Businessmirror July 18, 2018

D.O.S.T., D.T.I. launch innovation center for electronics manufacturing

F

OR 30 years, the semiconductor and electronics industry in the Philippines has significantly contributed to the economy, yet the industry has been limited to manufacturing intermediate products, assembly and testing services. Hopefully, things will get better. In line with this year’s theme for the National Science and Technology Week (NSTW ), “Science for the People: Innovation for Collective Prosperity,” the Department of Science

Science and Technology Secretary Fortunato T. dela Pena (center) hands over a token symbolizing the DOST-DTI partnership to Trade and Secretary Ramon M. Lopez (left), as Dr. Joel Marciano, director of the DOST’s Advanced Science and Technology Institute, looks on, at the opening ceremonies of the 2018 National Science and Technology Week Celebration on Tuesday. ROY DOMINGO

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

and Technology and Department of Trade and Industry (DTI) formally launched the Electronics Product Development Center (EPDC) Inclusive Innovation Center (EPIIC). The goal: encourage and support local Filipino electronics entrepreneurs to design and manufacture final products that can be put to market through the DTI. This project was implemented by the Advanced Science and Technology Institute (ASTI), headed by Joel Marciano Jr. “We want to help the small, micro, medium electronics industry enterprises that produce chips and devices and sell to companies in the Peza [Philippine Economic Zone Authority] zones to now be able to produce them into appliances or other electronic equipment,” Science Undersecretary for Research and Development Rowena Guevara said at a

See “DOST,” A8

BusinessMirror A broader look at today’s business

www.businessmirror.com.ph

n

Wednesday, July 18, 2018 Vol. 13 No. 277

DTI, biz groups oppose transfer of Peza to OP T By Elijah Felice E. Rosales

@alyasjah

HE Philippine Economic Zone Authority (Peza) wants to be under the direct supervision of President Duterte, but the country’s trade chief and top business leaders thumbed down the investment promotion agency’s proposal.

Peza Director General Charito B. Plaza announced her intent to separate her agency from the Department of Trade and Industry (DTI) and be placed under the

Office of the President (OP). This is the Peza’s response to the looming creation of the Fiscal Incentives Regulatory Board (FIRB) under the second package

of the Comprehensive Tax Reform Program (CTRP). “We are proposing an amendment to the Peza law because the Peza law is now 23 years old.

“[The Peza] is governed by law and it will take a law to change that, and [the] DTI will oppose the proposal.” —Lopez

There are so many weaknesses and [provisions are] lacking, like, for example, we want [the] Peza to be directly under the OP already as a GOCC [government-owned and -controlled corporation],” Plaza said in a recent news briefing. “Right now, we are attached to the DTI and we don’t know our personality. Some say we are a GOCC; See “Peza,” A8

BSP on curbing inflation: We know what we are doing By Bianca Cuaresma

B

news conference after the opening of the 2018 NSTW celebration at the World Trade Center in Pasay City on July 17. Guevara emphasized that the role of the EPIIC is to build electronic products that are proudly Filipino made. “At the electronic product inclusive innovation center, Filipinos can now generate products from the ideas of our Filipino inventors, made by Filipinos, manufactured by Filipinos for the Filipinos,” she added. With the DTI partnership, finished products made by technology generators from the DOST will surely be put in the market. This partnership is through a memorandum of agreement on Inclusive Innovation and Entrepreneurship Roadmapping signed last year by both departments.

@BcuaresmaBM

ANGKO Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. had defended its moves to tame inflationary pressures in the country, following rising concerns on their ability to bring inflation back to their target range. “We assure that our monetarypolicy responses to elevated inflation pressures were, and are, timely and appropriate,” Espenilla said in a recent speaking engagement. The BSP has been under fire for letting inf lation slip above their current 2 percent-to-4 percent target range. In the first five months of the year, inflation averaged at 4.3 percent, with the June inflation hitting 5.2 percent. BSP estimates show that consumer prices are still likely to go up and reach their peak in the third quarter of the year.

WATER EVERYWHERE Children play on a flooded street in Quezon City on Tuesday morning, as many communities in Metro Manila awoke to water-logged streets from rains brought by Typhoon Henry, aggravating the southwest monsoon.

See “BSP,” A2

PESO exchange rates n US 53.5220

ALYSA SALEN

2016 ejap journalism awards

business news source of the year

P25.00 nationwide | 5 sections 24 pages | 7 days a week

The right not to know Teddy Locsin Jr.

free fire A Philippine statement written by Maria Roseny Fangco, 3rd Committee, and delivered by Ambassador Teddy L. Locsin Jr., Permanent Representative of the Philippines to the United Nations, at the UN Security Council Open Debate on Children and Armed Conflict, UN Headquarters, New York, on July 9, 2018.

‘W

ithin these halls, we talk about the human rights of children—the right to life, to a name, to education, and to health, among other rights. Today, I want to mention another—their right not to know. Continued on A6

INVESTMENTS REGISTERED WITH P.E.Z.A., B.O.I. DOWN BY 10.8% IN JANUARY-MAY

T

OTAL investments registered to the Board of Investments (BOI) and the Philippine Economic Zone Authority (Peza) declined by 10.8 percent in January to May, as onshore and offshore commitments averaged a double-digit slump. Pledges to the BOI in the first five months expanded by 18.9 percent to P207.48 billion, and accounted for 82.5 percent of total investments committed for the period. However, fresh projects approved by the Peza in the five-month stretch were down by 59.1 percent to P44.12 billion, from P107.75 billion in the same period last year. Moreover, onshore and offshore investment pledges averaged a double-digit slowdown from January to May. Local pledges declined by 9.9 percent, while foreign pledges fell by 17.9 percent, largely due to doubledigit plunges from the country’s top investment partners. Investments from the United States and the United Kingdom—secondand third-largest sources of foreign pledges—slowed by 12.8 percent and 55.9 percent, respectively. The

17.9%

The rate at which foreign investment pledges fell in the January-to-May period, largely due to double-digit plunges from the country’s top investment partners

next top origins of offshore commitments, Singapore and the Netherlands, had 76.4 percent and 84.2 percent slumps, accordingly. On the other hand, Japan remained the country’s largest source of investment pledges. It applied P12.75 billion of investments in the January-to-May period, nearly fourfold the P3.3 billion it poured in for the same months in the previous year. Once in full swing, the projects are estimated to generate 57,627 jobs. See “Investments,” A2

n japan 0.4767 n UK 70.8524 n HK 6.8193 n CHINA 7.9974 n singapore 39.2995 n australia 39.7026 n EU 62.6796 n SAUDI arabia 14.2717

Source: BSP (17 July 2018 )

News

BusinessMirror

A2 Wednesday, July 18, 2018

Asia-Pacific to meet only 1 of 17 development goals

T

By Cai U. Ordinario

@cuo_bm

HE Asia and the Pacific region, where the Philippines belongs, could meet only one Sustainable Development Goal (SDG) by 2030, according to the United Nations Economic and Social Commission for Asia and the Pacific (Unescap).

After the High-level Political Forum (HLPF) in New York, the Unescap said that only SDG 4, which aims to achieve quality education and lifelong learning, is on track to be met by 2030. In several critical areas, including the health of the oceans, forest conservation and the reduction of greenhouse-gas emissions, the region is heading in the wrong direction, according to the regional development arm of the UN for the region. “Asia and the Pacific must step up its efforts to achieve the 2030 Agenda,” Unescap Deputy Executive Secretary Kaveh Zahedi was quoted in a statement as saying. “It is striking to see that despite a pe-

riod of robust growth, inequalities are widening between and among countries, particularly in income, access to essential services and exposure to natural disasters.” While acknowledging that poverty levels are declining, Unescap said the decline is at a slow pace. This is a concern given that the SDGs, particularly SDG 1, aims to eradicate poverty by 2030, the UN body added. However, innovation is powering new industries and infrastructure, and the region’s track record in poverty reduction over the past few decades is unparalleled. “Asia-Pacific may not be fully on track to achieve the 2030 Agenda yet, but the experience and dyna-

mism of the region combined with its notable successes in reducing poverty levels over the past few decades, provides the perfect foundation for the transformations needed,” Zahedi said. Unescap said this situation requires increasing inclusive, multistakeholder participation in efforts to meet the SDGs on a per country and at the regional level. Levan Davitashvili, cochairman of the Asia-Pacific Forum on Sust a inable Development (APFSD), said this situation also means greater regional cooperation is needed to meet the 2030 Agenda because many of the challenges of countries in meeting the goals cuts across borders. “In light of the complex risks facing the region, the fifth APFSD stressed the importance of inclusive, multistakeholder participation, including by disadvantaged, poor, vulnerable and risk-exposed populations and engagement by all levels of government,” said Davitashvili, who is also the minister of Environment Protection and Agriculture of Georgia. Still, the Asia-Pacific region has made some strides in the past three years, including in some of its least-developed countries. These gains have been observed in the improvement in the health situation and well-being. The fifth APFSD is a meeting

convened by t he Unescap in March in preparation for the HLPF. Convened annually, the forum is the primary platform for countries, civil society and the UN to share achievements, challenges and opportunities arising from the 2030 Agenda. The SDGs have 169 targets and 233 indicators. The Philippines has data to monitor only 103 indicators while the rest are either inapplicable or are not available. Around 193 United Nation member-countries like the Philippines committed to meet the SDGs by 2030. The SDGs were adopted in September 2015. The Global Goals aim to end poverty and hunger, promote u n i v e r s a l he a lt h , e du c at ion for all and lifelong learning, achieve gender equality, sust a inable water ma nagement, ensure sustainable energ y for all, decent work for all, resilient infrastructure, and reduce income inequality between and among countries. The goals also include create sustainable cities, ensure sustainable consumption and production, take action against climate change, conserve and sustainably use oceans and marine resources, reduce biodiversity loss, achieve peaceful and inclusive societies, and revitalize global partnership for development.

BSP. . .

Continued from A1

Just this month, congressmen discussed how to stop the rise of inflation, with House Committee on Economic Affairs Chairman Arthur Yap of Bohol saying the BSP must enact an off-cycle move to increase rates and stabilize the situation. “The increase in rates will mop up the market’s excess liquidity that may possibly rein in runaway prices and stave off further weakening of the peso,” Yap earlier said. However, Espenilla, in his speech on Tuesday, said their moves are “informed by a wide set of economic data.” “Our two successive rate hikes in May and June were measured and deliberate responses to the evolving economic environment and dynamic market conditions meant to help anchor inflation expectations and temper second-round effects, firmly signaling our commitment to ensuring price stability,” the governor said. The current BSP main policy rate now stands at 4 percent after the back-to-back hike in the last two meetings. In their June meeting, Espenilla also said “further moves are still on the table” should the inflationary environment warrants action from the BSP. “We reaffirm our strong commitment to ensure that inflation returns to target by 2019. We stand ready to take decisive action in a timely manner to address emerging risks that could threaten the attainment of this target,” the governor said further in his speech. The BSP chief also said the moves of the Central Bank should not always mirror the normalization moves of the United States Federal Reserve (the Fed), given the difference in their scale. “As an inflation-targeting Central Bank, we allow foreign-exchange flexibility so that we can conduct independent monetary policy primarily focused on assessment of domestic conditions, and is thus not based on actions of the Fed,” Espenilla said. “Nevertheless, we consider external factors and exchange-rate movements if these will materially impact the pursuit of domestic objectives, especially inflation. This approach is most appropriate for a small open economy like the Philippines,” he added. The BSP Monetary Board is scheduled to meet again to set monetary policy levers on August 9. This will be the fifth monetary-policy meeting of the BSP Monetary Board for the year.

www.businessmirror.com.ph

To open or not to open Boracay Island, that is the question for Binay By Ma. Stella F. Arnaldo

@akosistellaBM Special to the BusinessMirror

A

DELAY in the reopening of Boracay became a real possibility after government officials on Monday failed to answer basic questions during a Senate hearing on the state’s rehabilitation and reopening plans for the island-resort. Grilled by Sen. Nancy S. Binay, Undersecretary Epimaco V. Densing III of the Department of the Interior and Local Government (DILG) said there was still no determined carrying capacity for Boracay, as the Department of Environment and Natural Resources (DENR) has yet to complete its study on the matter. “The DENR said they would be submitting their report by May but recently they asked for more time to complete it,” Densing said. There were no high-ranking DENR officials who attended the hearing that was sponsored by Senate Committee on Tourism, which Binay heads. Meanwhile, tourism stakeholders have already started selling rooms in anticipation of the island’s reopening on October 26, and are working on their promotions and marketing plans. Contacted by the BusinessMirror, a sales and marketing officer of a popular resort on the island said: “We have started selling [rooms] for October 27, despite the absence of guidelines [from the Department of Tourism].” Residents living in Boracay have also confirmed the widening of their main road is still ongoing. A person familiar with the matter said contractors informed people in Boracay that “the entire [road] project will take three to four years to complete. But they are rushing the road from Cagban [jetty port] to Balabag.” At the Senate hearing, the Tourism Infrastructure and Enterprise Zone Authority, for another, has said its drainage system will be completed by 2019. Tieza Chief Operating Officer Pocholo Paragas said they are syncing their project with the road project of the Department of Public Works and Highways, so they don’t have to dig up a finished road just to lay down their pipes. “It w ill be done together,” Paragas said.

Federalism. . . Continued from A8

This, even as the Dean of the Ateneo School of Government, Dr. Ronald Mendoza, informed senators at the joint hearing that a recent survey showed 64 percent of Filipinos are not keen on changing the 1987 Charter. The senators were told that Filipinos are also wary over plans to convene Congress as a Constituent Assembly to amend the Charter because “the majority of its members come from political dynasties” such that “the risk of capture is too great.” Interviewed before the hearing, former Senate President Aquilino Q. Pimentel Jr., who sits on the Consultative Committee, assured senators that the Con-com sees the need for a clear provision that the Senate and the House will be voting separately on Charter changes to be endorsed by the Con-com. “Otherwise, the 200 House members will deluge the Senate

Investments. . . Continued from A1

The electricity, gas, steam and airconditioning supply industry remained to be the top recipient of pledges, accounting for 42.4 percent of the applied investments. Commitments to the industry grew by 146.3 percent to P106.63 billion from January to May. Transportation and storage also improved by 320.3 percent to P39.89 billion, and was the second-largest recipient of investment pledges. Real estate activities and manufacturing came next at P37.05 billion and P34.95 billion,

President Duterte ordered the closure of Boracay Island for six months starting on April 26 to give way to the government’s rehabilitation effort, after being shown dirt and other effluents passing through the drainage outfall and blackening Bulabog beach. The said pipe is being extended farther away from the beachfront while illegal connections have been dismantled, according to Paragas. Tourism Congress of the Philippines President Jose C. Clemente III told Binay—along with committee members Senators Paolo Benigno A. Aquino IV and Antonio F. Trillanes—that the private sector is already preparing for the island’s reopening by laying down its promotions plans. “As early as now, some of us in the private sector have already made the announcement to our clients and partners [that rooms are available] because we went on the statement of [DENR] Secretary [Roy A.] Cimatu [that Boracay would reopen on October 26],” Clemente said. “Definitely, there are promotional plans, and we’re working very closely with the Department of Tourism in regard to that.” While acknowledging the tourism sector’s marketing effort, Binay pointed out the urgency of determining the carrying capacity of the island. “The problem is, since we still don’t know what is the carrying capacity of the island, how many rooms are we going to sell in Boracay? In the first place, we still don’t know which among the resorts are compliant, and how many rooms will be available by October 26.” Industry stakeholders had also brought up their confusion on what constituted “compliance” with government regulations after several agencies issued new memos and new instructions on requirements that establishments on the island have to submit anew before they will be allowed to open on October 26. Peter Tay, Boracay Foundation Inc. board member, said they were told that “four or five” of their members in the DENR list were supposedly not compliant with government regulations. But based on their members’ inputs, he said, ”they were already compliant” and had submitted requirements to the relevant government agencies.

if voting jointly.” Asked by Sen. Paolo Benigno A. Aquino IV if the House “can do it alone,” referring to the proposed Charter changes, former Pimentel Jr. replied “that is only Speaker [Pantaleon] Alvarez’s position,” adding that “the law states separate voting” by the Senate and the House of Representatives. In the same hearing, the senators were warned that the proposed Charter changes submitted by the Con-com was “tailor-made for Duterte...because the Con-com explicitly failed to ban Duterte from enjoying a double bonanza to run and ser ve as transition president.” The Senate committee members were likewise alerted that the plebiscite to ratify the proposed Charter changes “will compete with the noise of local elections” and drawn out Charter-change debates. “Piggybacking the Charter-change plebiscite will be a sheer folly as only a few Filipinos will be informed of the Charter-change issues.” respectively—the former contracted by 72.7 percent, the latter expanded by 2.2 percent. Water supply, sewerage and waste management accelerated to P13.87 billion in the first five months from P88 million in the same period last year. Pledges to construction and public-private projects, however, fell by 85.3 percent; administrative and support service activities by 2.3 percent; and agriculture, forestry and fishing by 24.8 percent. The BOI is targeting to grow investment pledges to an all-time high of P680 billion this year. The Peza, for its part, is seeking a conservative 10-percent growth. Elijah Felice E. Rosales

The Nation BusinessMirror

www.businessmirror.com.ph

Noynoy on Dengvaxia rap: I was deprived of my fundamental right By Joel R. San Juan

F

@jrsanjuan1573

ORMER President Benigno “Noynoy” S. Aquino III on Tuesday questioned the National Bureau of Investigation’s (NBI) filing of a complaint for technical malversation against him and several others before the Ombudsman in connection with the P3.5-billion anti-dengue immunization program implemented by his administration. Interviewed at the Department of Justice (DOJ), Aquino lamented that his right to due process was violated when the NBI filed the complaint even without giving him an opportunity to air his side. “It’s not clear to me if the NBI followed the process to come up with their findings.... We don’t know what evidence they have.... Was there really an investigation conducted? Because there were no questions asked,” he told reporters covering the DOJ beat. Aquino was at the DOJ to file

his rejoinder in the charges of multiple homicide and physical injuries through negligence under the Revised Penal Code, malversation of public funds, and violations of Republic Act (RA) 3019 (Anti-Graft and Corrupt Practices Act) and RA 9184 (Government Procurement Reform Act) filed by anti-corruption groups Volunteers Against Crime and Corruption (VACC) and Vanguard of the Philippine Constitution Inc. (VPCI) in February over the deaths of schoolchildren inoculated with the controversial

Dengvaxia vaccine, which he had already previously denied. Aquino noted that he was summoned by the NBI to appear before the bureau on May 25. He said his lawyers went to the NBI, but were not even given specifics of any complaint. “They didn’t give us copy of any complaint... We were just surprised by the reports of the filing of the case by the NBI. I really don’t understand this because the right of the accused to know the accusations and face the accusers is supposed to be fundamental,” he said. Aside from Aquino, charged before the Ombudsman for technical malversation under Article 220 of the Revised Penal Code were former Budget Secretary Florencio B. Abad, former Health Secretary Janette Loreto-Garin, former Health Secretary Paulyn Jean B. Rosell-Ubial and several health officials. Likewise, the NBI asked the Ombudsman to hold Garin and several incumbent and former health officials and officers of Dengvaxia vaccine manufacturer Sanofi Pasteur Inc. The NBI sought the indictment of Aquino and his corespondents over the “use of savings from 2015 and use the same to augment a nonexistent anti-dengue immunization program.” Aquino said he would formally answer the charges before the Om-

budsman upon getting copy of the NBI complaint. He reiterated, however, that there was nothing irregular or illegal in the funding used for the P3.5-billion project. “The General Appropriations Act of 2015 allowed the use of savings to fill in the lack of funds for appropriated items,” Aquino pointed out. Meanwhile, in his rejoinder submitted to the DOJ on the complaint filed by the VACC and VPCI, Aquino again asked the DOJ panel to dismiss the charges for lack of merit. Aquino insisted that he cannot be held liable for criminal negligence simply because there is no valid evidence to prove that the deaths were a direct result of the vaccine. He also reiterated that the procurement process was aboveboard and within the timelines prescribed by RA 9184. Aquino submitted his rejoinder ahead of the scheduled hearing on July 20, when Garin and Abad are expected to submit their respective rejoinders. Other respondents in the case include former and incumbent health officials, officers of Dengvaxia local distributor Zuellig Pharma and Sanofi. The DOJ panel chaired by Senior Assistant State Prosecutor Rossane Balauag is set to resolve the case after the submission of rejoinders.

Editor: Vittorio V. Vitug • Wednesday, July 18, 2018 A3

N.F.A. Assures enough rice for areas hit by disasters

NFA rice is kept at the National Food Authority warehouse in Quezon City. Around 600 sacks of NFA rice arrived on June 25 to be retailed in different markets in Manila. NONIE REYES

T

he National Food Authority (NFA) said its rice stockpile is enough to meet the needs of relief agencies and local government units for calamity-hit areas following the arrival of the food agency’s first tranche of imports. NFA Administrator Jason Y. Aquino said the food agency “will no longer run out of stocks especially for any calamity or emergency.” Aquino added that the NFA would activate its 24-hour operations center during natural disasters to ensure quick response for rice needs. “During this time when typhoons and flooding are forecast in many parts of the country, NFA employees can be counted upon to man our offices and warehouses in order to assure our countrymen of available rice at any given time,” Aquino said in a statement. “We have already prepositioned our stocks in all provinces of our

country. We have secured stocks for island provinces easily isolated by typhoons, flooding and landslides, as well as other calamity-prone areas. We assure everyone that NFA rice will be available anywhere when needed,” he added. As of July 16, the NFA said about 197,400 metric tons out of the total 250,000 MT of rice it imported from Vietnam and Thailand have been delivered to its warehouses. The remaining 52,600 MT are expected to arrive before the end of July, according to the NFA. Aquino instructed the NFA’s field offices “to be ready to render service 24/7 when necessary to be able to quickly respond to any need for rice issuance for calamity victims.” “Market monitoring is also heightened to ensure that rice will continuously be available and to avert any unreasonable spike in prices,” Aquino said. Monique Danielle A. Fernando

A4 Wednesday, July 18, 2018 • Editor: Vittorio V. Vitug

Economy BusinessMirror

www.businessmirror.com.ph

RTWPBs in 4 regions okay pay hike for minimum-wage earners

M

By Samuel P. Medenilla

@sam_medenilla

INIMUM-WAGE earners in four regions of the country will soon get pay hikes after their respective regional wage boards separately issued new wage increase orders. In an ambush interview on Tuesday, Labor Undersecretary Ciriaco A. Lagunzad III announced the Regional Tripartite Wages and Productivity Boards (RTWPB) in Central Luzon, Central Visayas, Zamboanga Peninsula and Davao region have already raised their wage rates for this year. The new wage order for Central Luzon will take effect on August 1, 2018, and will grant workers there a P20 daily wage hike. The smallest minimumwage rate in the region is now P274 for retail or service firms with less than 16 workers in the province of Aurora, while its biggest pay of P400 are for workers in nonagriculture firms with assets worth P30 million or more. The RTWPB’s in the three other regions have yet to publish their wage orders. “It will take 15 days after the publication before their respective wage orders to be effective,” Lagunzad told reporters.

But once their wage orders take effect, minimum-wage earners in their jurisdictions will get the following rates: Central Visayas (P313 to P386); Zamboanga region (P303 to P316); and Davao region (P381.43 to P396.43). Lagunzad said workers in the Cordillera Administrative Region (CAR) and the Bicol region will also soon get their much-awaited pay increase. “RTWPBs CAR and [Region] 5...are expected to issue wage orders within the month of July and August 2018,” Lagunzad said. He added the RTWPB-CAR already completed their consultations and public hearing, while RTWPB Region 5 is expected to complete its board deliberations by August 14. Meanwhile, Lagunzad said, the RTWPBs in Metro Manila, Ilocos region, Cagayan Valley, Mimaropa, Northern Mindanao and Caraga Region have yet to start their deliberations since they are still waiting for the anniversary

date of their wage orders. Except for the RTWPB in the Ilocos regions, all of the said regions issued their wage orders in 2017. The RTWPB in Ilocos region issued its latest wage order on November 24, 2017, but it only took effect on January 25, 2018. Lagunzad said the six RTWPBs are monitoring the socioeconomic conditions to determine if they will be declaring a so-called supervening condition. Under the Wage Rationalization Act, RTWPBs could only grant new wage orders a year after the effectivity of their previous wage issuance. An RTWPB may be exempted from this rule if they declare a supervening event, which is any unusual spike in the prices of basic commodities and services in their areas for a certain period. As of Tuesday, Lagunzad said no RTWPB has declared any supervening event. Currently, only the RT WPBs in Calabarzon, Eastern Visayas, Western Visayas, Soccsksargen and the Autonomous Regions in Muslim Mindanao have issued their wage orders.

Meager increases

THE Associated Labor Union-Trade Union Congress of the Philippines (ALU-TUCP), however, slammed the latest of round of wage hikes, stating the increases are still insufficient for

the needs of workers. “These amounts fails to push minimum-waged workers and their families out of poverty caused by very high inflation,” ALU-TUCP Spokesman Alan Tanjusay said. The labor leader said none of the pay increase will allow minimumwage earners to receive the P42,000 monthly income prescribed by the National Economic and Development Authority for a family of five. More so, Tanjusay said, amid the unexpected increase in the inflation rate, which reached 5.2 percent in March. ALU-TUCP has been calling on the government to grant workers nationwide a P320 minimum-wage increase and cash subsidies to allow them to cope with the rising cost of living. For his part, Partido Manggagawa National Chairman Renato Magtubo agreed with Tanjusay, saying that the RTWPBs have failed in their mandate in granting workers a significant wage hike. “Once again, the regional wage boards proved themselves as inutile mechanism in addressing the demand for wage increase that could tide workers and their families against the rising prices of basic commodities,” Magtubo said. He reiterated his call to President Duterte to scrap the “provincial wage rates” and implement a uniform national minimum wage rate.

PSA lists Manila’s top BPM customers By Cai U. Ordinario @cuo_bm

T

HE local business-process management (BPM) sector’s largest customer is the United States, according to the Philippine Statistics Authority (PSA). In 2015 PSA data showed the BPM industries generated a total income of P461.4 billion. Nearly half of this amount is generated from foreign transactions. “Across the globe, [the] United States of America contributed the largest part of income, sharing P126.5 billion, or more than three-fifths [61.6 percent] of the total income from transactions outside the country,” the PSA said. This was followed by the Netherlands, contributing P17.2 billion, or 8.4 percent of the total, and Australia, 5.8 percent or P11.99 billion. Other countries that completed the top 5 clients of the BPM sector were the United Kingdom and Canada, which accounted for P9.76 billion and P7.48 billion, respectively. Meanwhile, in terms of total income, customer relationship management activities earned the highest, comprising more than half or 57.3 percent of the total income of the sector, or about P264.4 billion. Computer programming activities came far next with a total income of P62.7 billion, or 13.6 percent, followed by sales and marketing activities with P51.3 billion or 11.1 percent. The data also showed that the government granted a total of P136.7 million worth of subsidies to the BPM industries in 2015. “Subsidies are special grants received from the government in the form of financial assistance or tax exemption or tax privilege to aid and develop an industry,” the PSA said. Sales and marketing activities, including telemarketing, received subsidies worth P106.5 million and customer relationship management activities, P14.3 million. Data also showed that other information technology and computer service activities were granted subsidies worth P8.4 million, while other back-office operations activities received P7.6 million in tax perks. The data was obtained from the Annual Survey of Philippine Business and Industry (ASPBI) which surveyed some 1,781 firms. Around 88.88 percent or 1,583 firms responded to the survey and 72 or 4.04 percent responded online.

PHL rice production seen reaching 12.9 MMT in 2018 By Jasper Emmanuel Y. Arcalas @jearcalas

T

HE country’s rice output this year could rise by 1.6 percent to a record high of nearly 13 million metric tons (MMT) on the back of favorable weather conditions and high farm-gate prices, according to the Food and Agriculture Organization (FAO). In its biannual food outlook report, the FAO projected that total Philippine milled-rice production in 2018 would reach 12.9 MMT, 200,000 MT more than the 12.7 MMT recorded output in 2017. “Asia is expected to drive the global production expansion of 2018, harvesting a record 461.9 million tons, up 1.2 percent from 2017,” the FAO said in the report published recently. “Current prospects also point to Cambodia, Indonesia, the Philippines, Myanmar and Thailand producing more in 2018, but the outlook is less buoyant elsewhere in Asia,” it added. Despite the record-high harvest, Manila’s rice imports this year would expand by half to 1.5 MMT, from 1 MMT a year ago, as the government seeks to beef up the National Food Authority’s (NFA) depleting stockpile and keep retail prices of the staple within affordable level. “Asian import demand looks set to remain strong in 2018, amid efforts by countries such as Indonesia and

the Philippines to shore up reserves and contain increases in local prices,” the FAO said. The hike in the country’s rice imports, along with additional volumes purchased by Bangladesh and Indonesia abroad, would sustain the upward trend of the staple’s global prices amid currency depreciation in various exporting countries. “The upward trajectory exhibited by international rice prices since late-2016 held during the first half of 2018, as reflected by the FAO All Rice Price Index [2002–2004=100] rising by another 6 percent since December, to reach 232 points in June 2018. At this level, the index stood at its highest since November 2014, and 11 percent above its value a year earlier,” the FAO said. “The gains have been demanddriven, coming in the aftermath of large purchases by Bangladesh, Indonesia and the Philippines, although in the case of Vietnam, increases tended to be accentuated by tighter availabilities following a shift away from cultivation of lower-grade Indica varieties in the country,” the FAO added. The FAO projected that the Philippines’s total year-end rice inventory this year would settle at 2.4 MMT, 100,000 MT higher than the 2.3 MMT recorded stocks last year. The country’s total rice consumption for 2017 and 2018 is forecasted to increase by 2.22 percent to 13.8

MMT, from 13.5 MMT recorded demand in 2016 and 2017, according to the FAO. This indicates that a Filipino would eat 115.2 kilograms of rice in 2017 and 2018, which is 700 grams more than the 114.5 per kilogram per-capita consumption in 2016 and 2017. In April Agriculture Secretary Emmanuel F. Piñol said the country’s unmilled rice or palay production could rise by nearly 3.11 percent to a record high of nearly 20 MMT on the back of higher yield and better farmgate prices. “This year rice production is expected to grow by about 600,000 metric tons, stimulated mainly by good palay-buying prices, favorable climate and the increase in the adoption of good quality and hybrid seeds by farmers,” Piñol said. Rice output last year grew by 9.3 percent to 19.28 MMT, from 17.63 MMT recorded in 2016, according to the Philippine Statistics Authority (PSA). The 9.3-percent increase in palay output last year allowed the country to reach a 96-percent self-sufficiency in rice, according to the DA. “Last year the country posted its highest rice harvest in history at 19.28 million metric tons, which reduced the country’s dependence on imported rice from over 2 million metric tons in 2010 to only about 600,000 to 800,000 metric tons this year,” Piñol said.

WATER WORLD

Residents and commuters paddle their way across Araneta Avenue in Quezon City onboard a small banca amid intermittent monsoon rains, which, the weather bureau said, was spawned by Tropical Depression Henry. Tuesday’s weather, likewise, prompted the suspension of classes in Metro Manila and outlying areas, and the curtailment of work hours among most government offices. NONOY LACZA

www.businessmirror.com.ph

The World BusinessMirror

Editor: Angel R. Calso • Wednesday, July 18, 2018 A5

Japan, European Union to sign widespread trade agreement eliminating nearly all tariffs

T

OKYO—The European Union (EU) and Japan are signing a widespread trade deal on Tuesday that will eliminate nearly all tariffs, seemingly defying the worries about trade tensions set off by President Donald J. Trump’s policies.

The signing in Tokyo for the deal, largely reached late last year, is ceremonial. It was delayed from earlier this month because Japanese Prime Minister Shinzo Abe canceled going to Brussels over a disaster in southwestern Japan, caused by extremely heavy rainfall. More than 200 people died from flooding and landslides. European Council President Donald Tusk and European Commission President Jean-Claude Juncker, who arrived on Monday, will also attend a gala dinner at the prime minister’s official residence. Both sides are heralding the deal, which covers a third of the global economy and more than 600 million people. Prices of European wine and pork will fall for Japanese consumers. Japanese machinery parts, tea and fish will get cheaper for Europe. The deal eliminates about 99 percent of the tariffs on Japanese goods to the EU, but remaining at around 94 percent for European imports into Japan for now and rising to 99 percent over the years. The difference is due to exceptions such as rice, a product that’s culturally and politically sensitive and has been protected for decades in Japan. The major step toward liberalizing trade was discussed in talks since 2013 but is striking in the timing of the signing, as China and the United States are embroiled in trade conflicts. The US is proposing 10-percent tariffs on a $200 billion list of Chinese goods. That follows an earlier move by Washington to impose 25-percent tariffs on $34 billion of Chinese goods. Beijing has responded by imposing identical penalties on a similar amount of American imports. Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal. The partnership includes Australia, Mexico, Vietnam and other nations, although the US has withdrawn. Japan praised the deal with the EU as coming from Abe’s “Abenomics” policies, designed to wrest the economy out of stagnation despite a shrinking population and cautious spending. Japan’s growth continues to be heavily dependent on exports. By strengthening ties with the EU, Japan hopes to vitalize mutual direct investment, fight other global trends toward protectionism and enhance the stature of Japanese brands, the foreign ministry said in a statement. The EU said the trade liberalization will lead to the region’s export growth in chemicals, clothing, cosmetics and beer to Japan, leading to job security for Europe. Japanese will get cheaper cheese, such as Parmesan, gouda and cheddar, as well as chocolate and biscuits. Japanese consumers have historically coveted European products, and a drop in prices is likely to boost spending. AP

Oil halts slide as stockpile drop counters supply boost

O

il arrested losses near the lowest level in more than three weeks as investors weighed the prospect of shrinking United States inventories against more supply from Saudi Arabia and America’s emergency hoard. Futures in New York were little changed after a 4.2-percent plunge on Monday. Government data on Wednesday is forecast to show US inventories last week dropped further from the lowest level since 2015. Meanwhile, Saudi Arabia is offering extra crude volumes on top of its contractual supplies to some buyers in Asia and the Trump administration is said to be considering tapping into America’s Strategic Petroleum Reserve to cool rising fuel prices. Oil has tumbled about 8 percent from a 2014 high reached last month on concern that an escalating trade spat between the US and China will crimp global economic growth and reduce demand. Goldman Sachs Group Inc. says US political decisions will stoke oil volatility as investors look for signs that the Organization of Petroleum Exporting Countries (Opec) and its allies are boosting output to offset disruptions from Venezuela to Canada and supply risks from American sanctions on Iran. “The key lies in the US, with investors focusing on the fact that oil prices in New York have plummeted below $70,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “While the US stockpile situation will impact prices, what’s really key is the US’s stance—whether it’s the use of strategic reserves or a clear picture on the renewed sanctions on Iran—to determine the direction of the market.” West Texas Intermediate (WTI) crude for August delivery traded at $68.11 a barrel on the New York Mercantile Exchange, up 5 cents, at 12:14 p.m. in Singapore. The contract fell $2.95 to $68.06 on Monday. Total volume traded was about 44 percent below the 100-day average. Brent for September settlement added 41 cents, or 0.6 percent, to $72.25 a barrel on the London-based ICE Futures Europe Exchange. Prices on Monday dropped $3.49 to $71.84. The global benchmark crude traded at a $5.03 premium to WTI for September. Bloomberg News

c

A6 Wednesday, July 18, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror

www.businessmirror.com.ph

editorial

Keeping PHL bird flu-free

P

rior to August 2017, some experts said the risk of an avian-influenza outbreak in the Philippines is minimal due to a number of factors. Unlike Thailand that is landlocked, the Philippines is an archipelago, so a pandemic is unlikely. The tropical climate of the country is also a plus factor because AI, or bird flu, usually thrives in countries that experience winter, such as those in North America and Europe. One government official even said that the good personal hygiene habits of Filipino farm workers (e.g., taking a bath every day) would ensure that the virus will not easily spread to other farms. But these attributes failed to keep the virus at bay last year. The Philippines lost its reputation as one of the few countries in Asia that were left untouched by the bird flu on August 11, 2017. The Department of Agriculture (DA) announced that for the first time in history, bird flu had struck a poultry farm in San Luis, Pampanga. In a few months, the virus would jump to other poultry farms not only in Pampanga but also in Nueva Ecija. While the government was prepared for this as early as 2004 when it came out with a bird flu manual outlining its strategies for fighting AI, the blueprint was put to the test in 2017. For one, the government had to resort to “manual” culling of birds because the Clean Air Act does not allow waste incineration. The government could not just bury the infected chicken alive because there was no available land where the government could do composting. There was also the possibility that the virus could spread if the fowls were buried because San Luis is a wetland area. The bird flu outbreak in Central Luzon not only affected poultry growers but also exporters and retailers of dressed chicken. After the government confirmed that chicken and quail farms were struck by the virus, the country’s trading partners, such as Japan and the United Arab Emirates, banned local poultry products. Also, consumers stopped buying dressed chicken and shifted to other sources of protein, causing poultry growers and retailers to lose money. The steps taken by the government prevented the outbreak from spreading to other regions in Central Luzon. But the industry and the government suffered a setback last November when the virus resurfaced in a farm in Nueva Ecija. This happened at a time when the Philippines started its countdown to becoming bird flu-free. If not for the fresh outbreak in Nueva Ecija, the Philippines would have regained its bird flu-free status as early as December. With the publication of the country’s “self-declaration” report on the web site of the Office Internationale des Epizooties, the Philippines can now claim that it is finally free of bird flu. Regaining its bird flu-free status, which the country enjoyed for many years, allowed local producers to resume exporting chicken to traditional markets. Being bird flu-free also increased the confidence of consumers in the safety of local poultry. Unfortunately, the government remains clueless on how the virus was able to penetrate local poultry farms. There is speculation that the virus may have been brought by migratory birds that frequent the Candaba swamp. There is also the probability that it came from poultry products or live birds imported from AI-infected countries. The government has undertaken a study on the first bird flu outbreak. It is hoped that it includes efforts to find out how the virus found its way into ground zero in San Luis, Pampanga. Complacency will be the biggest enemy of the government in its bid to maintain the bird flu-free status of the Philippines. There must be no let up in its efforts to encourage poultry growers to immediately report unusual mortality rates in their farms. The government confirmed the outbreak in August 2017 but there were reports that as early as April of that year, poultry growers have already noted abnormal mortality rates among chicken in their farms. Unfortunately, this was not immediately reported, resulting in the culling of more fowl and mounting losses among poultry growers.

Since 2005

BusinessMirror A broader look at today’s business ✝ Ambassador Antonio L. Cabangon Chua Founder Publisher Editor in Chief Associate Editor News Editor Senior Editors

T. Anthony C. Cabangon Lourdes M. Fernandez Jennifer A. Ng Vittorio V. Vitug

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes Judge Pedro T. Santiago (Ret.) Benjamin V. Ramos Adebelo D. Gasmin Marvin Nisperos Estigoy Aldwin Maralit Tolosa Rolando M. Manangan

BusinessMirror is published daily by the Philippine Business Daily Mirror Publishing, Inc., with offices on the 3rd floor of Dominga Building III 2113 Chino Roces Avenue corner De La Rosa Street, Makati City, Philippines. Tel. Nos. (Editorial) 817-9467; 813-0725. Fax line: 813-7025. (Advertising Sales) 893-2019; 817-1351, 817-2807. (Circulation) 893-1662; 814-0134 to 36. E-mail: news@businessmirror.com.ph.

www.businessmirror.com.ph

Printed by brown madonna Press, Inc.–San Valley Drive KM-15, South Superhighway, Parañaque, Metro Manila MEMBER OF

Teddy Locsin Jr.

Free fire Continued from A1

‘C

hildren have the right not to know firsthand the horrors of war. They have the right not to know the weight of a rifle and the sharpness of its edges from a blow struck at them. They have the right not to know fear, the kind one feels staring at the barrel of a gun aimed at one. They have the right not to know hate, the tempestuous hate that is assuaged only by murdering its object. Except maybe on the screens of their Xboxes and Nintendos, children have the right not to know what a battlefield looks like. It is one place where they do not belong along with a militant’s malignant embrace.

“The Philippines shares UN’s profound desire to keep children away from armed conflict. And should it be unavoidable that we find them in the midst of battle, to keep them safe. The depth of our disdain for armed groups recruiting children and using them as human shields can only be measured by the grim determination to fight them. These armed groups are beneath contempt. Our country has suffered human, social and economic costs from armed conflicts waged by these groups. The suffering is multiplied when children and youth are involved, because the psychological cost of war, which is immeasurable, are borne by the children as they grow into adulthood and impacts on the nation’s future.

“In May 2017 militants affiliated with the ISIS took Marawi, a city in Southern Philippines. After five long months of fighting, government forces took back the city, but not without huge costs in their casualties and to the city. Regrettably, children recruited by the militants were hurt in the fighting. Schools occupied by militants were taken back; the city was destroyed—confirming the irony that sometimes a village must be destroyed in order to save it because it cannot be left in militant hands behind advancing army’s back. But a school? One can always surround it, go around it, and leave it behind. “Rebellion and armed conflict are complex issues but they do not defy solution. My government is tireless

“Childhood should be the most cherished stage of a person’s life; all are entitled to know the innocent joys from which we are all compelled to graduate into the world that adults make. We are committed to the UN Convention on the Rights of the Child and its related Optional Protocols to uphold children’s rights and welfare.” in finding a resolution to these conflicts. Attaining peace remains at the core of the Philippine President’s agenda. The Six-Point Peace and Development Agenda aims to bring about new peace agreements, always consistently with human rights and our democratic Constitution; while diametrically opposed to the tyranny of terror and ever adamant in enforcing the civil and human rights found in political constitutions familiar to the civilized. It is designed to promote a culture of peace and conflict sensitivity; and to achieve a peace that fosters catch-up economic development in conflict areas. Earlier this year, the President ordered his peace secretary to resume talks with the communist rebels. They rejected it. “The Armed Forces of the Philippines is mandated to be a primary duty-bearer not only of peace but especially of the safety of children in armed conflict. Under its regulation called “Children Protection During Armed Conflict Situations,”

children are given special protection in armed conflict situations. Those rescued or recovered, including those apprehended for alleged association with rebel armed groups are handed over to the local social welfare officer for processing and psychosocial services. Both the Armed Forces and the Commission for the Welfare of Children work with Unicef to end child rights violations. For this the Army has gotten scant credit; while enemies of the state are repeatedly eulogized for their repeatedly avowed and never fulfilled intention to end their recruitment of child soldiers. “Childhood should be the most cherished stage of a person’s life; all are entitled to know the innocent joys from which we are all compelled to graduate into the world that adults make. We are committed to the UN Convention on the Rights of the Child and its related Optional Protocols to uphold children’s rights and welfare. This commitment is guided by the Third National Action Plan for Children and the Philippine Plan of Action for the Elimination of Violence Against Children. Executive Order 138 strengthens the Children in Armed Conflict program, which involves the conduct of human-rights training, monitoring, reporting and responding to child rights violations in situations of armed conflict. “The militants are not bound by any of these conventions, protocols and plans in their predations. Nor is their anti-vision of society ever hospitable to the idea that children are outside the scope of war but rather one of its spoils. Thank you.”

Corrupt politicians can’t touch PCSO revenues

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

Online Editor Social Media Editor

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

The right not to know

Florante S. Solmerin

FACT IS MIGHT!

R

ogue politicians continue to entice some Malacañang officials to just allow the illegal numbers game jueteng to thrive because they need campaign funds for their reelection bids in the 2019 midterm elections. Even political wannabes, both administration allies and opposition, are eyeing jueteng money. The truth is, these politicians want jueteng to thrive because they can’t line their pockets with the revenues of the Small Town Lottery (STL) of the Philippine Charity Sweepstakes Office (PCSO). I hate to see the PCSO going to the dogs. If this happens, General Manager Alexander “Mandirigma” Balutan will not stay a minute longer at the PCSO. I’m very sure of that. The former Marine general has

an unblemished track record and he will never trade this for payola or whatever, as some corrupt officials would want him to do. He will never play the “game of gambling lords.” His integrity and leadership by example helped boost the PCSO’s revenues after President Duterte appointed him general manager in September 2016. At the PCSO, he walks the talk. He never capitulates to political whims meant to destroy

the agency. That’s why Duterte had chosen him to head the PCSO to rid the agency of corruption. Stories of alleged Malacañang bigwigs flexing muscles in juicy government agencies to generate campaign funds are not new. Unfortunately for these corrupt officials, the PCSO under Mandirigma’s watch will never become a milking cow for them. That’s the reason Duterte asked him to head the PCSO. So please spare the agency from this kind of corrupt practice because it’s the gaming public that would be at the losing end. The money that they contribute through various PCSO games such as Lotto, Keno (Digit Games), STL and Sweepstakes is being used to fund the government’s free medical services for the people. Everyday more and more Filipinos in need of medical assistance—such as dialysis—are flooding the gates of PCSO offices, apart from indigents seeking financial assistance, especially those who can’t pay for their hospital bills. The money that the PCSO has

earmarked for the sick in the form of medical assistance does not come from the people’s taxes. It comes from the gaming public who continue to believe and trust in PCSO’s lottery games. They patronize the games because they know that they will also benefit from the PCSO services when they need it the most. Mandirigma is not afraid to speak up, to tell the truth in public when he sees there’s a need to do it. He knows that the people is on his side, and he is ready to defend what is right and just. He said: “A good commander is one who solves a crisis, but a better commander prevents it from happening. I choose to be the better commander.” He has been there before and he will do it again. Last year the PCSO earned P52.9 billion, and this year it projects revenues to reach P60 billion. Mandirigma would not allow corrupt politicians to touch the money allotted to the people, especially the sick. E-mail: fetad@yahoo.com.

Opinion BusinessMirror

www.businessmirror.com.ph

Trump puts it all on the line...for what?

When problems get too big, build many mini water dams Michael Makabenta Alunan

Jonathan Bernstein

BLOOMBERG VIEW

D

onald J. Trump capped off his disastrous three-stop foreign trip by joining Vladimir Putin for an embarrassing and craven news conference. Pressed on whether Russia had any responsibility for the poor relations with the United States, the American president chose to ramble on about Hillary Clinton’s e-mails and wound up assailing his own FBI. After his attacks on Nato in Brussels and his efforts to undermine Prime Minister Theresa May in the United Kingdom, Trump gave a performance that will get the lowest grades from practically everyone in the US who cares about foreign policy. Yes, it’s very tempting to just say that a fiasco-filled foreign trip won’t matter when it comes to domestic politics. And there’s every chance that by next week the European tour will have fallen out of the news. I’m not so sure. For one thing, the trip will further upset and unite Republicans who care about foreign policy, a group that includes Sen. John McCain and the pundit Bill Kristol. As Dan Drezner wrote last week, that’s not a large club with major constituency support within the party, and it certainly doesn’t have the clout to sway Trump. Still, for a president who was elected by such a narrow margin, any defections matter, as does any failure to add to his coalition. In addition, foreign policy conservatives have visibility that is disproportionate to their numbers. If they are mostly unified against Trump on both Nato and Russia, the president is going to be hit from all sides as long as this story is in the headlines. It could be even worse if, as some are urging, one or more administration figure resigns over the policy. That’s a recipe for at least a temporary drop in Trump’s approval ratings. After all, he is at the high end of the range he’s occupied since last March. There’s no reason to believe he couldn’t drop back to his previous level of 38 percent approval from 42 percent now. He wouldn’t suddenly lose all Republican backing, but he could shed a few of the independents and weak Republicans who are his least-strong supporters right now. If that happens, and lasts beyond August, then even a relatively small approval slump could have huge effects. As it is, Republicans are in big trouble in November— mainly because of decisions that were locked in when Trump was even less popular than he is now. As the elections analyst Sean Trende says, “If we get back into the 30s, the mega wave is back on.” Also, 40 percent approval is probably the rough dividing line that determines whether a president is likely to receive a serious nomination challenge. Yes, Trump’s approval among Republicans is very high and likely to stay that way.

That’s a recipe for at least a temporary drop in Trump’s approval ratings. After all, he is at the high end of the range he’s occupied since last March. There’s no reason to believe he couldn’t drop back to his previous level of 38 percent approval from 42 percent now. That could be misleading, however; in a primary challenge Republican voters may well like both (or more) Republican candidates. That means there’s no guarantee Trump would win the votes of those who now say they support him, including those who would certainly vote for him against a Democrat in 2020. More to the point: One or more Republicans capable of putting on a serious race may believe that those who say they support Trump could be open to persuasion. And if the president looks like a 2020 loser, Republican party actors may be very open to replacing him, and therefore wouldn’t discourage a serious contender from jumping in. What’s more, Trump’s foreign policy record gives a challenger an easy platform to run on, even if the president can point to (relative) peace and prosperity. Trump’s blunders would also give an opponent a builtin group of high-visibility Republicans—those primarily concerned about foreign policy and national security—who might not command any votes, but could at least give the challenge credibility. It’s possible that none of this will happen. We can be certain that there will be some other administration faux pas within the next few days (or even the next few hours), and if dissenting Republicans and the neutral media move on, this all may fade very quickly. Even if it draws prolonged focus, there’s no guarantee that Trump’s approval will dip. That would be especially true if the media covers this flap, as it has so many others, as if both sides have legitimate points. And there’s still a long time before November, let alone before a 2020 challenger would have to begin serious operations in Iowa and New Hampshire. But this president is very vulnerable to sudden public opinion shifts against him right now, and his actions could cause dips in approval. It’s hard not to wonder what is so important to Trump that he’s unable to even pretend to stand up to Putin.

on the contrary

A

mid the season of monsoon rains and typhoons, resulting in flash floods, horrendous traffic snarls, mounting deaths due to rat-induced Leptospirosis, and a host of other social and environmental problems that are all getting too big, the catchall solution, perhaps, is to build mini dams or catch basins by the hundreds of thousands all over the country, which can also generate millions of jobs.

n “Pails” in comparison? A symbolic example but stupid approach of how many Filipinos tend to solve problems through palliative measures is when the former Department of Transportation and Communications “solved the leaking roofs at the MRT/LRT stations years back by installing portable pails.” It is surprising why some Filipinos resort to mediocre or stupid solutions unlike how neighboring countries like Vietnam, Laos PDR and Kampuchea have managed to solve many of their problems, and even overtook us in many respects. And yet Filipinos are known to be creative and innovative. Unfortunately, these traits are suppressed and crippled under a culture of subservience, reinforced by a prevailing feudal culture of an

oligarchic authority, which is more pronounced in government bureaucracies. Public officials have developed unwanted hubris and feelings of entitlements when they are supposed to be “public servants, serving the public. Worse, work stops when these officials are not around for days or weeks as decisions are too centralized, while subordinates are not trained to think and make decisions. n Harvest rain and reap jobs? Back to our excessive water problem during the rainy season, one strategy to solve it while helping solve massive joblessness is to harvest rain by building hundreds of thousands of mini dams or catch basins all over the country. This also solves other problems. For one, it will boost agricultural

Bloomberg Opinion

D

emocr acies look to voters for validation of their economic policies. For Thailand’s military junta, the affirmation is coming from Beijing, bankers and the likes of Harley-Davidson Inc. Harley’s decision to build a new Thai factory to supply Southeast Asia should be reassuring to Prime Minister Prayuth Chan-ocha. The former army chief, who ousted a civilian government in a 2014 coup, has a $51-billion, five-year plan to mold the country’s eastern seaboard—already a large manufacturing hub—into an industrial power-

house. Two of the three provinces included in the so-called Eastern Economic Corridor are bike-manufacturing hubs for Kawasaki Heavy Industries Ltd., BMW AG, Volkswagen AG’s Ducati and Britain’s Triumph Motorcycles Ltd. It’s not clear whether Harley would join them, but the Thai government is bound to roll out the red carpet if it does. A high-profile win for the special zone would silence skeptics who question the wisdom of doubling down on airports, seaports, highspeed train links and other tradeoriented infrastructure at a time when a tariff war between the US and China is threatening to disrupt global supply chains.

productivity. This is an adrenalinshot that could reverse agriculture’s dismal performance the past few years. In the mountain regions, they can also serve as alternative sources of water for house use and drinking, provided it’s boiled or purified first. With these catch basins, surrounding areas can become fertile again for agriculture, vegetable gardening and mini forestry or orchard fruit tree farming. Moreover, they can also be packed with appropriate fish species, thus, literally teaching poor farmers how to fish. Here, you need experts with the experience in fishery technologies and community development. Catch basins are also good climate-change adaptation strategy as they capture excessive rainwater, preventing soil erosion and flashfloods, while solving dtought problems during the dry season. n Good deal like “New Deal”? This can be a good development strategy similar to US President Franklin D. Roosevelt’s “New Deal,” which is actually composed of many programs that bailed out America from the Great Depression of the 1930s, and even created four million jobs in a month’s time, says Nick Taylor, author of When FDR Put the Nation to Work. n Money is good, but Manny is right? We can actually do the same and trigger a construction frenzy that would complement the “Build,

Premiums receivable as admitted assets Dennis B. Funa

INSURANCE FORUM

S

ection 202 of the Amended Insurance Code enumerates the assets that may be allowed and admitted for insurance companies. The provision does not include Premiums Receivable as among those admitted assets. Nonetheless, Section 202 (k) recognizes that the insurance commissioner may classify “other assets” as admitted assets provided they are “readily realizable and available for the payment of losses and claims at values to be determined by him” and are “not inconsistent with the provisions of paragraph (a) to (j)” of Section 202. Premiums not yet actually received or collected, in other words those in arrears, were first considered as assets for nonlife companies in a circular letter dated December 22, 1978. For life companies it was circular letter dated November 20, 1981. Today, for life companies, the prevailing rule is provided in Circular Letter 11-91, dated May 28, 1991. For life, it is referred to as Net Premiums Due and Uncollected. The difference in treatment (between life and non-life) “lies perhaps in the fact that fire and casualty premiums past due often represent bona fide obligation on the part of the policyholder; whereas unpaid life premiums do not, and are, therefore, only ‘offset’ assets.” In the United States, it originated as a balance sheet item labeled “premiums in the hands of agents and in course of collection.” To illustrate

the significance of this item in the US, it was observed that in 1869, the total assets of insurance companies doing business in New York was reported at $229,000,000, of which $77,000,000 or 34 percent, was “premiums notes and due and deferred premiums.” In 1871 the New York Insurance Commission simply non-admitted these assets. Being a perennial question on whether to admit uncollected premiums, the nonlife business found the more acceptable 90-day premium cutoff solution. Under the 1978 circular, premiums from “general agents, not exceeding 90 days, backed up by a surety bond,” and “in an amount equal to at least 1/12 of the general agent’s premium volume for the preceding calendar year or P50,000, whichever is higher” may be considered as admitted assets. The 90-day period is

Harley, Trump and Thailand’s big trade gamble By Andy Mukherjee

Wednesday, July 18, 2018 A7

As far as Harley is concerned, by ditching the Trans-Pacific Partnership, US President Donald J. Trump has helped remove concerns around a hollowing out of the Thai automotive supply chain. Since Thailand wasn’t a part of the original 12-country grouping, Vietnam, already a good location for making lighter bikes, could have used the TPP to quickly climb up the value chain. Trump has unwittingly buttressed Thailand’s competitive advantage in heavy motorcycles. Bankers, both domestic and global, are gung-ho about financing the corridor; Chinese bidders are jostling with Japanese and European rivals to land its centerpiece:

a $6.75-billion high-speed rail link that would connect the two airports in Bangkok with U-Tapao airport in Rayong province, the main gateway to the eastern corridor. Yet the fate of the plan could hang in the balance depending on the outcome of the elections the junta says it intends to hold by February. Just because the government has passed a law to fast-track environmental impact studies and bypass city-planning restrictions for the corridor doesn’t mean a democratically elected government— especially of a tourism-dependent country like Thailand—won’t be forced to reconsider ecological costs afresh.

Build, Build” projects. This time, we will involve millions of people in a cash-for-work program. Agriculture Secretary Emmanuel “Manny” F. Piňol is right in proposing to divert the consumptive dole-outs of conditional cash transfers, now called Pantawid Pamilyang Pilipino Program (4Ps) to a cash for work in agriculture. n It’s joblessness, not crime, unrest. Learning from the lessons of other countries, President Duterte must focus more on jobs creation and not on simply eliminating drugs, terrorism and criminality because it is joblessness that is breeding all these social problems. IBON Facts and Figures Executive Director Jose Africa, citing official statistics, said: “In 2017 the economy grew by 6.7 percent, but it actually shed 663,000 jobs, making it the biggest contraction in employment in 20 years. While there is a resurgence in manufacturing, agriculture lost 803,000 jobs in 2017.” There is, therefore, logic in building those many mini dams in the countryside that will help “dam” the massive rural-to-urban migration and stem the huge brain drain and brawn-drain of overseas Filipino workers. Currently, about 6,000 Filipinos leave the country every day. If Duterte can only create those jobs, then can we can commend him for a “job well done.”

E-mail: mikealunan@yahoo.com

more regulations. It added a cap which “shall not exceed 25 percent of the premium volume net of commissions.” It also required direct agents, general agents and insurance brokers to file a surety bond. Premiums receivable covering policies beyond 90 days from inception which are outstanding at the end of the calendar year and collected the following year shall be considered as after-date transactions. CL 27-2006 would be superseded by Circular Letter 22-2007, dated November 8, 2007. This circular removed the 25-percent cap, as well as the surety bond requirement. It would revert back to rules under CL 24-94, removing the additional regulations introduced by CL 27-2006. Circular Letter 2014-17, dated May 15, 2014, the prevailing rule for nonlife, would reiterate this and expressly supersede CL 24-94. CL 2014-17 simply reiterates thus: “Premiums Receivable Account (direct agents, general agents and insurance brokers) covering policies within 90 days from inception as of the cut-off date, provided that these receivables are supported by an aging schedule showing details per policy; and copies of policies and other pertinent documents are made available to the examiners for verification, otherwise, unverified accounts will be disallowed.”

reckoned from the date of inception of the policy when the premium is first due. In other words, those premiums which are more than 90 days in arrears will not be admitted as assets. Only those which have been in arrears for 90 days or below may be admitted as assets. In 1994 in the hope of addressing the margin of solvency problems being faced by nonlife insurers, the Insurance Commission reiterated that Premiums Receivable may be considered as admitted assets in Circular Letter 24-94, dated December 12, 1994 (Admitted Assets). This admission would, in effect, increase the assets of insurers. The circular provided: “Premiums Receivable Account ([from] direct, agents, general agents and insurance brokers) covering policies within 90 days from inception as of the cut-off date, provided that these receivables are supported by an aging schedule showing details per policy; and copies of policies and other pertinent documents are made available to the examiners for verification, otherwise, unverified accounts will be disallowed.” It also made clear that: “no afterdate transaction shall be allowed.” This circular would be reiterated by Circular Letter 12-2005, dated April 12, 2005. Subsequently, CL 24-94 was superseded by Circular Letter 272006, dated June 28, 2006. CL 27-2006 essentially maintains the same policy of recognizing premiums receivable “covering policies within 90 days from inception” as admitted assets but added a few

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.

The other issue is regional inequity. Eastern Thai provinces produced less than half the output of Greater Bangkok in 1981; by 2013, they were ahead of the capital and surrounding areas. The region that needs to catch up is the landlocked northeast. For this, too, Thailand may have to rely on Beijing’s belt-and-road ambitions. The viability of a high-speed rail link connecting southern China with Bangkok—and passing through northeastern Thailand—is suspect. Lao PDR, which would connect China to Thailand, could struggle to deal with the debt it’s taking on for its share of the railway bounty. Extending the line to Malaysia and Singapore would also be tricky, given new

Malaysian Prime Minister Mahathir Mohamad’s move to halt $22 billion of Chinese-backed projects signed by his predecessor. However, if northeastern Thailand misses out on connectivity, it risks slipping further behind, especially if the remaking of the eastern seaboard proceeds apace. Thailand’s domestic politics pit the so-called Bangkok elite against poor farmers from the north and northeast. A Harley factory may give bragging rights, but it’s an unintended gift from Trump—and not a substitute for a popular endorsement. As the Malaysian U-turn has shown, before taking a big punt on trade and transport, it’s good to also ask the voters.

2nd Front Page BusinessMirror

A8 Wednesday, July 18, 2018

Fiscal impact of federalism weighed; tab to reach ₧55B

T

By Bernadette D. Nicolas @BNicolasBM & Butch Fernandez @butchfBM

HE country will have “some gains, some losses” in the assignment of taxing powers under the proposed draft federal constitution of the President’s Consultative Committee (Con-com), a fiscal expert said on Tuesday.

Dr. Rosario G. Manasan, senior research fellow at Philippine Institute for Development Studies (PIDS), told a joint Senate committee hearing on the proposal to amend the 1987 Constitution on Tuesday that one of the “losses” include transferring the power to collect and levy documentary stamp tax from the national government to the proposed federated regions. “Right now, it has a big value of P80 billion but the question in fact is this—is this something that we want to reduce prospectively? Because it is a bad tax from the perspective of encouraging business investments, capital market development because of the volume of trade,” Manasan said. She agreed, though, with the Con-com decision to give to the regional government the power to levy and collect road users’ tax (13.4 billion), vehicle registration fees (P684 million), and transport franchise tax (P104 million). At present these taxes are levied by the national government. However, she also stressed that

the draft constitution was silent about the local business tax, which amounts to P70 billion. Under the 1991 Local Government Code, local government units have the power to levy local business tax, among others. Manasan said the proposed draft constitution also suffered from “lack of clarity” in terms of its assignment of functional responsibilities since the provisions introduce ambiguity in expenditure assignment because there is no list of shared powers unlike other constitutions. “Article XII Section 4 talks of shared powers. Article XII Section 5 talks of reserved powers being given to the federal government but taken together you don’t know what are shared and what are reserved because there is no list of shared powers. In constitutions of other countries, when they talk of reserved powers, they have a list. India has a list. Malaysia has a list of shared powers,” she said. Manasan also questioned the basis for the Con-com’s provision that

the federated regions shall have a share of not less than 50 percent of all collected income taxes, excise taxes, value-added taxes and customs duties which shall be equally divided among them and automatically released. It is not c lear, she noted, whether the 50-percent share of federated regions in these top revenue sources of the government can ensure a balance between the financial requirements of functional assignments and the taxing power, given the ambiguity in expenditure assignment. “Is 50 percent the right amount? Why are we giving these transfers,” she said, as she noted that the reason for giving these transfers is the assignment of functions which goes with some of cost of delivery. “You want to give them transfers to fill in the gap but if you don’t know exactly what those functions are because there is ambiguity, then how do you know how much should the transfers be?” She thinks that it might not be a reasonable or fair way to equally divide the 50-percent share from the collections of top revenue sources among federated regions. “I mean, if you are thinking of service delivery, service delivery is tied to population so some [regions] will need more than their just equal share,” she said. Though she affirmed that the equalization fund is “very important,” she disagreed with the Con-com’s principle behind the design of the equalization fund, which is financial viability and economic sustainability. According to the proposed Charter, the equalization fund is equivalent to

3 percent of the annual General Appropriations Act.

Bureaucratic cost: P55B

Manasan noted that the additional bureaucratic cost of shifting to the federal system is now at least P55 billion—equivalent to the incremental revenue of the first package of the ta xreform law. Asked by Sen. Francis “Kiko” N. Pangilinan where this money will come from, she said the bottomline is it will come from taxpayers. This cost, she said, was computed based on the salaries of governors, vice governors, senators and their staff, legislators of regional governments and their staff and their operating expenses, and salaries of additional members of Judiciary at the regional government level, as well as operating expenses of their offices. Excluded from the cost estimates are the expenses for new buildings to be put up once the country shifts to a federal form of government, as well as the cost of regional operations of the departments which will prospectively be regionalized, and the additional members of House of Representatives.

No Senate consensus

MEANWHILE, senators, even after taking turns on Tuesday grilling members of the Palace-appointed Consultative Committee tasked to draft the proposed Federal Constitution, have yet to forge a consensus to fast-track passage of an enabling law that will pave the way for Charter changes favored by the Duterte administration. See “Federalism,” A2

DOST. . .

Continued from A1

Science Secretary Fortunato T. de la Peña pointed out there is enough knowledge and creativity among Filipinos. “They only need our support or facilities so they can make new designs and products.” The secretary hopes that this initiative, aside from providing domestic employment oppor tunities and attracting foreign investors, will create new product lines and new companies, promote import substitution and exports in the Asean region that will definitely boost the country’s GDP, therefore inclining with the socioeconomic agenda of President Duterte. “’Expanding our potentials for growth’ is, I think, the President’s keyword,” said de la Peña. “We cannot simply follow a linear trend of what we’re doing. We have to go exponential and this is one way we could drive and help the country’s economy.” “This is only the first [initiative under the Inclusive Innovation and Entrepreneurship Roadmapping],” Guevara said. The EPIIC is the initial project and could lead to further initiatives in medicine, agriculture, biotechnology, to name a few. Duterte, in a speech delivered by Trade Secretary Ramon M. Lopez, also said his administration fully committed to support the DOST initiatives through various programs, such as finally signing into law the Balik Scientist Act, and boosting the current budget of the department with a higher outlay in the 2018 General Appropriations Act (GAA) budget. From P20.77 billion to P21.2 billion this year, the budget will carry on programs, such as development in S&T regions; the development of the agricultural, aquatic and natural resources sector; and the Small Enterprises Technology Upgrading Program or SETUP. “The DOST’s initiative in transforming marginalized communities through S&T must be further pursued and supported through collaborations with local government units, other government agencies and relevant organizations,”said the President in his speech. Stephanie Tumampos

www.businessmirror.com.ph

Automotive sector’s H1 sales down 12.5%

T

HE automotive industry has seen its first semester sales go down by 12.5 percent, a decline it attributed to the ballooning inflation causing consumers to prioritize buying basic goods and services over big-ticket items like cars. A joint report from the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and the Truck Manufacturers Association reported they sold 29,350 units in June. It was 21.7 percent lower than the 37,479 units sold in the same month last year. This put total vehicle sales of the two car groups at 171,352 units for the first half of the year. It was 12.5 percent lower than the 195,772 units sold in the same semester of the previous year. Campi President Rommel R. Gutierrez said the double-digit contraction is understandable, given consumers are reportedly spending on basic goods and services rather than on big-ticket items. Inflation, which accelerated to 5.2 percent in June, made it less likely for the automobile industry to grow, he added. “This is a typical consumer behavior pattern when

Peza. . .

Continued from A1

others say we are just a government instrumentality,” she added. Under Republic Act 7916, or the Special Economic Zone Act of 1995, the Peza is attached to the DTI, with the trade chief heading the Peza Board. However, the Peza Board’s function will soon be superseded by the FIRB. The latter will approve tax incentives and will be chaired by the finance minister once the second CTRP package is approved. The amendment to the Peza law, however, will challenge the FIRB, as it will retain the power to grant tax perks to locators under the Peza Board, Plaza explained.

DTI chief says no

Even before the proposal was delivered to lawmakers, the plan to move the Peza to the OP is already facing resistance—from no other than its board chairman, Trade Secretary Ramon M. Lopez. In a text message to the BusinessMirror, Lopez gave the proposal a stern “nope.” “It has to be under [the] DTI because it concerns trade, exports and economic zones. If they have a different mandate, then I won’t object to transferring them,” Lopez said. Moreover, how can programs aimed at magnetizing investors to the country be coordinated if the Peza is relocated to the OP, Lopez asked. “It has to be under [the] DTI to be aligned with our investments promotion [pro grams],” he added. The trade chief argued the Peza can only become a GOCC if a new law is enacted giving it a wholly different Charter. He also said the DTI will block any proposal—whether through revising the Peza law or passing a new one—freeing the Peza from its clutches. “[The Peza] is governed by law and it will take a law to change that, and [the] DTI will oppose the proposal,” Lopez said.

‘Premature’

George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry (PCCI), agreed with Lopez, and said, “it is a bit premature to request the whole functions [of the Peza] be transferred to the OP.” He said the plan will only overload the OP, which currently oversees dozens of agencies.

economic condition is a bit gloomy due to less favorable economic indicators. However, we remain optimistic that our sales will recover in the coming months, and, hopefully, a sustained growth by the end of the year, ” Gutierrez said. The passenger car segment had the highest sales decline in June at 42.6 percent, followed by the Asian utility vehicle at 31.7 percent. Sales of commercial vehicles also fell by nearly 10 percent, while light commercial vehicles and light trucks dipped by 0.6 percent and 5.7 percent, respectively. On the other hand, purchases of trucks and buses expanded by 25 percent and 22.9 percent, accordingly. Toyota Motor Philippines Corp. remained to be the top dog of the industry with a market share of 42.7 percent, followed by Mitsubishi Motors Philippines Corp. at 19.5 percent. Nissan Philippines Inc., Ford Motor Co. Philippines Inc. and Honda Cars Philippines Inc. were the third, fourth and fifth largest market players with market shares of 7.72 percent, 7.3 percent and 7.01 percent, respectively.

Elijah Felice E. Rosales

“When it comes to investment and matters of trade, I think, as of now, it is under [the] DTI, and that is the most prudent in the sense that all of these data [about] investors, trade and everything, it is [the] DTI that has those information. Can you imagine the [duplication] that will occur if it is [under] the OP?” Barcelon told the BusinessMirror. He is also of the view that locators may abuse the tax incentives granted by the Peza if the agency will be autonomous from the proposed FIRB. “Again, if it is going to the OP—or even if they stand alone—at the end of the day, there is a huge implication on the incentives that will be given, [as] it will effect also the revenue side of the government,” Barcelon said in a mix of English and Filipino. “On the part of the government, it also needs the money for [its] coffers, for all the projects it has in mind. My suggestion is they [the Peza and the DTI] must be in sync, in tandem, on what to do [with the tax incentives],” Barcelon added. The PCCI chairman also thinks Peza executives are being “a bit overly aggressive” in trying to spare their agency from the coverage of CTRP’s second package. “Right now, we have an issue on check and balances [in the power to grant tax perks], what more if you expand? I definitely would not agree that [the Peza] be a separate branch under the OP,” Barcelon said.

Blame labor, not tax reforms

Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., said the Peza should not pin the blame on the second tax-reform measure for its plunging investment pledges. In an interview with the BusinessMirror, he pointed to the government’s labor reforms as the main factor for the reduced commitments to the Peza. Investments committed to the Peza were down by 55.86 percent in the first half of the year. Plaza said the only way to prevent pledges from falling further is to exempt the agency from the coverage of the CTRP’s second package. Potential investors are reportedly holding on to their money, while existing locators are thinking twice about expanding operations. The CTRP’s second package seeks to rationalize tax perks and reduce corporate income tax.