An effective compliance program can avoid prosecution
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By Henry J. Schumacher
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ot surprisingly, some companies question whether or not they should invest in a fullfledged compliance program. However, while the return on investment is not always obvious, a strong program can help your company avoid fines and legal expenses. In the United States the Department of Justice (DOJ) and the Securities Exchange Commission (SEC) sometimes decline to pursue charges due to a company having an effective compliance program in place. »continued on A2
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Tuesday, July 25, 2017 Vol. 12 No. 285
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resident Duterte, in his State of the Nation Address (Sona) on Monday, vowed to prioritize the passage of a national land-use policy and the tightening of mining protocols in a bid to ensure food security and preserve the environment.
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ocal economists supported President Duterte’s statements on mining and his stand against the export of raw mineral ores from the Philippines. The President, in his second State of the Nation Address (Sona), emphasized the need to promote responsible mining and urged miners to process the minerals in the country to make the industry really inclusive. Wit h h is pronou ncements, Duterte was able to tell the public that he was not pro-mining but is for responsible mining, according to Rene Ofreneo, UP School of Labor and Industrial Relations faculty member. “He was able to redeem himself, especially on environment issues since last year. His hesitation in signing the Paris Agreement and the removal of former Environment Secretary Regina Paz L. Lopez due to pressure from the mining lobby sent the impression that the President was leaning in favor of the mining industry,” Ofreneo said. See “President,” A2
Duterte’s innovative approach to China issue Manny Villar
THE ENTREPRENEUR
Duterte: “You have to come up with a substitute to either spend to restore the virginity of the [natural] resources or I will tax you to death.”
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hen I gave President Duterte an “excellent” grade for his performance in his first year in office, it was not only because he hit the ground running, instead of spending too much time in organizing his Cabinet or shuffling office. More than this, I was impressed by his prompt attention to the major challenges that greeted him on his first day as President of the Philippines.
In his Sona, Duterte cited as an example Mindanao, which saw its food production decline due to the strong typhoons that battered the island in recent years. Continued on A5
President reaps praise for clearer mining tack
Continued on A10
BMReports
Terror groups in PHL: Removing the masks By Rene Acosta
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President Duterte delivers his second State of the Nation Address. ALYSA SALEN
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Part Two
F the terrorists grew and became strong in Mindanao, to the point that they could now directly challenge the military, as it is now in the case of the Maute-ISIS Group, blame no one but the government because of its complacency and, may be, even of its ineptitude. For years since it began dealing with the terrorist groups, the government has taken the “reactive”, rather than the “proactive” stance, by only operating against these groups when its forces are encountered, allowing them to employ the “attack-and-withdraw” scheme. Other than failing to sustain military operations, the state has also failed to stop the flow of funds to the terrorists, along with their fund-raising activities and their
procurement of high-powered firearms, with reports even pointing to some misguided members of the military as the source. In the case of the Maute—whose affiliation with the ISIS has been the subject of a continuous report, and therefore implies financial support from the Arab-based group—it has been the subject of an “on and off” operation in Butig and Pia Gapo in Lanao del Sur, until it bounced back with the rebellion in Marawi City. No less than President Duterte had been amazed with the massive firepower of the Maute, something that the military was supposed to only have.
Funding sources
IN procuring firearms and in funding their operations, including Continued on A2
n japan 0.4569 n UK 65.9829 n HK 6.5015 n CHINA 7.5021 n singapore 37.2304 n australia 40.1055 n EU 59.2369 n SAUDI arabia 13.5353
Source: BSP (24 July 2017 )
BMReports BusinessMirror
A2 Tuesday, July 25, 2017
Terror groups in PHL: Removing the masks Continued from A1
recruitment of members, the terrorist groups have to rely for money that is being sourced in different ways, but which have not principally changed through the years. In “The Evolution of Terrorist Financing in the Philippines”, former police intelligence chief Rodolfo B. Mendoza said terrorist organizations in the country have been raising funds through kidnap-for-ransom activities, extortion and zakat. Likewise, the groups—including the Moro Islamic Liberation Front (MILF)—were getting their money through non-governmental organizations, being used as fronts by “radical” Islamic groups and even by wealthy Arabs who buys their ideologies. “In organizations such as the MILF and the ASG, which claim to struggle for the establishment of an independent Islamic state in Mindanao, zakat contributes a lot in the advancement of their programs, the procurement of firearms and in providing financial support for the families of their members and other livelihood
President. . . Continued from A1
“It was also good that he adopted our proposal on value adding for the mining sector, that raw minerals, ores, should not be exported,” he added. Meanwhile, University of Asia and the Pacific School of Economics Dean Cid Terosa said the President’s discussion of the environment and also the importance of sustainable development is a step toward the right direction. Terosa added these are part of the foundations of sustained economic growth and development, which include civil order, civic education and participation, peace and security, social services, infrastructure, economic reform and institutional efficiency. However, Terosa said the President failed to mention exact measures to allow growth and development to trickle down to regions, provinces, municipalities and cities outside
programs,” Mendoza said. Zakat is the Islamic practice of giving alms to the poor and needy. “Zakat collected annually from Mindanao and Saudi Arabia is of great value to the MILF and ASG. Millions of pesos goes to the treasury of these organizations, although the annual collection would differ every year,” he added.
Drug-fueled terror
MENDOZA said that, aside from the zakat collected from Filipino Muslim workers in Saudi Arabia, the ASG also received alms from wealthy Arabs who were convinced that the ASG is in pursuit of jihad. “The MILF is more organized, well-oriented and more active in the collection of zakat than the ASG. The MILF has supporters all over the Middle East and Malaysia, while the ASG has not established a support group in other countries except Saudi Arabia,” Mendoza said. Mendoza claimed that during the time of Abdurajak Janjalani, the late founder of the ASG, residents of Sulu and Basilan were forced to give zakat to the group. of Metro Manila. “It would have been a good context for the troubles faced by the government in Mindanao. Specific measures to advance access to social services would have been another important theme,” Terosa said. For his part, Ateneo de Manila EagleWatch senior fellow Alvin Ang said it was good that the President recognized in his Sona the coordination failure in government. Ang also said the President’s mention of the importance of the environment and antidisaster efforts. He also supported the President’s responsible mining stance. Political economist Maria Ella C. Oplas of the De La Salle University said the land-use plan is long overdue. “But what remains to be a big question now is the implementation aspect.” “His request to the mining sector is valid. There are responsible mining firms and irresponsible mining firms. It is high time that we go all out against the irresponsible mining firms. What I really wanted to hear are his plans on small-scale mining, because they are the scarier issue. I don’t know why he is silent on
Duterte administration. . . Speaker Alvarez added that among the House-approved legislations are the 2017 national budget, the death-penalty bill and the comprehensive tax reform bill noting that the Senate and House-approved bills are now awaiting Duterte’s action to sign these into law, including bills to make tertiary education more accessible, increased interconnections through free Internet in public places, updating the Revised Penal Code and beefing up public health-care services. “We should also look into how land transportation, railways, airports, and seaports are organized and regulated. Often, a review of said areas of public interest would show how chaotic their regulatory frameworks are,” he said. “Let us begin
Continued from A12
by merging the LTO [Land Transportation Office] and the LTFRB [Land Transportation Franchising and Regulatory Board] into the Land Transportation Authority.” The country’s railways will be regulated via a new body, the Philippine Railways Authority, which will set the uniform standards and fares for all railways, Alvarez added. The Speaker said the chamber will also pass a bill creating the Philippine Airports Authority. “The same holds true for airports. We must create the Philippine Airports Authority since the different airports act autonomously, without sufficient oversight and agreed upon standards, given that many have their own charters.”
Legislative franchises
“ The ASG also organized a group tasked to collect donations during Friday congregational prayers and the money would be spent in the procurement of ammunitions, medicines and military supplies,” he added. From 1992 up to 2007, the ASG was estimated to have earned at least P20 million from zakat, according to Mendoza. In the case of the Maute, the group is reported to have principally received its funding from the ISIS. Local drug lords also contributed to the group’s operational coffers as claimed by Duterte. The latter intelligence data prompted him to declare the siege of Marawi was a drug-fueled terrorism.
Kidnap for ransom
ASIDE from alms, terrorist groups, especially the ASG, have been raising their monetary requirement from the conduct of kidnap-forransom activities, with the victims being killed if their relatives would refuse to pay the ransom. Then and now, this is apparently the best source of funds for the ASG and other groups, which have already earned billions of pesos out
of their kidnapping activities. In the early years that the ASG has resorted to this criminal act, it was merely content with snatching locals from Mindanao and even foreigners who happen to saunter in the south. However, the group has taken bolder steps by going into forays into Sabah, wherein it took victims, brought them to Mindanao and negotiated for ransom. It has also perfected the art of snatching sailors at sea, with most of the victims Indonesians, Malaysians and Vietnamese. The government, however, has lately stopped these acts. Mendoza said that from 1992 up to 2007, the ASG was believed to have earned P1.4 billion in kidnapping, noting that the abduction of 20 people in 2000 alone earned the terrorist group almost a billion pesos. A report also said that the ASG earned through kidnapping more than P300 million during the first six months of last year. No less than Duterte said, in August last year, that former kidnap victim Norwegian Kjartan Sekkingstad was freed out of a P50-million ransom. To be concluded
that,” Oplas added. Duterte, in his second Sona, underscored the need to invest in midstream manufacturing activities, especially for the extractive industries. Adjunct to this is a renewed proposal to stop the export of mineral resources. “We’re calling on industries and businesses to put up manufacturing establishments to process raw materials into finished products,” Duterte said in the early part of his two-hour speech. “It is not enough to mine these minerals, but we should process them into finished products.” The firebrand president likewise underscored the environmental impact of mining activity—warning extractive industries to invest in restoration activities or else be “taxed to death”. Trade Secretary Ramon M. Lopez said it has always been his position that higher valueadding be done with natural resources, but gave a more tempered response to taxation as a way to encourage local processing. “Of course, our first move is to enjoin these industries, and right now we already give
incentives to processing in the Investments Priorities Plan,” Lopez said in a phone interview following the President’s Sona. Lopez clarified that he is not proposing to levy export tax on minerals to discourage shipments abroad, but said this may be a policy option of Congress in the future if industries remain unresponsive. “We don’t need that export tax right now, although that is what other countries are doing with their natural resources, even with agricultural products. We’re not proposing that, but it could be the next move in the future,” he explained. Philippine Chamber of Commerce and Industry President George T. Barcelon advised that there should a gradual process to limiting exports. “We look forward to having higher value-adding here because these processing activities are likely to be big-ticket items that can provide a lot of jobs. But this can’t be done overnight; it won’t be immediate,” he said in a phone interview. Cai Ordinario, Catherine N.
According to Alvarez, a measure requiring operators of casinos, public transportation, as well as mining companies to secure a legislative franchise from Congress prior to their operations will also be passed. “Now, let us complete the reorganization by adding a safeguard mechanism that will make certain that the public’s interest will always be protected. This will make certain that their applications are scrutinized deeply. Only the deserving will be allowed to operate,” he added. On mining, Alvarez said the bill requiring mining companies to secure a legislative franchise and subjecting mining companies to congressional oversight is included in the Lower House’s priority measures. The Speaker said the bill will also require mined ores to be processed or semiprocessed within the Philippines. Alvarez also mulls over the removal of the
regulatory powers of the Philippine Amusement and Gaming Corp. (Pagcor) over casinos. “The regulatory framework is chaotic, full of overlaps, conflicts of interests and, at times, there is no clear central regulatory body. Let’s start off with Pagcor. It does not make sense for it to regulate and operate. An entity that has this power runs the risk of dealing itself a favorable hand while undercutting others,” he added.
Pillas, Elijah Rosales
Family-related bills
Alvarez also said the House will address concerns involving the basic fundamental unit of society—the family. Alvarez said a measure for the dissolution of marriages will also be passed to free couples from an “unhappy marriage”. “Admittedly, there is a sad reality about some marriages. We do not always get it right the first time around. Unfortunately, the present system practically coerces married persons to remain with each other even if the relationship is beyond repair and has caused, and continues to cause, harm to the well-being of the husband, the wife and, worse, the children involved. We have to change this.” “Married persons can mutually agree to end their marriage subject to the approval of the court. One of the conditions, which must be complied with, is an agreed upon and executable framework to provide for the care and support of their children,” he added. The Speaker will also file a measure that seeks to legalize civil union, not just for same -sex couples, but also for heterosexual couples. Alvarez said he is also looking at equalizing the treatment of illegitimate children. “Let us not stop there. Children, through no fault of theirs, have been stigmatized by society for being born outside of a valid marriage. It is time to end the unequal treatment of legitimate and illegitimate children. We can start the process by equalizing the legitimes that children receive regardless of whether or not they were born within or outside wedlock. This is an issue of justice and fairness. I hope that you support it, as well.”
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DOT. . .
Continued from A12
President Duterte recently approved the National Tourism Development Plan (NTDP) for 2016-2022, a blueprint that would allow his administration to increase foreign visitor arrivals to 12 million and domestic travelers to 89.2 million domestic travelers by 2022, as well as create 1.5 million more jobs for Filipinos, on top of the existing 5.2 million jobs the tourism industry currently sustains. Under the NTDP, the DOT envisions “at least 3 million Filipinos would have been lifted from poverty because of opportunities spurred by tourism” and raising the tourism sector’s contribution to the country’s GDP to 10 percent, from the current 8 percent. Other accomplishments by the DOT, under Teo’s watch, include: ■ Tourism cooperation pacts signed
with China, Russia, Cambodia, Thailand and Turkey; ■ Making available 811,044 new seats with the opening of new air routes to secondary gateways in the country; ■ Encouraging cruise-ship companies, like Star Cruises and Royal Caribbean Cruises, to homeport in the Philippines; ■ Swifter accreditation process of tourism establishments and frontliners. The DOT has accredited 4,057 enterprises and frontliners from July 2016 to June 2017; ■ Facilitating the completion of the airport at San Vicente, Palawan, a flagship Tourism Economic Zone of the Tourism Infrastructure and Enterprise Zone Authority, a DOTattached agency; and ■ The Intramuros Administration’s renovation and opening of the Postigo Nuestra Señora de Soledad, Plaza Moriones in Fort Santiago and Casa Azul within the walled city, among others.
An effective compliance program can avoid prosecution Continued from a1
Evidence of a solid compliance program has helped a number of companies avoid prosecution under the US FCPA, even when a company did not or could not prevent the underlying violation that gave rise to an investigation. In this article, you’ll learn more about demonstrating program effectiveness and how the multinational Harris Corp. avoided prosecution, thanks to its compliance program.
An effective compliance Program: The Harris Corp.
In September 2016 the SEC and DOJ declined to prosecute the Harris Corp., despite violations of the FCPA by its newly acquired subsidiary, CareFx Corp. The case demonstrates how robust compliance programs can shield companies from potential prosecutions. Briefly, Harris had acquired CareFx which, in turn, owned a Chinese subsidiary, CareFx China, whose CEO had engaged in a bribery scheme. The CEO, Jun Ping Zhang, offered gifts and hospitality to government officials at state-owned hospitals in China. Ping disguised the bribes as expense claims, which were then improperly recorded and consolidated into Harris Corp.’s accounting records. “Although only able to perform limited pre-acquisition due diligence on the subsidiary,” Harris had taken immediate, significant steps “to train staff in China and integrate the subsidiary into Harris’s system of internal accounting controls,” according to the DOJ. “As a result of Harris’s post-acquisition measures, including the implementation of an anonymous complaint hot line, Harris discovered the misconduct at the subsidiary within five months of the acquisition.” This case was the first time a multinational company avoided prosecution altogether while its employee (Ping) was still on the hook for the violation. Despite Ping’s flagrant violations, the SEC and DOJ declined to prosecute Harris, mainly because Harris had conducted appropriate due diligence on CareFx and maintained an effective compliance program in place after the acquisition. It’s important to note that Harris had ongoing self-policing in place as part of their program, which led them to discover the violation and subsequently report it to the government. It’s a great example of the protection provided by a strong compliance program.
Demonstrating your program’s effectiveness
The first step is to have a compliance program in place. But it’s not enough to just do the right thing—your company must also be able to provide evidence of the program’s effectiveness. This is
the same advice the Integrity Initiative is giving to signatories of the Integrity Pledge. Our advantage in the Philippines is that the Integrity Initiative has developed a “self-assessment” program that helps signatory companies to see their progress in creating compliance throughout the organization. In this process, the Integrity Initiative offers assistance to signatory companies to move up to the “Validation” stage and then on the “Certification”. The “Seal of Honesty”, developed by the BIR in cooperation with the CSR and the Integrity Initiative, is based on the same principles: you display honesty in your tax payments and the BIR will provide benefits. The following aspects of corporate compliance programs should be taken into consideration: ■ Analysis and remediation of underlying misconduct ■ Senior and middle management ■ Autonomy and resources ■ Policies and procedures ■ Risk assessment ■ Training and communications ■ Confidential reporting and investigation ■ Incentives and disciplinary measures ■ Continuous improvement, periodic testing and review ■ Third-party management ■ Mergers and acquisitions You can use this guide to measure how well your compliance program shields your company from prosecution. Whether you’re training individuals, rolling out policies or vetting third parties, every affirmative compliance effort that you make should become part of an auditable trail of efforts, processes and controls. Unfortunately, that’s where many companies fall short.
Technology’s role in compliance
At many companies, people may be committed to doing the right thing, but fail to fully record those efforts. Part of the problem is the sheer volume of information to maintain, from tracking whistle-blower issues to registering every gift or clearance of a potential conflict. In order to quickly and easily demonstrate your compliance efforts, you need more than good policies —you need a system of record. That’s where today’s technology offers great value: Sophisticated, automated systems are more reliable than good intentions when it comes to collecting the evidence you need to avoid risks. As we saw in the Harris case, evidence of an effective compliance program can make all the difference in deterring prosecution. If you want more detailed information on compliance programs, talk to us in the Integrity Initiative; or e-mail me at Schumacher@integrityinitiative.com
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Editor: Vittorio V. Vitug • Tuesday, July 25, 2017 A3
PHL, China strengthen tie-up vs drug dependency
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By Recto Mercene
@rectomercene
hinese authorities have recommended that the Philippine government should strengthen its fight against the drug menace, and emphasized that prevention is one of the best ways to nip the problem in the bud. The Ministry of Public Security, Anti-Drug Department, under the China National Narcotics Control Commission (CNNCC) relayed this message to visiting journalists from the Philippines, who were allowed to tour its rehabilitation center. The center treats drug dependents in humane manner, unlike the Philippines, which are run more like jails and guarded by the police. The Sun Flower Community in Ba Jiao Street Shi Jing Shan District, Beijing, allows members of the community to take part in the patients’ rehabilitation. The addicts are allowed to stay home and return on regular visits for treatment. T he faci lit y, a 100 square
meter, low-ceiling, rectangular building, hemmed in by apartment blocks on both sides, is run by Director Chen and his Deputy Director Wang. Thirty-eight similar facilities have been established all over Beijing, he said. Prospective candidates for rehabilitation signs up with Sun Flower for a three-year stint during which he or she would report once a month for the first year, then twice a week for the second year, then once a week on the third year. Addicts undergo testing, then compulsory detoxification, followed by methadone maintenance therapy (MMT). Clinics have been increasing rapidly across the coun-
try and needle exchange programs are being used to prevent the spread of HIV. Since the rehab centers in China were established in 2008, some 1.5 million Chinese have recovered from addiction, the CNNCC said. However, penalties for drug distribution and trafficking remain harsh that include capital punishment. Ambassador to China Jose Santiago Sta. Romana said 180 Filipinos are in jail and two more are in death row for drug offenses, usually as being the unwitting couriers for drug syndicates. A third Filipino, who was sentenced to death has been taken off the list, the envoy added during our courtesy call at his embassy in Beijing. Medical volunteers visit the Sun Flower facility to conduct psychological treatment of the addicts. They are then encouraged to engage in community activities, “because the eventual goal is for them to become useful citizens again”, Chen said. Since it was established in 2010, the Sun Flower facility has “graduated” 87 addicts and one former patient, a 35-year-old man became a prominent citizen, holding inspirational talks in the city. “He also became an entrepreneur and was able to put up his own
business,” Chen added. The Philippines and China have signed an agreement that will enhance cooperation and communication to combat drug trafficking, transnational crimes, including telecommunications fraud, online fraud, cybercrimes, trafficking in persons and wildlife trafficking. To further strengthen the efforts to fight illicit drugs, both sides agree to establish operation mechanism for joint investigation on special cases and intelligence collection purposes. The Philippines thanked China for its offer of assistance in personnel training and donation of drug detection, seizure and testing equipment to aid in the fight against illicit drugs, the Department of Foreign Affairs said, following President Duterte’s visit in October 2016. Chinese officials also said they are willing to train antinarcotics operatives from the Philippines on the innovative mechanism to reduce drug recourse, including mechanism on drug interruption. China faces a growing problem of illicit drug use. Drug addiction is considered personal failure and addicts are highly stigmatized. “The number of officially reg-
istered drug addicts [in China] totals about 2.5 million, having increased every year since the government’s first annual drug enforcement report in 1998,” a Brooking Institute study said. Drug addicts are usually caught because they are squealed by members of their own family or neighbors. Other means to detect addicts is by interception and online antidrug mechanism to which more than 100 Chinese web sites have signed up, the CNNCC said. The drug authorities told us that the long summer breaks in the Philippines “is a dangerous time to become drug user”. Thus, the CNNCC encourage the help of the media in drug campaign, “as they can educate the public on drug issues”. Aside from the media, China has also put up public platform mechanism, such as WeChat, an online web site similar to Twitter or Facebook. Last year Chinese authorities seized and closed 438 drug factories across China, saying Guangdong and Fujian provinces are the entry points of drugs coming into the mainland, while Hunan province is the source of drugs like heroin. To help combat the entry of drugs into China, the CNNCC has established bilateral relations in anti-
drug campaign with 13 countries, including the Philippines. It has also established bilateral relations with Australia, Singapore, Indonesia and Pakistan and conducts regular talk in drug-related issues. Apart from bilaterals, China has also engaged in multilateral agreements with 26 other countries and boast of “tremendous achievements in the last 25 years”. “Before, we were able to intercept 200 tons of marijuana a year, today, only 60 tons have been impounded,” the officials said, adding that last year, they also seized 604 kilograms of methamphetamine from the Philippines. China has equipped its entry points with detectors called mass spectrometer, which, unlike x-ray, could detect minute traces of drugs in a person, including his belongings, hence their high rate of arrests, the CNNCC said. The CNNCC added they donated 10 mass spectrometers to the Philippines following Duterte’s 2016 visit “and we are going to donate some more of them”. Aside from these, China also provided the country with 100 seats of portable drug test kits, a rehab center and training in narcotics control course for 15 personnel.
Economy
A4 Tuesday, July 25, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon
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Groups back Duterte’s push for new mining law, but reject Alvarez’s franchise proposal By Jonathan L. Mayuga
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@jonlmayuga
hile antimining stakeholders welcome President Duterte’s push for a new mining law, Speaker Pantaleon D. Alvarez’s plan to require mining companies to secure legislative franchise before being allowed to operate is not getting any support. The Chamber of Mines of the Philippines (COMP) maintains there is no need for a new mining law, although it respects Duterte’s decision, in response to his earlier public pronouncement to push for the enactment of a new mining law in lieu of Republic Act (RA) 7942, is enough to promote responsible mining and boost the mining industry in the Philippines. Days before delivering his second State of the Nation Address (Sona), Duterte again warned erring mining companies for causing environmental destruction and made a public pronouncement supporting the enactment of a new mining law. He vowed to call a meeting to consult mining stakeholders.
At a news conference in the House of Representatives on Monday, Alvarez bared his plans to sponsor several bills, which include same-sex marriage, giving legitimate and illegitimate children equal rights under the law, and dissolution of marriage. He also said that among his leadership’s priorities is to enact a law that will require casinos and mining companies to secure a legislative franchise before being allowed to operate in the Philippines. Sought for comment in supporting Duterte’s push for a new mining law, Jaybee Garganera, national coordinator of Alyansa Tigil Mina, said ATM will engage the administration should they call for a summit of all mining
stakeholders. “We are prepared to submit our recommendations. And we are ready to confront [the] mining industry and expose that their concept of responsible mining is a myth,” Garganera said. He added that they expect Congress to fast-track the enactment of proposed mining bills in Congress, particularly the Alternative Minerals Management bill (AMMB) and the new fiscal regime on mining. There are several AMMB filed in the House of Representatives: House Bill ( HB) 54, filed by Kaka Bag-ao; HB 113, filed by Rep. Arlene Bag-ao of the Lone District of Dinagat Islands Rep. Teddy Baguilat Jr. of the Lone District of Ifugao and Rep. Lawrence Fortun of the First District of Agusan del Norte; and HB 2633 of Party-list Rep. Tom Villarin of Akbayan. To prevent lawmakers with mining interest from thwarting the push for a pro-people alternative mining law, Garganera said ATM will demand their inhibition from the deliberations. “First, we will expose them. We are finishing our research on their mining links based on the Statement of Contribution and Expenditures [Soce] in the 2016 elections. We will oppose their participation in congressional hearings,” he said.
ATM also vowed to pursue localized “no-go zones” in provinces and legislative districts. Meanwhile, with his public pronouncement, Garganera said they expect the President to issue clear instruction to the Department of Environment and Natural Resources (DENR) to strictly enforce the closure and suspension orders issued against 28 mining companies by former Environment Secretary Regina Paz L. Lopez. The group also expressed doubts that Environment Secretary Roy A. Cimatu will sustain the policy reforms initiated by Lopez. Cimatu, upon taking over the DENR in May, ordered a review of Lopez’s controversial orders. He has already reversed last month Lopez’s order centralizing the processing of environmental compliance certificate (ECC) applications and gave back the power to the DENR’s regional offices. The DENR, under Undersecretary for Legal Affairs Maria Paz Luna, is finalizing the review of the closure orders by the end of the month. Sherwin de Vera, regional coordinator of Defend Ilocos, said their group supports the passage of another alternative mining bill—HB 2715, or the People’s Alternative Mining bill. The measure aims to reorient the mining industry toward national industrialization and ensuring the highest industry development standards.
The bill, filed by members of the Makabayan bloc in the House of Representatives, also gives premium to agriculture and conservation and protection of watersheds over minerals development. Meanwhile, he rejected Alvarez’s plan to require mining companies to apply for a legislative franchise. “That is the play…to squeeze mining companies’ lobby money. This is what greedy lawmakers do to telcos and what they want to do to other companies, too,” de Vera said. “The President certainly has the power to propose legislation necessary to implement his administration’s agenda. However, we believe the Mining Act is already responsive to the vision and needs of the Duterte administration,” COMP Vice President for Policy and Legal Ronald Recidoro told the BusinessMirror in a text message. He said the RA 7942, or the Philippine Mining Act of 1995, is, in fact, encouraging and attractive for investors while having worldclass provisions for environmental protection and social development. “It just needs to be implemented consistently and strictly,” Recidoro added. As for Alvarez’s plan, Recidoro said requiring mining companies to secure legislative franchise is “unnecessary given [that] the current regulatory framework is already sufficient”.
Jeepney phaseout offers good business in scrap metal–BOI
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he Board of Investments (BOI) is urging the private sector to pour some of their investments in materials-recovery facilities, saying the business offers an opportunity for upstream industries in scrap recycling with the impending phaseout of old jeepneys. BOI Managing Head and Trade Undersecretary Ceferino S. Rodolfo Jr. said that with the public utility vehicle (PUV) modernization under way, there is a need to address the retirement of aging jeepneys made from repurposed metal. “There’s still value in those materials because that’s scrap metal. That’s why we need a materials-recovery facility operator,”
Rodolfo added, pointing out that the recovery center is incentivized under the current Invesment Priorities Plan. The scrap can be sold to steel companies, particularly those that have electric arc furnace that processes scrap metal. “It’s good if we can have three materials recovery facilities, so there can be competition,” Rodolfo said. The value of the scrap metal from the old jeepneys can be used to offset the cost for jeepney operators to acquire the modern, environmentally compliant units, aside from financing from the Land Bank of the Philippines. Catherine N. Pillas
NREB looking for best options for ‘errant’ solar power providers By Lenie Lectura
@llectura
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he National Renewable Energy Board (NREB) has created a committee to focus on coming up with the best option on how solar providers who were not able to avail themselves of the feedin-tariff (FiT) can move forward. “At the NREB level, we created a committee to create options on stranded solar, on what alternatives could be availed [of],” NREB Chairman Jose Layug Jr. said. Among the options that could be considered are, “maybe, another round of bidding or public auction, though not necessarily in the form of FiT”. Also, he cited, “a subsidy scheme based on marginal cost so they can continue to operate without shutting down”. The committee, he said, is currently working on the numbers in its proposal before this is presented to the Department of Energy (DOE). “Then we submit this to the DOE for approval,” Layug said. The NREB is the advisory body tasked for the effective implementation of renewable-energy (RE)projects in the country. The DOE is the agency that crafts the policy for the RE sector. Meanwhile, the Energy Regulatory Commission (ERC) sets the FiT rates. Under the FiT system, RE developers of emerging renewable sources are offered a fixed rate per kilowatt-hour (kWh) of their exported electricity. In July 2011 the DOE approved a solar-installation target of 50 megawatts (MW), to which the Energy Regulatory Commission (ERC) granted a guaranteed FiT rate of P9.68 per kWh. When the DOE increased the target in April 2014 to 500 MW, the ERC lowered the rate to P8.69 per kWh. The new rate is applicable until the target is reached, but only for projects that qualified on March 15, 2016. However, the installation target was oversubscribed by 390 MW. Energy Secretary Alfonso G. Cusi has already declared that he will no longer allow another round of FiT being sought by RE developers, particularly by solar players that failed to qualify in the second round of solar FiT. A majority of the “stranded” solar farms without a guaranteed FiT were built in Negros where the transmission facility is unable to handle the new power capacity.
Nontariff measures hinder AEC realization, ADB economists say By Cai U. Ordinario
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@cuo_bm
espite making headway in bringing down tariffs, the region continues to struggle in realizing the Asean Economic Community (AEC) due to nontariff barriers (NTBs), according to the Asian Development Bank (ADB). This was based on the joint blog post of Jayant Menon, ADB Economic Research and Regional Cooperation Department lead economist for trade and regional cooperation; and Consultant Anna Cassandra Melendez on Monday. Menon and Melendez said that, amid the reduction of 96 percent of Asean member-states (AMS) tariff lines to zero, NTBs across the region increased to 5,975 in 2015, from 1,634 in 2000. “The achievements in tariff liberalization have been offset by the rise in nontariff measures,” the authors said. “There are also challenges to tackling barriers to trade in services. AMS have more restrictive services policies in general than any other region in the world, except for the Gulf states.” Apart from rising NTBs, the authors also said the Asean has failed in
addressing labor-mobility concerns, particularly in including unskilled labor in the region. Menon and Melendez added there have been mutual recognition agreements reached in eight professional qualifications. However, these only cover 1.5 percent of Asean’s total work force. The authors also said there have been delays in the implementation of the ratification of agreements and their alignment with national laws. “Pursuing behind-the-border reforms and policy harmonization has proven the most difficult. Seeking uniformity in regulatory rules remains challenging, given the widely different levels of development and often clashing national interests,” they added. Menon and Melendez said, however, that the AEC Blueprint 2025 has tried to address difficult reforms, which include reducing NTBs, simplifying rules of origin and deepening trade-facilitation measures. The new blueprint also aimed to raise productivity through innovation, technology, humanresource development and enhanced participation in global value chains, among others. It
also supports micro, small and medium enterprises (MSMEs). But the “real test” of the AEC implementation is how soon and to what extent its ideals and blueprint are implemented on the ground. “Asean has a long history of issuing declarations, action plans and frameworks that are not always translated into decisive and expedient actions,” the authors added. In May Yasuki Sawada, ADB Economic Research and Regional Cooperation Department chief economist and director general, said more open trade helps improve intra-Asian trade that has been on a decline. This includes the reduction of nontariff measures (NTMs) which, if left unchecked, can become NTBs to trade and prevent the free flow of goods in the region. These include sanitary phytosanitary measures, technical barriers to trade, taxes and other similar trade regulations. PIDS senior research fellow Erlinda M. Medalla and project development officer Melalyn C. Mantaring earlier said NTMs could be justified for different reasons, such as health, security, environment and consumer protection.
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Sona 2017
In-your-face address, protests, garb Text & photos by Jovee Marie N. dela Cruz
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@joveemarie
hile State of the Nation Address (Sona) attendees were in their usual glitz and glamour, some went beyond the superficial and wore symbolic attires at the red carpet. Outside the Batasan, meanwhile, two faces of protests were again on display. And the President would not be cowed.
Duterte, true to his confrontational nature, talked to protesters outside the Batasan minutes after delivering his second Sona, sharing to them his frustration over the “attempts” on his life when his security escorts were attacked on different occasions recently, while left-leaning groups were demanding that the peace talks be continued. Duterte, amid shouts and chants of slogans from protesters, said for the peace talks to resume, there should be mutual respect. The President had already said he is dropping the peace talks with communist rebels. “If you don’t want to respect me, that’s what I will give you; you forget about me. You don’t intimidate me,” Duterte told activists. But while the President’s speech both inside and outside the session hall displayed his in-your-face style anew, the attires of the attendees also directly showed their advocacies and concerns. Deputy Speaker Bai Sandra Sema of the First District of Maguindanao led womanlegislators in wearing the Mindanaoaninspired Inaul to reflect concerns over the conflict in Mindanao. Sema said Inaul, a fabric woven by a great race, is synonymous with Maguindanao. “It is a symbol of royalty of a great nation that once ruled a huge part of Mindanao— if not all of Mindanao,” she said. Inaul was worn by the royalties of Maguindanao as they moved around their vast territory through the riverways that served as the highways of the olden days, she added. At present, Sema said the Inaul does not only represent the rules of the sultanate of this magnificent land, but has expanded its meaning to amplify the greatness of the
people of Maguindanao. “Like a single thread of cotton or silk, or even gold, which is weak alone but strong when weaved together with another, Maguindanaoans seldom act individually, for they believe that in unity there is strength,” she said. The lawmaker added that Inaul represents how Maguindanaoans preserve their inheritance, strengthen their unity, nourish their culture, defend their land and share their bounty. To show her ardent support for the fight for regularization of contractual workers, Party-list Rep. Emmi A. de Jesus of Gabriela Women’s Party (GWP) wore a barong bearing a “Regular Jobs Now” beadwork in Monday’s Sona. De Jesus is the principal author of House Bill 1045, or the regular employment bill, a measure that seeks to ban contractualization. “Gabriela conveys its full support to mounting calls for the regularization of endo workers, especially as thousands of workers from Mindanao and other regions are converging along Commonwealth Avenue today to prod President Duterte to end contractualization, as what was promised during the election period,” she said. De Jesus’s barong was created by Ruel Rivera from Marikina, while the beadwork was done by Gabriela Youth members and BS Clothing Technology students Kat Estrella and Marianne del Rosario from UP Diliman. Party-list Rep. Arlene D. Brosas, also of GWP, meanwhile, was in a black dress created by activist Anna Vania Fatallia and handpainted by former political prisoner Voltaire Guray with a “No To Martial Law” artwork, depicting the people’s “resistance” to the creeping authoritarian rule.
Various militant groups march along Commonwealth Avenue in Quezon City. NONOY LACZA
PARTY-LIST Reps. Emmi A. de Jesus (left) and Arlene Brosas of Gabriela
PARTY-LIST Reps. Antonio Tinio (left) of Act Teachers and Carlos Isagani Zarate of Bayan Muna
Sen. Loren B. Legarda wore an ethnic-inspired dress with an off-shoulder cream top and a full-length red and brown skirt patterned with tribal decorations. Rep. Vilma Santos-Recto of the Sixth District of Batangas stunned in a multicolored ethnic dress covered with a translucent off-white bolero. Meanwhile, other law makers and guests still opted to don glamorous outfits amid the simplicity of the event. This, despite the appeal of Speaker Pantaleon D. Alvarez of Davao del Norte to attendees to wear simple or business attire as dress code for the guests of the annual event. Heart Evangelista, a celebrity and wife of Sen. Francisco G. Escudero, wore a navy
blue and gold-striped blazer with a pair of navy blue pants. Ilocos Norte Gov. Imee Marcos came in a rich purple barong-like blouse embroidered with golden diamond patterns with matching metallic gold pants.
Protests
However, unlike the President’s first Sona, effigies were burned by militant groups, while pro- and anti-administration rallies were held by various organizations in the Batasang Pambansa grounds. GWP members marched to once more bring forward women’s demands for regular jobs and homes. De Jesus and Brosas met with women
from various sectors and urban-poor communities to receive a letter that they hope to hand over to the President. “Duterte promised job creation and inclusive growth. We were moved by his very strong pronouncements against oligarchs and his consistent declaration of putting an end to contractualization. But one year into his administration, the practice of endo still prevails and, worse, this was even legitimized with its DO [department order] 174. President Duterte is nowhere near fulfilling his promise,” de Jesus said. “There is no inclusive growth. There is no job creation; 16.22 million women are shut out of the labor force. The economy remains backward and fails to employ women in productive sectors,” she added. Party-list Rep. Ariel B. Casilao of Anakpawis and other Makabayan Coalition lawmakers marched with about 7,000 farmers coming from the Southern Tagalog, Central Luzon and the Mindanao regions to demand genuine agrarian reform, nationalist industrialization, a stop to all-out war in the countryside and end to martial law in Mindanao. Other groups also expressed their demand for housing, holding Duterte to his word against any demolitions without consequent relocation with various government projects threatening to displace them from their communities. Also, Anakbayan joined the people in massive protest actions expressing indignation against the extension of martial law in Mindanao, the President’s long list of “broken promises, and his regime’s triple wars of death and destruction”. “We are one with the Filipino people in strongly condemning Duterte’s genocidal ‘war on drugs’ that has killed an estimated 12,000 people. We strongly oppose his regime’s disastrous ‘antiterror war’ that has led to the destruction of Marawi. We denounce his ‘all-out war’ against the revolutionary movement,” the group added. Meanwhile, an estimated 50,000 people from different groups marched to the Batasang Pambansa Complex on Monday to express their support to the Duterte administration. These groups include Kilusang Pagbabago, led by incoming Office on Participatory Governance Undersecretary Penpen Libres, Kilusang Pagbabago Metro Manila Movement, Federation of Business and Service Organizations, Citizen Crime Watch, Guardians Brotherhood and Hugpong Federal Movement of the Philippines.
Duterte wants land-use law, strict mining rules Senate told Continued from A1
With this, the President urged lawmakers to ensure the quick passage of a national land-use policy, which the House of Representatives approved in May. “I am appealing to all our legislators to immediately pass the National Land Use Act to ensure the rational and sustainable use of our land and our physical resources, given the competing needs of food security, housing, businesses and environmental conservation,” he said. House Bill (HB) 5240, or the National Land Use and Management Act of the Philippines, intends to classify land use into four functions: protection of land use; production-land use; settlements development; and infrastructure development. “Ours is a rich country. Wealth this country is endowed with [is] a gift from God to be utilized for the [people’s] welfare and the common good,” the President said. Under HB 5240, a National Land Use Policy Council, to be headed by the socioeconomic planning chief, will be created to serve as the policy-making body for land use and management. The Chief Executive also instructed government agencies “to look into and act accordingly” on extreme weather conditions, such as long dry spells, that threaten
President Duterte (center right) gestures as he addresses thousands of protesters following his State of the Nation Address outside the Lower House on Monday in Quezon City. AP/Bullit Marquez
food production in Mindanao. He said the climate problem in the island “will cut across all classes and all sectors of society and eventually affect the entire country”. The President again blamed mining operations for “poisoning” farms and the destruction of watersheds, forests and aquatic resources. He said the protection of environment is a “nonnegotiable” policy of his government and not even the P70-billion annual revenue from mining can convince him to think otherwise. “You have gained much from mining. We only get about P70 bil-
lion a year, but you have considerably neglected your responsibility to protect and preserve [the environment],” the President said. To this, Duterte ordered mining firms to conduct restoration and rehabilitation drives in mining areas, on top of providing health and livelihood assistance to the affected communities. A self-proclaimed antimining advocate, he said mining has taken too much of a toll on rivers and streams from which fishermen make a living. Duterte added communities in mining areas were reduced to dumpsites after
mining operations. The Chief Executive then warned mining firms to immediately act upon the destruction they wrought on rural places. “You have to come up with a substitute to either spend to restore the virginity of the [natural] resources or I will tax you to death.” The President also instructed mining firms to declare their correct income and pay their correct taxes, or else, “it will be their undoing and eventual end”. He then ordered local government units to assess mining operations under their watch “without fear or favor”. Taking a cue from his self-pro-
fessed leftist tendencies, Duterte said it is high time for the Philippines to industrialize under the context of a growing economy. “I call on our industrialists, investors [and] commercial barons to put up factories and manufacturing establishments right here in the Philippines to process our raw materials into finished products,” he said. “At this point in my administration, if possible, we shall put a stop to the extraction and exportation of our mineral resources to foreign nations for processing abroad and importing them back to the Philippines in the form of consumer goods at prices twice or thrice the value of the original raw materials foreign corporations pay for them,” the President added. National industrialization, which Duterte seems to be talking about, is a primary agenda of progressive groups and is one of the socioeconomic reforms the National Democratic Front is pushing for in the peace table. Under national industrialization, the country will veer away from its purported import-oriented, exportdependent policy. However, the President said the extraction and utilization of natural resources must not be conducted at the expense of the environment. “Responsible, regulated and sustainable development is what we advocate and require.”
to prioritize tax package
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resident Duterte personally asked the senators to prioritize the passage of the first package of his administration’s Comprehensive Tax Reform Program (CTRP). “The fate of the tax reform is now in the hands of the Senate. I ask the Senate to support my tax reform in full,” the President told lawmakers during his second State of the Nation Address. According to the President, the passage of the tax-reform bill is needed to fund the proposed P3.7-trillion national budget for 2018. Duterte said the benefits of the changes in the tax system will immediately felt by the poor. “The poor and the vulnerable are in the heart of tax reform.” Duterte, meanwhile, commended the House of Representatives for passing the CTRP. The President has certified as urgent the tax-reform measure. In an interview with reporters, Senate Committee on Ways and Means Chairman Juan Edgardo M. Angara said his panel will submit to the plenary its new version of the tax reform by September. He said his panel is now carefully scrutinizing the tax package, particularly the imposition of excise taxes on sugar-sweetened beverages (SSBs) and petroleum. Before adjourning in May, the lower chamber approved House Bill 5636, which seeks to lower personal income-tax rates, expand the value-added tax base, adjust excise taxes on petroleum and automobiles, impose excise tax on SSBs and ease the rates of estate and donor’s taxes.
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Tuesday, July 25, 2017
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WH signals acceptance of Russia sanctions bill
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ASHINGTON—The White House indicated last Sunday that President Donald J. Trump would accept new legislation curtailing his authority to lift sanctions on Russia on his own, a striking turnaround after a broad revolt by lawmakers of both parties who distrusted his friendly approach to Moscow and sought to tie his hands. If it passes, as now seems likely, the measure will represent the first time that Congress, with both houses controlled by fellow Republicans, has forced its will on Trump on a major policy matter. That it comes on an issue as fraught as Russia illustrates how investigations into possible collusion between Moscow and Trump’s team during last year’s election have cost him politically. The legislation may also have long-term consequences for the US relationship with Russia and the power of the presidency. Once sanctions are written into law, they are much harder to lift, even long after the circumstances prompting them have changed, which is one reason European allies opposed the bill. And presidents from both parties have
long resisted Congress’s inserting itself into the process of determining foreign policy through mandatory sanctions. But Trump found himself in a no-win position, as lawmakers eager to punish Russia for its interference in the election and its aggression toward its neighbors dispensed with the usual partisan divide. Trump, who has made it a priority to establish warm relations with President Vladimir Putin of Russia, lashed out in anger at both parties last Sunday. “As the phony Russian Witch Hunt continues, two groups are laughing at this excuse for a lost election taking hold, Democrats and Russians!” Trump wrote on Twitter. He then added: “It’s very sad that Republicans, even some
that were carried over the line on my back, do very little to protect their president.” The outburst contrasted with the efforts of his staff to argue that the sanctions measure had been improved. With little chance of blocking it, the White House was left to declare that changes to the original legislation made in an agreement announced over the weekend were enough to satisfy the president’s concerns. “The administration is supportive of being tough on Russia, particularly in putting these sanctions in place,” Sarah Huckabee Sanders, the new White House press secretary, said on This Week on ABC. “The original piece of legislation was poorly written, but we were able to work with the House and Senate, and the administration is happy with the ability to do that and make those changes that were necessary, and we support where the legislation is now.” Still, there seemed to be confusion among the president’s advisers. Anthony Scaramucci, the new W hite House communications director, said on another show that the president had not decided whether to sign the measure. “You’ve got to ask President Trump that,” he said on State of the Union on CNN. “It’s my second or third day on the job. My guess is he’s going to make that decision shortly.” He added, “He hasn’t made the decision yet to sign that bill one way or the other.” That seemed mainly to reflect
the fact that Scaramucci was getting up to speed in his new role. “My bad,” Scaramucci said by text, when asked about the different comments. “Go with what Sarah is saying as I am new to the information.” Privately, other W hite House officials said that, although the president wou ld not publicly commit to signing the bill until seeing the final version, they saw no politically viable alternative if it arrived at his desk as currently written. So Sanders seized on the changes made to lay the predicate for his expected signature. In reality, while the changes made the measure somewhat more palatable to the White House and to energy companies that objected, they mainly provided a way for the president to back down from a confrontation he was sure to lose if the sanctions bill reached the floor of the House. The Senate passed the original version of the bill, 97-2, and the new version, which also includes sanctions on Iran and North Korea, may come to a vote in the House as early as Tuesday. “In the end, the administration will come to the conclusion that an overwhelming majority of Congress has, and that is that we need to sanction Russia for their meddling in the US election,” Sen. John Thune, Republican-South Dakota, said on Fox News Sunday. “That, I think, will pass probably overwhelmingly
again in the Senate and with a veto-proof majority.” S e n . B e nja m i n J. C a rd i n , Democrat-Maryland and a longtime leader in pressing for more sanctions on Russia, particularly for human rights abuses, put it bluntly on the same program. “If he vetoes the bill,” Cardin said, “we will override his veto.” Russia has bristled at American sanctions for years, particularly since the United States began imposing them under President Barack Obama in 2014 after Moscow’s annexation of Crimea and intervention in eastern Ukraine. Donald Trump Jr., the president’s eldest son, said Russian visitors with Kremlin ties raised separate human rights sanctions at a meeting during last year’s campaign, and his father said Putin raised them with him this month during a summit meeting in Germany. The K remlin said over the weekend that it took an “extremely negative” view of the new congressional measure but sought to dismiss the impact of its provisions. Russian media outlets noted last Sunday that the bill appeared less severe than feared. Vesti Nedeli, the flagship news program of Rossiya 1, a stateowned television channel, gave only a brief summary of the new legislation, focusing instead on the Obama administration’s seizure last December of two Russian diplomatic compounds in Maryland and New York. New York Times News Service
Small businesses split over Republican health plans
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mall-business owners have been some of the most vocal opponents of the Affordable Care Act (ACA). One trade group fought the overhaul all the way to the Supreme Court. But for many solo entrepreneurs and freelancers, the seeming collapse of the Senate’s efforts to repeal and replace the law came as a relief. Sarah McCarthy, 39, a talent agent in Los Angeles, said President Barack Obama’s health-care law allowed her to start her own business. She opened her company in 2013, and for the first two years, her income was low enough that she qualified for subsidized coverage through the state exchange started after the law. That allowed her to put more money into building her business. She now employs a part-time assistant and earns enough to pay the full cost of her health insurance. She fears that the health-care law’s elimination would force her or her husband, a self-employed photographer, to work at a large company to gain affordable health coverage for them and their two daughters. “Being able to buy health insurance that didn’t completely break us financially was key to our ability to take the risk and become entrepreneurs,” McCarthy said. Her opposition highlights a growing schism about the ACA among smallbusiness owners—a split exposed as Republicans have pursued reversing much of the law in recent months. The divide also points to an unexpected outgrowth of the Republican agenda in Washington: As lawmakers pushed their plans, public support for the ACA grew from new corners. With so many forces aligned in opposition to the Senate’s proposed changes, the views of small business owners have not been a decisive factor. But the enthusiasm that a growing number are voicing for the health-care law weakened the argument, often cited by Republicans, that small businesses had been harmed by it and need a rollback. Business owners with a few dozen or more workers often resent the cost and regulatory burden of complying with the law’s mandates, and many have backed the Republican efforts. Fo r t h o s e w h o e m p l oy o n l y themselves, however, some of the features of the ACA—like coverage for existing conditions and curbs
on prices— opened up coverage unavailable to them before the law. In addition, there is a vocal group of self-employed workers who are, like many people, paying higher premiums and deductibles because of the law. But some of them want lawmakers to adjust the law to address those higher costs, instead of repealing and replacing it entirely. Th e N a t i o n a l Fe d e r a t i o n o f Independent Business, a powerful industry lobbying group that was the plaintiff in the case that went to the Supreme Court, helped lead the smallbusiness effort, years ago, to fight the law. It dislikes the costs that complying with the law impose on businesses, and the mandate that individuals buy insurance. As the Senate took up its overhaul proposals, the trade group pressed hard for a full repeal—and then criticized lawmakers for not getting it done. “Small-business owners are deeply disappointed,” said Jack Mozloom, a spokesman for the group. “The high cost of health care has been the No. 1 concern for small-business owners for more than three decades. Obamacare made that problem worse, driving up costs and shrinking choices. The Senate had a chance to address the problem, and they blew it.” But as overhaul legislation advanced through Congress, many small-business owners became more vocal about their opposition to the changes. Other industry groups, like the Main Street Alliance and the Small Business Majority, championed their cause. Manta, an online small-business community that regularly studies the sentiment of business owners, found that a majority of those it surveyed in January said they wanted the law repealed during President Donald J. Trump’s time in office. A s ke d t h i s m o nt h a b o u t t h e Republicans’ Senate bill, far more people said they opposed it than supported it. (A majority of those same respondents said they approved of the job Trump has done as president.) Brent Messenger, head of community for Fiverr, a marketplace for freelancers, said members he had spoken with recently lined up about 2-to-1 against a repeal of the Affordable Care Act. Striking down the law, he said, “would be potentially catastrophic for the gig economy.” New York Times News Service
briefs 9 die in human-smuggling attempt in sweltering truck SAN ANTONIO—At least nine people died after being crammed into a sweltering tractor-trailer found parked outside a Walmart in the midsummer Texas heat, victims of what authorities said last Sunday was an immigrantsmuggling attempt gone wrong. The driver was arrested, and nearly 20 others rescued from the rig were hospitalized in dire condition, many with extreme dehydration and heatstroke, officials said. “We’re looking at a humantrafficking crime,” said San Antonio Police Chief William McManus, calling it “a horrific tragedy.” One US official said Sunday evening that 17 of those rescued were being treated for injuries that were considered life-threatening. Authorities were called to the San Antonio parking lot late-Saturday or early-Sunday and found eight people dead inside the truck. A ninth victim died at the hospital, said Liz Johnson, spokesman for US Immigration and Customs Enforcement. AP
Taliban claim deadly suicide attack in Kabul that kills 24 KABUL, Afghanistan—A suicide bomber rammed his car packed with explosives into a bus carrying government employees in the Afghan capital early-Monday, killing 24 people and wounding 42 others, Kabul’s police chief spokesman said. The Taliban claimed responsibility for the assault. The attack took place in a western Kabul neighborhood where several prominent politicians reside and at rush hour, as residents were heading to work and students were on their way to a nearby private high school, said Basir Mujahed, the spokesman. “The bomber attacked at one of the busiest times of the day,” the spokesman said. “There were traffic jams with people going to work and to the university and schools. Many of the shops had just opened.” AP
Zuma to survive no-confidence vote, top opposition MP says South African President Jacob Zuma is likely to defeat a motion of noconfidence, irrespective of whether there’s an open vote or secret ballot, as most members of the ruling party will close ranks around him, a senior opposition lawmaker said. The Democratic Alliance (DA), the biggest opposition party, filed the no-confidence motion in April after Zuma’s decision to fire Pravin Gordhan as finance minister prompted two ratings companies to downgrade the nation’s foreign-currency debt to junk. While Zuma has been implicated in several scandals and faces mounting opposition within the ruling African National Congress (ANC), only a handful of its lawmakers have publicly said they will defy a party instruction and vote for his ouster. “I’m not optimistic at all that the ANC will vote Zuma out, secret ballot or no secret ballot,” John Steenhuisen, the DA’s chief whip in parliament, said in an interview in Cape Town. Bloomberg News
Kenya presidency race narrows, run-off likely– pollsters predict The race for Kenya’s presidency between incumbent Uhuru Kenyatta and opposition leader Raila Odinga has tightened less than three weeks before election day, with polls showing both candidates lack the support to avoid a second-round vote. Odinga, a former prime minister, is backed by 47 percent of voters, while Kenyatta is at 46 percent, according to a poll by Infotrak released in the capital, Nairobi, last Sunday. A separate survey by Ipsos showed Kenyatta at 47 percent and Odinga with 43 percent, up one point from a May survey. A candidate needs 50 percent plus one vote and support from 25 of Kenya’s 47 counties to be declared the winner. “The outcome will depend on voters’ turnout, which side gets more people out on voting day,” Ipsos researcher Tom Wolf said at a media briefing. “If the opposition can do that, they can flip this and they can win.”
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Tuesday, July 25, 2017
A7
China’s ‘gray rhinos’ threaten its economy
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HANGHAI—Let the West worry about so-called black swans—rare and unexpected events that can upset financial markets. China is more concerned about “gray rhinos”—large and visible problems in the economy that are ignored until they start moving fast. The rhinos are a herd of Chinese tycoons who have used a combination of political connections and raw ambition to create sprawling global conglomerates. Companies, like Anbang Insurance Group, Fosun International, HNA Group, and Dalian Wanda Group, have feasted on cheap debt provided by state banks, spending lavishly to build their empires. Such players are now so big, so complex, so indebted and so enmeshed in the economy that the Chinese government is abruptly bringing them to heel. President Xi Jinping recently warned that financial stability is crucial to national security, while the official newspaper of the Communist Party pointed to the dangers of a gray rhinoceros, without naming specific companies. Chinese regulators have become increasingly concerned that some of the biggest conglomerates have borrowed so much that they could pose risks to the financial system. Banking officials are ramping up scrutiny of companies’ balance sheets. The turnabout for the first generation of post-Mao Chinese capitalists, once seen as exemplars of the country’s ingenuity and economic prowess, has been swift. Last year the chairman of Anbang, a fast-growing insurer that paid $2 billion for the Waldorf Astoria in New York, held court at the luxurious hotel, wining and dining American business leaders. Last month the chairman, Wu Xiaohui, was detained by the Chinese police, for undisclosed reasons. Fosun, run by a professed “Warren Buffett of China,” made multibillion-dollar deals for Club Med, Cirque du Soleil and other brands. The company was recently forced to deny speculation that its chairman, Guo Guangchang, who was briefly held by officials in 2015 for unknown reasons, was in custody again. Founded as a regional airline, HNA evolved into a powerhouse, with stakes in Hilton Hotels, Deutsche Bank and the airport ground services company Swissport. European regulators are scrutinizing the conglomerate, while one big Wall Street bank, Bank of America, has decided not to do business with HNA. Dalian Wanda went head-tohead with US entertainment giants, promising a year ago to defeat Disney in China. Now, the Chinese company is in retreat, selling off its theme parks and hotels. “The downside of these new companies is that there was no one with the political or regulatory strength who could control these companies,” said Brock Silvers, chief executive of Kaiyuan Capital, a boutique investment banking advisory service in Shanghai. The gray rhinos have a common characteristic: A lot of debt and many deals. For years, China’s banks readily doled out loans, eager to keep pumping money into the economy. They doubled down after the global financial crisis in 2008, to prop up growth and push down the value of the currency. The conglomerates, with their stellar reputations and strong profits, were at the front of the lending line. HNA has secured a $90-billion credit line from state-controlled banks. Anbang spent more than $10 billion in three years, deals that were financed mostly by selling wealth management products—opaque i nvest ment s prom i si ng h ig h rates and low risk. With state money in hand,
companies looked beyond their borders, at the urging of the government. During the past five years, Wanda, Anbang, HNA Group and Fosun have made at least $41 billion of overseas acquisitions, according to Dealogic, a research firm. T he cou nt r y ’s debt le ve l s soared. In 2011 total credit extended to private, nonfinancial companies was about 120 percent of economic output in China. It is now 166 percent. “ T he C h i nese gover nment played the role of an indispensable enabler,” said Minxin Pei, a professor at Claremont McKenna College in California who studies Chinese politics. “If you look at how they got so big, it’s all through taking on debt.” By 2015, China’s economy was losing steam. And the government, which had been looking for ways to reinvest all the dollars pouring into the country, suddenly needed to prevent all the money from flowing out. Beijing had to dip deep into its pockets to keep the currency from sinking. The government started taking a closer look at the most prolific deal-makers. Last December four big Chinese regulators, in a rare joint statement, warned about “irrational” investments in overseas real estate, entertainment and sports, calling the areas rife with “risks and hidden dangers.” Some of the conglomerates’ purchases appeared to fit that description. Wanda paid a hefty $3.5 billion last year for Legendary Entertainment. The studio had produced blockbusters like 300 and Godzilla only to follow with flops like Warcraft and The Great Wall. Fosun bought Britain’s Wolverhampton Wanderers Footba l l Club. It was among a number of Chinese deals for soccer teams, including AC Milan, Inter Milan and FC Sochaux. Anbang was in a protracted battle for the Starwood hotel chain, bidding up the price and drawing scrutiny. It eventually walked away from Starwood, which Marriott purchased for $13 billion. In recent months, the political and regulatory environment has quickly shifted. Chinese officials have also become preoccupied with preventing any disruption to the Communist Party’s next congress, where the leadership is selected every five years. In the lead-up to the event this fall, the government is putting a premium on stability. The climate has put a chill on big deal-makers. Fosun has nearly stopped its frenetic deal-making. HNA’s purchases have also slowed. Both companies said their finances remain in good shape. “We maintain strict control over our financial risk and continue to improve our debt and cash flow,” Fosun said in a statement. HNA said its ratio of debt to assets had declined over the past seven years. “HNA Group is a financially strong company with a robust, diversified balance sheet that reflects our continued growth and engagement across the capital markets,” the company said. O n it s r e l at io n s h i p w it h Bank of America Merrill Lynch (BAML), the conglomerate said, “ With the exception of some modest asset-backed financing provided to some of our leasing subsidiaries, where business continues as usual, HNA Group has never engaged BAML for any significant business.” Wanda announced this month that it would sell $9.3 billion w or t h o f hot e l s a nd t he me parks to Sunac China, another real-estate developer. But then Wanda was forced to scrap the original deal and split the portfolio between Sunac and another Chinese buyer, R&F Properties. New York Times News Service
The bronze sculpture Charging Bull, sometimes referred to as the Wall Street Bull, stands in Bowling Green in the Financial District in Manhattan, New York City. Bloomberg
America First no more as IMF sees US fading as growth engine
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he world is leaning less on its biggest economy to sustain the global recovery, according to the International Monetary Fund (IMF).
The fund left its forecast for global growth unchanged in the latest quarterly update to its World Economic Outlook, released last Monday in Kuala Lumpur. The world economy will expand 3.5 percent this year, up from 3.2 percent in 2016, and by 3.6 percent next year, the IMF said. The forecasts for this year and next are unchanged from the fund’s projections in April. Beneath the headline figures, though, the drivers of the recovery are shifting, with the world relying less than expected on the US and the UK and more on China, Japan, the euro zone and Canada, according to the Washington-based IMF. The dollar fell to its lowest in 14 months last week as investors discounted the ability of President Donald J. Trump’s administration to deliver on its economic agenda after efforts by the Republican Senate to overhaul health care collapsed. The IMF estimated US growth at 2.1 percent this year and again in 2018, consistent with what the fund said on June 27 in its annual assessment of the US economy. In the April world economic
3.5%
The percentage of expansion of the world economy this year, up from 3.2 percent in 2016
outlook, it had forecast US growth of 2.3 percent and 2.5 percent, respectively, in 2017 and 2018. The economy expanded by 1.6 percent in 2016.
Fiscal policy
“U. S. g row th projections are lower than in April, primarily ref lecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated,” the IMF said in the latest report. In June the IMF said it had dropped assumptions of a boost to growth from Trump’s plans to cut taxes and increase infrastructure spending. Trump’s budget director, Mick Mulvaney, wrote
in July that the administration’s goal is “sustained 3-percent economic growth,” and he named the program “MAGAnomics” after Trump’s campaign slogan, “Make America Great Again.” Meanwhile, as the UK works through its Brexit negotiations, the IMF also chopped its forecast for UK growth this year by 0.3 percentage point to 1.7 percent on weaker-than-expected activity in the first quarter. “This forecast underscores exactly why our plans to increase productivity and ensure we get the very best deal with the EU, are vitally important,” the UK Treasury said in an e-mailed statement. “The fundamentals of our economy are strong.”
Strong China
Other countries are picking up the slack. The IMF’s projection for growth in China is 6.7 percent for 2017—the same as its estimate made on June 14 in an annual staff report, and up 0.1 point from April’s world economic outlook. For 2018 the fund sees Chinese growth at 6.4 percent, an increase of 0.2 points from three months ago. In the staff report, the IMF looked for average annual growth of 6.4 percent in China during 2018 through 2020. The fund raised its forecast for Japan to 1.3-percent growth this year, up 0.1 point from April, though it projects that the Japanese economy will slow in 2018 to
0.6-percent growth, unchanged from the April forecast. The euro area, as a whole will grow 1.9 percent this year, up 0.2 points from three months ago, and 1.7 percent in 2018, up 0.1 point. Spain appears to be the bright spot in both years. Canada w ill lead Group of Seven countries in growth this year, expanding at a 2.5 percent clip, up 0.6 points from April, the IMF said. However, the fund cut its projection for Canadian growth next year to 1.9 percent, down 0.1 point. While risks to the global outlook are “broadly balanced” in the near term, medium-term risks are tilted to the downside, the IMF said. “Rich market valuations and very low volatility in an environment of high policy uncertainty raise the likelihood of a market correction, which could dampen growth and confidence,” said the fund, which also cited China’s credit growth and protectionist policies as threats. T he IMF urged advanced countr ies w ith weak demand and low inf lation to continue s u p p or t i n g g ro w t h t h rou g h monetar y and f isca l pol ic y while cautioning central banks against raising borrowing costs too quickly. The fund said widespread protectionism or a “race to t he bot tom” on f i n a nc i a l and regulator y oversight would leave all countries worse off. Bloomberg News
Abe denies cronyism claims as support continues to fall
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a pa n e s e Prime Minister Shinzo Abe sought to stem a slide in his government’s popularity by reiterating his denials of cronyism and vowing to focus on the economy as he faced a special parliamentary hearing on Monday. Approval for Abe’s Cabinet sank to 26 percent, the lowest since he took office in 2012, in a poll conducted by the Mainichi newspaper over the weekend. Disapproval was more than twice as high at 56 percent. A separate poll by the Nikkei newspaper put support at 39 percent, down 10 percentage points from the previous month. Abe and his aides are facing two days of questioning over why one of his close friends received government backing to open the country’s first veterinary college
in decades. He is set to reshuffle his Cabinet early next month in a bid to claw back support and stay in his job at least until a party leadership election due in September 2018. “There is a saying that one should never allow room for doubts,” Abe told parliament. “Since this is a matter involving a friend of mine, it is understandable that the people would look at it with suspicion.”
Wine glasses
One opposition lawmaker produced a large print of a photograph showing Abe and Kotaro Kake, whose foundation is set to open the veterinary college, holding up wine glasses to the camera. Abe said the two had been friends since they were students and sometimes treated
one another to meals, but he denied that Kake had ever asked him for favors based on his political position and said he had never personally issued instructions on the project. While support for the main opposition Democratic Party has faded into the low single figures, Abe faces potential rivals within his own Liberal Democratic Party (LDP), raising questions over how long the government will continue with its economic program of unprecedented monetary easing, deregulation and limited attempts to restore fiscal health. “To restore the trust of the people, I think I must press ahead with my work with care and sincerity and achieve results,” Abe said. “The economy has been the administration’s top priority and it’s
our job to create employment and raise wages,” he added. More than 60 percent of respondents to the Mainichi poll said Abe shouldn’t serve a third term as party leader. Only months ago, Abe appeared to be within reach of becoming the country’s longest-ever serving prime minister. The long-dominant party changed its rules in March to allow him to serve a third consecutive term as party president, which could have taken him through to 2021. The ruling party suffered a historic election defeat in the Tokyo assembly election earlier this month. In a fresh blow, an LDP-supported candidate lost to a rival backed by opposition parties in Sunday’s election for mayor of the northern city of Sendai. Bloomberg News
news@businessmirror.com.ph
Banking&Finance BusinessMirror
Editor: Jun B. Vallecera • Tuesday, July 25, 2017
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Disbursement widens six-month deficit
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he national government (NG) reported a budgetary shortfall of P90.9 billion in June, or double the shortfall recorded in the same month last year of P45.2 billion, data from the Bureau of the Treasury (BTr) showed.
According to the BTr, the budget deficit reflects the 23-percent rise in expenditures amounting to P270.0 billion, against revenue growth of 2 percent for the month amounting to P179.8 billion. In the first six months, the government reported a budget deficit of P154.5 billion, higher by 28 percent, from the P120.3 billion in the January-to-June period last year. According to Budget Secretary Benjamin E. Diokno, the six-month shortfall showed a P10.7 billion surfeit in expenditures given the anticipated shortfall of only P143.8 billion. “This is more as a result of P16.6 billion undercollection in tax revenues. The higherthan-program deficit should not be a cause for concern. The annual deficit target is P482.1 billion. Expenditures are on the dot. Underspending, the plague of the previous administration, appears to be a thing of the past,” Diokno said in a statement. BTr data further showed revenues reaching P179.8 billion in June, or 2 percent higher year-on-year, compared to 2016’s P175.6 billion. Year-to-date collection amounted to P1.176 trillion, a 7-percent increase over
the previous year’s P1.101 trillion and only P16.6 billion or 1 percent below the program of P1.192 trillion. The Bureau of Internal Revenue (BIR) collected P131.2 billion in June, up 6 percent, compared to last year’s P124 billion. Year-to-date, BIR performance lags behind the program by 4 percent, or P33.7 billion. “BIR collections have grown consistently since the beginning of 2017, resulting in a P848-billion cumulative collection, which is P64.6 billion, or 8 percent higher, compared to the same period in 2016,” the BTr said. The Bureau of Customs collected P35.4 billion, roughly the same amount it had in June the year prior of P35.2 billion. Stronger collections in earlier months allowed for 10-percent growth in the year-to-date total of P210.3 billion in customs revenues, which was short of program by 3 percent. “For nontax revenues, total income collected by the BTr decreased by 8 percent year-on-year to P4.7 billion, due largely to lower remittance of NG Share in the Philippine Amusement and Gaming Corp. income that fell by P716 million. This was partially offset by higher interest income on NG de-
posits and collection of Foreign Exchange Risk Cover fees, which increased by P215 million and P243 million, respectively,” it added. BTr income in the first six months was down 17 percent to P52.7 billion. But, despite the contraction, the bureau still beat its six-month target by 54 percent to P34.2 billion. To date, the NG collected 90 percent of its P58.6 billion full-year target. Nontax revenue from other offices exhibited a year-on-year contraction of 28 percent, totaling P7.0 billion. Year-to-date revenue settled at P54.6 billion, reflecting 1-percent growth over 2016’s level of only P54.3 billion. Meanwhile, government expenditures continued its double-digit growth, showing a 23-percent increase to P270.7 billion in June 2017, compared to the P220.8 billion. Of the total, interest payments reached P19.3 billion, which rose by 9 percent from the P17.7 billion in 2016, while other expenditures totaled P251.4 billion, which expanded by 24 percent, from the 203.1 billion in June last year. “Part of the higher expenditure for the month can be attributed to the P35.5-billion budgetary support to government-owned and -controlled corporations, which has more than doubled year-on-year. In addition, releases to local government units is also up by P18.1 billion compared to last year,” the BTr added. For the month the government posted a primary deficit of P71.6 billion, more than double the amount posted last year of only P27.5 billion. This caused the first semester’s cumulative figure to also slip into a deficit of P2.9 billion. Rea Cu
Mighty, JTI sale up for PCC review By Rea Cu
@ReaCuBM
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he full collection of the civil settlement of the tax liabilities of Mighty Corp. will depend on how fast the approval of the sale of its assets to Japan Tobacco (Philippines) Inc. (JTI) is approved by the Philippine Competition Commission (PCC). Finance Secretary Carlos G. Dominguez III said Mighty Corp.’s offer to settle its tax liabilities for P25 billion will rise to around P30 billion, once the value-added tax (VAT) and other fees are included in the computation of the final settlement sum. This will be the largest sum of taxes collected ever from a single taxpayer in Philippine history. The date of full collection will depend on how fast the PCC approves the sale of Mighty Corp.’s assets to JTI whose largest shareholder, incidentally, is the Japanese
government. Mighty Corp. will be out of the cigarette manufacturing business from now on,” Dominguez said in a speech at the Davao Investment Conference held at the Lanang SMX Convention Center. The PCC is an independent quasi-judicial body created by law to promote and maintain market competition and a level playing field for business by checking anti-competitive practices. Under Section 3 of the implementing rules and regulations (IRR), parties to any merger or acquisition (M&A) are required to notify and seek prior approval from the Commission if the value of the transaction exceeds P1 billion. The Bureau of Internal Revenue (BIR) has already received the first tranche of Mighty Corp.’s settlement offer of P3.44 billion on July 20, according to the Department of Finance. Last week Dominguez said the receipt of the initial amount does not mean the govern-
By Butch Fernandez
@butchfBM
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enate leaders are backing an inquiry in aid of crafting remedial legislation to tighten internal controls of banks after a P900-million internal fraud that rocked Metrobank, following a series of glitches and skimming incidents in other big lenders. The proposed probe would help address last week’s revelation by Metrobank that an internal audit discovered a scheme allegedly perpetrated by one of its own executives who has been arrested and detained by the National Bureau of Investigation (NBI). Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla admitted the BSP was already investigating the matter, but expressed confidence it would not adversely impact Metrobank’s operation considering its stable financial profile. Calls for a legislative inquiry, however, are being fueled by the series of incidents that hit other major lenders before Metrobank’s case erupted. These included “a technical glitch” at Bank of the Philippine Islands, which wrongly debited sums from thousands of depositors for several days in June. It was followed by Banco de Oro Unibank, which warned its clients against skimming cases perpetrated by unscrupulous syndicates. Security Bank reported similar cases. Later, government depository Land Bank of the Philippines also encountered similar problems that disrupted servicing of some clients. Senate President Aquilino L. Pimentel III confirmed the Senate leadership fully supports an inquiry in aid of legislation to plug loopholes that enable fraudsters to illegally divert funds of bank clients. “Yes. Yes, we have to be vigilant with our banks, since the banking industry is imbued with public interest; especially now that the role of banks in our society has grown,” the Senate leader told the BusinessMirror. Pimentel III said depositors also need to be informed of new schemes perpetrated by hackers to avoid being victimized. “ATM [automated teller machine] hacking, internal fraud, etc., all these issues must be explained to the depositing public in terms they understand,” he added. Senate Majority Leader Vicente C. Sotto III also backed calls for a Senate inquiry to review bank controls. Asked if senators will also move to check adequacy of banks’ internal controls against fraud and other crimes, Sotto replied, “Yes, of course.” Sen. Francis G. Escudero, chairman of the Committee on Banks, Financial Institutions
and Currencies that will spearhead the inquiry into the spate of bank mishaps, indicated they have yet to fix a date after consulting with his peers and Central Bank officials. “I will consult with colleagues and BSP officials this week,” Escudero said in a text message to the BusinessMirror. NBI files charges, BSP investigates The NBI earlier filed charges of qualified theft, falsification of documents and violations of the General Banking Law against Metrobanks Vice President Ma. Victoria Lopez. As head of the bank’s corporate management services division, she dealt directly with large corporate clients, one of them being Universal Robina Corp. (URC). The NBI had said Lopez allegedly set up two bogus corporate loan accounts, disguising the fraudulent loans as drawdowns from a genuine P25-billion credit facility available to URC. The scam was tripped up by suspicious bank staff who verified the application with URC. The BSP promptly launched an investigation, even as Escudero’s counterpart, Rep. Ben P. Evardone of Eastern Samar, who chairs the House Committee on Banks, also served notice it will open an inquiry. On Friday URC, however, said in a statement it still trusted Metrobank: “We take this occasion to also reiterate our confidence with Metrobank as we continue to conduct regular, business-as-usual transactions with them.” For its part, Metrobank gave the Philippine Stock Exchange an update and issued a statement assuring the public it was on top of the situation and was actively cooperating with authorities. “Upon our own discovery, the bank immediately caused the arrest of the individual involved in this case, who has been detained by the authorities since Monday. “The bank is reinforcing its commitment to the highest standards of integrity and upholds the protection of its customers as its main priority. No customer has been affected in this incident. In the context of the Bank’s P 1.9-trillion financial resources, rest assured that we continue to operate business as usual for the bank and our customers. “The bank cannot further comment on the case as it has already been filed.” Espenilla affirmed all banks are required to put in place strict internal controls to prevent crime and untoward incidents that disrupt operations or harm clients. He said the BSP probe will focus on the internal systems at Metrobank, but remained confident that the lender’s financial stability—it earned P16 billion in 2016—will allow it to weather the crisis without affecting its clients.
Measuring your wealth by managing your net worth
ING names former PSE president as new country head
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NG Bank N.V. has announced that consuelo D. Garcia will retire as Country manager and head of clients of ING’s Manila branch, effective November 16. Hans B. Sicat, former president and CEO of the Philippine Stock Exchange Inc. (PSE), has been appointed as her successor. He will join the bank mid-August to ensure a smooth transition and will assume both roles upon Garcia’s retirement. Sicat headed the PSE for six years, until May 2017. He brings with him more than two decades of experience as an investment banker, having worked for Citigroup and its predecessor firms Citicorp and Salomon Brothers in the Philippines, Hong Kong and New York City. A trained mathematician and economist, Sicat has been involved in the global capital market for about three decades. He has held various external positions, such as independent director of Serica Balanced Fund and Master Fund (a hedge fund), member of Euromoney Institutional Investor Asia advisory board; independent director of the Philippine Dealing System Holdings Corporation; member of the board of trustee of Securities Investors Protection Fund; chairman of the emerging market working group of the World Federation of Exchanges; and executive in residence of the Asian Institute of Management. Garcia has been ING Bank’s country
ment has already formally accepted Mighty Corp.’s P25-billion offer. The finance chief further said that even if the government accepts the settlement, it does not preclude criminal charges the BIR may file against the homegrown tobacco firm “as criminal cases cannot be compromised”. He added future sin-tax collections of the government are expected to rise by an estimated P1 billion per month, which can be used to improve health-care facilities and pay for additional medicines, commodities and services that help prevent and control deadly diseases caused by tobacco use. Dominguez said Mighty Corp.’s offer to finally settle its tax liabilities after the BIR and the Bureau of Customs worked together to expose its tax-dodging practices shows that aside from tax reform, the government is bent on implementing improvements in tax administration to raise more revenues.
Senate to probe series of bank woes after Metrobank fraud
Garcia
manager and head of clients for almost nine years. She joined the Dutch financial institution in 1991 as head of Financial Markets, where she steered the bank to a dominant position in market making of Philippine global high yield and credit derivatives and as a top arranger for local debt capital markets. During her term as country manager, Garcia played a pivotal role in the divestment of the branch international private banking and assetmanagement businesses pursuant to the bank’s global strategy to focus on commercial and investment banking. She developed the Philippine business into an award-winning franchise, recognized consistently by other industry groups as the Top Fixed Income and Mergers and Acquisitions House. Garcia is a staunch and passionate advocate of good governance and integrity initiatives.
he net-worth statement provides a snapshot of your financial position as of a given time. It is an inventory of what you have and what you owe. If you are just learning how to manage your finances, the net-worth statement is a good starting reference in determining how much of your assets can be used to cover or fund your personal goals and the inevitable events or adversities in life. The components Assets can be classified as follows: n Liquid assets are cash and cash equivalents. These include cash on hand, money in your savings, checking and time deposit accounts, money market funds, and investments in bonds, balanced funds, and stocks in UITFs or mutual funds, government and corporate bonds. The cash surrender values of your insurance policies are also classified as liquid assets. n Nonliquid assets include real-estate properties, vehicles, artwork, jewelries and furniture. The value of these assets as of the date of the net-worth statement is the fair market value of these items or how much you are willing to sell them off at that time. Value references could be what the average prices of these assets are in buy-and-sell web sites and information you can derive from brokers and agents. Liabilities can be classified as follows: n Short-term loans are credit-card bills, car or motorcycle loans, salary and personal loans; n Long-term loans are housing loans and other long-term personal loans. Net worth is the difference between total assets and total liabilities. A positive
Eve Reyes Mercado
personal finance net worth means you have enough assets to pay off all your liabilities, while a negative net worth means you are in debt and will need to increase positive cash flow in order to pay them off. Net worth and cash flow The net worth statement has an iterative cause-and-effect relationship with the cash flow statement, another measure of the condition of your personal financial status in which details of cash inflow and cash outflow are listed and net cash flow calculated as their difference. The positive net cash flow for a given period can be used to acquire more assets or pay off liabilities, thus, increasing your net worth. An increase in net worth generates additional income sources from assets acquired or results to a decrease in cash outflow, thereby improving net cash flow. On the other hand, a negative net cash flow means you may need to liquidate some assets or increase your liabilities to fund cash outflow items, such as debts from loans, thus, decreasing your net worth. A decrease in net worth means an increase in liabilities is greater than the increase in assets (or, a reduction in assets is lower
than the reduction in liabilities). In this case, cash inflow could decrease and/or cash outflow could increase. Applying your net cash flow toward your net worth is a great way to increase assets without increasing liabilities or to decrease liabilities without increasing assets. Increasing your net worth through an asset increase will only work if the increase in assets is greater than the increase in liabilities. The same goes for trying to decrease liabilities. A decrease in what you owe has to be greater than a reduction in assets.
Significance and purpose Positive net worth, it being the measure of your wealth, will only be significant if it is there for a specific purpose, that is, to fund your or your family’s various personal financial goals. It is not a valid objective in life to keep increasing it, if doing so is not intended to fund any purpose. On the other hand, negative net worth should not dampen your spirits, but should inspire you to set financial goals to turn it around. Monitor your net worth on a regular basis, say once or twice a year, to see how you are progressing in this aspect. The net-worth statement is an excellent gauge in telling you how far you have come in achieving your financial objectives. Eve Reyes Mercado is registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 63rd RFP program this July 2017. To inquire, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.
Agriculture/Commodities BusinessMirror
news@businessmirror.com.ph
Editor: Jennifer A. Ng • Tuesday, July 25, 2017
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PHL sugar output hits 2.485 MMT By Jasper Emmanuel Y. Arcalas
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@jearcalas
he country’s raw sugar output in the current crop year has already reached 2.485 million metric tons (MMT), 11.03 percent higher than the 2.238 MMT recorded in crop year (CY) 2015-2016. The latest data from the Sugar Regulatory Administration (SRA) showed that as of July 9, the local sugar industry has produced 49.691 m i l l ion 50 - k i log r a m (Lkg) bags. Sugar production as of July 9 is nearing the SRA’s revised target of 2.5 MMT for CY 2016-2017, which will end on August 31. It is also the highest since CY 1976-1977, when output reached 2.685 MMT, according to data from the Philippine Sugar Millers Association Inc. SRA Administrator Anna Rosario V. Paner earlier said local sugar production could breach 2.5 MMT due to the expansion in areas planted with sugarcane. Data from the SRA showed that sugarcane areas in the current CY expanded by 1.87 percent to 419,207 hectares, from 411,502 has last year. The volume of sugarcane milled in CY 2016-2017 reached 27.8 MMT, the highest posted since CY
2008-2009 and is 19.55 percent higher than the previous year’s record of 23.254 MMT. However, milling recovery rate in the current crop year was down by 7.22 percent to 1.80 Lkg/ton, from 1.94 Lkg/ton a year ago. Data from the SRA also showed that the mill-site price of sugar continued on its downward trend and skidded to its 17-week low. As of July 9 the mill-site price of sugar averaged P1,344/Lkg, nearly 25 percent lower than the P1,784.92/Lkg recorded in September 2016. Of the total sugar output for the current crop year, 74 percent was allocated to the domestic market, while 6 percent will be shipped to the US under a preferential trade scheme. The remaining 20 percent would be exported to other countries. Earlier, the US Trade Representative (USTR) announced that the Philippines was again granted the same tariff-rate quota (TRQ) allo-
File photo
cation of 142,160 metric tons raw value (MTRV) for fiscal year 2018. The USTR said the allocation was based on the country’s historical shipments to the US.
Water rationing seen as scarce rain, leaky pipes combining to dry up Italy
A view of the Tiber River, whose level is low due to the drought, during a warm and sunny day in Rome on July 23. Scarce rain and chronically leaky aqueducts have combined this summer to hurt farmers in much of Italy and put Romans at risk for drastic water rationing starting later this week. Giorgio Onorati/ANSA via AP
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OME—Scarce rain and chronically leaky aqueducts have combined this summer to hurt farmers in much of Italy and put Romans at risk for drastic water rationing as soon as this week. Sky TG24 TV meteorologists noted last Sunday that Italy had experienced one of its driest springs in some 60 years and that some parts of the country had seen rainfall totals 80 percent below normal. Among the hardest-hit regions was Sardinia, which is seeking natural disaster status. Farmers’ lobby Coldiretti last week estimated €2 billion ($2.3 billion) worth of damage so far to Italian agriculture. Dairy farmers are lamenting drops in milk production. Among those suffering are farmers growing canning tomatoes in the southeastern region of Puglia, wine grapes throughout much of Italy and those cultivating olives—all signature crops for the nation. Another afflicted area was the province in Parma, an area in north-central Italy renowned for Parmigiano Reggiano cheese and prized prosciutto. Rome’s water-supply worries have turned political. Last week the governor of Lazio region, which includes the Italian capital, ordered no more water drawn from Lake Bracciano, which supplies some of the Italian capital, because the drastically decreasing water level posed danger to the aquatic life of the lake, some 40 kilometers (25 miles) from the city. The lake used to be used only for backup water supply but recent years have seen it
being tapped on a regular basis. Rome water company Acea warned that with the lake eliminated for water supplies, drastic rationing loomed. Italian media said staggered water-supply shutdowns could last as long as eight hours daily in alternating neighborhoods and start as soon as Wednesday. Rome’s famed fountains risk being turned off. Since the city of Rome is a major shareholder in Acea, populist 5-Star Movement Mayor Virginia Raggi was feeling some heat. Michele Meta, a Democratic party lawmaker from Rome, demanded to know why Acea “doesn’t have other solutions besides rationing and staggering the capital’s water” supply? Mother Nature was blamed in good part. Rome had 26 rainy days in this year’s first six months, compared to 88 in the first half of 2016, with precipitation totals in those same periods more than four times higher last year than this year. But water-supply pipelines in the Rome area—famed in ancient Roman times for its aqueducts, segments of which still stand— are notoriously leaky. La Stampa daily reported last Sunday that water, energy and environment companies lobby Utilitalia analyzed companies serving roughly half of Italy’s population and concluded that the water-loss rate from inadequate infrastructure, often decades-old, ranged from 26 percent in the north to 46 percent in the central and southern parts of the country. AP
The Philippines was given the third-largest allocation of the total 1.117 million MTRV inquota quantity of the TRQ, next to the Dominican Republic and
Brazil, which received 185,335 M T RV a nd 1 52 ,6 91 M T RV, respectively. Countries authorized by the US to export sugar under the TRQ
scheme may do so at lower duties. The TRQ is the minimum amount to which the US committed under the World Trade Organization agreement.
19 bidders from Southeast Asia to vie for NFA rice-supply deal T he National Food Authority (NFA) on Monday said 19 suppliers from Southeast Asia have signified their interest to participate in the auction for 250,000 metric tons (MT) of imported rice required by the government. Of the 19 companies that will join the open tender on July 25, the NFA said 10 are from Vietnam, six from Thailand, two from Singapore and one from Myanmar. “Those from Vietnam are Vietnam Southern Food Corp. II; Gentraco; Gia International Corp.; Vietnam Northern Food Corp. [Vinafood I]; Phan Min Investment Production Trading Services Co. Ltd.; Hiep Loi Food Jsc; Thuan Minh Import Export Corp.; Wilman Trading; Thao Minh Chau Production Trading Co. Ltd.; and Tan Long Group Joint Stock Co.,” the NFA said in a press statement. “From Thailand, interested bidders are Ponglarp Co. Ltd.; Thai Hua Co. Ltd.; Capital Cereals Co. Ltd.; Asia Golden Rice Co. Ltd.; Thai Granlux International. Inc.; and Thai Capital Crops Co. Ltd.,” it added. Also keen on supplying the country’s rice requirement are Singaporean companies, Olam International Ltd. and Louis Dreyfus Co., and Myanmar-based Swhe Wah Yaung Agricul-
ture Production Co. Ltd., according to the NFA. The NFA has scheduled the proper bidding process on July 25. The government is spending P5.637 billion to import rice and prop up its dwindling buffer stock during the lean months, when rice harvest goes down significantly. “Reference price for the importation had been set at $451.08 per MT based on the foreign-exchange rate of $1=P50. Bids shall be priced in US dollars per MT based on Cost Insurance and Freight, Delivered at Place Free on Warehouse up to the designated NFA warehouse,” the NFA said. “Opening of the bids and award
of contract to a bidder shall be based on t he lowest ca lc u l ated responsive bid price on a per lot basis,” it added. On July 6 the NFA published the terms of reference (TOR) for the purchase and supply of 250,000 MT of 25-percent broken well-milled long grain white rice of omnibus origin under the government-to-private sector scheme. Under the TOR, the NFA said prospective bidders will vie for the imported volume on a lot basis. “Prospective bidders may bid for any of the lots, provided that the bid must be the minimum/maximum of the imported rice allocated per lot, but the maximum quantity to be awarded per supplier must not be higher than 50,000 MT,” it read. The NFA divided the delivery of the 250,000 MT of rice into two periods: August and September. The NFA said 120,000 MT of rice should arrive within August, while the remaining 130,000 MT should arrive by September. The agency said winning bidders will be subjected to postqualification evaluation on July 27 and 28. “If they qualify, the Notice of Award shall be issued on July 31, and a Notice to Proceed shall be issued on August 3.” Jasper Emmanuel Y. Arcalas
Cacao farmers get four hauling trucks from DA
D
AVAO CITY—The Department of Agriculture (DA) has distributed four hauling trucks amounting to P5.96 million to four farmer cooperatives and associations in Davao City. The distribution was in time for start of the School-on-the Air (SOA) on Cacao Production and Rehabilitation on Monday. The hauling trucks, amounting to P1.49 million each, were turned over to Biao Agrarian Reform Beneficiaries Cooperative (Barbco), Cacao Industry Development Association of Mindanao (Cidami), Lapuy Batallion Comprehensive Agrarian Reform
Beneficiaries Cooperative (Labcarbco) and Manuel Guianga Multipurpose Cooperative. DA-11 Director Ricardo Oñate said the provision of hauling trucks is necessary and vital to the buying and selling of cacao products. He added that the said beneficiaries can now expand their market to other provinces. As for the cacao commodity, Davao City has a total of 4,171.41 hectares of planted areas, wherein 2,508.16 hectares of which are harvested areas. A total of 1,298.47 hectares are for vegetative stage and 364.78 hectares were the newly planted areas.
Meanwhile, two hand tractors worth P994,000 each were also awarded to Gumalang Small Coconut Farmers and Workers Association and Agila Farmers Association. Agriculture Secretary Emmanuel F. Piñol stressed the need for mechanization in order to improve farmers’ income, production’s efficiency and reduce postharvest losses. The assistance aims to help farmers in Davao City to produce high-quality cacao and other high-value crops such as fruits and vegetables. “We will uplift the dignity of our farmers by giving full support to their needs,” Piñol said. PNA
A10 Tuesday, July 25, 2017• Editor: Angel R. Calso
Opinion BusinessMirror
editorial
Averting the worst water scenarios
P
resident Duterte has not yet opened the resumption of the joint session of Congress to report on the status of the nation when this was being written. So we do not know if he mentioned the state of this nation’s freshwater supply. If not, please heed our own simple message: It is time to get serious about saving water. The Department of Environment and Natural Resources (DENR) said even simple things, like the alulod system to harvest rainwater for nonpotable household use, can help a lot in averting a serious water shortage in the next few years. The revival of the alulod water-collection system, a practical and reliable method used by our ancestors, was suggested during the last presummit meeting on water held on July 12, which our reporter Jonathan L. Mayuga wrote about in a recent story. Under this traditional system, people harvest rainwater by simply placing a drum or basin at the end of the alulod for domestic uses, like flushing the toilet, watering the garden and washing clothes. We have been warned for years about an impending water crisis. Whether these worst-case scenarios will actually happen or not, we would do well to prepare for them. Our apathy could only make them come true. The Philippines is actually rich in water resources. The country has 421 river basins, 72 lakes and numerous streams and creeks. As an archipelago, we have control over 479 billion cubic meters of ground and surface water, according to the DENR. Theoretically we should have enough water for both our ecological and economic needs, but this is not the case, even now. According to the Annual Poverty Indicators Survey in 2014, 15 million Filipinos still have to rely on unsafe water for their everyday drinking, cooking and hygiene needs. In May 2016 a total of 18 provinces have remained under a state of calamity due to El Niño, which caused severe water shortages and reportedly destroyed P6 billion worth of crops in the Philippines. An Environmental Management Bureau study revealed that 66 percent of the country’s 611 classified inland bodies of water were deemed unsuitable for human consumption. We obviously haven’t invested enough to deliver our water to where it is needed. We have also failed to recognize the value of water. Improper waste disposal due to the absence of waste-management and sewagetreatment facilities in many areas have led to the massive degradation of our water sources. How many countries, for instance, would have loved to have a Pasig River, which was once teeming with aquatic life and whose water was once potable, that is before it became a convenient dumping ground for our people’s waste? We need to take better care of our water sources and reform how they are governed. No less than the President should ensure that all the agencies, institutions and groups, and all the laws and regulations concerned with water-resource management are able to work effectively to avert a water crisis and ensure sustainable water supply and sanitation. Duterte should require specific water-conservation measures from water agencies like the National Water Resources Board, the National Irrigation Administration, the Metropolitan Waterworks and Sewerage System, Manila Water, Maynilad and other water distributors. Congress must also make sure our water agencies are adequately funded to do their jobs well. It should use its significant oversight functions to monitor the agencies’ performance. New laws and regulations could also be passed imposing heavy penalties on wasting water. Private concessionaires could offer incentives, like water savings rebates, to encourage businesses and residents to conserve water; and free consultations to help them figure out how to do so, such as checking for leaks and providing specific recommendations for water use. Manila Water and Maynilad must also significantly reduce their own systems losses or water leaks. The President should also order the Department of Science and Technology to look at what technologies can be used to treat and clean our water resources that have been polluted so we can use them. But it’s not just the government’s job. We need to involve everyone in water management because water is fundamental to life and health, as well as our nation’s economy. For starters, let’s stop polluting our lakes and rivers with our wastes and let’s use the water we have more efficiently. The threat of water scarcity affects us all and we can’t take a business-as-usual approach.
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THE Entrepreneur Continued from A1
B
efore the elections in May 2016, I was often asked about the biggest issues that the new administration would face. I listed five: the dispute with China over the Spratly Islands, peace and order, illegal drugs, the Muslim secessionist movement, and the communist insurgency. President Duterte has confronted all of these issues during his first year in office. Among the five issues, I think his approach to the China dispute earned him the respect of other heads of states and, as an expert said, served as prescient for other countries in Southeast Asia. His approach to the China issue involved a more comprehensive move. He declared the adoption of an independent foreign policy. As I explained in a previous column, an independent foreign policy is not a pro-US foreign policy or a pro-China foreign policy, but a pro-Filipino foreign policy. We can be friends with all countries because it serves our interest to do so. Some people call it the pivot to China, but it is actually just
expanding friendly diplomatic relations, which used to be heavily inclined (and dependent) on the United States, to other countries like China and Russia. If the US and China, which are rivals in the global arena, can have strong economic ties, why can’t the Philippines and China? In a BusinessMirror report published earlier this month, Philippine Ambassador to China Jose Santiago L. Sta. Romana said that, instead of continuing the previous administration’s approach of mak ing the dispute over the Spratly Islands at the center of bilateral relations, the President decided on a twopronged approach by putting the contentious issues on one track and the noncontentious issues on another track.
PSE: Bananas and mangoes
Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos Dennis D. Estopace
Online Editor Social Media Editor
Chairman of the Board & Ombudsman President VP-Finance VP Advertising Sales Advertising Sales Manager Group Circulation Manager
Manny B. Villar
The contentious issues were sovereignty, maritime jurisdiction, China’s nine-dash line claim as well as the other claimants to West Philippine Sea, and the UN Permanent Court of Arbitration decision that favored the Philippines, but that China did not accept. The two-pronged approach, according to Ambassador Sta. Romana, enabled both sides to improve relations in areas of common interest, like trade and investments. He added that because of the two-pronged approach, tension between the two countries eased, despite continuing differences on the Spratlys issue. Filipino fishermen, who were barred from fishing in the Scarborough Shoal, are now back to their traditional fishing grounds. China also lifted the blockade to the military supply line to the contingent of Filipino soldiers stationed on a grounded ship in Ayungin Shoal, as well as the supply lines to Pag-asa and other features occupied by the Philippines. Differences remain, but the two countries are now able to talk about them in an amicable and civil manner, according to Sta. Romana. At the same time, the Philippines and China continue to engage in a wide range of non-contentious issues—trade, economics, infrastructure, science, culture and the whole range
of areas, which were “frozen in the past.” Since the President’s first official visit to China last year, we continue to see the benefits flowing into our economy. China has also provided assistance in fighting the Maute terrorists in Marawi and has joined the Philippines in the campaign against terrorism. Under Duterte’s approach, the Philippines maintains its claims over parts of the Spratly Islands, while developing relations with China at the same time. Amid all these, Sta. Romana pointed out that the Philippines has not lost an inch of territory. In an online report, titled “PRRD’s independent foreign policy benefits country—experts”, the magazine cited former ambassadors Jose Romero and Alberto Encomienda and economist George Siy as saying the “normalization of diplomatic ties and direct negotiations with China has not only boosted mutually beneficial win-win bilateral trade, economic and tourism exchanges, but also helped stabilize the Asian region and minimized tension.” T he President’s innovative move in addressing the China issue puts him in the same league of world leaders. That is why I rate him “excellent” in his first year. For comments, e-mail mbv.secretariat@ gmail.com or visit www.mannyvillar.com.ph.
T. Anthony C. Cabangon
Editor in Chief
Senior Editors
Duterte’s innovative approach to China issue
John Mangun
I
OUTSIDE THE BOX
f you want to own and operate a banana plantation, it is probably best not to get your knowledge from the book Mango Farming Guide for Beginners. For one thing, the average life of a banana plantation is about 30 years. Mango trees are long-lived, with some specimens still bearing fruit after 300 years. Yet, when it comes to stock-market investing, that is what many investors are doing.
There are some fairly good reads about how to make money on the Philippine Stock Exchange (PSE). The problem is that they all start with the assumption that “bananas” and “mangoes” are fairly much the same. Except banana “trees” are not trees, but are herbaceous flowering plants. And a banana is not a fruit but a berry, while the mango actually is a “stone fruit”. Bananas and mangoes are considered fruits in the
same way the PSE and the New York Stock Exchange (NYSE) are considered stock markets. But that is where the comparison should end. We could spend time talking about the differences in the trading procedures between the PSE and the NYSE, but that would be like talking about the amount of water needed to cultivate bananas and mangoes. It is important but not critical, because you just have to live with those differences. You
can’t grow bananas in a desert, yet mangoes are commercially cultivated in the relatively dry Andalusia area of Spain. Where we make the mistake of stock-market comparisons is more about assuming what factors move prices on one market will also move the other. As a comparative example, the Philippine peso to US dollar exchange rate is almost 100 percent determined by actual physical demand for one currency or the other at any given time; dollars needed for international trade and money inflows such as from overseas remittances. We think that stock prices go higher or lower depending on whether investors want to own the stock or not. That makes sense. But in the real world, it is a logical fallacy. Ducks are birds. Ducks swim in the water. Chickens are birds. Conclusion: Chickens swim in the water. Here is what has been moving stock prices in the US over the past eight years.
According to research from Credit Suisse, if you look at the total NYSE market capitalization—the value of all listed issues—financial institutions like banks have sold off a cumulative net 7 percent of the value. Foreign cumulative net buying has been about 3 percent and household cumulative net selling has been about 3 percent. So how has the NYSE market value increased from $45 trillion to $65 trillion? Who has been buying the NYSE? Nonfinancial corporations have cumulative net buying of 18 percent of the total market capitalization or about $12-trillion of the $20-trillion increase in total market value. Corporations have spent $12 trillion of physical cash to purchase their own shares, which raised the paper value of those shares by nearly $20 trillion. PSE prices go higher because you decide to invest in a corporation shares. NYSE price go higher because a corporation buys its own shares to help inf late the price.
Opinion BusinessMirror
opinion@businessmirror.com.ph
Tuesday, July 25, 2017 A11
Trump’s pardoning himself Small cement importers want level playing field would trash Constitution
H
By Noah Feldman
/ Bloomberg View
ere’s some unsolicited advice for President Donald J. Trump: Don’t listen to any lawyers who might tell you that you can pardon yourself, or even that it’s a close legal question. You can’t—and no court is going to rule otherwise.
There’s a decent historical argument about why, but it’s beside the point. The bottom line is that if the president could pardon himself, we would no longer have a republic— nor a government of laws rather than men. We would be a dictatorship, not a democracy. You know that. Americans know it. The Supreme Court (SC) knows it. Now let’s move on. The very idea of self-pardon is the kind of silly technicality that non-lawyers think lawyers engage in all the time. I’m not going to offer a full-throated defense of the legal profession, but we’re not really that dumb or bad—at least not usually. The idea of the pardon power itself is old, going back at least to medieval England—and the king. It is based, roughly speaking, on the idea that the king is in charge of administering the common law, and therefore has the authority to go around that law and issue a pardon or reprieve when it’s desirable to do so. This made some sense in a system that wasn’t democratic and imposed the death penalty as punishment for all felonies, including relatively minor ones. In theory, the justification could be mercy, that most Christian of virtues. In practice, kings sometimes issued pardons to political allies, or in exchange for compensation, or to get military conscripts. As a result, as early as 1311 (you read that right), Parliament forced the king to promise that he would only pardon “by process of law and the custom of the realm”. The idea was to rein in the pardon power, making it into an instrument of law, not of arbitrary royal prerogative. Given that worry about the antilegal nature of the pardon power was already more than 450 years old when the Founding Fathers drafted the US Constitution during the hot summer of 1787, it’s a bit surprising that the pardon power even made it in. In Philadelphia the more rightsoriented republicans, like George Mason of Virginia, questioned the whole idea of the pardon power. The more pro-Executive participants, like Alexander Hamilton and James Wilson, managed to get it in, albeit without much debate. The idea was that pardons served mercy and could be expedient. No one so much as hinted that the president could pardon himself. The king, after all, was above the law—he would never have to pardon himself because he could never be brought before one of his own courts. The president wasn’t above the law. At the North Carolina ratifying convention, the future SC Justice James Iredell gave a lengthy, defense of the need to have a merciful pardon power somewhere.
In the speech, Iredell pointed out that the president wouldn’t be able to pardon an impeachment. The clear implication was that if the president was himself impeached, he could then be criminally tried. Iredell also commented that it was highly unlikely that the president would treasonously pardon a traitor—further reason to believe no one contemplated self-pardon. But frankly, the history isn’t the point. The basic problem with self-pardon is that it would make a mockery of the very idea that the US operates under the rule of law. A president who could self-pardon could violate literally any federal law with impunity, knowing that the only risk was removal from office by impeachment. We have a name for an elected leader who is outside the law: dictator. And dictatorship is fundamentally inconsistent with the republic established by the Constitution. In fact, it’s a little difficult to think of any single idea that would more grossly violate the rule of law than a president free to break any and every law and then wave a get-outof-jail-free card. Of course, it’s true that no court has ever held that the president can’t pardon himself—because no president has so outrageously tried to flout our basic constitutional principles. We can thank God for that. But more immediately, we can thank a constitutional structure that is designed to limit the institutional power of any single branch of government. And that’s why I can predict with complete confidence that no court would uphold a presidential selfpardon. To do so would be to render the courts essentially useless as checks on the Executive, to say nothing of Congress, which passes the laws in the first place. This isn’t a normal legal problem for courts to resolve by weighing plausible, competing arguments. It’s the whole ball of wax: the survival of constitutional government. The courts will treat it as such. If the president uses the pardon power to end investigations against his cronies and protect himself, that’s a political problem that would call for a political solution, namely impeachment. But if the president were to try to pardon himself, the courts would simply rule that the pardon was ineffectual. Once out of office, by impeachment or by the end of his term, the president would be subject to criminal charges. It won’t come to that, I believe. The Republic isn’t about to turn into a dictatorship. To make sure things stay that way, no one should talk as though self-pardon is a realistic possibility. It isn’t—not in a functioning democracy with the rule of law.
Ernesto M. Hilario
T
ABOUT TOWN
he scuttlebutt in business circles is that an undersecretary at the Department of Trade and Industry (DTI) now faces a complaint before the Office of the Ombudsman filed by a subordinate over the issuance of a department administrative order (DAO) that’s seen to give undue advantage to the giant cement manufacturers-importers at the expense of small importers. It would appear that the undersecretary who was then the officer in charge of the DTI’s Bureau of Product Standards, was responsible for the issuance of DAO 1702 issued on March 17 this year (and amended later by DAO 17-05) stipulating that an Import Commodity Clearance (ICC) would be required for all cement importations except those brought in by big cement manufacturers operating integrated cement plants in the country. The ICC requirement is on top of the Product-Safety (PS) mark that is mandatory for all cement imports. The small importers are up in arms against DAO 17-02/05 and the ICC requirement for a number of reasons. First, the big cement manu-
facturers-importers who are exempted from the ICC draw their imports from the same foreign suppliers, hence the quality of imported cement is the same across the board, especially with the PS mark certification. Second, the DTI order imposes an unnecessary burden on them and runs contrary to President Duterte’s repeated pledge to reduce red tape in government and to ease the cost of doing business in the country. Third, the DTI order is arbitrary and capricious as this was issued without any public consultation. Worse, following complaints from cement importers, the agency surreptitiously tried to cure the flawed order with certain exemptions. Fourth, the order would cause
Disruptor disrupted Cecilio T. Arillo
database
T
HE Philippines is the latest addition to the challenges that ride-sharing service companies are facing in the world, as the local transportation regulatory board rallied to disrupt the disruptors of the local transportation sector. Ride-sharing companies are part of what modern economists call the sharing economy. Scandinavian researchers Juho Hamari, Mimmi Sjöklint and Antti Ukkonen in a paper described sharing economy as a broad term often used to refer to a hybrid market model of peer-to-peer exchange. Such transactions are often facilitated via community-based online services. Other terms are shareconomy, collaborative consumption or peer economy. Uberization is also an alternative name for the phenomenon, a homage to the impact that Uber had created in its existence. The current scenario that both Grab and Uber are up against is nothing new having been met with strong (and sometimes violent) opposition in other continents, mostly by traditional taxi companies who feel like their toes have been stepped on and government regulators struggling to embrace the disruptive impact of this revo-
lutionary business concept. Singapore, Taiwan and other developed Asian nations have tightened their belts to regulate companies like Grab and Uber, as they would traditional publicutility vehicles (PUVs), in order to ensure safety and accountability to the service, as well as strike a balance with the already existing public-transport sector, particularly taxis. Despite being an early adopter of the sharing economy, Singapore would be a good case study as it scrambles to both encourage disruptive business models and keep them in line. Its new rules allow Singaporean transportation officials to suspend a ride-sharing company for up to one month if their drivers get caught without a proper license or insurance after three or more instances. The drivers themselves face separate penalties and jail time. Meanwhile, with much closer proximity to the Philippines, ride-
grave and irreparable injury to them as its implementation constitutes a material and substantial infringement of the right to import. Fifth, the order is unconstitutional as it violates the equal protection and due process clauses in the 1987 Constitution, as well as the proscription against unfair competition and unfair trade practices. And sixth, the order violates Philippine treaty obligations, specifically the Asean Trade in Goods Agreement (ATIGA) and World Trade Organization (WTO) Agreement of 1994. In 2015 the average cost of a bag of cement in the country was around P300 per bag. By 2016 when cement imports increased, the average price went down to P219 per bag. Today the market price is around P197. The demand for cement in the country is about 720 million bags per year. If small importers will be driven out of the market by what they consider an oppressive DTI order, cement prices will surely shoot up to P300 or more per bag like in 2015, when the big manufacturers-importers lorded it over the market. The small importers believe the DTI order could actually set back the implementation of the Duterte administration’s aggressive P8trillion “Build, Build, Build” program envisioned to usher in the
“golden age of infrastructure” in the country, as cement supply from the big manufacturers-importers may not be sufficient to meet the expected big demand for the commodity. Indeed, with no less than 75 big-ticket infrastructure projects up for implementation until 2022, cement manufacturers and importers would have to work double time to meet tight deadlines. The small importers are convinced that DAO 17-02/05 lays the ground for the big cement manufacturers-importers to operate as a cartel that could easily manipulate supply and prices. What applies here is the timetested rule that in any industry, “what’s sauce for the goose is sauce for the gander”. The DTI order actually runs counter to the concept of a level playing field that allows fair competition rather than control of the domestic cement industry by a few big players. The small importers are apprehensive that the DTI may be unduly protecting the interests of the big cement manufacturers-importers at their expense. The net effect of this would be to drive them out of business, which could lead to higher prices as more cement imports tend to lower the average cost of the commodity in the domestic market.
sharing companies are facing much bigger challenges in Taiwan. First, the government considers it illegal because it is registered as a technology company and not a transport business—misrepresenting its service. Another is that it disrupted the very mature and highly organized taxi market, hurting their income by as much as 30 percent according to the Taipei City Taxi Passenger Transport Trade Association. The BBC reported earlier this year that their government clarified that it has no problem with ride-sharing companies providing services, as long as it agrees to be regulated, insured and taxed like other taxi service providers. In the report, Uber says it’s only a platform provider and if any disputes, accidents or problems happen, it doesn’t take any responsibility. Taiwan’s government argues that providing transportation services require companies to take this responsibility. It resulted in a two-month suspension (from February to March of 2017) and hefty fines amounting to almost $800 million, but the ride-sharing firm struck a middle ground with the Taiwanese government when it agreed to be supervised and partnered itself with licensed transport companies. There are many similar storylines for ride-sharing companies, especially Uber, in other continents and have resulted in a shut down, like in Denmark or Hungary, because of new taxi laws mainly rooting from how it should
be regulated: as a transport service or a digital platform provider. In the Philippines, however, the Land Transportation Franchising and Regulatory Board (LTFRB) is, perhaps, seeking to tame the disruptive impact of ride-sharing companies not only in the market, but also in the realm of regulation. But the resulting scenario urged the technologically savvy commuting public to wage war against officials of the LTFRB as it gave a July 26 ultimatum on nonLTFR B-accredited drivers t hat roughly translate to 90 percent of the ride-sharing services’ fleet. It certainly would not take a genius to see the challenges and perils commuters face. To commuters, taking away Uber and Grab would most certainly mean like robbing the public of a silver lining in the daily commute—a decent, wellmaintained and self-regulating transport system. I hope that our transport officials and ride-sharing companies quickly resolve this matter, since the latter offers the safety and convenience absent in most of our obsolete and dilapidated mass transport systems. One of the harshest realities transport officials have to gravely consider is this: The Philippines, unlike its progressive Asian neighbors Taiwan and Singapore, does not have a safe, reliable, comprehensive and convenient mass public transport system.
Creation of a People’s Broadcasting Corp. in the Philippines
I
By Rex L. Navarro
N his first State of the Nation Address, President Duterte called for the creation of a People’s Broadcasting Corp. (PBC), replacing PTV-4, the government-run TV station. The PBC aims to replicate credible international public broadcasting networks like the British Broadcasting Corp. Along with this, he also announced that the government’s Radyo ng Bayan will be merged with the PBC and upgraded to be financially viable and become editorially independent for a more intelligent treatment of national and international news. The Constitution of the Republic of the Philippines recognizes the vital role of communication and information in nation building and the right of the people to information on matters of public concern. The broadcast media per-
forms a vital role in strengthening Philippine democracy and national development. It is the lifeblood of economic prosperity and national development by facilitating trade and commerce, sharing technological innovations, improving the
delivery of public services, forewarning against natural disasters, fostering national harmony and dialogue and spreading education and knowledge. Being the most pervasive source of public information, the broadcast media helps shape an enlightened citizenry capable of making informed and intelligent decisions for them to meaningfully participate in nation building. At the global level, the flow of information across national borders is also essential in fostering international understanding and cooperation. The broadcast media greatly helps cultivate establishment of ethnic-minority programming services and contribute to informed public debate
and critical thinking. As envisioned by the President, the PBC will be independent in programming, with decentralized and self-sustaining local stations, which will produce suitable programs for their respective communities. Being public, the PBC will not be driven by profit and will primarily provide high-quality programs to serve the people’s interest and mobilize all sectors for national unity and development. Moreover, national peace requires dialogue through a full and free flow of ideas which is principally achieved through an independent media. The PBC can make a key contribution to national peace by sharing everyone’s views and opinions in an atmosphere
of understanding and respect for others. The prevailing conflict in Mindanao and other parts of the country can be solved through peaceful dialogue and the convergence of various interests through articulation in the public media. Experiences of other countries, like India, show the benefit of providing balanced information services through the operation of public-service broadcasting alongside commercial systems. This has encouraged media professionals to reduce unnecessary display of violence and triviality in their programs and focus on delivering wholesome entertainment and development-oriented information to all their citizens. Likewise, public-service broad-
E-mail: ernhil@yahoo.com.
To reach the writer, e-mail cecilio.arillo@gmail. com.
casting will strengthen partnerships among professional media organizations and create new alliances with major stakeholders, reinforcing media pluralism. Such a system, if adopted, can definitely help the Philippine government in strengthening democracy and in bringing about political, economic and social progress and stability in the country, especially under a federal system of governance. Even as some initial headway has been achieved in community broadcasting in selected areas of the country, there is an urgent need to mainstream and institutionalize public-service broadcasting to serve the information needs of the Filipino people.
2nd Front Page BusinessMirror
A12 Tuesday, July 25, 2017
www.businessmirror.com.ph
House, Senate reveal priority measures in second year of Duterte administration
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By Jovee Marie N. dela Cruz
resumption of regular sessions this week, Pimentel said he tucked in the Charter change (Cha-cha) proposal on a separate list. “I made it on my list of priorities, which I submitted to Senate Majority Leader [Vicente] Tito C. Sotto III,” Pimentel disclosed before convening Monday’s session. He affirmed that “Congress also pursues its priorities not only the Ledac identified ones.” The Senate President admitted, however, there is yet “no formal agreement” between Senate and House leaders on how push Charter changes. “But in principle I agree. I made Charter change a priority in this second session,” he added. This developed as members of the House of Representatives, along with their Senate counterparts, separately opened their second regular session under the 17th Congress on Monday morning, prior to convening their joint session later in the day to hear President Duterte deliver his annual State of the Nation Address (Sona).
@joveemarie
ongress leaders confirmed forging an agreement to convene the Senate and the House of Representatives as a constituent assembly early next year to amend the Constitution and pave the way for the shift to a federal form of government favored by the Duterte administration.
At the resumption of sessions on Monday, Senate President Aquilino L. Pimentel III said aside from Malacañang-endorsed priority bills, including a taxreform package to raise more funds to bankroll administration projects, lawmakers were expected to submit their own pet bills for inclusion in the priority list of legislation during their regular session. “Of course, I will push that we study the revision of the Constitution, not only for federalism purposes but even for the economic provisions,” Pimentel III told Senate reporters. He added that heeding the p e o ple ’s c l a mor t he S e n ate will, likewise, push legislations est a bl i sh i ng “a n at ion a l I D system”, as well as “strengthening our anti-terrorism laws”.
BBL
P ime n tel
confirms
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PIMENTEL: “Of course, I will push that we study the revision of the Constitution, not only for federalism purposes but even for the economic provisions.”
Senate will also front-load passage of the awaited Bangsamoro basic law (BBL) granting greater autonomy to Muslim areas in Mindanao. “The BBL is also a priority, especially because it will be certified as urgent,” the Senate President said, explaining that “a bill certified as urgent [by Malacañang] means that it is certified as important”.
Death penalty
Pimentel indicated, however, gave no firm commitment to also fast-track passage of a Senate version of the House-approved bill restoring death penalty for
House agenda
Sen. Risa Hontiveros-Baraquel (left) takes a selfie with fellow lady-Sens. (from left) Cynthia A. Villar, Grace Poe, Loren B. Legarda and Nancy S. Binay during the opening of the Second Regular Session of the 17th Congress photos at the Session hall of the Philippine Senate. ROY DOMINGO
heinous crimes. “A s Senate President, this [death penalty] bill was submitted by the House, so I think we owe it as a gesture of friendship to the House that since they passed this, it means they also want us to discuss it,” Pimentel said, adding,
“Only up to that point. I will assure the House that we will discuss the death penalty bill.” He clarified that reimposition of capital punishment is “not a priority bill, it is in the regular course of business” of the Senate in their second regular session.
A look at major issues confronting the President in his second year A
year ago President Duterte promised to cleanse the country of illegal drugs in three to six months. He said he would tame corruption and began a profanity-spiked tongue lashing of America—which he called “lousy” last week. Those “shock and awe” declarations of a year ago have collided with reality. Drugs and corruption have persisted a nd he g r udg i ngly thanked the United States recently for helping to quell a disastrous siege in the south by pro-Islamic State group militants. T ho u s a nd s o f p r ot e s t e r s marched with Duterte’s effigy on Monday to demand that he deliver on promises he made in his first state of the nation speech last year, from pressing peace talks with Marxist guerrillas, which is currently on hold, to upholding human rights and the rule of law. Here’s a look at the major issues confronting Duterte as he enters his second year in power:
Islamic state-linked siege
Two months after more than 60 0 pro -Isl a m ic St ate g roup m i l it a nt s bl a s te d t he i r w ay into southern city of Marawi, the military is still fighting the last gunmen—fewer than 100, about 10 of them foreign—in the last three occupied villages. Cong ress over whelmingly voted last Saturday to grant D uter te’s request to e x tend martial law in the south to the year’s end to allow Duterte to deal with the Marawi City crisis, the worst in his yearlong presi-
[Duterte] has unleashed a human-rights calamity on the Philippines in his first year in office.”—Human Rights Watch dency, and stamp out other extremist groups across the south, something five presidents before him have failed to do. About half a million people have been displaced by the fighting, some of whom have threatened to march back to the still-besieged city to escape the squalor in overcrowded evacuation camps in nearby towns. Rebuilding Marawi will require massive funds and national focus and will be fraught with pitfalls. Amid the despair and gargantuan rebuilding, it’s important “to ensure that extremist teachings do not find fer t i le g rou nd ”, sa id Sid ne y Jones, director of the Jakarta-based Institute for Polic y Analysis of Conflict.
Drug war
During the campaign, he promised to rid the country of illegal drugs in three to six months and repeatedly threatened traffickers with death. But he missed his deadline and later declared he would fight the menace until his last day in office. When then-President Barack Obama, along with European Union and UN rights officials, raised alarm over the mounting deaths from
the crackdown, Duterte lashed at them, once telling Obama to “go to hell ”. Duterte’s fiercest critic at home, Sen. Leila del Lima, was detained in February on drug charges she said were baseless. More than 5,200 suspects have died so far, including more than 3,000 in reported gunbattles with the police and more than 2,000 others in drug-related attacks by motorcycle-riding masked gunmen and other assaults, the police said. Human-rights groups have reported a higher death toll and called for an independent investigation of Duterte’s possible role in the violence. Duterte “has unleashed a human-rights calamity on the Philippines in his first year in office,” US-based Human Rights Watch said. In April a lawyer filed a complaint of crimes against humanity against Duterte and other officials in connection with the drug killings before the International Criminal Court. An impeachment complaint against the president was dismissed in the House of Representatives, which is dominated by Duterte’s allies.
South China Sea
More than a month into Duterte’s
presidency, the Philippines won a landmark arbitration case before a tribunal in The Hague that invalidated China’s massive territorial claims in the South China Sea under a 1982 UN maritime treaty. Aiming to turn around his country’s frosty relations with China, Duterte refused to demand immediate Chinese compliance with the ruling. He promised he would take it up with Beijing at some poi nt . Con f ront i ng China, which has dismissed the ruling as a sham, risks sparking an armed conflict that the Philippines would surely lose, Duterte contended. Nationalists and critics blasted Duterte for what they see as a sellout to China. After meeting Chinese President Xi Jinping in Beijing, China allowed Filipino fishermen to return to the Chinese-controlled Scarborough Shoal, where Chinese coast guard ships had driven Filipinos away since 2012. The Philippines had been the most vocal critic of China’s aggressive behavior in the disputed waters until Duterte took power and reached out to Beijing, partly to secure funding for infrastructure projects. His move has effectively deescalated tensions in the busy sea, but critics have warned that Duterte’s friendly overtures to China may erode the country’s chances to demand that China comply with the ruling and relinquish its claims to waters regarded as the Philippines’s exclusive economic zone. AP
Cha-cha
On le a r n i ng t h at prop ose d Constitutional amendments were excluded from the original 13 priority bills endorsed by the Legislative-Executive Development Advisory Committee (Ledac) for Congress approval at the
For his part, Speaker Pantaleon D. Alvarez reports that members of the House passed on third and final reading at least 210 bills in their previous session. “Given that we had 97 session days, that’s an average of two bills on third reading for every session day,” the Speaker said, asserting that “our concrete efforts to provide our people with better chances in life are undeniable”. See “Duterte administration,” A2
D.O.T. accomplishment report shows it’s still ‘more fun in PHL’ By Ma. Stella F. Arnaldo
@akosistellaBM Special to the BusinessMirror
T
OURISM continues its spectacular rise as one of the country’s engines in growth, with the increasing revenue and visitor arrivals, as well as number of jobs, the sector has created. In its one-year accomplishment report released to the media on Monday, the same day of President Duterte’s State of the Nation Address (Sona), the Department of Tourism (DOT) said, “The tourism industry has become a bright spot for the Philippine economy during the first year of the Duterte administration, with the country more than doubling its tourism revenues to P222.3 billion from July 2016 to May 2017, a 109.13-percent increase compared to P106.297 billion [in visitor] receipts during the first 11 months [July 2010 to May 2011] of the Aquino administration.” The increase in visitor receipts, or the amount of money spent by foreign tourists in the local economy, reflects the growth in the number of tourists flocking to the Philippines. The DOT said in the first 11 months of the Duterte administration (July 2016 to May 2017), the Philippines welcomed some 5.87 million foreign visitors, a sharp 71.83-percent increase from the 3.42 million that arrived in the first 11 months of the Aquino administration. “ The yearlong tourism boom can be attributed to the
government’s firm resolve in dealing with threats, creating a more secure and safe environment, and raising tourists’ confidence,” according to the DOT report. In its one year in office, Duterte’s appointees at the DOT, led by Tourism Secretary Wanda Corazon T. Teo, have undertaken several major events intended to boost foreign visitor arrivals in the country. Some of these events include the Philippines’s hosting of the 65th Miss Universe 2016 pageant in January this year, the third Madrid Fusión Manila in April, the World Street Food Congress 2017 in May, and the Sixth United Nations World Tourism Organization International Conference on Tourism Statistics in June, among others. More foreign tourists are seen arriving in the country with its hosting of the Asean@50 meetings and other events this year, as well as the Beijing government’s commitment to send 1 million tourists. Couple with this, the Duterte administration has embarked on a massive tourism infrastructure program, and expanded international and domestic air connectivity to open more gateways, and improve the accessibility to emerging tourist sites. “With selfless dedication and faith in God and good old Filipino resiliency among the stakeholders, we have hurdled obstacles and surmounted setbacks. We are up for the challenge in the next five years,” Teo said in the report. See “DOT,” A2