Businessmirror july 19, 2018

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Thursday, July 19, 2018 Vol. 13 No. 278

DOF ‘sin’ tax collection up 41.03% in Jan-June ₧112.5B E By Rea Cu

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What can we learn from the US-China trade war? Rene E. Ofreneo

to-June period. DO F A s s i s t a nt S e c r e t a r y Mark Dennis Y.C. Joven told reporters in an interview that the

The total excise tax collections from tobacco products and alcoholic drinks in the first half of 2018

laborem exercens

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increase in excise tax collections was due to the hike in cigarette purchases and alcohol consumption in the first six months of the year.

onald J. Trump, the unpredictable American leader, has rattled the stock markets of the world with his “trade wars” with China, the European Union, Mexico, Canada, Japan, South Korea, Russia and Iran. The wars with China, the “foe,” and with America’s traditional Western allies (EU, Canada and Mexico) have been reported widely by newspapers everywhere. Trump imposed a 25-percent tariff on $34 billion worth of Chinese exports, and followed this up with an announcement that higher tariffs shall also be imposed on $200 billion more Chinese goods. As to the EU, Canada and Mexico, the United States imposed a 25-percent tariff on steel, and 10 percent on aluminum.

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FITCH AFFIRMS COUNTRY’S INVESTMENT GRADE RATING BUT CITES ECONOMIC RISKS By Bianca Cuaresma @BcuaresmaBM

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NTERNATIONAL credit watcher Fitch Ratings retained the Philippines’s investment grade rating on Wednesday, as the country maintained its place as one of the “fastest-growing economies in the Asia-Pacific region.” At the same time, it flagged “risks” to the economy, topped by overheating, and warned that reversal in the reforms being pursued by the administration would have an adverse impact. In a statement on Wednesday, Fitch said it is keeping the Philippines’s existing investment grade rating at “BBB,” citing the country’s robust economic growth path and well-managed finances. The BBB is a notch above the minimum investment grade. The rating was assigned a “stable” outlook, which means that the investment grade rating of the Philippines is likely to remain unchanged within the next 12 to 18 months. The ratings agency forecasts local economic growth to pace at 6.8 percent for the next two years. While the forecast is below the government’s 7 percent-to-8 percent target range, Fitch said the Philippines will remain to be a bright spot in the region in the next few years. “We expect domestic demand to maintain a strong growth of 6.8 percent in both 2019 and 2020, which would maintain the Philippines’s place among the fastest-growing economies in the Asia-Pacific region,” Fitch said.

The agency believes the economy faces some overheating risks, evident from a recent rise in inflation, rapid credit growth and a widening trade deficit, although steps taken by the BSP to tighten monetary policy may contain these risks.”—Fitch In terms of price growth, Fitch sees inflation averaging at 4.4 percent for this year, well above the Bangko Sentral ng Pilipinas’s (BSP) 2 percent-to-4 percent target band for the year. “The one-off impact of the tax hikes is likely to dissipate in 2019, and therefore we expect average inflation to fall to around 3.8 percent in 2019,” Fitch said.

Econ chiefs gladdened Finance Secretary Carlos G. Dominguez III said the rating affirms their direction toward revamping the local tax system for the overall benefit of the country. Continued on A2

PESO exchange rates n US 53.4660

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@ReaCuBM

XCISE tax collections from tobacco products and alcoholic drinks rose by 41.03 percent to P112.46 billion in the first half, from P79.55 billion a year ago, according to the latest data released by the Department of Finance (DOF).

Based on DOF data, collections from “sin” products breached t he go v e r n me nt ’s t a r ge t of P77.54 billion for the January-

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Duterte joins PAL in new Airbus planes’ unveiling By Recto Mercene @rectomercene

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With the two PAL Airbus planes in background outside the huge white tent where the turnover rites he witnessed were being held, President Duterte receives a miniature PAL plane from PAL Board Director Mrs. Carmen K. Tan (from left), PAL Chairman and CEO Dr. Lucio Tan, PAL President and COO Dr. Jaime J. Bautista and Airbus General Manager for Asia Fabrice Espinosa. recto mercene

US sets 2019 PHL sugar quota at 136,201 MT By Jasper Emmanuel Y. Arcalas

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@jearcalas

HE Philippines again obtained the same sugar quota from the United States under a preferential trade scheme for fiscal year (FY) 2019, which will kick off in October. The Office of the US Trade Representative (USTR) on Tuesday announced the tariff-rate quota (TRQ ) allocations for the next fiscal year. The Philippines was given a sugar quota of 142,160 metric tons raw value (MTRV), or 136,201 MT commercial weight,

for FY 2019. “These allocations are based on each country’s historical shipments to the United States,” the USTR said in a statement on July 17. Countries authorized by the US to export sugar under the TRQ scheme may do so at lower duties. The Philippines was given the third-largest allocation of the total 1.117 million MTRV in-quota quantity of the TRQ , next to the Dominican Republic and Brazil, which received 185,335 MTRV and 152,691 MTRV, respectively. The Sugar Regulatory Administration (SRA) and Philippine Sugar

Millers Association (PSMA) vowed that the Philippines would be able to fill up the sugar quota granted by the US for the fourth consecutive fiscal year. Since FY 2015-2016, producers have been able to fill up the sugar quota allocated by Washington. In FY 2014-2015, the Philippines was able to export only half of its allocation to the US as El Niño slashed sugarcane output. In the current fiscal year, Serafica said the Philippines has shipped three boatloads of raw sugar amounting to 85,086.77 MT. See “Sugar,” A8

AAN ang eroplano? Akala ko andito? [Where’s the plane? I thought it was here?]” A perplexed and amused President Duterte asked before he began his speech during the inauguration of two brand-new Airbus planes of flag-carrier Philippine Airlines (PAL) on Tuesday. The audience, titillated by the President’s remarks, laughed and applauded. As if on cue, powerful lights outside the tent illuminated the A350-900XWB and the A321neo (new engine option). Sitting on the tarmac and being pelted by rain, the planes were visible behind Duterte’s opaque plastic doors to indicate the rollout of two new additions to PAL’s growing fleet. Addressing PAL Chairman and CEO Lucio Tan, Duterte said: “Sir, may God grant you a thousand years more of your life. Happy birthday, Mr. Tan. You are 83 years old and still a success story on all fronts.” The event was held inside a huge white tent of the Lufthansa Technik hangar in Villamor Base in Pasay City. Duterte thanked the two local airlines, PAL and Cebu Pacific, for providing the airplanes that evacuated distressed Filipino migrant workers from Kuwait last See “Duterte,” A8

n japan 0.4738 n UK 70.1367 n HK 6.8123 n CHINA 7.9758 n singapore 39.1807 n australia 39.4900 n EU 62.3574 n SAUDI arabia 14.2568

Source: BSP (18 July 2018 )

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A4 Thursday, July 19, 2018 A2

Speaker insists no-el needed for Cha-cha, but Drilon vows to bring issue to Court

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ITH the need for Congress to attend first to the proposed 2019 national budget, the October deadline for the filing of certificate of candidacy of reelectionist lawmakers, the Christmas break and the start of the campaign period by February next year, the Speaker of the House of Representatives reiterated on Wednesday there is no time for Congress to tackle the proposed Federal Charter.

Speaker Pantaleon D. Alvarez, in an interview, said Congress would need six to eight months to complete deliberations on the proposed Federal Charter and another six months to conduct an information drive before the draft Federal Constitution can be presented to the people for ratification. Alvarez, who is strongly pushing for the postponement of 2019 mid-term elections, said members of Congress should now decide on the no-election (no-el) issue before the filing of certificates of candidacy in October. “If we delay it further, we would not be able to do it until the end of the term of President [Rodrigo] Duterte,” he said. After the 2019 elections, he said President Duterte would have a little over two years remaining in his term, which is not enough to approve a new Charter and allow a proper transition period to the new federal government. He said unless Charter change for a federal form of government is done by 2019, it would be very difficult to achieve this goal. “We need to focus on this. So, for example, if we decide to cancel the elections in 2019, we would tackle first the NEP [Nationa l Ex penditure Prog ram] and then after that, we would immediately discuss that [Charter change]. We would not do any other thing except to discuss that [proposed Federal Charter],” Alvarez said.

Drilon disagrees

The Speaker’s view that a people’s initiative can suffice for no-el was disputed by the Senate minority leader, however. Sen. Franklin M. Drilon on Wednesday debunked Alvarez’s assertion that instead of Congress acting as Constituent Assembly (Con-ass), Charter changes can be done through the so-called people’s initiative provision in the 1987 Constitution. “That cannot be done through people’s initiative. Why? Because this involves a revision of the Constitution’s provision which fixed the terms of elected officials,” said Drilon. He added that changing the fixed terms is “a revision of the Constitution which cannot be done through a People’s Initiative referendum” that is intended “only for minor amendments.” Asserting that there is a process to be followed, Drilon vowed to “bring it up to the Supreme Court and question the resort through people’s initiative” to determine once and for all whether such can be allowed as a mode for amending term limits spelled out in the Constitution. “It is clear that their purpose in pushing Charter change is to scrap elections and extend the terms on incumbent elected officials,” Drilon pointed out.

‘Anti-federalism’

Meanwhile, Alvarez said “antifederalism forces” are capitalizing on unfounded fears against his proposal to scrap the midterm elections in

2019 to serve their goal of derailing the passage of a new Charter. The Speaker said the 2019 polls may be scrapped through a law passed by Congress. But if the Senate would not agree, Alvarez said another option is for supporters of federalism to launch a people’s initiative.

Desperation

Me anwhile , Baya n Mu na Chairman and former Rep. Neri Colmenares said the proposed people’s initiative for no election shows the desperation of politicians, especially those with their terms ending and those wanting a new lease on their political lives. “These politicians should stop undermining the will of the people in wanting to elect new government officials and junk those who are not serving the interest of the majority of their constituents,” said the former lawmaker. “With this no-el proposal and Charter change they want to hit multiple birds with two stones: they remain in power; they can further open Philippine economy to foreigners; they can divide the country into their own little kingdoms with the same ruling political dynasties and they can have all their allies appointed to powerful positions so that they can cover each others’ backs,” he added. Caloocan Rep. Edgar Erice said people’s initiative as a way of amending the 1987 Constitution “shall be a harder mode of attaining desired amendments.” “At this point in time, logistical and time constraints will not make it possible. Good luck to the proponents. But more important, the people wants to have an election next year. A no-el scenario will always be unpopular,” he added.

Poor region

Magdalo Rep. Gary Alejano echoed the worries of Duterte’s economic managers that federalism may set back economic progress and leave most regions lagging. “I agree with the assessment of the Neda [National Economic and Development Authority]. Regions whose economies are underdeveloped will be further marginalized. There is a huge imbalance when it comes to

economic status and availability of wealth and resources among regions in the country,” he said. Alejano said only a few regions are capable of sustaining their operations without support from the national government through the internal revenue allocation (IRA). He cited the case of Davao region, the home of the President and Speaker of the House. “Davao region contributes only 1 percent to the total BIR [Bureau of Internal Revenue] collections and yet it gets almost 5 percent in return in the form of IRA. Where will they get the remaining 4-percent deficit, considering that regions still have to contribute to national services like defense, foreign relations, debt servicing and others in the federal setup?” he said. “This is not to mention the other expenses that would be incurred in setting up a federal state, such as personal services, MOOE, capital outlay and others,” he added. Alejano also noted that it is a wrong perception that so-called imperial Manila takes most of the country’s wealth. “It is misleading to think and argue that imperial Manila is taking the lion’s share while other regions are left with crumbs. It is the other way around. Imperial Manila contributes around 82 [percent] to 84 percent to the total BIR collections but gets back only around 6 percent. The remaining 76 [percent] to 78 percent of its contribution is given to all other regions in the form of IRA,” he said. The opposition lawmaker said more time is needed to prepare the regions sufficiently for them to survive the demands of shifting to a federal form of government. “Bottom line, most of the regions in the country spend resources much more than what they can raise locally. We need to capacitate them first politically and economically for them to be self-reliant. This will take years,” Alejano said. Without a public clamor, Akbayan Rep. Tom S. Villarin said there is no urgency and importance of Charter change, saying forcing it will invite political instability and even drag down the economy. Jovee Marie N. dela Cruz and Butch Fernandez, with Mark Joseph Fernandez, Joahna Lei Casilao and Jose Oscar Magpusao

Bicam panel works overtime to wrap up Bangsamoro bill By Butch Fernandez @butchfBM

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ENATORS and congressmen sitting in a bicameral committee worked overtime Wednesday night to wrap up a reconciled version of the Bangsamoro Basic Law for final ratification when Congress reconvenes on Monday, after which the BBL will be submitted to Malacañang for signing into law by President Duterte. Citing the soon-to-be-enacted Basic Law adopting a parliamentary system in the envisioned Bangsamoro region for Muslim Mindanao, Senate Minority Leader Franklin M. Drilon asserted this is proof other major government reforms can be

carried out without shifting to a federal system of governance. Interviewed at the sidelines of the bicameral talks, Drilon, a former justice secretary, asserted the BBL can “withstand the test of constitutionality” even as he did not rule out the possibility that the BBL’s parliamentary setup could be questioned in the Supreme Court. He said early enactment of the BBL will prove “we do not need federalism or amending the Constitution in order to achieve the selfgovernance or the benefits of the federalism that are being presented to the people.” “Why? The BBL grants self-governance. The law provides ample powers to the Bangsomoro government,”

said Drilon, pointing out there are “55 enumerations of the powers of the Bangsamoro” that he caused to be adopted in the proposed law. Moreover, the Minority Leader cited the adoption of other key provisions on “fiscal autonomy and generation of resources” in the law. “At least P60 [billion] to P70 billion in block grants [will be] automatically released,” he added, noting that only the Bangsamoro government is empowered to decide “where to put the money.” Drilon noted the envisioned Bangsamoro government was, likewise, granted taxation powers, such as excise taxes and other tax impositions previously reserved to the national government.

“Clearly, we do not need federalism to achieve what we want to do,” Drilon declared, asserting that the Constitution “allows the alleged benefits of federalism to be done by legislation.” This could be done, he said, through proposed legislation that will be submitted to a national plebiscite. Once ratified in a plebiscite, Congress can no longer impose changes in its provision “unless the amendment is submitted to a plebiscite.” Drilon said the issue stirred public perception that Charter changes are being pushed to allow incumbent elected officials to stay in power, including those whose terms are set to expire by June 30, 2019, after which the President will be “empowered to appoint officers in charge.”

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116 Luzon bgrys still flooded, NDRRMC braces for ‘Inday’ By Rene Acosta @reneacostaBM

& Joel R. San Juan @jrsanjuan1573

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LTHOUGH flooding has subsided in some areas in Luzon, including some parts of Metro Manila, at least 116 barangays or areas remained under water on Wednesday, the National Disaster Risk Reduction and Management Council (NDRRMC) has reported. The NDRRMC reported the widespread flooding even as the government prepares for the effects of the earlier reported low pressure area that has already developed into a tropical depression and is now named “Inday.” State weather forecasters warned that Inday may aggravate the conditions in the 116 barangays in the provinces of Bataan, Zambales, Bulacan, Cavite, Occidental Mindoro and even in Metro Manila, which all remain inundated. The flooding was borne by the persistent southwest monsoon that brought incessant rains over the past days in Luzon, Western Visayas and even in some parts of Mindanao. The NDRRMC said that Metro Manila, Ilocos region, the Cordillera Administrative Region, Cagayan Valley, Central Luzon, Calabarzon and even provinces in Region 4B should expect monsoon rains to continue.

The flooding and the prevailing weather condition has forced at least 142 cities and municipalities in Central and Southern Luzon and even in the National Capital Region (NCR) to suspend classes in all levels. Based on the 8 a.m. report of the NDRRRMC, the flooding affected at least 2,401 families or 7, 949 persons in Regions 3, 4 and 5 and in the NCR. A total of 482 passengers were also stranded in various ports in Palawan, Camarines Sur, Batangas and in Occidental Mindoro. At least 23 houses were also partially damaged in Central Luzon, while four houses were totally damaged in Belison, Antique, due to a coastal erosion that was spawned by strong waves.

Court work suspended

T h e Su p re me C ou r t (S C ) on Wednesday ordered a suspension of work in all courts in the National Capital Judicial Region (NCJR) anew due to bad weather. In an advisory issued through the Public Information Office headed by lawyer Theodore Te, the SC said also covered by the suspension of work order were the SC, Sandiganbayan, Court of Appeals and Court of Tax Appeals. Acting Chief Justice Antonio T. Carpio, meanwhile, said the suspension of work in areas outside the NCJR is left to the discretion of their executive judges.

DOF ‘sin’ tax collection up 41.03% in Jan-June continued from a1

Of the total excise tax collections in the first six months of the year, the lion’s share came from tobacco products at P78.95 billion, while collections from alcoholic beverages accounted for P33.51 billion. Taxes from tobacco products during the period was 53.5 percent higher than the P51.43 billion collected in the first six months of 2017. The total excise taxes collected from alcoholic beverages was also 19.2 percent higher than the P28.11 billion recorded a year ago. Joven said some firms “front-loaded” the manufacture of cigarettes during the period to avoid a higher excise tax rate. This would mean that some firms produced more cigarettes in the first half to dodge the second round of the excise tax hike for tobacco products under the Tax Reform for Acceleration and Inclusion (TRAIN) law. Under the TRAIN, the cigarette excise tax rate was increased to P32.50 per pack, from P30 in the first half of the year. This was raised further to P35 per pack starting July. As for the higher excise tax collections from alcoholic beverages, Joven said the reduction in personalincome tax under TRAIN may have allowed consumers to purchase alcoholic drinks from their spare cash. “Tobacco was the most aggressive in terms of growth [in collections]. Analysis showed that there is some front-loading, that’s why there’s an increase in collections in the first half. For alcohol, collection is above target, which means there were extra funds arising from the implementation of TRAIN,” Joven said.

Perils of front-loading

Finance Secretary Carlos G. Dominguez III said companies that have front-loaded the production of tobacco products may incur additional costs. “You cannot keep cigarettes for long. There’s also the inventory carrying cost. If stored for long, the quality of cigarettes deteriorates because of the humidity even if it is encased in plastic,” Dominguez said. Sin products are certain goods deemed harmful to society. The excise taxes imposed on these products are collected by the Bureau of Internal Revenue and the Bureau of Customs. The TRAIN was signed into law by President Duterte in December 2017 and took effect in January. The law slashed PIT rates while implementing offsetting measures, such as increasing excise tax rates on tobacco and fuel, among others. Dominguez earlier said “substantial” PIT cuts under TRAIN—the first package under the Comprehensive Tax Reform Program—put an additional P12 billion in the pockets of taxpayers every month. Also, the free tuition in state universities and colleges allowed families to save P3.5 billion in school fees. The unconditional cash transfer gave beneficiaries a total of P2 billion a month. There is no provision under the TRAIN on increasing excise tax rates for alcoholic beverages. DOF data also showed that the total excise taxes collected by the government in the first half reached P152.72 bil lion, 71.42 percent higher than its 2017 collection of P89.09 billion.

Fitch affirms country’s investment grade rating but cites economic risks

“This is another recognition of the bold economic policy of the Duterte administration to fix the flawed tax system for the first time in over 20 years, and at the same time provide a steady revenue stream for its ‘Build, Build, Build’ infrastructure development initiative, as well as for social programs that would accelerate poverty reduction and grow the middle class,” Dominguez said in a comment. The recent tax overhaul—which

effectively lowered the income taxes of lower- and middle-income earners while raising taxes on key commodities like sweetened beverages and petroleum products—has come under fire for putting pressure on overall price growth. Latest inflation figures show inflation averaging at 4.3 percent in the first half of the year, with the latest number hitting 5.2 percent for June. BSP Governor Nestor A. Espenilla Jr., meanwhile, reiterated the BSP’s

commitment to maintain price stability in the country. “The BSP’s firm commitment to price stability conducive to a balanced and sustainable growth of the economy has allowed the Philippines to remain resilient amid external headwinds and to remain as one of the fastest-growing economies in the region,” Espenilla said.

Risks abound

Fitch, however, flagged risks for

the economy, particularly citing the possibility of an overheated economy. “The agency believes the economy faces some overheating risks, evident from a recent rise in inflation, rapid credit growth and a widening trade deficit, although steps taken by the Bangko Sentral ng Pilipinas to tighten monetary policy may contain these risks,” Fitch said. The credit watcher also said the Philippines continued to lag peers

on some structural metrics despite its strong GDP growth. “It is less developed on metrics such as GDP per capita, standards of human development and governance. The Philippines ranks in the 40th percentile on the World Bank’s latest governance indicators compared with the 57th percentile of the current ‘BBB’ median.” Fitch said. Fitch warned that a reversal of reforms or a departure from the existing policy framework, the dete-

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rioration in external balances and a potential instability in the financial system will likely bring down the rating of the country. Just a few months back, international ratings agency S&P Global ratings raised the Philippines’ ratings outlook to “positive”, citing the government’s effective fiscal program. A positive outlook means their current ‘BBB’ rating of the Philippines will likely be raised within the next 24 months.

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Editor: Vittorio V. Vitug • Thursday, July 19, 2018

Other side of TRAIN: DOF bares SME benefit from tax-reform law By Rea Cu

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@ReaCuBM

he Department of Finance (DOF) on Wednesday reported that small and medium enterprises (SMEs) benefited from tax breaks amounting to no less than P44.158 billion for the first six months of 2018 under the Tax Reform for Acceleration and Inclusion (TRAIN) law, as they are now covered by a higher value-added tax (VAT) threshold, and can now choose from two options to be able to pay lower income taxes.

In a report by the Bureau of Internal Revenue (BIR) to Finance Secretary Carlos G. Dominguez III at a recent executive committee meeting of the DOF, VAT collections mostly from its regional offices fell, but collections from the percentage tax and income tax increased from January to June this year. Finance officials said that the figures indicate that that many SMEs have reaped benefits from raising the VAT threshold from P1.9 million to P3 million under the TRAIN law. The finance chief explained that increases in the percentage- and income-tax collections indicate that SMEs and self-employed individuals that have not exceeded the VAT threshold are now opting to pay either the 8-percent income tax on gross sales or receipts and other non-operating income or the percentage tax and the graduated income-tax rates under the taxreform measure.

₧44.158B

Total tax breaks accorded to SMEs with the implementation of TRAIN law in the first six months of the year The BIR reported that total collections nationwide from the percentage tax rose to P44.158 billion during the first six months of the year, higher by 0.93 percent than the its goal of P43.744 billion and the 2017 collection of P38.241 billion for the same period. Based on preliminary data from the BIR, income tax collections rose to P500.585 billion for the first half of the year, higher by 2.2 percent compared to the 2017 level of P489.456 billion as well as the BIR’s goal of P450.375 billion. Total VAT collections for Jan-

Turnover of modern jeepneys boosts govt’s PUJ modernization program

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INO Motors Philippines (HMP) on Wed nesd ay turned over a total of 416 units of modern public-utility jeepneys (PUJs) to two different t ra nspor t cooperat ives f rom Taguig City, Pateros and Fort Bonifacio. Some 137 units were handed to the Taguig-Pateros-Fort Bonifacio Transport Service and Multipurpose Cooperative (TSMC), while the Taguig Transport Service Cooperative (TSC) received 279 units. Present during the ceremony were Department of Transportation Assistant Secretary Mark M. de Leon; Metro Manila Development Authority Director of Transport Terdy Taguinod; Office of Transportation Cooperatives Chairman Emmanuel Virtucio; Taguig City Mayor Maria Laarni Lopez Cayetano; Pateros-Fort Bonifacio TSMC Chairman Nonito Sinamban, Taguig TSC Chairman Freddie Hernandez, Land Transportation Franchising Regulatory Board-National Capital Region Director Atty. Zona Russet Tamayo, HMP President Hiroshi Aoki and HMP Chairman Vicente Mills Jr. HMP utilized the air-conditioned Class II Hino jeepney, wh ic h c a n accom mo d ate 23

uary to June this year reached P179.951 billion, expanding by 0.84 percent from the P178.435 billion recorded in 2017, but fell short of the BIR’s goal of P222.419 billion for the period. Meanwhile, VAT collections amounted to P63.217 billion in the BIR’s regional offices from January to June this year, lower by 13.1 percent, from last year’s P72.813 billion. Percentage-tax collections for the same period in the regions, however, rose by 48.9 percent to P18.079 billion, from P12.130 billion in 2017. The figure for the six-month period for percentage tax collections also exceeded the BIR’s goal of P14.803 billion for the same period. Income-tax collections in the regions also rose by 0.42 percent to P207.332 billion, from P206.454 billion in the same period in 2017. This also surpassed the BIR’s goal of P198.618 billion for the first half of the year. With Manuel T. Cayon

LRT 1’s Sucat extension project done in 2021 if…

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Some 416 units of modern Euro-4 compliant jeepneys were turned over to two transport cooperatives in ceremonies at the Philippine Army Club in Taguig City on Wednesday in ceremonies attended by key transportation and local government officials and executives of Hino Motors Philippines (HMP). In photo are (from left) Naoto Tago, Marubeni Philippines president; Taguig Transport General Manager Jovito Mayo; HMP Managing Officer Toshiaki Yasuda; HMP Chairman Vicente Mills Jr.; Taguig City Mayor Laarni “Lani” Cayetano; PaterosFort Bonifacio Transport Service and Multi-Purpose Cooperative Chairman Nonito Sinamban; Taguig Transport Service Cooperative Chairman Freddie Hernandez; Transportation Assistant Secretary Mark M. de Leon; Land Transportation Franchising Regulatory Board (LTFRB) National Capital Region Director Atty. Zona Russet Tamayo; HMP Philippines President Hiroshi Aoki and LTFRB Chief of Technical Division Joel Bolano. Roy Domingo

passengers with seatbelts and perimeter seats. Other advanced features of

the vehicle include a Beep Card payment system, GPS, CCTV and dash cam. Further, each unit

is fitted with a speed limiter system to ensure safety of the passengers. Randy S. Peregrino

he project to extend Light Railway Transit 1 (LRT 1) service to Sucat, Parañaque, could start serving commuters by the end of 2021 if work on site starts by February 2019, and the right-of-way (ROW) is free and clear by May 2019. “We are just waiting for the complete ROW and government approvals, especially on the delayed increase in our fares from around an average of P20 to around P25 depending on the distance traveled, which is basically the same as bus fares,” Juan Alfonso, president of the Light Rail Manila Corp. (LRMC), operator of LRT1, said in a news statement issued on Wednesday. He added: “The main difference is we can bring our riders from Baclaran to Sucat or vice versa in 15 minutes, rush hour or not, and even if the roads are flooded. We are traffic-free.” Alfonso said its contract with the government provided that the fares be increased automatically every two years starting in 2016 to allow LRMC to have the funds to properly maintain and operate the line. The railways operator wants the P5 fare increase to cover both the 2016 and 2018 adjustments. Without the increase, LRMC said, it might not be able to borrow from banks the funds needed to build the extension. “The banks want to make sure we can repay them, and the only way this can be attained is for us to be able to earn enough through higher fares,” Alfonso said.

What can we learn from the US-China trade war?

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Abaca yield grew modest 1.4 percent to 26,509.19 MT from January to May By Jasper Emmanuel Y. Arcalas

@jearcalas

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he country’s abaca output from January to May grew 1.4 percent to 26,509.19 metric tons, from 26,149 MT recorded a year ago, owing to higher production by Mindanao regions, latest Philippine Fiber Industry Development Authority (PhilFIDA) data showed. Data released by PhilFIDA to the media indicated that abaca production in five regions of Mindanao posted a double-digit growth, which offset the 28.9-percent decline in the output of Bicol region, the country’s top producer of the fiber. Abaca output in Bicol region fell to 7,496.55 MT, from the 10,548.875MT recorded volume in the fivemonth period of 2017. Due to the nearly 30-percent decline in production, the share in total output of the region dropped to 28.3 percent, from 40.3 percent last year. Total abaca output by Mindanao rose by more than a third to 14,550.625 MT, from the 10,834.125-MT recorded volume in the January-to-May period of 2017. Davao region was the top producer of abaca in Mindanao accounting for 20.7-percent share of the total output during the five-month period. Davao-based farmers produced 5,480.94 MT of abaca, which was 35.3 percent higher than the 4,050.56 MT recorded a year ago. Davao only accounted for 15.5 percent of the total output in January-to-May 2017 period. Northern Mindanao posted the highest year-on-year output after it registered a 65.8-percent expansion in output. Abaca production of Northern Mindanao during the five-month period reached 2,119.81 MT, from 1,278.5 MT recorded same time period last year. Other regions of Mindanao, such as Zamboanga Peninsula, posted a 60.6-percent year-on-year output growth, while abaca production in Soccsksargen expanded by 42.5 percent. Caraga abaca production grew by 37 percent year-on-year, while Autonomous Region in Muslim Mindanao output posted a 10-percent growth over last year’s volume. PhilFida data also showed that abaca production in all regions outside Mindanao posted declines from their year ago levels. Abaca output in Central Visayas registered the highest year-on-year decrease at 43.3 percent, with production settling at 69.85 MT. Abaca production in Southern Tagalog declined 27.1 percent, while output in Eastern Visayas and Western Visayas fell by 4.8 percent and 6.3 percent, respectively. Central Luzon recorded a 4.4-percent year-on-year reduction in abaca output during the five-month period. With Mauro Alfonso S. Mendoza

Continued from A1

Trump’s unilateral trade actions were angrily denounced by China and the US European partners. They chorused that America is ripping wide open the multilateral trade rules that the United States helped form through the establishment of the World Trade Organization (WTO). China has been countering the American tariff increases with its own tariff impositions on a number of American exports, primarily agricultural products. These trade wars have elicited fears that they can plunge the world once again into a global recession, if not a full-blown depression. Worse, these trade wars may also generate serious political conflicts that are similar to the impact of the tariff wars that preceded World War II. Apparent ly, Tr ump simply wants a quick solution to America’s gargantuan trade deficit. He wailed that China and America’s allies have made Uncle Sam their “piggy bank.” In 2017 the US trade deficit in goods with the world was $810 billion, or nearly a trillion dollars. Almost half of the deficit

was with China—for a whooping total of $375 billion. During his campaign for the American Presidency, Trump accused China of raping America by using unfair trade practices such as currency manipulation and technology piracy. The 2017 US trade deficits with its Western allies are also big—$151 billion with the European Community, $70 billion with Mexico and $17 billion with Canada. In the recent G-7 talks, Trump quarreled openly with America’s traditional partners. Apparently, Trump enjoys the support of his constituency in the Rust Belt of America. His main argument for the imposition of these high tariffs is the lack of “reciprocity” in trade. Example: Canada’s tariffs on US dairy products are over 275 percent and 80 percent on US wine! Another example: Europe’s tariffs on US cars are more than 10 percent, and yet US tariffs for European cars are only 2 percent. The lopsided tariff-rate arrangements are the same with China, which has higher tariff schedules compared to America. Under the most-favored-nation

rule of the WTO, the US cannot adjust its tariffs unilaterally just to offset the higher rates imposed by its trade partners. But Trump just did that with his trade wars. After the breakdown of the G-7 trade talks, Trump even proudly released the following tweet: “Fair trade is now to be called fool trade if it is not reciprocal. Not fair to the people of America! $800 billion trade deficit. Why should I, as president of the United State, allow countries to continue to make massive trade surpluses, as they have for decades, while our farmers, workers & taxpayers have such a big and unfair price to pay?” In a press interview, he thundered: “We’re like the piggy bank that everybody’s robbing—and that ends.” At this point, it is difficult to speculate on how these trade wars will end or will be resolved. The experts are divided as to whether China and others will eventually capitulate to America’s pressures and seek a negotiated compromise. There are also those who worry that more sinister events like wars are looming on the horizon.

But for the Philippines, there are several lessons that can be learned from these trade wars. First, globalization has not erased the fact that countries enter into trade agreements primarily to advance their respective national interests. As Ha-Joon Chang, who wrote the best-selling book Kicking Away the Ladder (2002), put it: capital has a “nationality.” And so are traded goods. Incidentally, because of national interest, China and Vietnam became members of the WTO only after they have completed several years of negotiations for the adjustment of their tariff schedules line by line, meaning after they have negotiated for the individual tariffs for thousands of goods. In the case of the Philippines, tariff negotiations with the WTO were easily concluded because tariff commitments were made for whole sectors or subsectors, such as manufacturing. This explains why we do not have tariff peaks of over 100 percent or so like what Canada and other developed countries have. Second, the US is able to adopt an aggressive unilateral position on

trade, partly because it is not fully dependent on external trade. It has a large and well-developed domestic market. Although America is a large trading nation, its dependence on external trade is much less compared to the interstate trade among the 50 federated states. Today, China is aping America by enhancing the development of China’s domestic market. Imagine the impact of intra-China trade involving a billion plus population. Similarly, the Philippines, with a population of 110 million and an archipelago of 7,000 plus islands, can develop a vibrant domestic market. However, for this to happen, the economic planners should stop looking only at the export market or strategizing industrial development by simply participating in the so-called global value chains of the multinationals. There should be some balancing of the domestic and export markets, and increased promotion of productive linkages between these two markets. Third, at the heart of the USChina trade conflict is the quarrel over China’s acquisition of technology. China today is position-

ing itself to become the world’s technology leader by 2030 or so. This is a dreadful scenario for some American leaders like Trump. Thus, Trump is questioning not only China’s trade tactics but also China’s alleged technology piracy. But is this not what the US in its long “protectionist” period (from its break from England in the late 18th century up to the 1930s), did. Under the doctrine of Alexander Hamilton, George Washington and successors prodigiously worked for the development of American industry that would be able to compete with Europe. Only after World War II when its manufacturing had “matured” that America started lowering its tariffs and pushing for global trade agreements on tariffs through the formation of the General Agreement on Trade and Tariffs, which became WTO in 1995. Now that the US is losing massively in the global trade war, it is returning to its protectionist past. It is even denouncing the very institutions it helped set up, such as the WTO and the North American Free Trade Agreement. “America First” is US national interest first.

A4

TheBroa

Business

Thursday, July 19, 2018

Japan offers railway lore to boost PH M By Lorenz S. Marasigan

ETRO Manila traffic. It is as much of a Filipino monster as the legendary aswang, tiyanak or tikbalang—except it is no myth. Filipinos live through this nightmare every day. They fear it; they live through it; they breathe it.

MRT Line 3 Taft Avenue station,which connects Metropoint Mall and LRT-1’s Edsa Station. ED DAVAD

JAPAN International Cooperation Agency Senior Representative Tetsuya Yamada fields questions from reporters of Aliw Media Group at a BusinessMirror Coffee Club forum. ALYSA SALEN

With approximately 9.5 million motor vehicles, cars on the road have formed a perpetual gridlock, adversely affecting not only travel time for motorists and commuters but also the country’s revenue and its overall air quality. Traveling in Metro Manila has taken a toll that guarantees commuters are on the road at least 66 minutes before getting anywhere else, according to a study conducted by the Boston Consulting Group (BCG), which ranked the Philippines as the third worst in terms of traffic congestion in Southeast Asia. The impact of traffic congestion is also being felt by the country’s coffers, with the Japan International Cooperation Agency (Jica) reporting an approximate P3.5-billion loss in opportunities and revenue every single day since 2017. More than losses from traffic congestion, health hazards have also been noted by the Department of Environment and Natural Resources, which reported that 80 percent of air pollution in the country was a result of the transport sector. Globally, 4.2 million people die from outside air pollution, according to the World Health Organization. While a report from the National Economic and Development Authority (Neda) showed that the number of Filipinos whose health was adversely affected due to exposure to particulate matter grew to 1 million in 2003 alone. The problem for the chronic pain that Filipinos suffer—both literally and figuratively—from traffic congestion is always seen to have come from poor infrastructure, poor urban planning and poor traffic management. However, experts view that the root cause of the problem is a mix of decades of underspending, miles of bureaucratic red tape, personal agenda and legal tussles.

Develop railway systems

ONE way to help alleviate the traffic mess in Metro Manila, according to Jica Senior Representative to the Philippines Tetsuya Yamada, is to develop railway systems in the metropolis. Train lines are seen as one of the most effective solutions to addressing the need for a mass transit system that is more efficient than buses, jeepneys, taxis and even Internet-based ridehailing apps. “In our view, transportation is a network service,” he said during a BusinessMirror Coffee Club forum recently. “Just like power situations or water services, they are a network—not really a pinpoint, point-to-point services.” This, however, remains true for Metro Manila. Currently, the metropolis has four railway lines servicing different corridors in the capital. Some stations of the four systems intersect, but moving from one line to another can be of a hassle, as none of them have a common station for ease of transfer. Based on the recent competitiveness report by the World Economic Forum, the Philippines ranked a dismal 97th out of 137 countries when it comes to infrastructure, 104th in road quality, 91st in railway infrastructure, and 124th in transport infrastructure. This comes in stark contrast to Jica’s reports of Manila’s dense population count. Despite numbering at 20,785 people per square kilometer (sq km), only a total 79 kilometers of rail track is currently in operation to serve this group. Other major cities like London, England, have a total of 590 km of railroad serving a 5,375 people/sq km density count. Similarly, New York City, despite having only 10,250 people per sq km, has an 890-km stretch of railroad.

A PASSENGER boards a train run by the Philippine National Railways, which began operations on November 24, 1892, as the Ferrocarril de Manila-Dagupan, during the Spanish colonial period. It operates a single line of track on Luzon. NONIE REYES

‘Strong backbone, feeder lines’

HOWEVER, this presents an opportunity for the Philippines to step up its game in the railway game, according to Yamada. The Philippines, while boasting of having the first overhead railway line in Southeast Asia, is still in the nascent stage of railway development, he pointed out. “Network should be developed in the future. But there’s always a starting point. And we are at the starting point,” he said. The good thing about having a starting point, he said, is that it allows the country to first build a “strong backbone.” “We all know that roads are congested. There is no more room for roads, for more cars in the future. So that means we have to stretch the living areas and the working areas, north and south of Metro Manila,” he said. “We need

strong transportation backbone running north and south—that’s the whole concept.” Yamada was referring to the Jica-financed North South Commuter Railway project, a roughly P136.3-billion railway initiative that will create a 38-km commuter line that runs from Malolos, Bulacan, to Tutuban, Manila. The objective of the said project is to reduce travel time between the two areas from over 1.5 hours to only 35 minutes. It is expected to serve more than 300,000 passengers per day, and is expected to be fully operational in 2022. “Even people outside Metro Manila can agree with the necessity of building a railway transportation system in the national capital, Metro Manila area,” Yamada said. Japan is extending a loan facility of $2 billion to finance the project, the largest loan commitment that Jica has ever made.

Currently, the Department of Transportation (DOTr) is in the process of finalizing the bidding for the construction of the said railway system. Bids are expected to be placed in August. Jica is also assisting the Philippine government in the creation of the supplemental feasibility study and detailed engineering and design of the second phase of the North South Commuter Railway, which aims to connect Malolos to Clark, and Tutuban to Calamba. Complementing this backbone, according to Yamada, is the proposed Metro Manila Subway system, which Japan is also funding through an initial tranche of loan amounting to P49.5 billion. The whole project costs about P378.6 billion. The first phase of the whole project involves the construction of a 25-km underground train line that connects Mindanao Avenue in

Quezon City to the Food Terminal Inc. compound in Taguig City. According to Yamada, his group is currently studying the possibility of extending the first phase of the subway project to the Ninoy Aquino International Airport (Naia), as requested by the Philippine government. “Our plan is to complete everything by 2025,” he said. But aside from having a strong backbone, the railway network in the Philippines should also include feeder lines, which are basically peripheral routes that connect remote areas that are carrying heavy traffic. Yamada cited the Metro Rail Transit (MRT) Line 7 as a good example of a feeder line. Targeted to be finished by 2019, the 2.8-km rail-transit system is envisioned to operate 108 rail cars in a three-car train configuration with a daily passenger

aderLook

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A5

HL’s battle vs. monstrous traffic woes or Vietnam, they are actually lower when it comes to national level of income but they are moving ahead of us—building subway systems. In that sense, I think we were a bit late to start.” Still, he quickly added, it’s best to start somewhere. BCG’s report also finds that despite the ambitious plans to remedy the congestion issue through increasing rail-based public transport capacity, estimating “that the added capacity of rail transport alone will not be sufficient to meet growth in transport demand by 2022.”

Integrated transport system

AND while it is a little too late to develop railway infrastructure, Yamada believes that the current administration’s initiatives are “better than nothing.” However, these are only the initial batch of railways that should be developed by the Philippine government in the next few decades. There are more train lines that need to be constructed in order to really achieve a better, more efficient transportation system in the Philippines. “Basically, in order for people to rely more on public transportation, instead of using cars, we need a more comfortable network system where, basically, you can walk to the station. Or you can walk to the bus or para-train system to go to the station. So that’s the ideal situation of the public transportation system that needs to be further developed,” he said. “So it shouldn’t be only the train system that serves all the passengers, but what we need [are] more integrated, comprehensive routes and franchising system that need to be rationalized,” he said. Included in the government’s plan for a more efficient transport system is the modernization of the public utility vehicles in the Philippines. In the said program, routes for road transport modes will be rationalized and further developed, and old, dilapidated models of vehicles will be replaced by new ones.

KYOTO Station, Japan’s second-largest station building. SEAN PAVONE | DREAMSTIME.COM

Railway education

SHINKANSEN trains at Shin-Osaka Station in Japan. Colloquially known in English as bullet trains, they can reach speeds up to 320 kph. LEONID ANDRONOV | DREAMSTIME.COM

capacity ranging from 448,000 to 850,000. It will have four stations, starting with the North Avenue Station on Epifanio de los Santos Avenue, passing through Commonwealth Avenue, Regalado Avenue and Quirino Highway, up to the proposed Intermodal Transport Terminal in San Jose del Monte City, Bulacan. The said railway infrastructure is being constructed by a unit of San Miguel Corp. “I think when it comes to feeder lines, private bodies can come in to serve certain areas or certain passenger segments,” Yamada noted.

‘A little too late‘

WHILE these new projects paint a rosy picture for the future of the Philippines, some critics are skeptical of the progress these projects assume to deliver. Prof. Jose Regin F. Regidor from the University of the Philip-

pines-Diliman’s National Center for Transportation Studies pointed out that the Philippines is playing catch-up with its neighbors in terms of railway development. “We should have built a network starting back in the 1980s. The original network plans for subways, for example, were in the mid-’70s yet the government then opted for light rail, thus Line 1. Events during the 1980s and 1990s made sure we didn’t get a second line, Line 2 until the late 1990s,” he said in an e-mail to the BusinessMirror. Backtracking through past policies concerning the country’s railway confirms Regidor’s findings. Following the Philippine National Railways’ (PNR) success and continued use after the Second World War, three comprehensive railway plans were created and proposed, but were eventually dismissed when the government

decided to settle just for the Light Rail Transit (LRT) Lines 1 and 2, and the MRT Line 3, through an executive order and a republic act. These abandoned plans were the Urban Transport Study for Manila Metropolitan Area (UTSMMA) in 1973; the Metro Manila Urban Transport and Land Use Plan Study (MMETROPLAN) in 1977; and the Metro Manila Urban Transportation Integration Study (MMUTIS) in 1999. The UTSMMA recommended five rail rapid transit lines with a combined stretch of 141.87 km of railway. It would have connected areas like Construction Hill and Talon; Novaliches and Cainta; Marikina and Zapote; Meycauayan and Manila; and provided passage along C4. This plan was supported by the Overseas Technical Cooperation Agency (Otca), the precursor of today’s Jica. The MMETROPLAN opted for a network of five light rail transit lines, 36.76 km long, which would

have superimposed the current roadwork in Metro Manila. The country currently follows a “bastardized” version of the MMUTIS, which was supported by Jica back in 1999. Only three out of the nine lines proposed in the study were followed in its implementation, thus forming only a brief stretch of 74.5 km of railway; with only 43 percent, or 61 of the original 142 proposed stations. The study “What if Metro Manila Developed a Comprehensive Rail Transit Network?” conducted by Regidor and his colleagues found that full implementation of the MMUTIS plan would have reaped the “most benefits” to the country, alleviating the major problem of exaggerated travel time. Even Yamada conceded the late timing: “I would agree. It was too late. If you look at the other countries at the same level in terms of the national income such as Indonesia

TO complement the hard infrastructure being built to address traffic congestion and the country’s stunted growth in public transportation, Jica plans to put up a Philippine Railway Institute (PRI), a body that will act both as a training institution and a licensing agency, when it comes to railway management. The project began in April and will officially end in March 2023. “The objective of establishing this Philippine Railway Institute is basically to avoid the same mistakes that happened all the time for railway systems in this country,” explained Yamada. The institute is also the government’s response to past mistakes in terms of the poor management and maintenance that led to the deterioration of facilities like the MRT 3, which is deemed as the most congested of all three overhead railway lines. The said train system is also marred by legal cases, procurement hullabaloos and corruption issues. It has also figured in an uncoupling incident that caused one of the train cars to ram against its barricade in Pasay City, causing injuries to several passengers. “I believe the major, major issues related to the unlucky event are lack of proper maintenance and lack of people capable of doing that. So that’s a whole objective of establishing this Philippine Railway Institute in terms of building the capacity that is involved in the future railway business in the country,” Yamada said. The Japanese agency will be developing curriculum and teaching materials to train Filipinos in handling train systems. “We’re going to help the Philippines develop the laws and regulations and safety standards. And, based on that, we will build training material. And we’re going to develop training programs and

facilities. This not only serves the railway business employees in the public sector, but anyone involved in the railway business, including the private sector, can come in to be trained under this PRI,” Yamada said.

Policies, laws

HOWEVER, in order to help implement all these hard infrastructure development projects and education programs, the government must also implement laws and policies pertaining to railway management. “Basically, we have railway laws in Japan so that all the railway operators should follow some sort of norms and standards, in terms of safety and business efficiency and benefit of the passengers that use the train system,” Yamada said. He said the Japanese government is keen on helping the Philippine government develop laws and policies that are targeted for the local market. “What we are trying to do is, first of all, introduce the Japanese system to show to Filipino counterparts to help understand what kind of laws are there in Japan. And we will discuss further what needs to be introduced in this country. Basically, we have very different conditions,” Yamada said.

Separate operator, regulator

SPECIFICALLY, a policy on the separation of operator and regulatory functions should be implemented in the Philippines, he noted. Currently, the DOTr plays the role of railway operator and regulator at the same time through the Light Rail Transit Authority. Only the LRT 1 is privately operated. “In Japan’s case, it’s totally different systems. We have various railway operators, but regulation is taken care of by the Ministry of Land, Infrastructure, Transport and Tourism—they don’t run the train system. Some train systems are run by public sectors, but not the ministry itself,” he said. “So that’s one of the things that we’re thinking about introducing.”

Sustainability

WITH all these plans now up and running, and assistance from foreign groups pouring in, the Philippines is on the right track to attaining a better railway and overall transportation sector. However, for Rene S. Santiago, president of Bellwether Advisory Inc. and longtime critic of the country’s transportation system, plans for infrastructure development and policies are things that need continuation. “The solutions to traffic congestion—there’s nothing new there. The newness is the people coming in. They are always new. They’re always groping and trying to learn. When they see something from the past, something that happened in the previous administration, they tend to dismiss it—just like that,” Santiago said in a phone interview. Yamada agreed, saying that sustainability is the way to go, as politicizing projects will not benefit the common Filipino. “We need support from the public. We need continuation. We cannot stop by 2022. Everyone wants it. Everyone wants good transportation network. Everyone wants to ride the train. Everyone wants to be at the work place faster than what we are currently experiencing right now. And we all need to support that idea,” he said. Yamada added: “I think that’s the top priority issue for the entire Philippines as an administration—which is basically traffic and decongesting Metro Manila; preventing the same situation to happen in the future for some other parts of the country.” But for as long as these infrastructure projects are not yet completed and policies remain unchanged or improved, traffic congestion will continue to haunt the common Juan like the monsters from Filipino folklore. With additional report by Wynzyleen L. Lee, Intern

A6 Thursday, July 19, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror

www.businessmirror.com.ph

editorial

Flag-bearers for free trade

J

APAN and the European Union on Tuesday sent a strong message against protectionism when they signed a landmark deal that will eliminate nearly all tariffs on products they trade. Described as the largest bilateral trade deal ever, the pact eliminates about 99 percent of the tariffs on Japanese goods sold to the EU and about 94 percent of the tariffs on European exports to Japan. As the United States is turning to protectionism under President Donald J. Trump, the two United States allies signed a trade deal to bolster globalization. The pact should send a clear message to Trump, who ignited a trade war with China and some US allies, that other countries will continue to pursue trade liberalization even without the US. Japanese Prime Minister Shinzo Abe said “the EU and Japan showed an undeterred determination to lead the world as flag-bearers for free trade.” Apart from its 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. “The document we signed today is much more than a trade agreement,” said European Commission President JeanClaude Juncker. “What we’re saying is that we believe in open, fair and rules-based trade. What we are saying is that a trade agreement is not a zero-sum game, but a win-win for the involved parties.” Donald Tusk, president of the European Council, said the world doesn’t need to go a hundred years back in time. “Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case,” he said. As far as the Philippines is concerned, the Japan-EU trade deal is an important development worth observing. In particular, we want to see how it will help grow the economies of the participating countries by eliminating tariffs and other barriers that can inhibit trade. As things stand, the Philippines could be the most at risk nation in Southeast Asia from the worsening trade conflict between the US and China. For example, 17 percent of Philippine exports are part of China’s value chain—goods that serve as inputs to China’s exports. Thus, the need to strengthen and enhance our trade and other economic activities with other trading partners. The Philippines can’t afford to see itself hostage to a trade war between the world’s economic giants. We need to trade more with countries with no barriers. One good way to go is to follow the Japan-EU trade deal and look for opportunities in markets that promote the free flow of trade and investment. Since 2005

BusinessMirror A broader look at today’s business

Stock market 001 John Mangun

OUTSIDE THE BOX

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retend for a moment that you do not understand anything about the stock market. Most of us do not have to pretend, and that include many who are investing in the stock market. When asked for a book about the stock market, I refer people to the Internet, that ultimate source of knowledge. But the truth is, I am too lazy to find a book that might meet their needs. Plus, for basic information, books are all the same. The web site investopedia.com is a great source of basic information. For 18 months, I wrote and edited hundreds of the definitions on the site. So what is the stock market? “The stock market refers to the collection of exchanges where the trading of equities or stocks of publicly held companies takes place. It provides companies with access to

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capital in exchange for giving investors a slice of ownership.” Further, “It lets investors participate in the financial achievements of the companies, making money through dividends. Investors also make a profit by selling appreciated stocks. This is known as a capital gain.” But that is like saying that the “wet market” is a place to buy food. It seems to make sense but it is not accurate. A wet market is where you buy the raw materials to make a meal unless you are into eating uncooked pork. How can we more easily understand this “make a profit” concept?

Stock market investing is not like buying a lotto ticket in that the profit outcome is not determined by chance and you can increase your winning odds in the market just like you can at the casino. The stock market is not about buying the stock of a company that was incorporated on the same date you were born. It is not like trying to figure out if “red” is going to come up again on the roulette wheel after seven times in a row. As I have said many times, I became interested in the stock market because stock prices were in the newspaper right after the horse racing results. For me, what I saw was that the stock market was like picking the winning horse. How do you pick a stock market winner? Stock market “experts” want to make this seem as difficult as possible? To win the race, the horse must run faster than the rest. Therefore, we have to figure out what factors will make one horse stand out. The best way to do that is to look at the horse’s “track record” of performance against horses similar in class to what is running today.

A

s a significant contributor to the country’s economy, the multibillion-peso Philippine maritime industry must adapt to the changing times and keep up with the latest innovations and modern technologies. Three major maritime sectors that stand to benefit from modernization, automation and other evolving technologies are shipping, shipbuilding and ship repair and maritime manpower. Ports and harbors and container and freight companies whose work and services are interrelated to the three sectors must also implement parallel programs for a more harmonious and productive collaboration. Recent development is quiet encouraging as shipbuilders constructed massive ships that are of newer models and designs, automation and containerization for fast, safe and timely loading of goods and passengers. The Philippines is one of the top 10 largest shipbuilding countries in the world, employing over 46,000 highly skilled workers, according to a recent working paper published by the Ateneo School of Government, “Growing the Philippine Blue Economy: Policy Challenges and Opportunities.”

What remains to be the bane of the industry is, however, the presence of a considerable number of smaller vessels that operate in the roll-on/roll-off terminal system using secondhand class cargo ships that were converted into passenger-and-cargo vessels. Their safety and security features are sometimes compromised as they are used for purposes other than what they were originally built for. Between 2009 and 2014, the Maritime Industry Authority has recorded about 20 major maritime accidents involving passenger-carrying ships. Of this number, 19 are vessels imported as secondhand ships and only one was built locally. Marina and other relevant agencies, including financial institutions, created a financing program to support and encourage the construction of new ships at local shipyards. The Marina, the country’s regulatory and supervisory agency, is mandated by law to address ship modernization

program with the safety and security of millions of people in mind as they rely on interisland passenger shipping lines to take them from one island to another and transport goods to various ports in the country to sustain the nation’s trade and economic growth. The participating sectors will have access to the subsidy to assist shipping companies in replenishing their fleet with modern vessels to help the local shipbuilding business flourish rapidly. The world’s sophisticated shipping companies have automated most, if not all, of their processes, in both their offshore and onshore operations. They are able to do so because they can afford to buy modern and sophisticated technology and infrastructure, like satellite communication facilities. For fast and accurate third-party certification and verification of transactions, some of them are now using blockchain technology. With blockchain, officers and crewmembers can communicate faster with one another and easily sort out tedious administrative documentation work in the shipping industry. Although a more sophisticated and faster Internet access may not be available in the country right now, various sectors in the maritime industry can avail themselves with adequate software and hardware systems to automate their processes, including online certification, verification procedures and other simple transactions. Training and education programs are now available through e-learning and simulation courses.

For a stock price to go up, other people—many other people—must buy the stock and we have to figure out what issue they are buying. That is much easier than you think. The performance of a stock is found on its price chart, which is easily obtainable on the Internet. Universal Robina Corp., the maker of C2 drink, went from P8.10 a share in January 2010 to P230 in March 2015. Lots of people were buying. The “why” they were buying is not important to you. Even if you waited until the price was P100 in 2013, you still could have doubled your money. Currently, the price is P130 but you also could have easily seen people stop buying at P230 because the price started going down. Making money in the stock market is relatively easy even for the beginner. There is only one rule. Buy when the price is going up and sell when the price is going down. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

The latest breakthroughs in the maritime industry is in green shipping, a subject that included activities sponsored by the International Maritime Organization, Global Maritime Energy Efficiency Partnership project with the United Nations Development Program and the Global Environment Facility, an IMO-sponsored workshop participated in by 30 maritime educators. The workshop, the second of its kind in Asia, is designed to equip those in the industry with knowledge on ship-energy efficiency. For example, trained Filipino crews are expected to have the necessary knowledge to reduce fuel consumption and greenhouse-gas emissions. Looking at geography and demography, the Philippines is, in fact, a maritime country with 52 natural harbors scattered in over 7,107 islands and a land area of more than 300,000 square kilometers. Strategically, the country is propitiously located at the center of the globe, six to 18 degrees above the equator between the South China Sea and the Pacific Ocean. It’s only in this country where these two great oceans merge at Escarpada Point, off the coast of Santa Ana town in Cagayan province, an ideal getaway to China, Japan, South Korea and the rest of world. Because of this, our policy-makers must put a high priority on the maritime industry, bearing in mind that the Philippines is archipelagic and maritime, not an agricultural country.

To reach the writer, e-mail cecilio.arillo @gmail.com.

Opinion BusinessMirror

www.businessmirror.com.ph

Apostles in communion

Tempest at the Medical City

Msgr. Sabino A. Vengco Jr.

Alálaong Bagá

Val A. Villanueva

Businesswise

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nfortunate. This is the only word that comes to mind when I try to digest what’s going on at The Medical City (TMC), one of the biggest and most revered health-care institutions in the country today. It’s surreal to see the unfolding corporate infighting in an organization primarily built to heal the sick. At the heart of the intramurals is its director and treasurer, Jose Xavier B. Gonzales and his foreign partners who have been accused of contriving a hostile takeover of Philippine Services Inc. (PSI) the company that operates TMC. The accuser is Gonzales’s uncle, former Health Secretary Dr. Alfred R.A. Bengzon, who is TMC’s president and chief executive officer. The foreign stakeholders are Viva Holdings (Philippines) Pte. Ltd., Fountel Corp., Felicitas Antoinette Inc. and Viva Healthcare Ltd. In a criminal complaint lodged before the Securities and Exchange Commission, Bengzon accused Gonzales and his foreign backers of acquiring their PSI shares illegally. To date, Bengzon claims, Gonzales and his foreign partners have wormed themselves into the company for a combined 54-percent stake in a move that is in violation of the securities law. Based on Bengzon’s pleadings, it appears that Gonzales and his partners have stealthily acquired shares of stocks from other hospital stakeholders in concert, thus circumventing corporate regulations that would have obliged them to make a “tender offer” to acquire other owners’ shares, a prerequisite that publicly listed corporations must comply with. According to a Supreme Court ruling, companies are deemed “public” once their assets have hit P50 million or more, and when their holders reach 200, with at least 200 of them each owning a minimum of 100 of equity securities. Bengzon claimed that the board was not aware that Gonzales and his foreign partners have been working together since the time they started buying into PSI in 2013. The “silent” takeover only became apparent when Ayala Corp. offered to buy into the company as a minority shareholder. Ayala, in the process of due diligence, uncovered the “unholy alliance” and promptly asked PSI of its veracity. Ayala was willing to infuse P2 billion in fresh capital, two times PSI’s book value. The discovery must have jolted the mild-mannered Bengzon, who had been grooming his nephew as his heir. Inside sources told BusinessWise that the former health secretary has had several one-onone, heart-to-heart meetings with his nephew. In one instance Gonzales acceded to selling his shares in the company, only to back out when his foreign partners threatened to throw the book at him. It was then that Bengzon discovered that

Gonzales has crossed the line because the money that the latter used to buy his PSI shares was loaned to him by his foreign partners. In the battle to win the hearts of PSI stakeholders, Gonzales launched a campaign painting himself as a savior, coming to the aid of the company when it was in dire financial straits. He also lambasted PSI’s foray into Guam, picturing it as a white elephant, which has put a strain on the company’s coffers. Inside sources, however, are saying that the Guam project is Gonzales’s own idea, which he left to Harvardeducated Margaret Bengzon, head of TMC’s Strategic Services Group to manage. She is the Guam Regional Medical City’s (GRMC) chairman and CEO. Based on company records obtained by BusinessWise, GMRC did struggle financially at the start, but slowly rose to profitability. Recording a net revenue of more than P100 million last year, from only P34.8 million the year before, GMRC does not seem to be a losing venture, from where I’m sitting. Its total comprehensive income stood at P76 million (75.9 percent revenue) last year, up from P21.7 million (-62.5 percent revenue). PSI, on the other hand, posted a net revenue of P16.3 billion in 2017, up from P11.5 billion in 2016. Things came to a head recently when TMC chairman, Dr. Augusto P. Sarmiento, sided with Gonzales, throwing under the bus his decadeslong friendship and professional affinity with Bengzon. Sarmiento said that he’s “deeply disturbed,” and that Bengzon was “not upholding good corporate governance” and was “jeopardizing” the hospital’s future. He scoffed at Bengzon’s claim that he was not aware of what Gonzales and his foreign partners were doing in buoying up TMC’s financial standing. Inside sources, however, told BusinessWise that Sarmiento’s claims are not backed up by the company’s board minutes. This means that no one on the board was apprised of the fact that Gonzales and his foreign partners were working as one entity to take over PSI. If the board minutes from 2013 to date could not support what Sarmiento was claiming, would it be farfetched to think that he knew all along about what Gonzales and his foreign partners were doing? There are those who are wondering if Sarmiento was, in fact, complicit in Gonzales’s boardroom maneuvers. For comments and suggestions, e-mail me at mvala.v@gmail.com.

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hose sent by Jesus to proclaim the Gospel of salvation to all peoples need to return to Him and have bonding together in His company. Jesus is the Alpha and the Omega of the entire mission to teach the world the Word of God.

In community with each other Sent out like missionary prophets to proclaim to all the reign of God, Jesus’ disciples themselves experienced the transforming signs of the time of salvation in their activities against the dominion of evil, in the exorcisms they performed and in the cures they brought about. We saw them sent out by Jesus two by two. If they proceeded one by one, would they not have doubled the area covered and doubled the people met and the work done? Not really. Alone, each one would have been more tired, and empty, and not much enriched spiritually. As they watched each other perform wonders in the name of

Jesus, as they listened to each other echo what they have heard from their teacher, it must have been a deepening process for each one. Working in community, disciples reflect to each other the image of the master. This needed immersion in each other’s company must have been planned. As participants in Jesus’ prophetic work, formation is ongoing in community with Him and with one another. Literally after the apostles have said and done all with the power and words Jesus entrusted to them, they needed to return to Him. When, after a while, they all reported in as must have been the agreement, the crisp and clear instruction of Jesus

Bloomberg Opinion

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t’s the go-to measure of an economy. But sometimes GDP doesn’t tell you much. A glance at China’s second-quarter GDP, released on Monday, might suggest things are holding up pretty well in the world’s second-largest economy. The 6.7percent increase from a year ago—just barely below the prior period—points to a China that weathered the early skirmishes of a trade war, continued its transition to a consumption-driven economy and isn’t suffering too much from a state campaign to rein in debt. Fair enough, as far as it goes. But the

quarterly data doesn’t convey that activity slowed significantly in June, the last month of the period under review. (This isn’t a comment on whether China’s figures are cooked, though there are skeptics who point to comments WikiLeaks attributed to Premier Li Keqiang when he was a provincial leader that GDP is “manmade” and “for reference only.”) Figures released the same day as GDP showed fixed-asset investment by the government and state-owned enterprises grew at the slowest pace since at least 2004 last month, and industrial production cooled. Two other numbers showed a mixed bag: Retail sales were healthy, while a report Friday showed new loans by the shadow-banking system dropped

was: “Come away by yourselves to a deserted place.” The “revolving door” of people coming and going with their many demands made it all the more necessary to also have rest together in a deserted place.

Contemplating the face of God

Returning to Jesus and going with him to some deserted place is actually not to desert the mission or to escape from the people. Literally, the people in need, the poor, are always there and arrive in place even before the apostles seeking some rest. Their needed relaxation became marginal, as they now witnessed Jesus treat the people with the primacy of love and compassion. Moved with pity for the people, for they were like sheep without a shepherd who cares for them and guides them around, Jesus poured out to them his love by teaching them generously many things. Jesus is the total prophet in action, blending together His life and His mission, teaching by example His apostles, His partner prophets in mission, that the mission is the life for a true messenger of God with consuming love in his heart. To really live up to our Christian mission of evangelization, we have

The proposed federal tax system and the problem of tax overlapping Atty. Pierre Martin Reyes

Tax Law for Business

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draft Constitution was submitted to the President on July 9, 2018, by the Consultative Committee constituted to review the 1987 Constitution. The main aim of the draft Constitution is to change the country’s political system, from unitary to federal. This draft was approved by the President on July 10, 2018, and has since then been endorsed to Congress. Though the said draft still needs to go through other processes before approval, it gives us a glimpse of the tax system to be employed under the proposed federal system of government. Under our current system of government, the power of taxation is exercised by the national government through Congress. Though local government units have the power to tax, such power is merely a delegated power to be exercised within the limitations imposed by law. This system follows the principle of preemption or exclusion, which means that local governments cannot impose a tax that is already levied by the national government. On the other hand, in a federal system, the power of taxation rests in the three levels of government, i.e., the federal, the state and the local governments. This means that each level of government can impose the same tax on the same taxpayer unless otherwise limited by the Constitution. Taxation in a federal system presents a common pool problem. As the federal, state and local governments share the same tax base, the result can be overtaxation, analogous to overfishing in a shared body of water. Added to this is the problem of compliance: taxpayers will now have to go through various levels of

regulations just to pay taxes. This results to overlap among the three levels of government. To illustrate, in the United States, income tax is imposed by the federal, the state and local governments, and sales tax is imposed by the state government and, if delegated, the local governments. On this point, we ask: Does the draft Constitution address this foreseeable dilemma? Under the draft Constitution, the envisioned “Federal Republic of the Philippines” shall consist of 18 federated regions. If there is no allocation of taxing power, then the proposed Federal Government, the proposed federated regions and the several local government units under the federated regions can impose similar taxes on the same taxpayer. To resolve this, the draft Constitution clearly delineates the power to tax between the proposed federal government and the federated regions. The draft Constitution gives the federal government the power to levy and collect all taxes, duties, fees and charges, except the power to tax granted to the Federated

How strong is China’s economy? GDP alone won’t say By Daniel Moss

Thursday, July 19, 2018 A7

the most on record. Similarly, the quarterly headline also gives the impression that Beijing’s campaign to rein in debt isn’t denting the broader economy and that little course correction is warranted. In reality, China is tweaking monetary policy to prevent June’s softness leading to a more pronounced slackening. The imposition of tariffs by President Donald J. Trump (and China’s retaliation) gives the task more impetus. The People’s Bank of China has trimmed the amount of cash that banks are required to hold as reserves, albeit with very specific conditions. The PBOC demurred on interest rates in June instead of following the Federal Reserve’s hike, as some econ-

omists had anticipated. Government spending picked up in June, focused on environmental protection, science and technology. These steps don’t amount to a wholesale opening of the spigot; they do show that President Xi Jinping’s team is attuned to risks and is prepared to take further steps, preferably without compromising debt reduction. Soft landings are tricky. Too much focus on GDP would miss all this. The same is true of Western economies. Quarterly GDP gives you an idea of what three months, in aggregate, look like compared with a threemonth aggregate from a year ago or one quarter ago. It isn’t very illuminating about the real-time direction of the

to learn to go back to our fundament and origin, Jesus our Lord. Together in communion with Him, we must again and again gaze at His face and contemplate Him, to see in Him our mission and identity. Jesus is the Word of salvation we herald to the world, the Truth we adhere to, and the Life we testify to. Our preaching easily becomes a proclamation of ourselves and our activities of self-seeking, if we stay away from Jesus for whatever rationalization. We need to return to Him again and again, to find the rest only he can give us. Only in intimacy with Him can we mediate life to others. To remain in communion with Jesus is not an alternative among others, but the one option necessary. Alálaong bagá, it is through Jesus that we stay on course and contribute to the establishment of God’s reign whatever may be our activities. It is with Jesus that we are sent into the world as bearers of God’s Word. It is in Jesus that we enjoy the only rest and fullness of life prophets in mission need and can expect. Join me in meditating on the Word of God every Sunday, from 5 to 6 a.m. on DWIZ 882, or by audio streaming on www.dwiz882.com.

Regions. The draft Constitution then limits the federated regions’ power to tax to the following: (a) real property tax; (b) estate tax; (c) donor’s tax; (d) documentary stamp tax; (e) professional tax; (f) franchise tax; (g) games and amusement tax; (h) environmental tax, pollution tax and similar taxes; (i) road users tax; (j) vehicle-registration fees; (k) transport franchise fees; and (l) local taxes and other taxes that may be granted by federal law. To emphasize that no overlap occurs, the draft Constitution expressly states, “no double taxation shall be allowed.” Thus, it can be readily seen that the allocation of the power to tax between the proposed federal government and the proposed federated regions bears a striking resemblance to the current setup between the national government and the local government units. Currently, the national government collects taxes under the National Internal Revenue Code and other national taxes, while local government units can only collect taxes delegated to it by Congress through the Local Government Code. The change introduced by the draft Constitution is to shift certain national taxes, such as estate tax, donor’s tax, documentary stamp tax, road users tax and vehicleregistration fees to the proposed federated regions, and to give to the federated regions the power to impose local taxes, which is currently delegated to local government units. The proposed federal government retains the sole power to impose income taxes, value-added taxes, excise taxes, customs duties and other taxes to be passed by the proposed Federal Congress. While the tax structure under the draft Constitution will minimize, if not avoid, the excessive tax burden

that can result from multiple levels of taxation under a federal system, taxpayers will inevitably be burdened by having to comply with another layer of rules set by the federated regions in addition to those set by the local governments. To resolve this, the proposed federated regions should pass uniform rules and procedures to govern taxpayer compliance. Another inevitable outcome of the proposed tax structure is tax competition. Insofar as those taxes that they are allowed by the draft Constitution and by federal law to levy, federated regions will likely engage in a “race to the bottom” in terms of taxation and regulation to persuade taxpayers to move to their respective jurisdictions. In a nutshell, the propriety of the shift to a federal system and the proposed tax structure is still a matter of debate. What is clear is that as the proposed draft goes through constitutional processes, it is the duty of every citizen to take part in this national debate. After all, the draft Constitution will still be presented to the people for ratification. In so doing, we, the people, will be deciding the future of our generation and generations to come. A participative and informed discussion on the draft Constitution is key in making an informed choice for the Philippines’s future.

economy or its velocity. There’s also a faction within economics challenging GDP as a measure of economic well-being. Lorenzo Fioramonti, author of The World After GDP, is one economist who argues it’s time for something different. A guest on the Bloomberg Benchmark podcast last year, Fioramonti sees the South Pacific island of Nauru as a case in point. Rapacious mining swelled GDP and attracted lots of banks eager to lend to Nauru. Environmental damage was simultaneously destroying Nauru’s future, but GDP showed everything was hunky-dory. There’s no easy answer. As long as governments publish GDP, unilaterally doing away with the quarterly gauge

would be silly. We should also proceed with caution when basing an economic assessment on those three letters. That’s especially the case with China because what happens there is so critical for the world economy. China’s picture may look placid on the surface. It’s also easy to think that the country has everything figured out, especially in contrast to the apparent chaos in the West since Brexit and Trump’s election. Underneath China’s bland projection, there is a truly compelling economic dynamic playing out. Who knows? Maybe China can perfectly thread the needle between deleveraging and growth. Just don’t rely on GDP to show that.

The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm of WTS Global. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at pierremartin. reyes@bdblaw.com.ph or call 403-2001 local 311.

2nd Front Page BusinessMirror

A8 Thursday, July 19, 2018

TF to cancel ECCs, biz permits of Bora establishments to start with ‘clean slate’

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By Jonathan L. Mayuga

@jonlmayuga

he interagency Task Force Boracay will cancel all business permits, including environmental compliance certificates (ECCs), of businesses operating on Boracay Island in preparation for its reopening on October 26. Closed for six months starting April 26, Boracay Island is the country’s top tourist destination, and the first to undergo massive rehabilitation. “Secretary [Roy A.] Cimatu wants to start with a clean slate. Since Boracay was closed, he wants us to review all ECCs. The ECCs were, in effect, suspended. What we will do is check the compliance of all establishments. For those [who] comply, we will just lift the suspension of the ECCs,” Jonas R. Leones, the DENR’S undersecretary for policy, planning, international affairs and foreign-assisted projects, said. The DENR chief, Leones said, wants to start with a clean slate

by canceling all business permits and require businesses to apply for such permits, and separate permits to operate from the local government of Malay, Aklan, and the ECC from the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources (DENR). He added that those establishments built on the wrong place, either on lime forestland or wetland, would likely lose their ECCs for good. A DENR document which lays out a plan to rehabilitate Boracay showed there are more than 2,600 business establishments operating on Boracay, and estimated total

population of around 34,000 in some 700 households. Tourists arriving on the island at any given time are estimated to reach 22,000. The tourism industry in Boracay employs a total of 17,208 individuals based on records of the municipality of Malay. With the tourism industry as the main source of income and livelihood of the people on the island and in mainland Malay, hotels and restaurants, and other service-related industries, including transportation, rely heavily on tourist arrivals. Last year the municipality of Malay generated around P400 million from various fees, while the provincial government of Aklan generated revenues of P150 million. In 2014, according to the Department of the Interior and Local Government, tourism revenues attributed to Boracay reached P27 billion. Hundreds of business establishments have been found violating various rules. Various DENR documents revealed the massive violation of environmental and other rules in Boracay. A total of 679 residential, com-

mercial and mixed residentialcommercial buildings violated the road-easement rule, 161 individuals and businesses were identified as illegal forest occupants; 195 businesses were “not connected” to sewer lines, and hundreds more were issued notice of violation of Clean Air Act and Clean Water Act, raising question as to why they were issued ECCs and Forest Land-use Agreement for Tourism, if indeed they have one. To recall, President Duterte had ordered the rehabilitation of the pollution-challenged Boracay, an island paradise in Malay, Aklan, which he tagged as a “cesspool.” To fast-track the rehabilitation, Task Force Boracay led by Cimatu recommended the closure for six months. Two months into the island’s closure to tourism activities, the DENR chief said water quality in the white-sand beach of Boracay has greatly improved, finally removing the cesspool tag. Prior to its closure, there was a freeze on new construction projects while the DENR-EMB ceased accepting ECC application for projects on Boracay.

Pag-IBIG earns record 6th straight unqualified opinion from COA

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ag-IBIG Fund has earned its sixth straight unqualified opinion from state auditors, breaking yet another record in the Fund’s 37-year history. In June the Commission on Audit (COA) transmitted a copy of the results of the audit of the accounts and transactions of Pag-IBIG Fund for 2017 and 2016. State auditors gave Pag-IBIG another unqualified opinion -- the best opinion that a government agency or corporation can get from the COA. “In our opinion, the financial statements present fairly, in all material respects, the financial positions of HDMF as of December 31, 2017 and 2016, and its financial performance and its cash flows for the years

then ended in accordance with Philippine Financial Reporting Standards [PFRS],” read the Independent Auditor’s Report. Secretary Eduardo D. del Rosario, concurrent chairman of the Housing and Urban Development Coordinating Council and Pag-IBIG Fund, said, “This is Pag-IBIG Fund’s sixth consecutive unqualified opinion. This six-peat achievement is yet another proof that Pag-IBIG Fund is working hard to serve our members while maintaining the sustainability of the Filipino workers’ fund which is in accord with the housing sector’s initiatives and President Rodrigo Roa Duterte’s directive to prioritize the delivery of reliable government services.”

“We, in Pag-IBIG, are delighted for having earned another unqualified opinion from the COA. We concluded 2016 as a great year but our performance in 2017 was recordbreaking, making it our best year ever,” said Pag-IBIG Fund CEO Acmad Rizaldy P. Moti. Moti also clarified that contrary to reports, Pag-IBIG home borrowers face no risk in losing their homes based on a COA finding that 22,123 accounts were not yet converted from Contracts to Sell (CTS) to Real Estate Mortgage (REM). “It is unfortunate that COA’s report has been misread. Let me clear things by saying that borrowers do not risk losing their homes on account of the non-conversion

from CTS to REM. Pag-IBIG has safeguards in place to ensure that the home loan borrower’s rights are always protected. For one, the CTS is assigned to Pag-IBIG Fund and annotated in the title as proof that the borrower purchased that property. Two, we can sanction developers who fail to meet the conversion timeline. Lastly and most importantly, Pag-IBIG itself can do the conversion by using the retention fee deducted from the developer to make sure that these titles will be transferred under the names of the borrowers,” he said. “Borrowers have no reason to worry because, regardless of the conversion status of their properties, the only way they face the risk of losing their homes is if they are not paying their monthly obligations,” Moti added.

Duterte. . .

Continued from A1

month. “Before I would begin to talk about the event, let me just express my profound gratitude to the two airlines that helped government during the Kuwait stressful moment—not a crisis,” he said. “And I requested, though we had the money then, Philippine Airlines and Cebu Pacific to fly to Kuwait and bring in some of our countrymen who were there in distress,” the President added. He said he hopes that somehow “government can return the favor in the days to come.” “Salamat po sa lahat ng ginawa ninyo para sa ating mga kababayan (Thanks for what you did for the sake of our fellow Filipinos).” The President led the welcome ceremonies for the new jets. He was joined by Tan and company president and COO Jaime J. Bautista. The event coincided with the birthday of Tan who has served as the carrier’s chairman since 1995. “As the PAL family works together to achieve our dream of becoming a 5-star global carrier, we have achieved great strides in support of this goal. We are in the midst of a fleet modernization program. We are also focused on route network expansion and have improved our services to our passengers. I am happy to welcome the A321neo and A350 to our fleet.” Bautista said: “Through these new airplanes, we aim to reclaim our stature as one of the world’s best airline-to be a beacon of hope… that Filipinos can set the standard of excellence and be the best of what we can do.”

www.businessmirror.com.ph

MORE CHINA-FUNDED PROJECTS ROLLED OUT NEXT YEAR–AMB. ZHAO

President Duterte, along with Executive Secretary Salvador C. Medialdea and Public Works Secretary Mark A. Villar, joins China’s Ambassador Zhao Jianhua at the Groundbreaking Ceremony for the Two China-aid Bridges Project across Pasig River. CONTRIBUTED PHOTO By Cai U. Ordinario @cuo_bm

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ILIPINOS can expect more China-funded infrastructure projects to be rolled out next year, according to Chinese Ambassador Zhao Jianhua. In his speech at the recent Groundbreaking Ceremony for the Two China-Aid Bridges Project across Pasig River, Zhao said the Chinese government is speeding up its efforts to deliver much-needed public infrastructure in the Philippines. Zhao said some of these projects include the Kaliwa Dam, PNR South Long-Haul Railway, SubicClark Railway and Mindanao River flood-control project. “More of such projects are already in the pipeline and are expected to roll out starting from next year,” Zhao said. “And a good news for the Pasig River, China is positively considering soft loans for five more bridges to make the two sides across the river more connected and integrated. All these infrastructure projects take time, and we’ll do our best to facilitate quality implementation of these projects,” he added. Zhao said that apart from the two bridges, projects such as the two Dangerous Drugs Abuse Treatment and Rehabilitation Centers in Mindanao supported by China’s grants have begun construction. He added the Chico River Pump Irrigation Project, the first infrastructure project financed by Chinese soft loan, has also started construction. Efforts to fast-track Chinesefunded infrastructure projects are a response to the President’s call for a faster turnaround for all infrastructure projects, especially those under the “Build, Build, Build” program. “I am therefore directing the DPWH [Department of Public Works and Highways] and the other agencies concerned to ensure that the construction of these bridges will be finished within 30 months or earlier,” the President said. “Through our combined efforts, we will be able to expedite our infrastructure programs [that] will improve connectivity and mobility around the country. Together, let

Sugar. . .

Continued from A1

Earlier, SRA Administrator Hermenigildo R. Serafica told the BusinessMirror that the fourth vessel that will carry the next round of the country’s outbound shipment to the US will arrive by the third week of July. In June the SRA issued Sugar Order 12, which authorized the verification of the production of “A” sugar bound for the US market, from the previous two crop years. Data obtained by the BusinessMirror

us join hands in uplifting the lives of our people [through] channels that will give [them] the decent and comfortable lives that our people rightfully [deserve],” he added. The current cooperation between China and the Philippines with regard to infrastructure is being undertaken amid efforts to start between the two countries on geopolitics. Duterte said he and China’s President Xi Jinping have agreed to discuss geopolitics, specifically the arbitration case on the West Philippine Sea, “at some other time.” The President said the Philippines is open to allow China to “sort out things” before they start discussions. However, he remained confident that “China will be fair and the equity will be distributed.” Earlier, Socioeconomic Planning Secretary Ernesto M. Pernia said careful project preparation and evaluation is crucial in the case of Chinese-financed projects, especially after issues surfaced in China’s port project in Sri Lanka. Pernia said in the case of Sri Lanka, its loan from China for the port project was turned into equity, making the port the property of China. This, Pernia said, is something the administration wants to avoid. Neda Undersecretary for Investment Programming Rolando G. Tungpalan said Chinese-funded projects in the Philippines are not tied to land ownership. This means contractors are just contractors and not landowners. The Chinese government is financing the P4.37-billion Chico River Pump Irrigation Project to be implemented by the National Irrigation Administration (NIA). It also extended grants to build several bridges crossing the Pasig River. Neda Assistant Secretary for Investment Programming Jonathan L. Uy said whether these projects are financed by China, Japan or Korea, the Philippine government does not grant sovereign equity or ownership to official development assistance (ODA) partners. He said if development partners are not keen on following the Philippines’s laws and regulations or impose certain conditions in financing ODA projects, the government is forced to subject projects to another review.

showed that as of June 29—the deadline for verification—the SRA was able to validate 155,848.29 MT of “A” sugar. Given this figure, Serafica said, the country will be able to ship its entire sugar allocation for FY 2018 and will even have a carryover volume for the next fiscal year. The US Department of Agriculture announced on July 2 that its TRQ on raw cane sugar for FY 2019 is 1.117 million MTRV. The volume is the minimum to which the US is committed under the World Trade O rg a n i z at i o n’s U r u g u ay R o u n d Agreement on Agriculture.