, wine and Pilates tastes, not to mention possess the right attitudes about David Foster Wallace, child-rearing, gender norms and intersectionality.

2nd Front Page BusinessMirror

A12 Wednesday, July 12, 2017

www.businessmirror.com.ph

Senators likely to OK martial-law extension, but not the 5-yr option S By Butch Fernandez

@butchfBM

enators have expressed concern over the five-year martial-law option floated by Speaker Pantaleon D. Alvarez, even as Senate leaders left the door open for a possible extension of the 60-day martial rule imposed by President Duterte to crush Maute terrorists in Marawi City when it expires on July 22.

Senate President Aquilino L. Pimentel III pointed out that any proposal to extend the martial-law imposition must come from Malacañang. “My position is that extension of martial law must be requested by the President,” Pimentel told Senate reporters on Tuesday. “The idea that we need to extend martial law should come from him, not from anyone else,” he said. The Senate President surmised that Alvarez may just be sending signals he is open to the five-year martial-law idea, and was just “telegraphing his personal position” on the issue, if such a request is made

ZUBIRI: “But personally, it [five-year extension] is way too long without justification. Okay with me is an extension to include the period of rehabilitation for the affected areas.”

by the Palace. Asked if he was inclined to back the Speaker’s position, Pimentel said he would first read the martial-law report they expect Malacañang to submit to Congress detailing what happened during the current 60-day martial-law

imposition in Marawi. Senate Majority Leader Vicente C. Sotto III hinted that senators may vote in favor of a Palace request for the martial-law extension, but not one lasting five years as suggested by Alvarez. Sotto suggests that the Speaker may just be airing “a personal opinion” on the issue. Sen. Juan Miguel F. Zubiri, who hails from Mindanao, opted to reserve his comments on the Speaker’s five-year martial-law extension plan until after the lawmakers’ meeting with Duterte “this coming week”. “But personally, it [five-year

extension] is way too long without justification,” Zubiri told the BusinessMirror, adding: “Okay with me is an extension to include the period of rehabilitation for the affected areas.” Pimentel indicated that senators are likely to firm up their decision when a report is submitted to Congress on “what happened during the martial-law implementation and what were achieved”. “Then, we measure this based on the goals from the start, when m a r t i a l l aw w a s de clared; what were the goals, and then what will be the justification or grounds for extending it,” he added.

CHINESE TOURISTS DROP ‘BUY, BUY, BUY’MANTRA

LT SUPPORTS MARAWI CAMPAIGN Rear Adm. Narciso Vingson (second from left), deputy chief of staff of the Armed Forces of the Philippines, receives a P2-million check from Philippine Airlines (PAL) Chairman Dr. Lucio C. Tan (third from left) as the flag carrier’s support to the country’s soldiers fighting in Marawi. Tan lauded the courage and sacrifices of those on the front line and thanked the Armed Forces for its loyal service to the nation. Also in the photo are (from left) Armed Forces Spokesman Col. Restituto Padilla Jr., PAL President Jaime Bautista and Basic Holdings Corp. President Lt. Gen. Salvador Mison (Ret.).

Slash rice tariffs to cut poverty in Asean–OECD Continued from A1

food regulations, could improve food security for each of the 10 Asean members,” the study read. However, the OECD noted that the benefits of such free trade will vary depending on the development of the Asean member-nation. Countries like the Philippines and Indonesia, which depend on imports to plug the shortfall in domestic production, would benefit the most. The OECD said its recent analysis supports findings on the potential positive links between regional rice market integration and food security. This analysis, however, took note of tariff reduction and trade reforms across the Asean member-nations. “The analysis shows that there is much to be gained—in terms of managing risk and improving food security—from moving toward regionally integrated rice markets,” the study read. One of the findings of the analysis showed that once the integrated regional rice market is achieved in 2025, it would increase the “total welfare” of Indonesia, Malaysia, the Philippines, Thailand and Vietnam by around $2.8 billion, according to the OECD. “Of this, $1 billion accrues to the Philippines, with the remaining gains spread more evenly across countries,” the OECD added. The OECD analysis also showed that an integrated regional rice market would bring down the domestic price of rice in Indonesia, Malaysia and the Philippines by 25 percent to 45 percent. For the Philippines alone, the OECD projected that the domestic price of rice

would go down by 45 percent due to the influx of the staple from the region. The OECD added the reduction in the local price would make the staple affordable to the poor Filipinos, and result in a 5-percent reduction in the number of undernourished people. “The 5-percent fall in undernourishment accounts for both the benefits from price falls in some countries and costs from price rises in others. Of these five countries, undernourishment in two rice-importing countries—Indonesia and the Philippines—would fall the most due to the resulting decreases in domestic prices,” the study read. Cutting tariffs and knocking down trade barriers would cause rice prices in Indonesia, Malaysia and the Philippines to decline by 39 percent, 26 percent and 45 percent, respectively. The OECD added that, due to the increased consumer access to cheaper rice, countries like Indonesia and the Philippines could “offset” the impact of climate change, particularly El Niño, on crop production. “While the regional El Niño scenario increases the undernourished population in five Asean member-states by 49 percent under the current rice-trade regime, integrating the regional rice market could mitigate the impact to an 11-percent increase,” the study read. However, the OECD warned that riceimporting countries in Asean should put in place safety nets to help rice farmers cope with the influx of cheaper rice. The OECD projected that the total volume of rice traded in Asean would increase to 10 million metric tons once the integrated rice market is realized by

2025. Of this volume, about half would come from a diversion of rice exports that would have gone to the rest of the world. The expected increase in the volume of rice traded in Asean would result in higher prices in the world market. “Reduced supply to the world market would cause international prices to rise by approximately 8 percent, thus ,impacting on food security in countries outside the region,” the study read. However, the OECD noted that an integrated regional rice market would only materalize if the 10 member-nations would move toward reducing tariff and removing trade-disrupting measures. “It is noted, however, moves to integration are best realized through shared actions over time. In this way, the disruptions to world markets are minimized and time is allowed for adjustments in both exporting and importing countries, avoiding pressures on world markets,”the OECD said. In order to facilitate freer trade of rice, the OECD recommended that both exporting and importing Asean membercountries should reduce government intervention and increase private-sector involvement in the regional market. “In addition, greater involvement of the private sector in regional rice trade could help to facilitate the necessary market integration, as well as providing benefits in terms of greater efficiency, reduced distortions and greater potential for growth,” the study read. “Vietnam could, for example, allow its private exporters to play a greater role in the export market, while in the Philippines, Malaysia and Indonesia, the role of state agencies in imports could be

restricted to the neutral management of emergency stocks to enable the greater involvement of private traders,” it added. Earlier, economists and analysts told the BusinessMirror that Asean should leverage its well-deserved reputation of being the “food bowl of the world” to cut poverty incidence in the region and wipe out hunger. In the Philippines alone, inflation in the past five years has been benign. The highest average inflation experienced by the country was in 2014, at 4.1 percent, while the lowest was in 2015, at 1.4 percent. In the region, based on the 2016 Asean Community in Figures, inflation was highest in Indonesia, at 3.4 percent in 2015; and lowest in Thailand, where deflation reached 0.9 percent. Despite this, data from the International Food Policy Research Institute (Ifpri) showed that some 84.1 million people are considered hungry in Southeast Asia and the Pacific in 2010. In 2010 Ifpri said there were 32.4 million people who were considered hungry in Indonesia; some 12.9 million in Vietnam; 12.1 million in the Philippines; 10.5 million in Myanmar; 6.2 million in Thailand; and 900,000 in Malaysia. Data from the Asian Development Bank also showed that, apart from Brunei Darussalam, Singapore and Timor-Leste, which had no available poverty data, the highest poverty incidence was in Myanmar at 25.6 percent, and the Philippines at 25.2 percent. This was followed by the poverty incidence in Lao PDR at 23.2 percent; 13.5 percent in Cambodia; 11.2 percent in Indonesia; 10.9 percent in Thailand; 8.4 percent in Vietnam; and 0.6 percent in Malaysia.

hey’re still coming in droves— but no longer buying in spades. After propping up sales for overseas retailers over the past decade with a shopping-driven tourism agenda, Chinese visitors are no longer returning home with suitcases bulging like before. A new survey by consultancy Oliver Wyman shows Chinese tourist numbers and holiday expenditure continuing to rise last year, even as shopping during overseas travel dropped 17 percent from a year earlier. The average Chinese tourist spent about 6,705 yuan ($986) on shopping when traveling, down from 8,050 yuan in 2015. But overall holiday spending—including on hotels and sightseeing—rose 3.5 percent to 20,317 yuan from 19,635 yuan, according to the survey of 2,000 travelers from the mainland. The sea change in spending habits is dealing a blow to retailers from Parisian department stores to Japanese duty-free operators and Hong Kong jewelers, but bigger numbers of wealthier Chinese may create other opportunities for leisure and entertainment operators in popular overseas destinations. “Businesses globally have to adjust their strategy to think about how to capture the new Chinese tourist dollar,” said Oliver Wyman’s Shanghaibased partner, Hunter Williams. “It’s less about the outlet mall now and more about the national park.” Domestically, the growing middle class’s desire for recreation has propelled revenue for the country’s media and entertainment industry to grow more than 70 percent in the last five years to $204 billion. One reason for the change is the easier access to foreign goods in mainland China due to a booming $60 billion cross-border e-commerce market. Imported items can now be ordered online and delivered in as quickly as a day, often exempt from taxes levied on goods from store shelves. That’s dampened the practice of buying overseas to resell locally, and the survey showed such resales falling to

3 percent of shopping expenditures from 8 percent in 2015. Chinese outbound spending still ranks highest in the world. In 2016 travelers from the Asian country spent $261 billion, a fifth of the global total, up from $249.8 billion in 2015, according to the World Tourism Organization. But the portion contributed by shopping has fallen to 33 percent of overall travel expenditure, from 41 percent in 2015, the survey showed. Chinese consumers no longer need to travel overseas to stock up on items from Playtex Products Llc. bras to Christian Dior SE lipsticks and Blue Nile Inc. diamond rings, which are now available on online portals run by firms like Alibaba Group Holding Ltd. and JD.com Inc. With foreign brands increasingly using the Internet to reach Chinese buyers, foot traffic to malls and outlet stores in popular overseas destinations is slumping. Japanese duty-free retailer Laox Co. reported a 33-percent fall in revenue for 2016 as Chinese tourists spent less, while US retailer Macy’s Inc. is shutting 14 percent of its stores to stem sales declines. Luxury houses like LVMH Moet Hennessy Louis Vuitton SE and Cie Financiere Richemont SA and Japanese brewer Kirin Holdings Co. have pointed to sales pressures from fewer Chinese shoppers visiting stores globally, said Bloomberg Intelligence retail analyst Catherine Lim. The survey also showed that more Chinese tourists are traveling with children and spouses rather than going alone or with friends. That could benefit destinations that offer unique leisure experiences or entertainment options, Williams said. “The number of Chinese tourists is still rising rapidly and at quicker pace than their overall spending,” he added. “This should give industry players some pause to think about how to make up for the loss of shopping-related spending through volume.” Bloomberg News