A.D.B. backs fiscal perks reform, corporate tax cut T HE second package of the Tax Reform for Acceleration and Inclusion (TRAIN) will promote a level playing field and improve the country’s business climate, the Asian Development Bank (ADB) said. In a statement, ADB chief economist Yasuyuki Sawada threw his support behind the Duterte administration’s plan to rationalize fiscal incentives and cut corporate income tax, the key features in TRAIN 2. Sawada said firms that receive tax incentives face lower effective tax rates at around 6 percent to 14 percent, while other firms face a 30-percent corporate tax rate. “The guiding principle is fairness—the playing field must be level, so that similar entities
HABAGAT’S HANDIWORK The former Molino Dam—used in the 18th century to irrigate surrounding rice fields in Las Piñas and Bacoor, Cavite—is like an instant waterfall as rains spawned by the southwest monsoon poured over large parts of Luzon early Monday (July 16). The dam is no longer being used as most surrounding lands have been converted to residences. Besides being a crossing point for the residents of both Las Piñas and Bacoor, the area is deemed part of the cultural heritage of Las Piñas. NONIE REYES
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face similar tax rates,” Sawada said. “TRAIN 2 aims to improve horizontal equity by rationalizing fiscal incentives for businesses.” Sawada said the efforts to reform the tax system are not always linked to revenue generation, even for a country like the Philippines, which collects lower revenues compared to its neighbors. He said the Philippine government collects just under 20 percent of GDP. Collections of other developing countries reach just below 25 percent of GDP and advanced economies, 36 percent of GDP. The ADB’s chief economist said reforms are needed to improve tax systems according to the seven See “ADB,” A2
BusinessMirror A broader look at today’s business
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n Tuesday, July 17, 2018 Vol. 13 No. 276
Tax perks lifting cited as investors shun Peza By Elijah Felice E. Rosales
I
@alyasjah
NVESTMENTS committed to the Philippine Economic Zone Authority took a nosedive in the first half of the year, and the only way to prevent these from falling further is to exempt the agency from the coverage of the second package of the tax-reform program, the Peza chief said.
55.86% The level of decline of investment pledges to Peza from January to June 2018
Peza Director General Charito B. Plaza issued the statement after investment pledges to the agency declined by 55.86 percent from January to June. Plaza attributed this to the apprehension of investors about the second See “Tax perks,” A8
M
@cuo_bm
A K I NG poor he a lt h choices can be costly and life threatening. In 2015 alone, the Asian Development Bank (ADB) said Filipinos spent $716 million for the treatment of noncommunicable diseases (NCDs), particularly diabetes. ADB Vice President for Knowledge Management and Sustainable Development Bambang Susantono said NCDs are now considered the leading cause of death among AsiaPacific countries. “Marked by their chronic, longterm nature, NCDs are placing increasing strains on health systems of our developing member-countries. They are posing financial risks to governments,” Susantono said at the opening ceremonies for the three-day Innovations and Actions against NCDs event on Monday. “They are hampering economic growth and putting at risk the economic gains, and reduced poverty and inequality that Asia and Pacific have admiringly achieved,” he added. Health Undersecretary Rolando Enrique D. Domingo also said the Philippines needs to address the rising prevalence of NCDs since these shorten the life span of Filipinos. Domingo said based on the NCD Progress Monitor 2017 of the World Health Organization (WHO), around 68 percent of Filipino deaths are due to NCDs. Further, nearly a third, or 29 per-
68% The percentage of Filipino deaths blamed on noncommunicable diseases, based on the NCD Progress Monitor 2017 of the World Health Organization
cent, of the Philippine population do not reach the age of 70 because of NCDs.
A healthier Boracay should serve as model Manny B. Villar
THE ENTREPRENEUR
T
he six-month closure and cleanup of the resort-island of Boracay is an opportune time to rethink our tourism development for a more sustainable and long-term growth.
While Boracay was getting more than 2 million foreign and domestic tourists a year, it was on the brink of environmental catastrophe in the absence of a master plan and supporting infrastructure. Continued on A6
Remittances back to normal levels in May
C
VIVE LA FRANCE!
Obese adults in Asia
Efforts to address the threat of NCDs are not limited to the Philippines, however. Susantono said 62 percent of all overweight people reside in a developing country. He added Asia and the Pacific is home to the largest absolute number of overweight and obese people. One billion, or about 2 out of 5 adults, in Asia are considered overweight. Domingo added that in Southeast Asia alone, NCDs have claimed around 7.9 million lives, or 55 percent of deaths in 2014. “It is my hope that these disturbing numbers compel us to realize that it is imperative upon us to make the most out of this initiative led by the ADB—to identify priority interventions and, likewise, discuss how to effectively channel resources and investments to successfully implement such,” he said. See “Diabetes,” A2
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‘DIABETES, HEART DISEASES IMPERIL ECONOMIC GAINS OF DEVELOPING NATIONS’ By Cai U. Ordinario
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ASH sent by Filipino migrant workers nor malized in May, after seeing a double-digit surge in the previous month, the Bangko Sentral ng Pilipinas (BSP) reported on Monday. Overseas Filipino Workers (OFWs) sent about $2.47 billion in remittances in May alone, growing 6.9 percent from the $2.31 billion seen in the same month last year. The rise in remittances during the month was a normalization after the double-digit growth in April and the 98-percent contraction in March. It also brought the average remittance growth of the country to 4.2 percent in the first five months of the year—well within the government’s 4 percent projection for 2018. Total cash remittances in January to May this year hit $11.82 billion, up from the $11.35 billion seen in the same five-month period last year. By worker source, cash remittances from both land-based and sea-based workers grew during the month, with land-based workers comprising the bulk of remittances at $1.9 billion—up 5.3 percent for May. Sea-based workers, meanwhile, sent $500 million during the month, up 13.2 percent from last year’s remittances.
Paul Pogba celebrates with the trophy and the Eiffel Tower is illuminated with the colors of France after the Les Bleus beat Croatia, 4-2, on Sunday to win the 2018 World Cup in Moscow, Russia. See story on C1. AP
See “Remittances,” A8
n japan 0.4766 n UK 70.7622 n HK 6.8130 n CHINA 7.9814 n singapore 39.1693 n australia 39.6640 n EU 62.5118 n SAUDI arabia 14.2591
Source: BSP (16 July 2018 )
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A2 Tuesday, July 17, 2018
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PAL ups the ante with XWB Airbus plane flying from Europe in just 13, not 15 hours
House leaders warm up to Cha-cha tasks, senators nix ‘railroading’ By Jovee Marie N. dela Cruz @joveemarie
& Butch Fernandez
D MANILA TOUCHDOWN The first Airbus A350-900 jet of Philippine Airlines touches down at the Ninoy Aquino International Airport on July 15 to a water salute welcome after a 13-hour nonstop flight from Blagnac Airbus Delivery Center, Toulouse, France, carrying PAL officials (led by PAL President Jaime J. Bautista) and Philippine media. The ultra long-range jet—fitted with luxurious cabin amenities—will fly nonstop to New York starting October 2018. recto mercene By Recto Mercene
P
@rectomercene
HILIPPINE Airlines (PAL) brought home its first A350-900XWB (extra-wide body) plane, the first of six A350s it ordered this year in what it describes as a bid to introduce another level of comfortable flying on the longest nonstop route by a Philippine carrier.
The plane landed smoothly at the Ninoy Aquino International Airport (Naia) at 2:15 p.m. on Sunday, under gray skies and rainy spells. T he passengers appl auded heartily, either from relief for the 13-hour nonstop flight, or because the pilot, Capt. Emmanuel Generoso, steered the plane uneventfully, from takeoff in Blagnac Airport, France, to landing in Manila. The delegation that fetched the plane was led by Jaime J. Bautista, president and chief operations officer, who accepted the A350—the airline’s new flagship—in ceremonies on Saturday at the Airbus Delivery Center in France, with airline and media guests in attendance. “Let us thank God for the safe trip. This aircraft is a game changer in the industry with their unexcelled comfort, spacious cabin, greater range and lower operating costs,” Bautista said.
Manila to New York
The A350 will start is first direct flight from Manila to New York
Diabetes. . .
Continued from A1
In a presentation, Thaksaphon Thamarangsi of the WHO Regional Office for Southeast Asia said NCDs create various problems concerning health and human capital as well as lead to societal and opportunity costs. Addressing these problems requires financing. However, Thamarangsi said that as the increase in NCDs surpassed the hike in the prevalence of communicable diseases (CD), funding for NCD prevention and control has been scant. Official development assistance (ODA) for NCDs reached $5.71 billion between 2007 and 2016. However, the funds were not used in places where they were needed the most. East Asia and the Pacific and South Asia account for 31.8 percent and 23.1 percent of NCD disability-adjusted life year (DALY), or overall
and Manila to London in October, following several regional flights to acclimatize the crew. From Blagnac Airport in Toulouse, the course took the A350, flying at an altitude of 41,000 to 43,000 feet to Germany, Poland, Belarus, the vast expanse of Russia, Mongolia, and China’s continents and on to the South China Sea and Manila. The flight covered a total of six countries in 13 hours, which is shorter by two hours from the previous route from Europe. The only drawback in the entire flight was the unavoidable turbulence over the Ural Mountains when the entire plane skips, shakes and quivers for long minutes. The Urals—the boundary between Europe and Asia—stretches for 1,500 miles from the Arctic Ocean down to central Russia, where the Ural River flows. There was also a brief bout of turbulence over southern China as the plane headed toward Luzon via the South China Sea. “Had the plane taken the previous route via the Mediterranean, crossing about 20 individual airdisease burden. These two regions received the least in ODA. Of the $5.71 billion, Thamarangsi said East Asia and the Pacific only received 5.3 percent of the total and South Asia, 2.7 percent, during the period. To address NCDs, he said many countries have used various innovations to raise funds. These solutions include the introduction of “sin taxes.” In the Philippines, the country taxes tobacco, alcohol and, recently, consumption of sugar-sweetened beverages. In the case of tobacco use, these are accompanied by the placing of pictorial warnings, market control, the ban on public smoking and an aggressive public campaign. Interventions also include controlling the physical availability of certain products, as well as changing the formulation of products, such as the reduction in salt content of some products. “We need to champion disease prevention
ADB. . .
Continued from A1
dimensions of a good tax system—mobilizing revenues, equity, efficiency, competitiveness, stability and predictability, ease of administration and compliance, and the need to ground policies in evidence. Sawada said TRAIN 2, as well as the other tax packages will help improve the country’s tax system, and ensure the attainment of inclusive growth for the next generation of Filipinos. “Passage of this important legislation will demonstrate the commitment of Congress, and the country more broadly, to the reforms that
spaces from Italy, all the way to Vietnam, the flight would have taken 15 hours,” according to Jose E. L. Perez de Tagle, vice president for Corporate Communications. He said PAL had previous arrangements going through Italy, Iraq, Iran, Pakistan, India, Burma, Thailand, Vietnam and several other countries, which is more time-consuming. Tagle recalled having a hard time seeking permits to cross the Russian airspace from the com mu n i st aut hor it ies, who gave their nod—temporarily—in 2015, before the final bilateral agreement was forged. “It was a difficult undertaking talking with the Russians to get the go-signal to cross their airspace because of the heavyhanded bureaucracy,” Tagle said, adding PAL will also be crossing part of the Polar region from Manila to New York, which is under Russian control. “Many of the Russian airspaces have sensitive military installations,” he said, which could partly explain their reluctance to give permits, including the usual expenses associated with any complicated agreement. He added that the shorter route would be a permanent route once the Manila to Paris flight commences, including possibly to Moscow, which has been under study, according to Bautista. Flight PAL 2003 carried 80 PAL executives, Civil Aviation Authority of the Philippines check pilot and
technical men, extra crew members and media persons as it landed in Manila on Sunday. Two Naia firetrucks showered the plane on either side with blasts of water cannon salute it entered the tarmac. Airbus Chief Commercial Officer Eric Schulz cited “the strong working partnership between Philippine Airlines and Airbus through the years.” PAL’s A350 aims to set a new standard by allowing the flag carrier to fly nonstop almost halfway around the world on the longest routes ever to be served by a Philippine carrier. The A350 can fly up to 8,000 nautical miles (14,800 km) and boasts a quieter cabin with up to four times less noise, making it the quietest twin-aisle aircraft to date. Phi lippine A irlines f lights to the US and Europe will get a major boost, as the A350 will be deployed on the nonstop ManilaNew York JFK and Manila-London Heathrow routes by the end of October 2018. Services to other points in North America and Europe are expected to follow as more aircraft join the fleet over the next 12 months, including possible routes to Seattle, Chicago and a point in Western Europe. PAL has placed six firm orders for Airbus A350-900s, and options for an additional six A350-1000. Four A350-900 are to be delivered in 2018, and the other two are slated for delivery in mid-2019.
through information and advocacy campaigns. We need to take part in managing NCDs by becoming champions of healthy living,” Domingo said.
of Finance’s TRAIN 2 package, because legislation to increase tobacco sin tax can stand alone so as to provide focus and primacy on the issue of health. “The insertion in TRAIN 1 package of the P2.50, or P5.00, annual increase on tobacco excise tax will not be sufficient to fund the proposed UHC Program even if other proposed resources are pooled such as from the Philippine Amusement and Gaming Corp., [Pagcor], the Philippine Charity Sweepstakes Office [PCSO] and medical assistance program,” the SWP said. Section 5 of Senate Bill 60 authored by Sen. Ralph G. Recto provides the fund sources of the UHC but again, this will not ensure full implementation of UHC. Currently, SWP said the government lacks P200 billion for the annual implementation of UHC, of which, only P30 billion may come from the charity portfolio of Pagcor and the PCSO.
‘Hike tobacco tax’
Social Watch Philippines (SWP) urged Sen. Juan Edgardo M. Angara, chairman of the Senate Ways and Means Committee, to call for public hearings on tobacco sin tax increase. Senate Bill 1599, filed by Sen. Emmanuel D. Pacquiao, and Senate Bill 1605, filed by Sen. Joseph Victor G. Estrada, respectively, have not been tackled since last year. SWP believes that Angara must understand the urgency of enacting the unitary tobacco sin tax increase because the measure will finance the implementation of the Universal Health Care (UHC) Bill, which is now certified by the President as a priority legislative agenda. The group sees no need to wait for the implementation of the Department
are needed to spur growth, reduce poverty and inequality, and achieve upper middle-income status,” he said. Critics of TRAIN 2 argue that the implementation of the new tax package will lead to job losses and undermine the competitiveness of the country in attracting investments. However, Trade Secretary Ramon M. Lopez earlier told reporters on the sidelines of TRAIN 2’s first congressional hearing that incentives are not the only reason the country attracts investments. Lopez noted the Philippines’s highly educated and talented work force are deemed assets by many firms here and abroad. To underscore why incentives are not the only investor draw, Finance Undersecretary
With reports from Marc de la Paz and Pearl Anne Gumapos
Karl Kendrick Chua pointed out that the Philippines, despite granting incentives for the past 50 years, remains a laggard compared to its Asean neighbors in terms of attracting foreign direct investments (FDI). Apart from granting income tax holidays, the Philippines grants other incentives enshrined in 123 investment laws and 192 non-investment tax incentives. Chua said granting tax incentives has cost the country some P301 billion in lost revenues —a conservative estimate that does not yet account for the leakage in taxes, as well as local business taxes. The biggest bulk of these lost revenues are due to import VAT (gross) losses worth P159.8
@butchfBM
ESPITE lawmakers’ appeal and survey results indicating little support for Charter change, the leadership of the House of Representatives on Monday said it would not abandon the moves to revise the 1987 Constitution. In a news conference, Deputy Speaker Gwendolyn F. Garcia of Cebu said the proposal shifting the country’s system of government to a federal form as well as the 2019 annual budget are among the top priorities of the third regular session of the 17the Congress, which will open on July 23. “Certainly, not [the time to give up]. The President, when he was still a candidate, had pushed for this shift. This is very much part of the platform of the President along with his fight [against] drug problem and corruption,” said Garcia amid a recent survey result showing a majority of Filipinos oppose a shift to a federal form of government. “We [members of the lower chamber] are in full support of the advocacy of the President, which is why we will continue the push for this shift to a federal system,” Garcia said. According to the latest Pulse Asia survey, 62 percent said they were not in favor of federalism, while 28 percent said they were in favor. Ten percent said they didn’t know or couldn’t say.
‘Abandon Cha-cha’
Meanwhile, lawmakers also on Monday urged the leadership to now give up the Charter change proposal and instead use the remaining time of the 17th Congress to discuss its other priorities. B a y a n Mu n a R e p. C a r l o s Isagani T. Zarate also warned those pushing for “self-serving Charter change.” “The message is very clear: better stop it now, or, face the people’s wrath,” Zarate said. “The bold writings are very clear on the wall: majority of our people are opposed to Charter change and this is bound to grow as more of its provisions are exposed as anti-people and will only further the self-serving interests of the present elitist system,” he added. The Pulse Asia survey was conducted between June 15 to 21, or before the draft Constitution from the Consultative Committee (Con-com) was submitted to the President. “Even this Con-com draft contains provisions that open the gates for ‘no election’ and term extensions for politicians, as well as the further opening of our economy to foreign control and plunder,” said Zarate. Akbayan Rep. Tom S. Villarin said the prevailing sentiment among Filipinos against Charter change now is a “knock on the head of a stubborn” Duterte administration.
billion. This is followed by income taxes, P86.3 billion; local VAT (gross), P37 billion; and customs duties, P18.1 billion. After the passage of the Tax Incentives Management and Transparency Act in 2015, the government lost P104.4 billion in income tax holidays worth P86.3 billion and customs duties worth P18.1 billion. The largest losses because of tax incentives were reported by the Philippine Economic Zone Authority (Peza) with P66.6 billion and the Board of Investments (BOI) with P29.4 billion. The rationalization of fiscal incen tives, under the proposal of TRAIN 2, also includes the creation of the Fiscal Incentives Regulatory Board, to be head-
“Forcing the issue of Charter change foments discord and creates political instability that compounds the economic crisis the administration created. It reeks of arrogance and insensitivity to the plight of the poor already burdened by high cost of living and dying from a fake war against illegal drug,” Villarin added. Act Teachers Rep. Antonio L. Tinio said the survey only shows that overwhelming opposition to both Charter change and federalism growing even more. “It shows that President Duterte’s push to amend the Constitution and shift to a federal form of government is an initiative of politicians, by politicians, for politicians. The people see right through and reject their self-interested motives,” he added. Gabriela Rep. Emmi de Jesus said the government should now consider the strong public opposition against Cha-cha.
Cha-cha railroad
Meanwhile, senators are firming up a consensus on Sen. Grace Poe’s crusade to “block any Charter change [Cha-cha] express” seen to be driven by elected officials with expiring terms. This, even as Senate President Vicente “Tito” C. Sotto III is not readily committing support for Poe’s pledge to derail any attempt to railroad a revived Charter change scheme designed to benefit incumbent lawmakers, including those with expiring terms. “I will listen to my colleagues first before I express my thoughts and that includes Sen. Grace Poe, obviously,” Sotto told the BusinessMirror. Sen. Juan Edgardo Angara, however, predicted the renewed scheme to tinker with the Charter to lift existing term limits is “doomed to fail.” “A move to change the Constitution that puts self interest ahead of the general welfare is doomed to failure,” Angara said in a separate text message to the BusinessMirror. Poe poi nted out on Monday that the Filipino people were “caught in a tug-of-war between t wo e x t remes: One dema nding that we approve it [Charter changes] without thinking. The other, to reject it outright.” Poe clarified she was “taking the centrist view of giving the Constitutional Commission’s product the courtesy of a thorough study, subject it to intense debate, so that we can all make an informed choice.” The senator asserted that a document as important as the basic law “should be rigorously studied, and not railroaded.” Poe declared: “I will block any Cha-cha express, especially one driven by people with expiring terms and fuelled by selfish interest.” She noted “no palpable popular clamor for a new Constitution,” noting as well there’s “no proof that a brand new one is the magical cure-all to the country’s manifold problems.”
ed by the finance secretary, and which will approve incentives moving forward. The primary criteria proposed by the DOF in granting tax incentives include performance-based indicators, such as actual investment, job creation, exports, countryside development and research and development. The criteria also include granting only targeted incentives to minimize leakages and distortions; ensuring they are time-bound; and transparency, which means these are regularly monitored by the government. Currently, there are 13 firms receiving incentives as long as 26 to 29 years; 131 firms getting incentives for 21 to 25 years; and 510 firms getting incentives for 15 to 20 years. Cai U. Ordinario
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NBI to Ombudsman: Prosecute Noynoy, Abad, Garin, et al. for graft over dengue vaccine mess By Joel R. San Juan @jrsanjuan1573
T
HE National Bureau of Investigation (NBI) has asked the Office of the Ombudsman to prosecute for graft and other criminal offenses former President Benigno S. “Noynoy” Aquino III, his Budget Secretary Florencio B. Abad, former Health Secretary Janette L. Garin and several incumbent and former health officials and private individuals in connection with the P3.5-billion anti-dengue drive of the Department of Health (DOH) and French pharmaceutical giant Sanofi Pasteur, manufacturer of the controversial Dengvaxia vaccine. In a letter addressed to Ombudsman Conchita Carpio-Morales, the NBI recommended the conduct of preliminaryinvestigationagainstAquino and his corespondents for “conniving” to introduce the Dengvaxia vaccine in the country by circumventing procurement and other government processes. The NBI said Aquino, Abad and Garin should be held liable for technical malversation for conspiring to unlawfully effect the release of savings from the fiscal year 2015 Mutual Benefit Personnel Fund and use the same to augment the antiDengue immunization program. The agency also recommended that former Health Secretary Paulyn Jean B. Ubial be investigated for technical malversation for pursuing the denguevaccine project, despite knowing that it was never part of the 2015 or 2016 General Appropriations Act. Aside from Aquino, Abad, Garin and Ubial, also facing complaint for technical malversation are Family Health Office Officer in Charge Joyce Ducusin; Philippine Children’s Medical Center Director Julius Lecciones; Family Health Office Medical Specialist II Dr. Maria Wilda Silva; DOH-Disease Prevention and Control Bureau Director IV Mario Baquilod; and Dr. Rosalind Vianzon. “There is technical malversation because government funds amounting to P3 billion intended for the 2015 Miscellaneous Personnel Benefit Fund (MPBF) of the Executive department was utilized for the procurement of Dengvaxia undertheDOHschool-based immunization program. Although the source of fund was declared as savings by the Chief Executive, its intended purpose failed as there is no existing programs, activity or project for dengue procurement and immunization,” the NBI said. Likewise, the NBI asked the Ombudsman to hold Garin, Health Undersecretary Kenneth HartiganGo; former Officer in Charge of the Food and Drug Administration lawyer Nicolas Lutero; former OIC of Center For Drug Research and Regulation-FDA Ma. Lourdes Santiago; OIC CDRR-FDA Melody Zamudio; FDA consultants Grace Medina and Imelda Matero; Health Undersecretaries Lyndon Lee Suy and Vito Roque; DOH official Vito Roque; and Sanofi officers Conchita Santos, Oliver Charmeil, Guillaume Leroy, Jean Antoine Zinsou, Thomas Triomphe, Joselito del Mundo Sta. Ana and Jervin Papelleras liable for violation of Section
3 (e) of Republic Act 3019, or the Anti Graft and Corrupt Practices Act. Likewise, the NBI said Formulary Executive Council Chairman Froilan Bagabaldo and members Cleotilde How, Cecicilia Jimeno, Hilton Lam, CeciliaMaramba-Lazarte,PaulMatthew Pasco, Imelda Pena and John Wong should also be investigated for violation of RA 3019. The NBI accused the respondents of “causing undue injury” to the government by giving Sanofi unwarranted privilege in connection with the anti-dengue vaccine deal. Meanwhile, another criminal case was filed on Monday against Garin and 36 others health officials and private individuals before the Department of Justice (DOJ over the death of a student inoculated with the controversial Dengvaxia vaccine. It was the 11th criminal complaint filed against Garin and other respondents before the DOJ since the PublicAttorney’sOffice(PAO)documented 67 cases of deaths from the vaccine. A complaint for reckless imprudence resulting in homicide under the Revised Penal Code and violations of Anti-Torture Act and Consumer Act was f i led aga inst t he for mer health officials and executives of manufacturer Sanofi Pasteur Inc. and distributor Zuellig Pharma Corp. by the family of 11-year-old Michael Tablate from Subic in Zambales. Tablate died in October last year after being inoculated with the antidengue vaccine. Tablate’s mother, Rowena Villegas, was assisted by PAO in filing the complaint. The DOJ had earlier tapped the PAO to conduct fact-finding investigation and case buildup on the Dengvaxia controversy. It was the 11th criminal complaint filed against Garin and other respondents before the DOJ so far as the PAO has already documents 67 cases of deaths from the vaccine. Just like in previous cases, the latest complaint accused Garin and others of negligence through “arbitrarily, maliciously, and deliberately failure to inform the Dengvaxia recipients and their parents/families of the dangers and risks related to Dengvaxia and to obtain their informed consent.” It also cited the failure of the DOH under Garin to conduct proper screening of Dengvaxia recipients and to implement active and aggressive monitoring and surveillance over the recipients considering the risks posed by the vaccine to seronegative recipients or those who had no history of dengue. According to Villegas, her son was inoculated with the vaccine thrice—in March 2016, November 2016 and July 17, 2017. “Around a week after receiving his last shot of Dengvaxia, Michael experienced dizziness, headache and vomiting, causing him to miss school.... Since Michael was inoculated with Dengvaxia, he started having frequent asthma attacks,” the complaint read. The PAO forensic team conducted an autopsy on the victim and found that he died of “multiple organ failure” attributed to “viscerotropic-like disease with neurotropic-like disease secondary to Dengvaxia vaccination.”
Editor: Vittorio V. Vitug • Tuesday, July 17, 2018 A3
DOF raises figures for Marawi rehab, rebuilding now costs P62B in 5+ years
D
By Manuel T. Cayon
@awimailbox Mindanao Bureau Chief
AVAO CITY—The rehabilitation of battle-flattened Marawi City would now cost as much as P62 billion in more than five years, a recent estimate from an evaluation conducted by the Task Force Bangon Marawi (TBFM) showed. Finance Secretary Carlos G. Dominguez III said the government would now start to strategize on raising the amount—from government budget allocation annually, official development assistance in the form of grants, and to a year-onyear floating of so-called Marawi bonds in the market. A DOF news statement issued on Monday, quoting a report from the task force, said TFBM Chairman Eduardo del Rosario has revised the estimated cost of reconstruction to reach P62 billion. Two months earlier in May, the DOF has estimated a lower cost of around P55 billion, and has identified then the National Disaster Risk Reduction and Management Project Fund to shoulder half of that costing. Dominguez said the government “is currently working on the funding mix for P52 billion of the five-year P62-billion budget for the rehabilitation and reconstruction of the devastated city of Marawi.”
He said some P10 billion was already allocated in this year’s General Appropriation Act for the Marawi rehabilitation program “hence the need to explore ways on how to finance the additional P52 billion.” “Now that we have a hard number, we will now go to the details on where the money will come from. Certain portions of the money will come from grants,” Dominguez told a news briefing on Monday. Japan and China were among the various countries that have committed to provide grants to aid in the reconstruction of Marawi City. Japan had earlier signed a ¥2-bi l lion assistance in May this year for the Marawi rehabilitation, its fourth financial grant since last year that already amounted to a total $36 million for Marawi’s relief and rehabilitation. Dominguez, who signed the grant agreement on behalf of the Philippine government, said the fourth package was approximate-
ly $18.66 million or about P970 million. Three previous Japan grants formalized on November 12 last year between the two governments included the provision of heavy equipment for Marawi City’s reconstruction. Yoshio Wada, chief representative in the Philippines of the Japan International Cooperation Agency signed the fourth aid package on behalf of Japan. The DOF said the Grant Agreement for the Programme for the Support for the Rehabilitation and Reconstruction of Marawi City and Its Surrounding Areas covered infrastructure projects. Dominguez said the Philippine government has identified 902 priority projects and activities, as drawn up by the Bangon Marawi Comprehensive Rehabilitation and Recovery Plan and
form of grants from outside and also from domestic sources. Also, some of the funding requirement may be sourced from floating security bonds and Dominguez said the DOF was planning on the timing of its issuance. He said the DOF was thinking of issuing the bonds in several tranches. “We would issue it definitely in tranches because we should not borrow more than what we need for that year. We have P10 billion already budgeted so we would go and get more details on how much is actually required and at what dates,” Dominguez said. The government might issue the Marawi bonds as retail Treasury bonds “so that people will really feel that they are participating in the rebuilding of Marawi City,” he added. The tenor of the bonds would
Now that we have a hard number, we will now go to the details on where the money will come from. Certain portions of the money will come from grants.”—Dominguez approved in early-April. “This [financing requirement spans] over five years. This is not immediate so it’s over five years and there is a progression, the total is P62 billion. So we will have to do now our financial planning,” Dominguez said. The rehabilitation budget, the finance chief said, would cover the use of heavy equipment and the plan by the government to acquire certain properties in the area. Dominguez said some portions of the budget would come in the
depend on market conditions and the issuance might be P10 billion a year, with the government “probably ending up raising maybe P40 billion of the P62 billion total rehabilitation cost,” Dominguez added. The finance chief earlier ordered the Bureau of the Treasury to study the issuance of the debt securities. He said the bonds would appeal to those citizens who would like to help rebuild the lives of their fellow Filipinos in the war-torn city. With Rea Cu
briefs three soldiers die in mountain province clash Three soldiers were killed while two others were wounded on Sunday as government troops clashed with the same band of New People’s Army rebels in the same area in Mountain Province, which the military earlier reported it has already cleared from rebels. The encounter at Sitio Dandanac, Barangay Tamboan, Besao, Mountain Province, followed the firefight on Saturday in the same area, wherein a member of the Army’s 81st Infantry Battalion was wounded. Armed Forces Northern Luzon Command Spokesman Lt. Col. Isagani Nato said the latest firefight occurred at around 2:50 p.m. on Sunday and raged for about three hours. The military also initially reported that soldiers lost a K3 Squad Automatic, two R-4 rifles, an M-203 grenade launcher and a Harris handheld radio during the clash, but Nato said the firearms have been recovered as soldiers conduct clearing and pursuit operations in the area. Rene Acosta
phl, australian navies start joint maritime training Naval forces from Australia and their Philippine counterparts began on Monday a more than a week long maritime training activities in the sea of Palawan in antikidnapping and counterterrorism operations. The maritime training, the fourth under the existing Status of Visiting Forces Agreement with Australia, was being participated by at least 200 forces from both sides. “The said bilateral activity aims to enhance training, interoperability and cooperation between the Philippine Navy and RAN in addressing terrorism and kidnapping activities within Palawan water lanes that are of common interest
to the two countries,” said Capt. Cheryl Tindog, spokesman of the Armed Forces Western Command. Two Australian military ships, HMAS Ararat and HMAS Wollonggong, arrived on Monday at the Puerto Princesa pier for the series of maritime training activities. Rene Acosta
duterte urged to act swiftly on plastics pollution Environmental group Kalikasan-People’s Network for the Environment (Kalikasan-PNE) is urging President Duterte to act on the worsening plastic pollution in the Philippines, amid calls to impose a nationwide ban on the use of single-use plastics to prevent ocean pollution. The group said Duterte should sanction multinational corporations (MNCs) behind the importation, manufacture, and sale of environmentally unfriendly plastic products, which are now the targets of a global campaign against ocean plastic pollution. The call came a few weeks after Environment Secretary Roy A. Cimatu’s plan to impose a ban on single-use plastic on the pollution-challenged Boracay Island in Malay, Aklan. In a news statement, Leon Dulce, national coordinator of KalikasanPNE, said the Philippines has been consistently in the top 3 contributors to marine plastic pollution since 2014, but the biggest sources come from multinational corporations overseas. “If the Duterte government does not sanction, prohibit or significantly limit the importation of excessive plastic-intensive products, then we are virtually doing nothing to address the issue,” Dulce said. Jonathan L. Mayuga
A4 Tuesday, July 17, 2018 • Editor: Vittorio V. Vitug
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DTI, Jica tie up with academe to ensure enough manpower for auto industry
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By Elijah Felice E. Rosales
@alyasjah
he trade department has tapped academe in securing the needed manpower to run the automotive manufacturing industry that is seen growing under the government’s reform programs.
The Department of Trade and Industry (DTI) and the Board of Investments (BOI) are partnering with the Japan International Cooperation Agency (Jica) in a project that seeks to link higher education institutions with vehicle manufacturers, and ensure that there is sufficient human resource available to the fledgling automotive industry to further its development. BOI Executive Director Corazon H. Dichosa said the Auto-Academe Congress intends to promote job opportu-
nities in the automotive manufacturing industry to students. She added that the government, with the help of academe, hopes to entice young workers to consider careers with car makers. “The project is among the collaboration projects between the Philippines and Japan in promoting the domestic automotive industry and deepen its involvement in the regional and global value chains. It focuses on the human-resource development, local suppliers development and invest-
ment promotion,” Dichosa said. “The upcoming congress will allow for greater collaboration between the government and academe. As schools improve [their] curricula, it will also allow students to consider the job opportunities offered by the automotive industry,” she added. The BOI finds the Auto-Academe Congress on August 28 “timely,” as the government expects increasing employment opportunities in the automotive industry with the Comprehensive Auto-
motive Resurgence Strategy program in full swing and the imminent modernization of public-utility vehicles. The DTI-BOI-Jica project will expose students to jobs they can possibly apply for in the industry. It will also allow higher education institutions to forge stronger ties with vehicle manufacturers in the improvement of their curricula and the development of their technological entrepreneurship and collaborative applied research activities.
Do you finally have a compliance program? How do you monitor its effectiveness? By Henry J. Schumacher
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he details of what makes up an effective compliance program have already been discussed in previous columns. But once the effective compliance program has been established, what’s next? You have probably (hopefully) spent a lot of time designing and establishing systems, devising the right policies, figuring out the perfect due diligence, training and whistle-blowing program, selecting the right vendor and more. However, running the program is just as critical as designing it. Just as much thought and effort must be put into the monitoring and review process. Not only does a business evolve over time, e.g., by engaging new third parties, starting operations in new markets, etc., but so do regulations and the laws that govern your industry and your business operations, thus rendering initial assessments of risks possibly obsolete. Risks constantly change and evolve and so should your compliance program. All guidance released by enforcement authorities equally emphasize the above point: A stale program is a failed program, no matter how well your processes were designed in the first place. Compliance officers and data-privacy officers must adopt an evaluative approach and ensure that the objectives set out by the compliance program are achieved, and, whenever flaws or failures are detected, they are proactively addressed. Regulatory authorities (like the National Privacy Commission) will evaluate whether companies regularly review and improve their compliance programs. Take note that “adequate procedures” can only be a defense if they were in place before a breach happens. Likewise, among the guiding questions regulators include is how to evaluate the effectiveness of compliance programs and address continuous evaluation and improvement. This may take several forms, including, but not limited to, internal and external audits, testing of relevant controls and collection and analysis of relevant data, as well as evolving updates, which mainly concern updating risk assessments and the review of internal controls. Remediation and follow-up should guide you in improving your compliance program. Here are a few practical guidelines to ensure the proper monitoring and review of your compliance program: 1. Plan: Put a plan in place and follow up on it. Whether it is to rewrite your code of conduct or provide more and better work force training, make sure you track the progress of your initiative to figure out whether your compliance program is evolving and keeping up with best practices. 2. Capture data: Collect as much data on your compliance activity as possible and consolidate that information in accurate and useful ways. 3. Be proactive: Groom and aggregate your data. Analyze and track trends in compliance activity and report it to the right executives. One example could be tracking trends in exception request submissions: If you have a greater number of exception requests, it could attest to your success at making people understand the policy and the process, or maybe it’s a sign that you do have a bigger problem. 4. Escalate: Create a clear and appropriate escalation system, so that the right managers or risk owners can quickly and adequately respond to any identified red flags or breaches. 5. Remediate: When flaws and failures are identified in the system, they should be addressed through the development of internal controls to match and mitigate those risks. 6. Train: Train your employees. Remember, building a human firewall is one of the most effective defense against compliance breaches. When employees recognize a reportable event when they see it and know how to report it, then you have managed to install a sound corporate compliance culture. You can even measure that engagement through survey results 7. Document: Getting documentation in place must not be secondary. Document all your efforts and keep auditable records that prove of all your compliance activities. A strong reporting system will always allow you to be prepared for any inquiry in case authorities come knocking at your door. 8. Automate: Moving from manual to automated reporting and monitoring processes will allow the flow of data to be constant and human intervention minimal, leaving less room for human error. The complexity of compliance management and understanding that the safe journey into compliance management and data protection needs automation inspired EITSC to create a cooperation with Straits Interactive, a company in Singapore that has developed the online Data Protection Management System (DPMS), to equip professionals, managers and executives with the competencies to perform their jobs in data protection. The DPMS is not only assisting in the compliance with the Philippine Data Privacy Act (DPA) but also with the EU’s General Data Protection Regulation (GDPR). Comments are welcome—please contact me at Schumacher@ eitsc.com.
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Tuesday, July 17, 2018 A5
A6 Tuesday, July 17, 2018 • Editor: Angel R. Calso
Opinion BusinessMirror
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editorial
Going EMV
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loomberg News recently reported that the number of hacked US credit cards offered for sale to other criminals on the Dark Web jumped by about two-thirds in the first half of 2018. The data came from IntSights, a New York-based cybersecurity research firm. More than 4,000 credit cards per bank were on sale in the first half, up from about 2,400 in the second half of 2017, IntSights said, adding its researchers analyzed data from the “top 50” banks and financial firms in the US and Europe for its report on the Dark Web, where anonymous browsing allows illegal activity to flourish. It’s interesting to note that the credit-card hacking surge happened despite the EMV rollout for credit and debit cards that has been progressing steadily the past few years all over the world. EMV—which stands for Europay, Mastercard and Visa, the original card networks that developed the technology and payment scheme—is supposed to make it more difficult for criminals to counterfeit cards, as these would be equipped with chips that authenticate transactions. Unlike the traditional magnetic-stripe cards that contain unchanging or static data, which can easily be stolen through skimming and counterfeiting, EMV cards generate a unique code for every transaction, one that cannot be used again. If a hacker steals your debit or credit-card information on one specific point of sale, typical card duplication would not work, because the stolen transaction number created in that instance would not be usable again. Migrating to EMV and making it the global standard is meant to protect consumers and reduce the cost of fraud. “Losses from ATM fraud have surged alarmingly from P175 million in 2012 to more than P600 million in 2016—a 250-percent increase in just four years. Add to this the reported P500 million stolen through fraudulent credit-card transactions in 2016 alone and one starts to get the scary picture. This has to stop,” said House Committee on Banks and Financial Intermediaries Chairman and Eastern Samar Rep. Ben Evardone, who sponsored a bill that seeks to impose harsher penalties for ATM and bank fraud, which recently passed second reading. The Philippine National Police Anti-Cybercrime Group (PNP-ACG) also noted that there are thousands of other cases of fraudulent transactions online that have not been reported to the police, because banks are only mandated to report fraudulent transactions with amounts involving P20,000 and above. The Bangko Sentral ng Pilipinas (BSP) has ordered banks to migrate to EMV as early as 2014, following the lead of other countries, with a mandated deadline to fully shift to EMV by June 30, 2018. The BSP said there are 76 million debit and prepaid cards currently in circulation, in addition to 8.5 million credit cards. If you still have your old magnetic stripe debit, credit and ATM cards, have them converted to EMV chip cards right away. Help your bank, the BSP and yourself. You probably have received calls, text messages and/or e-mail from your bank urging you to make the shift and have thus far ignored them. (New EMV credit cards can be mailed but ATMs need a personal visit to your bank.) Protect yourself from fraud by availing yourself of the EMV technology. The shift to EMV is no doubt an important step to prevent personal data theft, but the Bloomberg story also shows it can’t eliminate all types of card fraud. Hackers don’t stop targeting bank-account data, IntSights’s Itay Kozuch said in the Bloomberg interview. “To get credit-card or bank-account credentials you don’t need to hack the bank, but you just trick the customer into giving up his credentials on a fake site,” he said. “As banks fortify their defenses, hackers go for the weaker link: the customer.” Cardholders have the responsibility to protect and safeguard the integrity of their transactions. Thus, immediately report lost cards and observe billing discrepancies. The BSP has a primer on protecting yourself from fraudulent transactions that you can download (http://www.bsp.gov.ph/downloads/ primers/CCS4.pdf ). Let’s make the No. 1 rule in boxing also the No. 1 rule in personal banking: Protect yourself at all times.
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THE Entrepreneur Continued from A1
T
he President did the right thing when he asked his Cabinet secretaries to bring order to Boracay amid the rush to construct structures on the 1,000-hectare island. Without proper sewage and treatment facilities, the island’s residents and tourists are vulnerable to illnesses caused by infected water.
As the country’s top destination, Boracay should now be seen as a model of tourism development for other islands. Aware of this, President Duterte wants a new Boracay that is orderly, clean, livable and appealing to tourists. I am positive that a better and sustainable Boracay will emerge from its six-month closure. Ot her isl a nd dest inat ions should follow the lead of Boracay— Panglao, Puerto Galera, Siargao, Mactan, Palawan, to name a few. In fact, all of the country’s 7,107 islands should have proper sewage and treatment facilities, not only to make them more appealing to foreign tourists but also to make the environment cleaner, healthier and more habitable for our people. Now is a good time to adopt a
new master plan for tourism development. Both the government and the private sector have their respective roles to play to ensure that rules are followed, like the 30-meter easement from the shoreline and the preservation of the wetlands. Nations that attract the most number of tourists are known for protecting their heritage and natural sites. They have also built worldclass infrastructure, such as modern airport terminals, subways, wide roads, walkways and bicycle lanes to allow greater mobility. It is a good thing that Boracay’s restoration as a pristine island gets the limelight now, so that other local government units will be encouraged to redevelop their own islands. We have a lot of beach
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resorts that will become more attractive if they get some semblance of order. A healthier Boracay that balances environment protection and tourism can become a model for Philippine tourism. It can also be a source of pride for Filipinos. Replicated in other islands, this model can help us attract more than 10 million international visitors a year, a figure that has been achieved by our Southeast Asian neighbors Thailand and Malaysia a long time ago. This year the Department of Tourism (DOT) targets to lure 7.4 million foreign travelers, up from the 6.62 million arrivals in 2017. Visitors from South Korea and China are expected to top 1 million each, thanks to our enhanced relations with these countries. With dozens of hotels and resorts rising each year across the country, our tourism sector is bound to finally achieve the 12-million arrivals target by 2022, as anticipated by the DOT. Tourism can be a greater contributor to Philippine economic growth. It supports the expansion of other industries such as transportation, food and retail. Data from the DOT show that in 2017 alone, international tourism receipts reached P448.6 billion, up 44 percent from P311.7 billion in 2016. Domestic tourism is now big in
What is the real inflation rate?
Jennifer A. Ng Vittorio V. Vitug
Ruben M. Cruz Jr. Angel R. Calso
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A healthier Boracay should serve as model
John Mangun
I
OUTSIDE THE BOX
magine you are waiting to check in into a hotel. The first man in line will pay the “rack rate” or the published price for a room. However, he has been given buffet breakfast and upgraded to a “Superior Room”.
The lady in front of you booked online through the hotel web site at a discounted price, including breakfast and a free massage at the hotel spa. You made your reservation through TripAdvisor. The price of the room for you was much less and included breakfast and free Wi-fi. The guy standing behind you is the boyfriend of the sister of the hotel’s general manager. Don’t even ask what his room rate is. The test question for the day: “What is the price of a ‘Deluxe Room’ at the hotel?” When you hear about the global price of crude oil, usually it refers
to “Brent Crude” extracted from the North Sea. But it is virtually always the closing price of the nearest settlement month of the Brent Crude futures contract traded on the Intercontinental Exchange in the US. But those are speculative cashsettlement contracts bought and sold by business people, most of whom have never seen a barrel of oil. In fact, the only person who knows the actual price of crude oil is the one who just bought an oil tanker sitting full in Singapore harbor an hour ago. But there are about 100 different “prices” for crude oil depend-
ing on origin and quality, ranging from Qua Iboe crude oil from Nigeria—usually one of the most expensive—to one of the least expensive, Western Canadian Select. The price differential between the Canadian and Nigerian oil on Monday was $21 per barrel. So, while Brent may be a benchmark in pricing, it is the same as the rack rate being the benchmark at the hotel. The Philippine annual inflation rate for June 2018 showed a 5.2-percent increase against June 2017. Seems simple enough, even with the explanation that this represents the prices of a basket of goods. Currently though, Philippine inflation is based on the change in the Philippine Consumer Price Index. The breaks prices into 11 categories, including recreation and culture, health, housing, water, electricity, gas and other fuels, clothing and footwear, alcoholic beverages and tobacco, and food and nonalcoholic beverages. Does that mean that the average consumer is buying equal amounts of these categories? Every three years—due again in 2018—the government makes its
this country, with over 60 million Filipinos visiting different parts of the archipelago every year. More than 5 million Filipinos rely on tourism and allied industries for their employment and livelihood. The government’s “Build, Build, Build” program will help make the Philippines more attractive to tourists. The construction of a subway in Metro Manila, along with new mass transit systems, will surely add to our appeal as a tourism destination. For example, Japan’s bullet trains—Shinkansen—have caught the world’s attention as early as the 1960s. We were excited to see the completion of a beautiful airport in Cebu and hope that more projects of such caliber will be constructed in the coming years. Airport connections are important to make it more convenient for tourists to enjoy the beauty and charm of this country. Finally, we need to instill a culture of tourism among our people, starting with our airport and immigration personnel, as well as taxi drivers who are at the frontlines to welcome our foreign guests. With the right model, infrastructure and mind-set, I believe we are on track to become a great tourism nation. For comments/feedback e-mail to: mbv.secretariat@gmail.com or visit www.mannyvillar. com.ph
Family Income and Expenditure Survey. The data is grouped into income deciles (income distribution is described by means of tenths or deciles). For example, in 2015 the “average” Filipino family spent 42 percent of its income on food and 2.6 percent on clothing and footwear. However, the bottom 30 percent economic group spent 60 percent of its income on food, while the top 70 percent spent only 39 percent. The bottom spent twice as much on tobacco and 50 percent more on alcohol. The top group used almost twice as much income on housing as did the lower group. There are many variables to Philippine inflation as there are to crude oil prices. The more important point is that if you are going to mitigate the effects of inflation for the lowest group, you have to know where they are being hit. Interestingly, the “rich” and the “poor” spend almost the same percentage (8 percent and 7.2 percent, respectively) on “water, electricity, gas and other fuels.” So, probably to best reduce inflation, get the price of crude oil down.
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Pragmatic approach is what’s needed
Heat wave in California and heavy rains in Japan Cecilio T. Arillo
Ernesto M. Hilario
ABOUT TOWN
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t escapes me now as to who originally came up with the term “principled pragmatism” to refer to the how one’s approach to complex issues should be made with practical solutions in mind while strictly adhering to one’s principles. The objective, quite simply, is to deliver results. President Duterte appears to be taking such an approach in dealing with the resource-rich West Philippine Sea by expressing openness to the idea of jointly exploring the disputed waters with China. For Presidential Spokesman Harry L. Roque Jr., an international law expert, joint exploration “is a practical solution for Filipinos to utilize natural resources without having to deal with the contentious conflicting claims to territories.” Foreign Secretary Alan Peter S. Cayetano, for his part, said the two sides are now in the process of “finding a common legal framework to conduct joint exploration and surveys” in the disputed waters, and that Duterte and Chinese President Xi Jinping had agreed in principle that such joint exploration should be “done as soon as possible.” Our country needs to enhance its competitiveness and attract more investments to sustain its status as one of Asia’s fastest-growing economies. Given our fast-rising power demand and the projected depletion of the natural gas supply in the Malampaya facility by 2030, our government must now redouble its efforts in finding new energy sources. The West Philippine Sea, which is believed to be rich in oil and gas deposits, is an opportunity waiting to be tapped. But we can only go as far as sending scientists to the area to conduct study missions because neither the government nor our private sector has the financial capability to shoulder the huge costs needed for its exploration and development. A joint exploration arrangement between the Philippines and China, so long as these are covered by commercial agreements, is legally acceptable. Principled pragmatism will play a key role here, as this involves a solution that delivers results without compromising our sovereign claims or any of our constitutional provisions. The Constitution allows the government to jointly explore and develop our natural wealth with foreignowned corporations provided that it retains full control and supervision of these resources. The 1987 Constitution states that the President “may enter into agreements with foreign-owned corporations involving either technical or financial assistance for largescale exploration, development, and
A joint exploration arrangement between the Philippines and China, so long as these are covered by commercial agreements, is legally acceptable. Principled pragmatism will play a key role here as this involves a solution that delivers results without compromising our sovereign claims or any of our constitutional provisions. utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.” The Constitution also provides that the government “may directly undertake such activities, or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 percent of whose capital is owned by such citizens. And that “such agreements may be for a period not exceeding 25 years, renewable for not more than 25 years, and under such terms and conditions as may be provided by law.” The Constitution also mandates the State to “protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.” In short, the government can proceed to jointly explore our waters with foreign firms through commercial agreement. Any such joint use or exploration will, as I pointed out in an earlier piece, even strengthen the Philippines’s position on the award granted by the Permanent Arbitral Tribunal in 2016. The Duterte administration’s idea of “copartnership” and joint exploration with other claimant countries is the pragmatic—and legal—approach to the West Philippine Sea issue without surrendering our sovereignty. E-mail: ernhil@yahoo.com
French tax cuts aren’t helping everyone By Pascal-Emmanuel Gobry Bloomberg Opinion
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he French state has, at times, been as close to a nanny state as it gets. But that doesn’t mean France lacks a thriving charity and nongovernment sector. On the contrary, France’s charity sector is massive, with some 1.3 million estimated nonprofit groups. They spend close to 3.4 percent of French GDP, and employ close to 2 million people, with 14 million volunteers, donating time equivalent to almost 1 million full-time workers, according to one study. The nonprofit sector has been growing faster than the overall economy since the 2008 recession, in part thanks to increased public spending and in part thanks to donation tax incentives. Now that sector is under threat because of changes French President Emmanuel Macron has made to the tax code.
Macron’s drive to shift the tax burden away from capital and work is, in principle, good, since onerous taxes on wages and capital are a major brake on the French economy. But there have been unintended consequences for France’s nonprofit sector from two of Macron’s tax reforms. One unintended consequence has come from the abolition of France’s wealth tax, a direct tax on capital which is unique to France and has been much decried by many economists and international observers. Macron replaced this with a tax called IFI, a tax on real-estate wealth, which is much lighter and, as the name indicates, only applies to real-estate ownership. So far so good. But the old wealth tax also included significant deductions for charitable donations; tax-deductible donations had become a major source of income for French private charities. The new tax contains no such deduction.
Tuesday, July 17, 2018 A7
database
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tefan Rahmstorf, Earth System Analysis research domain cochairman at the Potsdam Institute for Climate Impact Research (PIK) and professor at the University of Potsdam, said the Earth is once again being hit by extreme weather, including extreme heat with wildfires in California and devastating floods in Japan.
“Based on the laws of physics, due to global warming, we must expect more frequent and worse heat waves, as well as extreme precipitation events. Weather data already show a significant worldwide increase in both types of events in recent decades. Climate researchers have warned about this for a long time. This trend can only be halted if the Paris Agreement for stabilizing our climate is rapidly and fully implemented,” Rahmstorf said in the new PIK study shared to Database. Heavy rainfall events setting new records have been increasing strikingly in the past 30 years. Before 1980, multidecadal fluctuations in extreme rainfall events are explained by natural variability, a team of scientists at PIK detected a clear upward trend in the past few decades toward more unprecedented daily rainfall events. The scientists found the worldwide increase to be consistent with rising global temperatures, which are caused by greenhouse-gas emissions from burning fossil fuels. Short-term torrential rains can lead
to high-impact flooding. Extreme rainfall in Pakistan in 2010 caused devastating flooding, which killed hundreds and lead to a cholera outbreak. Other examples of record-breaking precipitation events in the period studied include rainstorms in Texas in the United States in 2010, which caused dozens of flashfloods. And three socalled “once-in-a-century” flooding events in Germany, which all happened in just a couple of years, starting in 1997. “In all of these places, the amount of rain pouring down in one day broke local records—and while each of these individual events has been caused by a number of different factors, we find a clear overall upward trend for these unprecedented hazards,” said lead author Jascha Lehmann.
Sharp rise in Southeast Asia
An advanced statistical analysis of rainfall data from the years 1901 to 2010 derived from thousands of weather stations around the globe shows that, from 1980 to 2010,
there were 12 percent more of these events than expected in a stationary climate, a scenario without global warming. “Due to the upward trend, the worldwide increase of recordbreaking daily rainfall events in the very last year of the studied period reached 26 percent,” Lehmann added. The record-breaking anomaly has distinct patterns across Earth’s continents with generally wet regions seeing an overproportional increase and drier regions less so. In Southeast Asian countries, the increase in record-breaking rainfall events is as high as 56 percent; in Europe, 31 percent; and in the central US, 24 percent. In contrast, some regions experienced a significant decrease of record-breaking daily rainfall events. In the Mediterranean, the reduction is 27 percent, and in the Western US, 21 percent. Both regions are at risk of severe droughts.
Link to climate change
While a statistical analysis of course cannot provide direct physical cause-effect relations, the scientists compared their findings to existing knowledge about how much more water can be stored in the atmosphere when temperatures rise, as given by the well-known ClausiusClapeyron equation. This additional moisture can be released during short-term heavy rainfall events. The scientists show that the observed increase in unprecedented heavy rainfall events generally fits with this thermodynamically expected increase under global warming.
“One out of 10 record-breaking rainfall events observed globally in the past 30 years can only be explained if the long-term warming is taken into account,” said coauthor Dim Coumou, adding that: “For the last year studied, 2010, it is even one event out of four, as the trend is upward.” Up to now, studies could add up to only medium confidence on how human-induced greenhouse gases have contributed to changes in heavy precipitation events at the global and regional scale. The new analysis now helps to fill this research gap. Building on previous work on extreme precipitation, it is the first to study worldwide observational data of record-breaking daily rainfall events in this context.
Upward trend is worrying
The scientists took into account that the quality of historic weather data differs from one place to another. For instance, rainfall measurements from the Sahara Desert are scarce, which inhibits making any conclusions for this particular region. Other regions like Europe or the US are well covered with rainfall measurements stretching back over a century, which enabled the authors to draw conclusions with high levels of confidence. “The pronounced recent increase in record-breaking rainfall events is, of course, worrying. Yet, since it is consistent with human-caused global warming, it can also be curbed if greenhouse-gas emissions from fossil fuels are substantially reduced,” Coumou concluded.
To reach the writer, e-mail cecilio.arillo@ gmail.com.
Game theory and Trump’s trade strategy By Mohamed A. El-Erian Bloomberg Opinion
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inancial markets were of two minds last week about the impact of mounting trade tensions between China and the United States. On the one hand, the escalating tit-for-tat tariffs still affect only a relatively small part of the two countries’ economies. The consensus baseline remains that the measures should not have a significant and lasting downward impact on the economy and stocks and, ultimately, may help bring about trade that is still free but fairer. On the other hand, each escalation (the latest is the July 10 announcement by the Trump administration of its intention to impose import duties on an additional $200 billion of Chinese products) increases the market’s downside risk scenario of slipping, either on purpose or inadvertently, into a full-blown trade war that would significantly damage corporate earnings and the overall growth outcome. And there is a third possible scenario for international trade that hasn’t yet captured the attention of markets: A “Reagan Moment” that has an upside, though it is less probable than the downside scenario, that goes beyond tweaks to the existing system by delivering changes in the overall global economic landscape that favor the US in both relative and absolute terms. Making firm predictions on the probability distribution of these three possible outcomes is challenging. The answer will depend on a lot more than just economics and finance. Domestic politics also play an important role, and the current polarized environment adds to the complexity of reconciling competing expectations with reinvigorated global harmony. Here are some insights from game theory on what to watch and expect. An inherently cooperative game is increasingly played uncooperatively: The Trump administration is taking a disruptive approach to trade, and several other areas, by shaking things up as a means to fix what it views as asymmetrical components that under-
mine the fairness of the system and harm the US. It has resorted to unilateral tactics that combine actual tariff actions with threats of escalation, instead of continuing to rely on the rules-based system that has underpinned the post-World War II international economic order. In game theory terms, the Trump administration has introduced a notable “uncooperative” element to the inherently “cooperative game” of international trade. Most economists worry about the implications for individual countries and the system as a whole. Trade wars tend to create a strong stagflationary impulse, disrupting growth and increasing costs and prices. The conflicts complicate domestic policy management and increase the risk of financial instability. They also risk causing serious fractures to the international economic and financial architecture, with consequences that can extend well beyond economics and finance. Given all this, the major question today is whether the current round of mounting trade tensions is a means to a better end—still free but fairer trade—or an end in itself. Until now, the markets have attached a considerably higher probability to the former, more positive possibility, though every escalation in the tit-for-tat tariffs erodes some of the confidence in that outcome. Further escalation is the most likely outcome for now: For trade tensions to be a means to a better end, individual country behaviors must change in a manner that is visible, verifiable and durable. This is particularly true of China’s approach to intellectual property, market access limits and joint-venture requirements, which are a longstanding source of friction with the US, as well as other countries. Until there are indications of durable change, the most likely American strategy will be to increase the pressure on China, even though that carries significant risks for all. The US stance is intended to leave no doubt about the administration’s resolve and its commitment to affecting change, almost regardless of the domestic costs. But the United States could end up pushing China too far, too fast. That would
threaten not just a full-blown trade war, but also increased geopolitical strains and financial disruptions (because China is a large holder of US government securities and a major participant in the dollar market). The game is inherently unbalanced: Whether by accident or design, the US is now playing in an uncooperative game that it is well placed to win in relative terms. For many reasons, trade tensions are less damaging for the US than for China, whose growth model is still notably dependent on foreign markets. This relative advantage is already evident in the performance of the equity and currency markets of the two countries. While this advantage certainly isn’t protection against some absolute damage, it gives the US a stronger hand to play. The situation resembles the 1980s, when President Ronald Reagan embarked on a military spending race with the Soviet Union, a contest America was destined to win, albeit with costs and at considerable risk. This is an approach the Trump administration will be tempted to press further when it shifts its attention back to the modernization of existing trading arrangements with other countries, including some of its closest allies. China will likely ultimately agree to some US requests: Because the game is unbalanced, China’s least costly strategy over time will be to seek a return to a cooperative approach to trade, even though the country is making gains on regional arrangements. This may only be possible by acceding to some US requests. It may not be a first best outcome for China, but it’s a lot better than a full-blown trade war. Public accusations and counteraccusations make trust difficult: Restoring greater trust between China and the US is key to reestablishing a durable cooperative game. This requires behindclosed-door meetings that set aside accusations currently being levied by both sides, and focus on immediate confidence-gaining steps, as well a framework for resolving the inevitable misunderstandings and misperceptions that are likely to arise. The sooner these meetings resume in earnest, the lower the risks the current uncooperative
game will turn into a very costly global trade war. You can get there faster through coalition-building: Given that America’s genuine grievances against China are shared by other countries, it would be in the US interest to build coalitions early on. Although the alliances could complicate the bilateral negotiations the US wishes to pursue with those countries, they would help accelerate the effectiveness of its approach toward the bigger issue of China and reduce the risk of costly global economic fragmentation. This would also impart more of a multilateral tone to a notably unilateral approach, helping to safeguard an international architecture that, while it needs modernizing reforms at several levels, still serves the United States and the world well. Implementation is trickier than design: These steps are very difficult to calibrate. Trust is low, both in terms of domestic politics and between countries. A good understanding of other nations’ reactions is essential, as well as an openness to course correction as an uncooperative game becomes increasingly unpredictable. Moreover, on the domestic front, well-communicated, timely and coordinated White House decision-making is key to maintaining the needed buy-in from broad segments of the population and Congress. These seven insights are key to assessing the benefits, costs and risks of the Trump administration’s unconventional approach to international trade. They go beyond the arguments underpinning the markets’ consensus baseline view that the tit-for-tat measures should not have a significant and lasting downward impact on the economy and stocks and, ultimately, may help bring about trade that is still free but fairer. They also trace a fuller distribution of possible outcomes that includes a rather fat left tail (a full-blown trade war) and a smaller right tail—that is, a more fundamental realignment of the global system that favors American interests, counters the multiyear erosion of its international standing and allows it to benefit more from its core position in the international economy.
2nd Front Page BusinessMirror
A8 Tuesday, July 17, 2018
Duterte-Mahathir gab tackles terrorism, drugs, piracy, crime
P
By Bernadette D. Nicolas
and the illegal drug trade. “President Duterte and Prime Minister Mohamad renewed and reaffirmed the long-standing brotherhood and friendship between the Philippines and Malaysia,” the statement read. Duterte also expressed appreciation for Malaysia’s sustained
support for the quest for just and lasting peace and development in Mindanao. Both leaders have also committed to work closely together and with other Southeast Asian countries to achieve shared aspirations of greater peace, progress and prosperity for the Philippines and Malaysia, and greater stability and security in the region. On T hu rsd ay President i a l Spokesman Harry L. Roque Jr. said that the President wanted to talk about insurgency and the terrorist group ISIS. Duterte left the country to go on a private trip to Malaysia on July 14. Together with Mahathir, 93, currently the world’s oldest elected leader, Duterte watched Sen. Manny Pacquiao’s fight with Argentine boxer Lucas Matthysse on Sunday, July 15, prior to the bilateral meeting.
remain the top driver of remittance growth for the month, accounting for the 2.6 percentage points from the 6.9-percent growth during the month. Remittances from the UK followed at 1.6 percentage points and from Singapore, accounting for 1.3 percentage points of growth for the month. In 2017 remittances to the Philippines accounted for 10 percent of GDP and 8.3 percent of gross national income. Aside from its
contribution to growth via the boosts in consumer spending, the steady influx of remittances is also expected to support the ailing value of the local currency for the year. “Over the longer term, we hold a neutral view on the Philippine peso as strong and stable remittances will likely support the currency, partially offsetting higher inflation and a wider trade deficit,” BMI Research said in a recent commentary. Bianca Cuaresma
@BNicolasBM
RESIDENT Duterte and Malaysian Prime Minister Mahathir Mohamad on Monday renewed their commitment to strengthen defense and security cooperation at the bilateral and regional level. During their bilateral meeting on Monday in Putrajaya, Malaysia, Duterte pointed out the need to address terrorism and violent extremism in the region. According to a Palace statement, Duterte also stressed the need to address transnational crime, such as piracy and armed robbery at sea
Remittances. . . Continued from A1
By country source, cash remittances from the United States, Saudi Arabia, Singapore, United Arab Emirates, the United Kingdom, Japan, Qatar, Hong Kong, Germany and Kuwait accounted for about 78 percent of total cash remittances.
US, top driver
The remittances from the US
www.businessmirror.com.ph
N.A.S.A. scientists to join D.O.S.T.’s SciTech week celebration
At left photo, Science Secretary Fortunato T. de la Peña (at podium) tells journalists about the participation of a Nasa delegation in the 2018 National Science and Technology Week from July 17 to 21. Seated is Director Richard P. Burgos of the Science and Technology Information Institute (DOST-STII). At right is one of the Nasa participants expected, Florence Tan, a deputy chief technologist at Nasa Headquarters in Washington, US. Left photo by Edd K. Usman. Right photo from Tan’s Facebook page. By Edd K. Usman
Special to the BusinessMirror
A
DELEGATION of scientists from the United States National Aeronautics and Space Administration (Nasa) is coming to the Philippines to participate in the National Science and Technology Week (NSTW), which will kick off on Tuesday. The NSTW will be held from July 17 to 21 at the World Trade Center in Pasay City. The Department of Science and Technology (DOST), together with its 18 attached agencies, will lead the annual celebration. The event is staged annually to highlight the major role played by science, technology and innovation in achieving national development. The theme of this year’s celebration is “Science for the People: Innovation for Collective Prosperity.” Information provided to the DOST by the US Embassy in the Philippines indicated that Florence W. Tan, an electrical engineer, will lead the Nasa scientists’ delegation to the NSTW. Tan works at the Nasa Headquarters in Washington and is currently the deputy chief technologist of the space agency’s Science Mission Directorate (SMD). She was earlier with the Nasa’s Goddard Space Flight Center (GSFC), in Greenbelt, Maryland. Part of her work with the SMD’s chief technologist is to survey and assess technology needs for Heliophysics, Astrophysics, Earth Science, and Planetary Science Divisions. She also liaises with the Nasa Office of Chief Technologist, as well as other Nasa mission directorates and Nasa centers. In her 32 years at the GSFC, Tan served as a system engineer, designer, manager and instrument operator of Nasa space-flight projects.
Tax perks. . . Continued from A1
package of the Comprehensive Tax Reform Program (CTRP). Potential investors are apparently holding on to their money, while existing locators are hesitant to expand operations, as some tax incentives might soon be removed. Investments registered under the Peza declined to P53.07 billion from January to June, down by more than half, from P120.22 billion at the same period last year. This resonated across all industries, as commitments to manufacturing fell by 9.29 percent; information technology by 13.66 percent; economic zone development by 65.15 percent; and other sectors by nearly 100 percent. Plaza said her agency is also pushing for the passage of the CTRP’s second package, but only if the Peza is exempted from its coverage. The proposed tax measure seeks to rationalize fiscal incentives, as well
As Nasa lead electrical engineer for multiple space-flight spectrometers, she works on instruments, among them the Mars Science Laboratory Curiosity Rover SAM (2012-present), MAVEN NGIMS (2014-present), LADEE NMS (2014) and ExoMars MOMA. The Nasa scientist has received various awards, such as the Nasa Medal for Exceptional Achievement, Robert Goddard Award for Outreach, Solar System Exploration Special Award Act, Goddard Special Act Awards and Goddard Peer Awards. She has a degree in Bachelor of Science in Electrical Engineering from the University of Maryland, and a Master of Science in Electrical Engineering, as well as a Master in Business Administration in E-Commerce from Johns Hopkins University.
Special lenses vs mosquitoes In an e-mail to the DOST, which was sent to Manila journalists, the US Embassy said it will provide hundreds of specialized lenses for the identification of mosquitoes during the NSTW. The lenses are from the Nasa-led Global Learning and Observations to Benefit the Environment Program. GLOBE “offers low-cost, high-impact science and information-technology tools for US Embassies.” The Philippines joined the GLOBE program in 1999. The program is coordinated in the country by the Philippine Science High School through country coordinator Rod Allan de Lara, PSHS deputy executive director. The program includes “fighting vector-borne diseases, showcasing science and technology innovations, improving understanding of the environment, promoting English language learning, empowering women and girls, and engaging in
as lower corporate income tax. “We will be asking Congress for the retention of those incentives that are working. Why are we going to change the rules—or, in this case, the incentives—in the middle of the game when our investors are happy with these incentives?” the Peza chief said in a briefing on Monday. She argued the agency has been utilizing the proposed criteria of the Department of Finance in giving out incentives long before it was indicated in the CTRP’s second package. Plaza said additional incentives in the form of income-tax holiday (ITH) are granted to locators that bring in new technology and products to the country. She pointed out this is in line with the DOF’s criteria that tax perks should be “performance-based, timebound, transparent and targeted.” In 2015 the Peza accounted for P66.6 billion of the P104.4 billion total tax incentives granted by investment promotion agencies, according to data from the DOF. Most
promoting positive interactions in conflict-prone regions.” According to the US Embassy, the lenses come from the Country Mosquito Trainings of GLOBE provided to country coordinators, which they can use in identifying mosquitoes. For the NSTW, the American embassy will provide six boxes containing 56 lenses and 50 bags each, for a total of 336 lenses and 300 bags. GLOBE started in 1995 with support from Nasa, US Department of State, National Science Foundation and the National Oceanic and Atmospheric Administration. Its various programs enable students and citizen scientists to collaborate with Nasa on Earth science, satellite missions and in the regional and global field measurement campaigns, the US Embassy said. The GLOBE programs provide an opportunity for teachers to strengthen Science, Technology, English and Mathematics skills and environmental awareness of students to promote regional and international linkages. Its app on Google Play, dubbed as the “GLOBE Observer Mosquito Mapper,” was designed “to enable citizens and students to identify mosquitoes that carry disease like Zika, eliminate their breeding sites and upload data to improve tracking/control of the disease.” The program on mosquito-habitat mapper is focused on hard-toreach populations in targeted countries affected with Zika, including the Philippines and is backed by the US Embassy’s Public Affairs section. Its objective is to establish sustainable networks of schools, organizations and public health officials in regions affected with Zika and harness their cloud-sourced data aimed at improving tracking and control of the disease.
of these tax perks were in the form of ITH and special income-tax rates. Locators paid P89.35 billion in taxes that same year, mostly on withholding tax on compensation, duty payment on local sales and expanded withholding tax. Calculations by the Peza reported the government gained P22.75 billion in the process. With the backing of local government executives, Plaza believes lawmakers will consider her appeal and tax incentives will be retained. The Union of Local Authorities of the Philippines Inc., the umbrella group of all leagues of local government units and officials, passed in May a resolution calling on President Duterte and Congress to exempt the Peza from the second tax-reform measure. The resolution stated the Peza has to be exempted from the CTRP’s second package “in order to preserve its authority to administer incentives under its charter and sustain the momentum and effectiveness of its ongoing investmentpromotion campaign.”