Businessmirror july 27, 2016

“The party now needs new leadership that will open the doors of the party and welcome in working people and young people.”—Vermont Sen. Bernie Sanders, after the resignation of Debbie Wasserman Schultz (in photo) as chairman of the Democratic National Committee. AP

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“Today I feel deep sadness. Why can one person do something like this?”—Veljo Raicevic, a resident of Munich, paying tribute to the nine victims of a deadly rampage last week carried out by the German-born son of Iranian asylum-seekers. AP

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Wednesday, July 27, 2016 Vol. 11 No. 291

ACCELERATION OF CONSUMER PRICES TO PICK UP PACE

July inflation rate seen breaching 2%

INSIDE

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Alveo launches Callisto for the young professionals

property

By Bianca Cuaresma

@BcuaresmaBM

ecelerated inflation that has fallen below the target for 14 months in a series already could finally push past the 2-percent low end of the target range in the July price survey, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday. Continued on A2

Going forward, the BSP will remain watchful of evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth.” —Tetangco

By Ma. Stella F. Arnaldo

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Special to the BusinessMirror

HE tourism industry may have merited only one line in the State of the Nation Address (Sona) of President Duterte on Monday, but its stakeholders praised the Chief Executive for addressing problems that have been obstacles to the industry’s growth. In his Sona, Mr. Duterte said: “In the field of tourism, we shall construct more access roads and tourism gateways to service centers and tourist sites.” Jose Mari R. del Rosario, president of Microtel Hotels and Resorts Philippines, said: “My main tourism concern is the peaceand-order situation in the country. And it’s being addressed. For tourists [international and domestic], having a positive perception for personal safety is of paramount importance.” With regard to the President mentioning the construction of tourism infrastructure, the veteran hotelier told the BusinessMirror: “It’s long overdue. So even to just continue it is an achievement in itself.” The construction of infrastructure to tourism gateways and destinations was a project started by the Aquino administration in 2011, when the Department of Tourism and the Department of Public Works and Highways (DPWH) forged a Tourism Convergence Program that identifies the vital linkages that need to be built for tourists to get to major tourism destinations in the quickest possible manner. About P60 billion has been allocated for the Tourism Convergence Program from 2011 to 2016, of which some P48 billion has been utilized for road projects to tourism destinations as of August 2015, according to a report from the DPWH. Another P24 billion is supposed to be allocated for the program under the General Appropriations Act of 2016. See “Tourism,” A2

Airport deals to be offered to private sector separately By Lorenz S. Marasigan

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A MAN walks by piles of container vans at the Manila North Harbor in Tondo, Manila. NONIE REYES

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Torre Lorenzo launches new project in Batangas

property

Tourism stakeholders praise Duterte’s Sona

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BPOs continue to call the shots in PHL real estate

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17TH CONGRESS OPENS

PHL’s ‘archaic’ trade laws up for review By Jovee Marie N. dela Cruz @joveemarie

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Conclusion

NOTHER set of trade or business law that President Duterte wants to tweak concerns taxes. After Mr. Duterte supported calls to lower income and corporate tax rates, lawmakers said they will push for the immediate passage of a tax-reform bill. Unlike the previous administration, Mr. Duterte said his government will prioritize the approval of tax-reform measures. “On taxation, my administra-

PESO exchange rates n US 47.1800

tion will pursue tax reforms toward a simpler, and more equitable and more efficient tax system that can foster investment and job creation,” the President said at his first State of the Nation Address on Monday. “We will lower personal and corporate income-tax rates.” Speaker Pantaleon D. Alvarez took the cue, and vowed the 17th Congress will pass measures in compliance with Mr. Duterte’s request. “The law on income taxation should be simplified into one imposed on gross income progressively,” Alvarez said. “Tax laws have become so complicated that they are exploited

by corrupt BIR [Bureau of Internal Revenue] officials in order to extort money from the taxpayers.” According to Alvarez, “Ordinary individuals choose not to pay taxes precisely, because they do not understand tax laws. “A simplified law on taxation would encourage people to pay taxes and contribute to a society that they know will take care of them.”

November

DEPUTY Speaker Romero Federico S. Quimbo of Marikina City said the lower chamber is eyeing to pass the Continued on A2

@lorenzmarasigan

he transportation department will move forward with the bidding of the P108.2-billion contract for the development of five airports around the country, but will take a different approach in auctioning these off. Cherie Mercado-Santos, the spokesman of the transport agency, said the department plans to unbundle the contract and bid them out separately. “I think the plan with the regional airports is to desegmentize them than put them into one cluster,” she said in a news briefing on Tuesday. Santos noted that the government must decide on this in the shortest time possible, “because it needs to be opened for bidding.” The previous administration started the auction for the contract to develop and operate five airports around the Philippines in two packages to make the projects more enticing to investors. The first package consists of the Bacolod-Silay Airport (P20.26 billion) and the Iloilo Airport (P30.40 billion), while the second bundle is composed of the New Bohol or Panglao Airport

I think the plan with the regional airports is to desegmentize them than put them into one cluster.” —Santos (P2.34 billion), the Laguindingan Airport (P14.62 billion) and the Davao Airport (P40.57 billion). The private partner will undertake the operation and maintenance of the airport, as well as provide additional facilities and other necessary improvements to enhance passenger safety, security, access, passenger and cargo-movement efficiency, and operational efficiency under a defined concession period. There were five prequalified bidders for the project: ■ Filinvest-Jatco-Sojitz Consortium (Filinvest Development See “Airport,” A2

n japan 0.4461 n UK 62.0040 n HK 6.0828 n CHINA 7.0622 n singapore 34.6453 n australia 35.2246 n EU 51.8886 n SAUDI arabia 12.5813

Source: BSP (26 July 2016 )

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A2 Wednesday, July 27, 2016

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17TH CONGRESS OPENS

PHL’s ‘archaic’ trade laws up for review Continued from A1

tax-reform bill last November. Quimbo said in an interview he expects about 6.4 million working Filipinos will benefit from the measure. “It’s really about time [we] do this,” Quimbo said. “It’s a priority measure and with this strong and popular administration and absolutely correct program, there’s no debate about it.” According to Quimbo, the government has already achieved the first step in the direction of the tax-reform bill’s passage. “If you are just looking at the first step, which is [tax rate] adjusting to inflation,it is already ready; all studies have [been] done,” Quimbo said. “The second step, the corporate-income tax [being reduced] down to 25 percent, we concluded a study a month ago [that] our tax collection will actually increase, instead of decreasing, because it will bring more investor or make the country more competitive.”

Agenda

QUIMBO and Rep. Rozzano Rufino B. Biazon of Muntinlupa have filed a new income-tax measure seeking to adjust individual income-tax brackets to inflation and reduce the tax burden of Filipino workers. The measure also seeks to peg corporate-income tax rate to 25 percent, from its current 30 percent. The measure aims for a simpler, efficient and equitable tax system, a proposal included in the administration’s 10-point economic agenda. The two lawmakers are proposing that the indexation of tax brackets to inflation should be based on the Consumer Price Index (CPI). The CPI shows changes in the

Tourism. . .

Continued from A1

Jay Aldeguer, president and chairman of the Islands Group, which includes hotels and tour services, said in a text message: “I noticed that the issues that moved [Duterte] personally and which he was handling directly, he would be more emphatic about while other topics he would just breeze through them. But that’s

average retail prices of a fixed basket of goods and services commonly purchased by households relative to a base year, according to the Philippine Statistical Authority (PSA). The CPI is helpful in measuring inflation and the purchasing power of the peso. The lawmakers said income tax should be adjusted, considering that an income of P500,000, currently taxable by 32 percent, amounts to P1.1 million today.

Brackets

THE tax measure proposal of Quimbo and Biazon includes the following seven new tax brackets: ■ t hose ear ning not over P21,613 will pay a fixed-tax rate of 5 percent; ■ those earning over P21,613, but not over P64,839, would pay a fixed tax of P1,080 with an additional 10 percent of the excess over P21,613; ■ those earning over P64,839, but not over P151,290, would pay a fixed tax of P5,402, with an additional 15 percent of the excess over P64,839; ■ those earning over P151,290, but not over P302,581, would pay an excess tax of P18,370, with an additional 20 percent of the excess over P151,290; ■ those earning over P302,581, but not over P540,323, would pay a fixed tax of P48,628, with an additional 25 percent of the excess over P302,581; ■ those earning over P540,323, but not over P1.08 million, would pay a fixed tax of P108,063, with an additional 30 percent of the excess over P540,323; and ■ those earning over P1.08 million would pay a fixed tax of P270,160, with an additional 32 not to say it wont get the attention it deserves. I think he’s very decentralized in his management style and gives his team almost blanket authority. For tourism, I’m more curious to see what programs [Tourism Secretary Wanda Corazon T. Teo will embark on.” The Cebu-based tourism entrepreneur also agreed that priority should be made for the construction of tourism-related infrastructure, “with airport decogestion on top of that list.”

percent of the excess over P1.08 million In the current setup, those earning P10,000 or less per month pay a 5-percent income tax. Those with yearly earnings of P500,000 and above pay a 32-percent income tax. The measure also provides for automatic adjustment of the tax brackets to inflation every three years.

Simpler

REP. Alfred Vargas of the Quezon City and Rep. Tobias M. Tiangco of Navotas said that, with the current income tax brackets, the Philippines effectively imposes the highest personal-income tax in the whole Association of Southeast Asian Nations (Asean) region. Vargassaid he agrees with Mr. Duterte that simpler tax measures should be enacted for the benefit of Filipinos. Tiangco, who authored a taxreform bill, described current-tax rates as iniquitous for low-income and middle-income earners, most of whom are salaried workers. They suffer and bear the bulk on their purchasing power, Tiangco said. Rep. Arthur C. Yap of Bohol is also seeking to reform the current personal-income tax system to effectively reduce the taxes on low-income earners. Doing so, said the former agriculture secretary, will allow these earners a higher net income and will increase their purchasing power. Yap said his proposal will also ensure the government will be able to collect a larger share of income from those who can afford to pay more. Earlier, the Department of Finance (DOF) has said the proposal may cause the government to lose revenues totaling as much as 1.5 percent of the country’s GDP, or P30 billion. Asked whether the one -line mention of tourism infrastructure in the Sona conveyed the President’s prioritization of the tourism industry as an important engine of growth for the country, former Secretary of Tourism Ace Durano, said: “President Duterte is reputed to be a man of action. As such, I’m more interested in his actions. The to-be submitted 2017 proposed National Expenditure Program will be telling of the priorities of the Duterte administration.” The Department of Tourism (DOT), in a press statement, said President Duterte’s promise to construct highways and bridges to connect the country’s major islands, and access roads to world-class tourist destinations bodes well for the travel and tourism sector. “We are elated and inspired by the President’s announcement that topping his list of priorities is the building of highways and roads that can provide easy access to our tourist sites,” Teo said. She, likewise, lauded the President’s issuance and implementation of the executive order on freedom of information. “Our books are open and available to the public. We will soon be relaunching our official web site, so information on activities and transactions of the DOT and its attached agencies can readily be accessed in line with President Duterte’s policy of transparency and accountability,” she stressed. With a P3.61billion budget for 2016, up 44 percent, from the 2015 budget of P2.5 billion, Teo vowed to run an efficient and streamlined bureaucracy, making sure DOT’s resources are utilized for the promotion and development of tourism industry. DOT’s attached agencies include its marketing arm, the Tourism Promotions Board, Tourism Infrastructure and Enterprise Zone Authority, Intramuros Administration, the National Parks Development Committee, Duty Free Philippines Corp., Philippine Commission on Sports Scuba Diving, Nayong Pilipino Foundation, and the Philippine Retirement Authority.

Offset

PARTIDO Demokratiko PilipinoLaban Reps. Horacio Suansing Jr. of Sultan Kudarat and Estrellita Suansing of Nueva Ecija filed a bill imposing a P10 excise tax on sugar sweetened beverages (SSB). They said their proposal is timely, since one of the policies the Duterte administration plans to pursue is reforms in income tax rates. “Additional revenues raised from the P10 excise tax on SSB [per liter of volume capacity] would offset any revenue loss resulting from the implementation of income tax reforms,” the lawmakers said. The excise tax, proposed by Suansing and Suansing Jr. will provide additional revenue of about P34.5 billion for the government, the lawmakers said. House Bill 292 seeks to impose an excise tax on SSBs by inserting a new Section 150-A in the National Internal Revenue Code of 1997, as amended. The new Section 150-A, titled “Sugar Sweetened Beverages,” provides “there shall be levied, assessed and collected on sugarsweetened beverages per liter of volume capacity, an excise tax of P10. The rate of tax imposed under this section shall be increased by 4 percent every year thereafter, effective on January 1, 2017, through Revenue Regulations issued by the secretary of finance.”

to make a drink.” SSBs include the following: ■ soft dr inks, soda, pop and soda pop, which are nonalcoholic, flavored, carbonated or noncarbonated beverages; ■ fruit drinks, punches or ades, which are sweetened beverages consisting of diluted fruit juice; ■ sports drinks, which are beverages designed to help athletes rehydrate, as well as replenish electrolytes, sugar and other nutrients ■ sweetened tea and coffee drinks, which are teas and coffees to which caloric and noncaloric sweeteners have been added; ■ energy drinks that are carbonated and contain large amounts of caffeine, sugar and other ingredients, such as vitamins, amino acids and herbal stimulants; and ■ all nonalcoholic beverages that are ready-to-drink and in powder form with added natural or artificial sugar. The bill seeks to exclude from the scope of the Act the following: 100-percent natural fruit juices, 100-percent natural vegetable juices, yogurt and fruit flavored yogurt beverages with pure fruit and vegetable juice or concentrate, meal replacement beverages (medical food), as well as weight loss product and all milk products, infant formula and milk alternatives, such as soy milk or almond milk, including flavored milk, such as chocolate milk.

SSB

Secrecy

THE proposed bill defines sugar sweetened beverage as “a nonalcoholic beverage that contains caloric sweeteners/added sugar or artificial/noncaloric sweetener. It may be in liquid or solid mixture, syrup or concentrates that are added to water or other liquids

ALVAREZ said the Lower Chamber will include the proposal amending the bank-secrecy law to its priority measures. “We will pass our priority bills this 17th Congress,” he said. “I will ask the House committees to tackle the bills immediately until the passage of the bills into law.”

At his Sona, Mr. Duterte asked lawmakers to relax the bank-secrecy law to combat money laundering after the controversial $81-million cyber-money laundering heist involving Philippine financial institutions. However, lawmakers have yet to file measures amending the said law. Quimbo, meanwhile, said lifting the bank secrecy law also allows the government to collect more taxes. “I’ve always [been] in favor of lifting the bank-secrecy law,” Quimbo said.

Dangerous

QUIMBO prefers that bank secrecy be placed not in the hands of the Bureau of Internal Revenue (BIR), “because the BIR is the most corrupt government agency.” “If you put the information in the hands of the BIR, I am sorry to say, they will not use it for the government,” Quimbo said. “[The BIR personnel are] going to use it for their own personal activities to shake down businessmen.” He said an independent body should handle the implementation of new bank-secrecy law. “It has go to a particular strong task force maybe under the Office of the President or under the DOF, but separate from the current infrastructure of the BIR,” Quimbo said, adding this is because he thinks bank secrecy “in the hands of wrong people can be very, very dangerous and can destroy investment.” But Rep. Feliciano R. Belmonte Jr., during his term as House speaker of the 16th Congress, rejected the proposal to lift the bank-secrecy law to collect more revenues, saying doing so will spook investors and avoid doing business in the country.

July inflation rate seen breaching 2% Continued from A1

According to BSP Governor Amando Tetangco Jr., consumer goods prices may have accelerated to within target range in July as a result of adjustments in electricity rates and in food prices. He told reporters on Tuesday inflation likely ranged from a low of 1.5 percent to a high of 2.4 percent in July, which is an indication that services and goods prices finally picked up pace enough to pull inflation past the 2-percent threshold. The forecast inflation Tetangco gave for July is the same forecast he gave for the month of June when inflation hit a 14-month high of 1.9 percent on higher food and beverage prices. The central bank governor said the upside inflation pressures come from the upward adjustment in power rates in Meralco-serviced areas and higher rice prices along with the weaker peso. The accelerated forecast inflation, however, could be offset in part by lower water rates, the re-

Airport. . .

Continued from A1

Corp., Filinvest Land Inc., Filinvest Alabang Inc., Japan Airport Terminal Co. Ltd; and Cyberzone Properties Inc.); ■ GMR Infrastructure and Megawide Consortium (Megaw ide Constr uction Cor p., GMR Airport Developers Ltd., GMR Hyderabad International

duction in domestic oil prices and a decline in vegetable prices during the survey month. Headline inflation consistently fell off the target since May last year and somewhat embarrassed policymakers in both the fiscal and monetary sectors whose technocrats anticipated inflation to range from 2 percent up to 4 percent this year. Prior to this episode, the BSP successfully anticipated the path inflation took the past six years. In 2015, for instance, the BSP inaccurately forecasted inflation which averaged 1.4 percent that year, or below the government target of 2 percent to 4 percent. The June inflation print pushed the average inflation to only 1.3 in the first half of the year, still below target. This means that for inflation to graze the low end of the government’s 2 to 4 target range for the year, the average inflation in the second half must be around 2.7 percent. Tetangco refused to drop hints in his inflation forecast statement,

but vowed to monitor developments affecting the stability of prices in the country. “Going forward, the BSP will remain watchful of evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth,” Tetangco said. Analysts said the July inflation rate would finally hit the low-end of the government target. Ateneo de Manila University economist Fernando Aldaba said inflation in July could fall within the 2 to 2.5 percent range while University of Asia and the Pacific economist Victor A. Abola said it could settle at 2 percent. “For the second half of the year, inflation could be close to 2 percent crude oil prices remain soft and there is no more election spending,” Abola said. Aldaba said inflation in the July to December period could breach the 2-percent mark, especially during the fourth quarter, when demand usually picks up.

Airport Ltd.; and Delhi International Airport Ltd.); ■ Maya Consortium (Aboitiz Equity Ventures Inc., VINCI Airports SAS, ANA-Aeroportos de Portugal SA, VINCI Construction Grands Projets SAS; Therma South Inc., and Hedcor Sibulan Inc.); ■ Philippine Airports Consortium (Metro Pacific Investments Corp., Aeroports de Paris, and ADP Ingenierie); and ■ SMHC-IIAC Airport Consor-

tium (San Miguel Holdings Corp., Incheon International Airport Corp., Star Infrastructure Development Corp., and Citra Metro Manila Tollways Corp.) Mercado said these bidders may find it quite easy to rehash their proposals, which are currently modified to be offered for bundled deals. “It shouldn’t be too difficult to desegmentize their own proposals,” she said.

With a report from Cai U. Ordinario

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IMPORTS SURGED 39.3% IN MAY

Neda more bullish on PHL growth as May import bill rises

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By Cai U. Ordinario

@cuo_bm

ith the May imports bill registering the highest growth in 22 years, the National Economic and Development Authority (Neda) said it expects investment and consumption to drive economic growth this year. Data from the Philippine Statistics Authority (PSA) showed imports grew 39.3 percent in May, the highest since the 39.45 percent posted in January 1994. The country’s import receipts rose to $6.736 billion in May, from $4.834 billion a year ago. “The bullish performance of imports is a clear signal that our domestic economic conditions remain robust, despite the weak global economy,” Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement. “With its current upward trend, we expect investments and consumption to drive growth for the rest of the year,” Pernia added. Pernia, who is also Neda director general, said the hike in the May imports bill was mainly due to the increase in payments for imported transport equipment. PSA data showed transport equipment accounted for 10.4 percent of the total import bill, and was the country’s second top import for the month and the biggest gainer among the imported commodities. Imports of transport equipment reached $703.61 million in May 2016, more than double last year’s value of $337.30 million. Pernia also noted that payments for consumer goods rose by 47.2 percent to $1.2 billion in May. He attributed this to higher spending on both durable goods and nondurable goods at 92.4 percent and 15 percent, respectively. The increase was driven by the higher demand for passenger cars and motorized cycles during the period. “This is consistent with the findings of AmBisyon Natin 2040, which listed car ownership as among the aspirations of the Filipino people. But infrastructure, especially roads, must keep up,” Pernia said. “At the same time, public-transport systems must be improved to expand people’s transport options, while we foster economic development in the countryside. Since these strategies take time to implement, we need everyone’s full cooperation toward efficient traffic management and strict enforcement of regulations,” he added.

The Neda chief added that on the upside, the high domestic demand for vehicles can be a source of growth if firms located in the country can participate in the manufacture of the parts and components or even a complete car model. Among 11 selected Asian countries, only the Philippines posted a double-digit growth of 39.3 percent in imports bill; others saw a decline in their purchases in May. This is the third consecutive month that the country’s import receipts posted a double-digit increase, and the fourth time that it posted such growth in the Januaryto-May period. The expansion of imports bill and the slide in exports during the period caused the country’s balance of trade in goods (BOT-G) to widen in May. The country’s trade deficit in May reached $2.021 billion. It marked the third time the country’s trade deficit breached the $2-billion mark in 2016. In the January-to-May period, the country’s cumulative BOT-G also posted a wider deficit at $9.816 billion. This is the highest five-month average since 2014. Meanwhile, aggregate payments from the country’s top 10 imports sources for May reached $5.422 billion, or 80.5 percent of the total import bill. The country’s top 3 sources of imports were China, which accounted for 20.4 percent of the total; Japan, with 10.5 percent; and the United States, with a share of 8.5 percent. Imports from China amounted to $1.373 billion, an increase of 65.7 percent from $828.66 million in May 2015. The country has a trade deficit with China worth $879.87 million. Shipments from Japan reached $709.57 million in May, more than double the $318.64 million worth of purchases made last year. The country’s import receipts from the US reached $573.10 million. This represented an increase of 7.8 percent, from $531.42 million in May 2015. The Philippines has a trade surplus of $325.01 million with Japan, and $136.30 million with the US.

₧86-B Mindanao rail project to start in 2019

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he development of several railway systems in key cities and provinces in Mindanao—pegged at about P86 billion, according to government estimates—should start by the middle of the Duterte administration. Transportation Spokesman Cherie Mercado-Santos said the department is eager to jump-start the development of train systems in the South, and the government is bent on constructing these much-needed facilities in any mode possible. “It is included in the program for the midterm until the full six years of the administration. It is being studied, and we are open for proposals coming from the private sector,” she said. The program will involve the construction of circumferential railway system that will be built in six phases. The first phase of the proposed railway system will be the construction of a

line from Iligan to Gingoog in Misamis Oriental. The second phase is a system from Nasipit in Agusan del Norte to Surigao City. The third phase will run from Prosperidad in Agusan del Sur to Tagum in Davao del Norte. It will be followed by the line from General Santos City to Cotabato City, then a system from Aurora in Zamboanga del Sur to Zamboanga City; and the line from Cagayan de Oro to Malungon in Sarangani. Santos said the government may pursue the project under the Public-Private Partnership Program, or wait for a private company to submit an unsolicited offer. “We’re letting the private sector know that these are the projects that the department will prioritize and will bid out,” she said. The project was first introduced about two decades ago. Lorenz S. Marasigan

Wednesday, July 27, 2016 A3

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Govt can revoke Laguna de Bay permits

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By David Cagahastian

@davecaga

he government can revoke the permits given to private corporations to develop and manage huge portions of the Laguna de Bay, as hinted by President Duterte in his State of the Nation Address (Sona) on Monday, but such move could affect the supply of freshwater fish from the lake. Former Laguna Lake Development Authority (LLDA) Chairman Edgardo Manda said on Tuesday it is possible for the government to revoke all licenses to manage fish pens in the Laguna de Bay, then give out new entitlements, with farmers having the priority.

However, he said such a move will immediately reduce production of tilapia and bangus, affecting market prices. “That’s possible, because it could be effected by the mere change in policies to revise or rescind the permits granted,” Manda told the Busi-

nessMirror in an interview. In his first Sona, Mr. Duterte noted that small fishermen making a living out of the Laguna de Bay are left with very little area to ply their trade, with most areas of the Laguna de Bay allocated for private fish pens owned by big corporations. “I can see it from the plane every time I go to Davao. Every time I can see that, there’s really nothing left, and the fishermen are complaining about their loss, because they have very little left for them,” Mr. Duterte said. “The Laguna de Bay shall be transformed into a vibrant economic zone, showcasing ecotourism by addressing the negative impact of the watershed destruction, land conversion and pollution. This is what I’m telling you: The poor fishermen will have priority in its entitlements,” he said. He then directed Environment Secretary Regina Paz L. Lopez to reduce the areas of occupation of those holding big areas of the Laguna de

DOE eyeing to cut universal charge By Lenie Lectura

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@llectura

O reduce consumers’ monthly electricity bill, the Department of Energy (DOE) is considering the possibility of slashing the universal charge (UC), a pass-on charge collected from consumers every month. “The Department of Energy is studying all options [on] how to lower the universal charge being passed on to consumers. This is one of the mechanisms that the DOE is considering to lower the price of electricity. We hope to come up with a win-win solution for all affected stakeholders,” DOE Spokesman Wimpy Fuentabella said. The purpose of UC, among others, is to pay for the stranded debts and stranded contract costs 
of National Power Corp. (NPC), as well as qualified stranded contract cost of distribution utilities. On the average, P0.35 per kilowatthour (kWh) is collected from consumers every month. The agency, however, did not provide any further details on how it plans to bring down the UC. Based on DOE data, UC collection as of May amounted to P0.468 billion. As of May 31, remittances of collecting entities (CEs) to Power Sector Assets and Liabilities Management Corp. (PSALM) amounted

to P94.817 billion, with interest earnings from deposits and placements of UC funds amounted to P0.147 billion. On the other hand, UC fund disbursement amounted to P94.496 billion, data showed. Accounting for the inflows and outflows of the UC fund leaves it with a balance of about P0.468 billion as of May 31, the DOE said. Relatedly, the DOE said San Miguel Global Power, through its South Premier Power Corp. (SPPC), should pay its unpaid obligations for the generated capacity of its Ilijan power plant. Otherwise, any amount not paid by SPPC to the PSALM will be passed on to consumers via the UC. The unpaid amount of the SPPC forms part of the privatization proceeds to be utilized to liquidate the financial obligations of the NPC pursuant to the Electric Power Industry Reform Act. This was noted by the Commission on Audit in its opinion for the PSALM’s 2014 Annual Report, where it cited that collections from SPPC are not sufficient to pay for the capacity fees and energy fees due the independent power producer (IPP), fuel expenses and other related expenses necessary for the operation of the said power plant, and for the amortization of the outstanding loans of the

PSALM, the DOE said. SPPC, the DOE added, has the obligation to pay the PSA LM generation payments and fixed monthly payments. Meanwhile, the DOE, PSALM and the Department of Finance (DOF) are in close coordination to sell the remaining power assets of the government. Proceeds would be utilized to repay NPC’s debts. The DOE said it anchors its directions on the merits of the Epira, like in the case of Malaya Thermal, which is targeted to be bid out by 2018, while the privatization of the Agus-Pulangi Hydro Complexes would still have to go through legislative consultation. Meanwhile, the sale of Bataan Thermal and Bataan Gas Turbines is still pending subject to the resolution of the court involving their assets, it said. Based on the list, Malaya plant is scheduled for bidding in the first semester of 2018, with turn-over slated in the second semester of the same year; Agus 1, 2, 4, 5, 6, 7 and Pulangui hydro facilities are up for bidding in 2017; the decommissioned Sucat plant in the second semester of 2016; Bataan thermal and Bataan gas turbines are also slated for biding subject to resolution of court cases.

Bay, and disclosed the big entitlements are owned by retired generals.

Not generals, but big corporations

But Manda said the big entitlements in the Laguna de Bay are now held by big corporations, with those held by retired generals, referred to by Mr. Duterte, having dwindled through the years. Manda explained that the entitlements currently held by big corporations may range from 50 to 1,000 hectares of the lake surface. He said some corporations now have big entitlements by merging those entitlements granted to their dummies. Manda, who served as chairman of the LLDA during the Arroyo administration, said some 20 percent of the 90,000-hectare lake surface of the Laguna de Bay is now covered by entitlements granted to private persons to manage and develop fish pens. Although the licenses of these

big corporations may be revoked, he said the small fishermen who will be given priority in the grant of new entitlements might not be able to fill in the resulting shortage in production because their capital in their individual capacities would not be enough to supply the huge demand for bangus and tilapia. Aside from the lack of capital, Manda said all the stakeholders in the Laguna de Bay would also have to contend with the growing pollution in the lake, which has drastically reduced its production capacity. The lake had been so strained to the extent that its former average depth of 10 meters is now only at 2 meters.

Other sources of income

Manda said instead of focusing on water-based sources of income such as fishing, the fishermen should set their sights on new sources of landbased income, such as reforestation, which will also allow them to help

in the preservation of the Laguna de Bay watershed. Manda said one of the advocacies he had been pushing is the reforestation of the areas around the Laguna de Bay with bamboo, with the fishermen in the area leading the reforestation effort. Manda is currently the president of the Philippine Bamboo Foundation Inc., a nonstock, nonprofit corporation dedicated to research and development of all aspects of the bamboo plant. “We need capacity-building programs to teach the fishermen how to care for the bamboo and manufacture its byproducts, because the fishermen are not used to land-based livelihood,” he said. Some of the byproducts of bamboo include charcoal, bamboo shoots and furniture. Aside from selling bamboo byproducts, he said the reforestation and cleanup of the Laguna de Bay watershed would also allow ecotourism to flourish in the area.

Business locators prefer to be in Taguig–Jones Lang Lasalle By Roderick L. Abad

Contributor

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@rodrik_28

ORE and more business locators are now moving in to Taguig City, rather than to Makati City, because of its lower tax rate and more office space available, Jones Lang Lasalle (JLL) said on Tuesday. Comprising mostly of Bonifacio Global City (BGC), McKinley Hill and Uptown areas, Taguig accounts for 48 percent of the overall demand drivers by location based on transactions tracked by the property consulting firm in the first half of 2016, JLL Regional Director Lizanne Tan said. At present, rental rate in this area is already similar to Makati City. For instance, Grade A buildings in Taguig are leased for P850 to P1,300 per square meter, which is akin to that in the latter at P950 to P1,200 per sq m. “Although the rents are quite similar to Makati, many companies are pretty much eager to move to Taguig City because of lower tax rates,” she said, without citing exact figures. “So it really depends, I guess, on what type of business you’re in. But as a general rule, a lot of companies feel that business tax rates are still lower in Taguig versus Makati. And so this is mostly the reason they are quite interested to move over to this particular location.” Apart from the kind of progress the city has undergone, so far, Tan said the numerous developments that allow businesses to scale up are what also make Taguig attractive to them to set up shop. She noted, though, the traffic situation and congestion going in and out of the city are among the concerns of locators. “When you’re in Taguig—in the actual city—you don’t really encounter these problems. But if you’re moving from Taguig to Makati, Ortigas or Quezon City, you will notice that congestion is actually pretty difficult here,” she said. Expectation in this city is, likewise, bullish, given the massive inventory of office space today and beyond. Currently, Taguig has a total stock of 1.6 million sq m of office space, including existing buildings and in the pipeline up to the end of this year. The annual supply for 2016 stands at 445,000 sq m, or 62 percent of the total supply. “So there’s really a lot of demand that’s still coming in to Taguig City and there’s still a lot of development happening within this location,” the executive said. Coming in second as the pre-

1.6M sq m

The total stock of office space in Taguig by year-end ferred site by office occupiers in Metro Manila at 21 percent is Makati, which currently has around 1.8 million sq m of office stock. The annual supply for this year is only 30,300 sq m of office space, of which 21 percent has been already leased. For Pasig City, mainly the Ortigas area, rental range is still low at P600 to P750 per sq m. Considering that it’s like a discounted rate versus that in Makati and Taguig, a lot of companies are still growing in this particular area, Tan said. She cautioned, however, that it has limited office space, with around 22,300 sq m of office space delivered within 2016, and almost 100 percent leased. “[But] there’s going to be some increase [in the office stock] starting 2017 and 2018 in this particular area, with the likes of developments of the likes of Megaworld, Ortigas & Co. and Ayala Land for 2017,” she said. Compared with other areas in the metro, the executive cited Quezon City as “a popular city” that has continuously become such because it's the biggest in terms of population. Rental rates here are similar to Pasig City, but due to its popularity, plus the various developments around, they have actually started to go up to about P550 to P850 per sq m. “A lot of big developments here are quite popular because of the availability of large floor plates that cannot really be achieved in most of the central business districts. For big takers, they are able to take in more space in this particular location,” Tan said, noting the accessible transport system here is also a plus factor for occupiers. It is in Quezon City where the second-biggest stock is seen coming in to the market in 2017, with about 213,400 sq m of office space, next only to Taguig’s 394,900 sq m of office space. Meanwhile, Alabang, according to Tan, has actually started to gain some in terms of interest from a lot of corporate clients. This is because rental fees here are quite discounted compared to all the other cities, and there’s a lot of good stock coming in to the market. For this year, JLL tracks about

32,000 sq m of office space in this side of Muntinlupa, of which almost half, or 43 percent, has already been leased out. “But we’re seeing more stock coming in to the market in 2017. This is actually quite an attractive location, especially for people coming from the South [or] from labor pools in Cavite and Laguna. So the advantage also of Alabang, much like of Quezon City, is the big floor plates that developers are able to achieve in this particular location,” Tan said. In Pasay the Bay City area has had constant interest for a lot of occupiers, especially those with big chunks of space as their requirement. The JLL regional director attributed this to property giant SM Development Corp. of Henry Sy. “Developments of SM have been very popular and they’ve been very good in using their office premises. So the advantage really of Bay City is being able to cater to big BPOs [business-process outsourcing] and call centers because of their requirements,” Tan said. The annual supply in the Bay City is pegged at 109,400 sq m of office space this year, and is expected to go up to 53,500 sq m in 2017. Overall, the office demand has been constantly expanding since 2012 due to the growing BPO industry. For 2016, JLL already tracked approximately 721,100 sq m of office space that is delivered and is going to be delivered to the market, with 56 percent already leased from the existing supply. Vacancy levels in the Metro are still low at 4 percent of the current stock. “ This number has actually changed since the start of the year, because we saw some developments supposed to be delivered at the end of this year that slipped to 2017,” Tan said. Because of the current demand, she said the market remains quite favorable still for the landlords. “We are seeing a lot of precommitments from the bigger tenants to be able to take advantage of low rental rates. The market is still strong, especially in central business district areas, like Makati and BGC,” she said. “In 2017 we’re tracking about 1.2 million sq m of office space that will be delivered to the market. The bulk of that will be coming in the first half of 2017, mostly also because of some of the slippage from the developments supposed to be delivered at the end of this year.”

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McDonald’s selling rights in Malaysia, Singapore

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cDonald’s Corp. is planning a sale of 20year franchise rights in Malaysia and Singapore that could collectively fetch at least $400 million, people with knowledge of the matter said. Suitors for the fast-food operations in the two Southeast Asian markets have begun sounding out banks for financing, said the people, who asked not to be identified because the information is private. A potential bidder is in talks with lenders for as much as $300 million in funding, they said.

$112B The market value of McDonald’s

McDonald’s is seeking local franchise partners to run its restaurants in Malaysia and Singapore, as it pursues an international turnaround plan put in place after CEO Steve Easterbrook took over last year. The Big Mac maker, which has a $112-billion market value, is revamping its ownership models throughout Asia, including plans to sell operations in China, Hong Kong and South Korea. McDonald’s has adopted a “development licensee model” for the two markets, a Singapore-based spokesman for the company said in an e-mailed response to Bloomberg queries. It is negotiating with candidates “who are committed to helping accelerate growth and innovation in Malaysia and Singapore,” she said. Unlike in its other major markets—including the US—most McDonald’s outlets in Asia are company-owned. The chain aims eventually to have 95 percent of its restaurants in the region under local ownership, it said in March. McDonald’s currently has more than 120 restaurants with around 9,000 employees in Singapore, according to its local web site. In Malaysia the chain runs more than 250 restaurants, its web site shows. Bloomberg News

Editor: Max V. de Leon • Wednesday, July 27, 2016 A5

Allies step in for ‘weak’ Asean vs China

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he United States, Japan and Australia have urged China not to construct military outposts and reclaim land in the disputed South China Sea, in a strong show of support for Southeast Asian nations that have territorial disputes with Beijing in the resource-rich area.

A joint statement by the three allies, issued on late Monday, ironically fills the vacuum created by Southeast Asia’s main grouping, which, during its meeting of foreign ministers on Sunday, failed to take a stand against China because of disunity among themselves. “The ministers expressed their serious concerns over maritime disputes in the South China Sea. The ministers voiced their strong opposition to any coercive unilateral actions that could alter the status quo and increase tensions,” said the statement issued by Secretary of State John Kerry and foreign ministers Fumio Kishida and Julie Bishop. The three met in Vientiane on the sidelines of a series of meetings organized by the Asean. The grouping could have leveraged the recent decision by a permanent arbitration panel in The Hague, which ruled in favor of the Philippines in a case it brought against China in their dispute in the South China Sea. The panel ruled that China’s claim that amounts to claiming almost all of South China Sea was illegal.

Implicit in the ruling is that China has no standing in its other disputes with Malaysia, Brunei and Vietnam, which also are Asean members. But Asean became divided because of China’s divide-and-rule diplomacy by winning support from Cambodia, and to some extent Laos, which resulted in the grouping issuing a joint statement on South China Sea that did not mention China by name or the arbitration ruling. Instead, it fell upon Asean’s allies to rush to their support. In their joint statement, the ministers of Japan, Australia and the United States also expressed “strong support” for the rule of law and called on China and the Philippines to abide by the arbitration panel’s award, “which is final and legally binding on both parties.” “The ministers stressed that this is a crucial opportunity for the region to uphold the existing rules-based international order and to show respect for international law,” they said in one of the strongest and most detailed postarbitration warnings by the allies against China.

OfficialS attending the Asean Summit in Laos include (from left) South Korean Foreign Minister Yun Byung-se, Japanese Foreign Minister Fumio Kishida, Laos Foreign Minister Saleumxay Kommasith, Chinese Foreign Minister Wang Yi and Philippines Foreign Minister Perfecto R. Yasay Jr. AP

In a clear broadside at China, the statement urged all parties to refrain from “unilateral actions that cause permanent physical change to the marine environment...and from such actions as large-scale land reclamation, and the construction of outposts, as well as the use of those outposts for military purposes.” China has been rapidly developing reefs and rocky outcrops into islands in the South China Sea, including building air strips capable of landing military aircraft. It claims historic rights to the vast sea, a claim that was rubbished by the arbitration panel, which said the sea is international waters and the rocky outcrops do not constitute sovereign islands that would give states an ownership on the surrounding waters.

The ministers voiced their strong opposition to any coercive unilateral actions that could alter the status quo and increase tensions.” —Joint statement of Kerry, Kishida and Bishop For years China has prevented fishermen from other countries from venturing into the areas it claims, and has made it clear it will not back down despite the arbitration award, which it calls politically motivated, illegal and irrelevant. It has accused countries outside the region—notably the United States, Japan and

Weak statement a lost opportunity for Asean–ADRi

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ays of deadlock ended in lukewarm statement at the Asean weekend meeting in Vientiane, Laos, when the Philippines reportedly dropped a request for the member-countries’ joint statement to mention a landmark legal ruling on the South China Sea. The legal victory for the Philippines before the Permanent Court of Arbitration on the South China Sea could have been used as a rallying call during the Asean Summit in Laos. Instead, the release of what many described as a watered-down joint statement from the 10-nation bloc became a “lost opportunity,” said Dindo Manhit, president of Stratbase Albert del Rosario Institute (ADRi). “The group reaffirmed [its] respect for and commitment to freedom of navigation in and overflight above the West Philippine

Sea as provided by international law, but stops quite short of acknowledging the ruling itself or affirming acceptance of the tribunal’s findings,” he said. The statement emerged following a deadlock among the 10 nations on how to confront China’s aggressive moves in the hotly contested waters, with smaller countries like Laos and Cambodia reportedly foiling moves by claimant-states to issue a more strongly worded rebuke of Chinese expansion. The Vientiane meet is the first since the Philippines handily won its arbitration case versus China, after the tribunal struck down the country’s claims of historic rights over much of the West Philippine Sea. The invocation of broad principles suffer because of the lack of specifics, the ADRi president stressed, “the South China Sea section of the text does not even include

the simple phrase ‘full respect for legal and diplomatic processes’, which was present in previous Asean statements.” The statement cautioned countries to exercise self-restraint in their activities in the area, including provocative actions on presently uninhabited islands, reefs, shoals and other features. This is the only part that could be considered “vaguely critical” of China, which is the only country to have such moves in recent years. Manhit said the statement just plays par for the regional bloc, which has been known for its lukewarm statements that some attribute to its consensus-building mechanism. “As with everything in Asean, countries win some and lose some. It’s hard to say what the Philippines gained, but it is clear what the region lost: an opportunity to speak decisively against the clearly coercive diplomacy of its larger neighbor.”

Jokowi hits stride in Indonesia with tough-talking wins

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oko Widodo won the Indonesian presidency in 2014 by campaigning as a man of the people who could tackle graft and stand up to the political establishment. Expectations soon soured as Widodo, known as Jokowi, struggled to control his government and break free of the very elites he initially outmaneuvered, including former President Megawati Soekarnoputri, who chairs his ruling Indonesian Democratic Party of Struggle, or PDI-P. With his agenda languishing, markets noticed—the rupiah fell nearly 12 percent in his first year after taking office. Fast forward nearly two years and Jokowi has notched up several policy wins, gotten his pick through for national police chief and is sounding tough on terrorism and against neighbors over territory, including China. Last month Indonesia’s navy detained a Chinese boat near the Natuna Islands, arresting seven fishermen after firing warning shots into the air. “We probably have to separate out the political from the economics, but politically he has really in quite an impressive way consolidated his position in the last year,” said Greg Fealy, an associate professor at the Australian National University. Since a Cabinet

reshuffle in August, Jokowi has been “systematically distancing himself” from Megawati. “He has much more authority, he has a far greater ability to get things done and he’s behaving more like the president that a lot of us expected that he would be,” Fealy said. Still, his success “is highly contingent on the economy continuing to do well and infrastructure projects remaining on time.” In June lawmakers passed a bill for a controversial tax amnesty that lasts until March 2017 and which the central bank says will result in 560 trillion rupiah ($43 billion) of inflows over an unspecified period. The funds are needed to finance Jokowi’s ambitious infrastructure agenda which includes a pledge to build ports, roads and railways to spur growth in Southeast Asia’s biggest economy to 7 percent by the end of his term.

Impacting budget

The tax amnesty will serve as a test for the president as it will impact the budget deficit “as well as Jokowi’s priority program, including infrastructure, which will differentiate Jokowi from the previous governments,” said Yunarto Wijaya, a political analyst at

consultancy Charta Politika Indonesia. Jokowi needs hundreds of billions of dollars for infrastructure in his first term, according to the Public Works Ministry. The state budget can finance about 40 percent of that, with 31 percent coming from private investors. For a story from a recent interview with Indonesia’s finance minister, click here. “As a good governance measure and as a revenue measure it’s a mixed bag, but the fact that they were able to get it through and avoid some of the really bad things that the DPR, the legislature, wanted to put into the bill, that’s positive,” said Aaron Connelly, a research fellow at the Lowy Institute for International Policy in Sydney, referring to the tax amnesty. Another public relations win came last week after security forces announced they had killed the country’s most wanted militant, Santoso. Long a thorn in the side of authorities, Santoso, who like many Indonesians uses only one name, was the leader of the Eastern Indonesia Mujahideen and declared allegiance to Islamic State in 2014. Jokowi has slowly built alliances in parliament, where he now enjoys the support of more than two-thirds of

lawmakers. One-by-one, opposition parties have been lured toward his coalition. Golkar, the party of former dictator Suharto, is the latest to signal its support. Embroiled last year in a messy public dispute over who should become national police chief, Jokowi succeeded in February in getting his pick, former antiterrorism chief Tito Karnavian, through. In doing so he passed over former Megawati aide Budi Gunawan, who is deputy police chief. The president’s popularity at home has also been boosted by his strong stance against drug crimes, with 12 foreigners executed by firing squad last year for narcotics-related offenses. Another round of executions is expected within days. His actions though have drawn international condemnation.

Natuna meeting

At the end of June, when Jokowi donned a bomber jacket and flew to the Natuna area to meet some cabinet ministers on a warship, he sent a signal to China he took Indonesia’s sovereign maritime rights “pretty seriously,” said Connelly. The government plans to blow up three impounded Chinese fishing boats on August 17, Indonesia’s independence day. Bloomberg News

Australia—of meddling in Southeast Asia and destabilizing the region. In recent days, China’s military has staged live-firing exercises in the area and said it would begin regular aerial patrols over the sea. It also has asserted that it will not be deterred from continuing construction of its man-made islands. AP

Singapore banks facing earnings stumble as bad loans, Sibor bite

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arnings reports due soon from Singapore’s largest banks may show their second-quarter profits were crimped by higher buffers for soured loans and a faltering rally in domestic interest rates. Here are five charts illustrating the themes that may emerge out of the reports from DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. (OCBC) and United Overseas Banking Ltd. (UOB). Interbank borrowing costs have slumped this year as the local dollar strengthened, causing the three-month Singapore interbank offered rate to fall by 0.31 percentage point since December and by 0.13 percentage point in the April-to-June period. That may curb growth in banks’ net interest margins as banks price their domestic loans, in part, on interbank rates. Margins have risen over the past year in tandem with a rally in Sibor. As Sibor continued to fall in July, the banks’ interest income will remain under pressure. Melissa Kuang, an analyst at Goldman Sachs Group Inc. in Singapore, lowered her forecasts for net interest margin growth by one to eight basis points across the three Singaporean lenders for 2016 through 2018, according to a July 19 report. The banks’ exposure to struggling oil and gas firms means they will probably declare higher provisions to cover the increased badloan ratios they’re likely to report for the second quarter, according to UBS Group AG analyst Aakash Rawat. The lenders had an average NPL ratio of 1.13 percent in the first quarter and 0.9 percent in the second quarter of 2015. Overall classified loan exposure, which includes debts that are unrecoverable, as well as those unlikely to be repaid, rose to a seven-year high of 0.92 percent by March, according to Monetary Authority of Singapore data. Though oil prices have rebounded this year after 2015’s historic rout, Singapore banks remain heavily exposed to energy-related companies that are still in the process of restructuring their finances, Moody’s Investor Service said last month. The ratings company downgraded its outlook for the lenders to negative from stable, citing the energy exposure and also challenges to economic and trade growth. The Singaporean banks derive most of their revenue from extending credit in Southeast Asia and Greater China, where economic expansion is slowing. Singapore’s economy expanded an annualized 0.8 percent in the second quarter from the previous three months, according to an advance estimate by the Ministry of Trade and Industry on July 14. While that was faster than the first quarter’s 0.2 percent growth, DBS said in a note that day the figure was “fairly weak” given the economy’s historical track record. “Almost every single country where they have a presence is saturated with debt and seeing a slowdown in economic activity,” Loo Kar Weng, an analyst at HSBC Holdings Plc., wrote in a July 13 note. These trends mean that net income for the June quarter at DBS and OCBC probably fell 3 percent and 14.5 percent, respectively, according to the average estimates of six analysts compiled by Bloomberg. UOB may post a 0.9-percent increase. OCBC and UOB, Southeast Asia’s second- and third-largest banks by assets, are due to post earnings on July 28. DBS, the region’s top bank, will report on August 8.

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The World BusinessMirror

Wednesday, July 27, 2016

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Kerry: Progress in talks with Russia on Syria

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IENTIANE, LaoPDR—US Secretary of State John Kerry said progress is being made with Russia on a potential military partnership that could strengthen a faltering truce in Syria despite grave doubts expressed by the Pentagon and joint chiefs of staff. Speaking on Tuesday after meeting Russian Foreign Minister Sergey Lavrov in Laos, Kerry made no promises of success but said he hoped discussions with Russia could produce a tangible

result in the next week to 10 days. “My hope would be that somewhere in early August—the first week or so, somewhere in there— we would be in a position to be able to stand up in front of you

and tell you what we’re able to do with the hopes that it can make a difference to the lives of people in Syria and to the course of the war,” he said. His comments followed remarks from Defense Secretary Ash Carter on Monday, in which he said Kerry’s efforts with Russia have been complicated by the fact that Russia is focused mainly on supporting the Syrian government, which he said has had the effect of prolonging the civil war. “We had hoped that they would promote a political solution and transition to put an end to the civil war, which is the beginning of all this violence in Syria, and then combat extremists rather than moderate opposition, which has to be part of that transition,”

Carter said at a Pentagon news conference w ith Gen. Joseph Dunford, chairman of the joint chiefs of staff. “So they’re a long way from doing that.” When a reporter told Carter that he sounded unenthusiastic about the Kerry effort, Carter said, “No, I’m very enthusiastic about the idea of the Russians getting on side and doing the right thing. And I think that would be a good thing if they did. I think we’re a ways from getting that frame of mind in Russia. But that’s what Secretary Kerry is working toward.” Ker r y sa id he appreciated Carter’s words and that his talks with Lavrov, as well as technical discussions at lower levels, would be continuing “to work through to

details in order to make certain that the doubts expressed by Secretrary Carter by Chairman Dunford or doubts expressed by [Russian] President [Vladimir] Putin and the Russians are going to be addressed ahead of time.” Ker r y has been ta lk ing to Russian officials about a proposal in which the US would share intelligence and targeting information with the Russians. In exchange, Moscow would use its inf luence with the Syrian regime to effectively ground the Syrian air force and promote a political solution to a civil war that has killed as many as a half-a-million people. Both Carter and Dunford said any arrangement with the Russians to coordinate military action in

Syria would be transactional and not based on trust. Kerry’s talks with Lavrov in Laos on Tuesday and with Putin in Moscow 10 days ago came after a leaked proposal showed the US offering Russia a broad new military partnership against Islamic State and the Nusra Front, which is al-Qaeda’s Syrian affiliate. Several conditions would apply, including Russia committing to grounding Syria’s bombers and starting a long-sought political transition process. Dunford denied reports that US-backed opposition forces have coordinated with Nusra in some cases. “We don’t have any indication that the forces that we are providing support to in Syria are cooperating or intermingled with al-Nusra,” the general said. AP

History and hostility as Hillary Clinton ascends to nomination

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HILADELPHIA—A glass ceiling is shattering at the Democratic National Convention as Hillary Clinton ascends to the presidential nomination with Tuesday’s roll call of the states, making her the first woman to lead a major party into a White House race. But as history is being made, hostility is being heard, too. Rhetorically, at least, die-hard Bernie Sanders’s supporters also are breaking some glass, loudly protesting his treatment by the party and still cold to Clinton, even as Sanders appeals for Democrats to unify and defeat Republican Donald Trump, “a bully and a demagogue.” What was expec ted to be a tightly orchestrated convention, run with all the professionalism and experience that were lacking at Trump’s often-chaotic affair in Ohio, instead showed its rough edges in the early going, starting with chants of “Bernie” during the opening invocation and boos at numerous mentions of Clinton’s name. First lady Michelle Obama gave a heartfelt endorsement of the candidate who engaged her husband in a fierce struggle for the nomination in 2008. “I trust Hillary to lead this country,” she said in a speech that provided a parent’s-eye view of the White House and its power.

Bertrand Piccard (right) and Andre Borschberg, the pilots of the Solar Impulse 2 plane, embrace in Abu Dhabi, United Arab Emirates, on July 26. The world’s first round-the-world flight to be powered solely by the sun’s energy made history on Tuesday as it landed in Abu Dhabi, where it first took off on an epic 40,000-kilometer journey that began more than a year ago. AP

Historic solar flight marks 1st round-the-world tour

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BU DHABI, United Arab Emirates—T he world ’s f i rst rou nd- t he -world flight to be powered solely by the sun’s energy made history on Tuesday as it landed in Abu Dhabi, where it first took off on an epic 40,000-kilometer journey that began more than a year ago. Since its March 2015 take off, the Swiss-engineered Solar Impulse 2 has made 16 stops across the world without using a drop of fuel to demonstrate that using the plane’s clean technologies on the ground can halve the world’s energy consumption, save natural resources and improve quality of life. After landing the plane, pilot Bertrand Piccard was greeted outside the cockpit by his Solar Impulse partner and fellow pilot Andre Borschberg. They hugged and pumped their fists in the air. “The future is clean. The future is you. The future is now. Let’s take it further,” Piccard said, speaking through a microphone to applause and cheers from a crowd that included Prince Albert of Monaco. The aircraft is uniquely powered by 17,248 solar cells that transfer energy to four electrical motors that power the plane’s propellers. It runs on four lithium polymer batteries at night. The plane’s wingspan stretches 236 feet to catch the sun’s energy. At around 5,070 pounds, the plane weighs about as much as a

minivan or mid-sized truck. An empty Boeing 747, in comparison, weighs 400,000 pounds. To help steady it during takeoffs and landings, the plane was guided by runners and bicyclists. Despite its historic mission, the Solar Impluse 2’s journey was far from quick or problem-free. The pilots faced a nine-month delay a year ago after the plane’s batteries were damaged during a flight from Japan to Hawaii. It was also delayed for more than a week in Cairo ahead of its final flight to Abu Dhabi when Piccard fell ill, and due to poor weather conditions. Over its entire mission, Solar Impluse 2 completed more than 500 flight hours, cruising at an average speed of between 45 kilometers per hour and 90 kmh. It made stops in Oman, India, Myanmar, China, Japan, the US, Spain, Italy, Egypt and the United Arab Emirates. Its North American stops included California, Arizona, Oklahoma, Ohio, Pennsylvania and New York. The carbon-fiber plane is a single-seater aircraft, meaning its two Swiss pilots—Piccard and Borschberg—had to take turns flying solo for long days and nights. To calm their minds and manage fatigue during the long solo flights, Borschberg practiced yoga and Piccard self-hypnosis. In a statement this week, Borschberg said it is no longer a question of whether

17,248 The total number of solar cells that powered the Solar Impulse 2 plane

it’s possible to f ly without fuel or polluting emissions. “By f lying around the world, thanks to renewable energy and clean technologies, we have demonstrated that we can now make our world more energy efficient,” he said. The pilots would rest a maximum of 20 minutes at a time, repeating the naps 12 times over each 24-hour stretch. It took 70 hours for Piccard to cross the Atlantic Ocean, which was the first by a solar-powered airplane. Borschberg’s flight over the Pacific Ocean at 118 hours—or what is five days and five nights— shattered the record for the longest flight duration by an aircraft flying solo. Neither pilot was able to stand in the cockpit while flying, but the seat reclined for stretching and its cushion could be removed for access to a toilet. Goggles worn over the pilot’s eyes flashed lights to wake him up while armbands placed underneath their suits buzzed when the plane was

not at flying level. The plane also did not have a pressurized cockpit so Borschberg and Piccard could feel changes in temperature. The pilot’s blood oxygen levels were monitored and sent back to ground control in Monaco. Hot temperatures in the Middle East this time of year cause thermals and turbulence that forced Piccard to fly longer periods of time with an oxygen mask, as he piloted the last leg of the trip from Cairo to Abu Dhabi in roughly three nights and two days. Piccard, a psychiatrist, is the son of undersea explorer Jacques Piccard and a grandson of balloonist Auguste Piccard. In 1999 he became the first person to circumnavigate the globe nonstop in a hot-air balloon. Borschberg, an engineer and graduate of Massachusetts Institute of Technology, is also an entrepreneur. He launched the Solar Impulse project in 2003 with Piccard. The project is estimated to cost more than $100 million. The UAE-based Masdar, the Abu Dhabi government’s clean-energy company, was a main sponsor of the flight. There were more than 40 additional sponsors, including Omega, Belgian chemical company Solvay, Swedish-Swiss automation cor poration A BB, Swiss manufacturer Schindler, Google and Moet Hennessey, among others. AP

Upset

LIBERAL favorite Elizabeth Warren, senator from Massachusetts, and Sanders himself also gave the party something to cheer about on Monday night. While Mrs. Obama has often avoided overt politics, her frustration with Trump’s rise was evident. Without naming him, she warned that the White House couldn’t be in the hands of someone with “a thin skin or a tendency to lash out” or someone who tells voters the country can be great again. “This right now, is the greatest country on Earth,” she said. Sanders took the stage to a sustained roar and shouts of “We love you, B er nie.” S ome of his supporters were in tears. While asserting “our revolution continues,” the Vermont senator implored his restive followers to get behind Clinton. On issues of poverty, immigration, environmental protection and more, he said, Clinton’s election counts. “If you don’t believe that this election is important,” he said, “take a moment to think about the Supreme Court justices that Donald Trump would nominate.” Democrats made a pronounced effort to showcase their diversity, salting the lineup from the stage with black, Hispanic, gay and disabled speakers in an obvious counterpoint to Trump and the various groups he has upset with his remarks.

Uproar

THE convention opened in a dustup over leaked e-mails showing the party’s pro-Clinton, anti-Sanders slant

during the primaries, when it was supposed to be neutral. In the uproar, party chairman Debbie Wasserman Schultz of Florida went swiftly into exile, first giving up her position, then the convention’s opening-day gavel after being roundly booed by Sanders partisans at a meeting of her home-state delegation. Sanders delegate Gian Carlo Espinosa, 29, of Key West, Florida, said he would not abandon protests, as Sanders urged. “Why else are we here?” he asked. “The people that we’re representing are displeasured with the party. We have to get that across somehow.” This, despite Sanders telling his backers in an e -mail and tex t message: “Our credibility as a movement will be damaged by booing, turning of backs, walking out or other similar displays.” In roasting heat, spirited protests unfolded outside, another echo of the Republican convention in Cleveland. Several hundred Sanders backers marched down Philadelphia streets, with signs saying “Never Hillary.” One said, “Just go to jail, Hillary,” a takeoff on cries at the Republican convention to “lock her up.”

Counterpoint

NEVERTHELESS, Clinton was firmly on track to write the next chapter of a story that left off in 2008, when she conceded the Democratic presidential race to Barack Obama in a speech that lamented “we weren’t able to shatter that highest, hardest glass ceiling this time,” but added proudly, “it’s got about 18 million cracks in it,” a tally of her primary votes. The roll call, when each state announces its delegate totals from the primary season, will affirm a nomination Clinton locked up weeks ago. One question of the day was whether Sanders would press for a count by all the states, as his delegates want, or interrupt the process to ask that her nomination be approved by acclamation. That’s what Clinton did on Obama’s behalf in 2008 to indicate their rivalry was truly over. Clinton promised an uplifting c o u n t e r p o i n t t o Tr u m p’s d a r k portrayal of the state of the nation, but the fallout from some 19,000 leaked Democratic National Committee e-mails threatened to complicate those plans.

Inexcusable

MICHAEL Buratowski, an analyst with the cyber-security firm the Democrats employed, said he found evidence of Russian involvement, such as the use of a Russianlanguage keyboard and time-offs that coincided with Russian business hours in what he described as an attack too sophisticated to be the work of freelance hackers. The hackers took at least a year’s worth of detailed chats, e-mails and research on Trump, according to a person knowledgeable of the breach who wasn’t authorized to speak publicly about the matter. AP

ExportUnlimited BusinessMirror

news@businessmirror.com.ph

Editor: Efleda P. Campos • Wednesday, July 27, 2016 A9

HK trade chief meets with local IT-BPM execs By Gliceria N. Cademia | Trade and Industry Development Specialist, DTI-EMB

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HE Philippine Trade and Investment Center (PTIC) in Hong Kong and the Department of Trade and Industry’s Export Marketing Bureau recently arranged the visit of Willie Tan, investment promotion deputy head of the Hong Kong Economic and Trade Office (HKETO), to meet with executives of the top 2 information technology-business Process management (IT-BPM) companies in the Philippines on June 30.

(FROM left) Melvin Lee, Hong Kong Economic and Trade Office (HKETO); Export Marketing Bureau (EMB) Services Division Officer in Charge Maria Teresa Loring; EMB Assistant Director Anthony Rivera; Mykel Teodoro, CAI-STA Philippines; President CAI-STA Philippines Emma Teodoro; HKETO Deputy Head Willie Tan; EMB Director Senen M. Perlada; and JL Botor, manager, Healthcare BPM Practice, Pointwest Technology Inc.

Through meetings, hketo assists persons or companies interested in establishing connections and strengthening ties with Hong Kong, and those investing in Hong Kong or in mainland China and other parts of Asia through Hong Kong. Tan met with executives of Computer Aid Inc. (CAI)-Softech Advantage Inc. (STA) and Pointwest Tech-

CAI-STA company action plan. She said Tan could make referrals with executives of prospective partner private companies in Hong Kong. On the dow nside, Teodoro mentioned the issue of high cost of wages and difficulty finding locations with lower rental fees in Hong Kong. Tan mentioned the seven-year residency requirement before one can acquire permanent residency in Hong Kong.

nologies. CAI-STA is a joint venture between US-based Computer Aid Inc. and SoftTech Advantage Inc. It serves as an offshore delivery center of CAI-STA and other clients. CAI-STA Philippines President Emma Teodoro requested Tan to look for market and partner/local distributor of IT-BPM services in Hong Kong, adding such expansion will be incorporated in the

CAI-STA was founded in 1981 to provide quality information services to companies of all sizes. The Filipino- and American-owned company develops a system that tracks the origins and locations of cigarettes and food products. It is engaged with numerous Fortune 1000 companies and government agencies, having expanded to Europe and Canada. In 2007 CAI-STA launched a new Asia-Pacific busi-

ness unit based in Sydney, Australia. Next to meet Tan was JL Botor, manager of Healthcare BPM Practice of Pointwest Technologies. Pointwest is an award-winning global solutions company based out of Manila. It is recognized as one of the largest software development-outsourcing companies in the Philippines. Botor said it is worth considering Hong Kong as a place of investment, also depending on the feasibility of

company engagement. He will assign employees to research about and consider Hong Kong as a place of investment. He acknowledged the effort of Hong Kong Trade and Investment Office to help Philippine companies setup business in Hong Kong. Botor told Tan Pointwest puts premium on ease of doing business, incentives for effort, power rates, cost of rental and distance to universities in setting up business. The company is the largest Filipino IT-BPM company with 1,800 employees, 100 of whom are based in the US, and 800 programmers working in the country. It has gained market share in the US and Japanese markets. Pointwest is 80-percent IT and 20-percent business-management company. It has regional operating headquarters in Singapore and has penetrated Japan in 2015. It is into banking, airline transportation and health care in the US. It bids for projects with Philippine government, particularly the Department of Health. The IT-BPM industry in the Philippines has grown twelvefold since 2004 in terms of revenue, faster than the global industry, which has grown five times. In terms of work force, the Philippine industry grew 10 times. The size is seen to double by 2020, from 1.3 million full-time employees in 2016.

EMB CORNER

Better export trade facilitation By Franclem A. Peña

Trade and Industry Development Specialist, DTI-EMB Export Assistance and Business Matching Division DTI-EMB

I

N his first State of the Nation Address, President Duterte highlighted reforms that include making ease of doing business mandatory. Improving trade facilitation is contributory to improving the overall experience of doing business in the country. For the export industry, both the Department of Trade and Industry (DTI) and exporters organizations had been long advocating the simplification of trade policy and procedure, transparency and efficient customs process. Landmark government policies to foster better export trade facilitation include, among others, Executive Order 1016 (March 25, 1985), or Withdrawing the Inspection, Commodity and Export Clearance Requirements on Philippine Exports, and Presidential Decree 930 (May 13, 1976), or Simplifying Export Procedures and Documentation by Realigning Functions of Certain Government Offices/ Agencies Involved in Processing Export Documents, by Authorizing the Issuance of Periodic clearances, by the Adoption of Standardized Export Documents and For Other Purposes. These executive issuances created the List of Prohibited and Regulated Products for Export, which is available at the DTI web site (www.dti.gov.ph), as well as all customs offices and ports. An Interagency Committee (IAC) was also created to review the list and approve issuances or orders from government agencies that may have an impact on export trade. It is composed of the secretary of trade and industry, as chairman, and the representatives of the Department of Finance (DOF), Department of Budget and Management (DBM), Bangko Sentral ng Pilipinas and the National Economic and Development Authority (Neda) as members. Recent transparency initiatives include the creation of the Philippine National Trade Repository (PNTR), www.pntr.gov.ph, a web site providing a comprehensive reference on all trade data, regulations and processes. PNTR is supported by 50 trade regulatory government agencies (TRGAs) and trade policy-related agencies. To support all these efforts, the DTI, through its Export Marketing Bureau (EMB) and the Export Development Council (EDC), is continuously working with other government agencies and exporters organizations toward the development of the Philippine exports. Export Assistance Network, a unit under the DTI-EMB, liaise with all export-regulating government agencies. Trade facilitation issues reported by affected exporters are resolved directly with the concerned government agency. The Networking Committee on Trade Policies and Procedures Simplification of the EDC handles issues and concerns on trade policies and procedures, which have adverse effect on export trade.

D.B.F.T.A. SESSION Victorino Soriano, Trade and Industry Development Specialist and Chief

of the Knowledge Processing Division of the DTI-EMB, discusses the benefits awaiting local companies when they avail themselves of the DTI-EMB’s Doing Business in Free Trade Areas (DBFTA) program. In the session held July 14 at the DTI-EMB office along Gil J. Puyat Avenue in Makati City, participants were faculty and students of the Centro Escolar University Makati campus, and their counterparts from the Iligan campus of the Mindanao State University. ROY DOMINGO

PECP info sessions sought to help boost export capabilities of local companies

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HROUGHOUT the first six months of the year, the Export Management Bureau (EMB) of the Department of Trade and Industry (DTI) continued to hold seminars seeking to inform the public of the various facets of manufacturing and the export trade. The Philippine Export Competitiveness Program (PECP), a major program of the DTI-EMB, seeks to bolster the competitive stance of local manufacturers through seminars, information sessions and similar activities that give them insight into global standards on production, innovation and exports. Mainly held in the government agency’s headquarters on Gil Puyat Avenue in Makati City, the sessions covered various topics that sought to give domestic manufacturers, including exporters and potential exporters, academe, officials from local government units and agencies, and other business sectors a better perspective on how to break into the overseas markets. The lone visit done by a PECP resource team outside the National Capital Region was conducted on March 17 in Cebu. The information seminar covered topics including organic certification, the Philippine halal certification process, updates on the Food and Drug Administration (FDA) and financing. The 13 information sessions conducted by the

PECP during the January-to-June period were attended by 757 people. The information sessions presented an overview of export procedures, the terminal appointment booking system, updates on FDA regulations, organic certification, the Philippine halal certification process, financing programs available and services provided by the Department of Science and Technology. Other sessions included discussions of services conducted by the Bureau of Fisheries and Aquatic Resources on both municipal and commercial fishers, with food becoming an ever-bigger part of the country’s exports; global consumer trends; drivers of future export competitiveness; organic certification and potential for export; labeling requirements for food products to Europe; protection of brand names in export markets. Organic certification and potential for export; drivers of future export competitiveness /2016 global consumer trends; organic certification; philippine halal certification process; update on fda; financing; labelling requirements for food products to europe (food divison); protection of brand – ip abroad; effects of intellectual property infringement to services and goods exports; non-tariff measures and its impact to philippine exporters standards as tool to market access;

upcoming events Compiled by Louise Kaye G. Mendoza DTI-EMB Knowledge Processing Division

JULY 28

Event: Philippine Export Competitiveness Program Time: 1-4:30 p.m. Session 1: 2-2:30 p.m. Overview of EMB Services and Export Procedures Session 2: 2:30-4 p.m. Overview of Asean FTAs and the Self-Certification Scheme Venue: Penthouse, Fifth Floor, DTI International Building, 375 Sen. Gil Puyat Avenue, Makati City

JULY 28-29

Event: RIPPLES during the Fourth National Marketing Conference: HELLO Asean

Venue: Manila Marriott Hotel, Resorts World Manila, Pasay City

JULY 27-29 Event: Cocolink 2016

By the Davao Region Coconut Industry Cluster Inc. (DRCICI) Attended by: Food and Agri-Marine Division (FAMD) Director Senen M. Perlada Assistant Director Anthony Rivera Venue: SMX Convention Center, SM Lanang Premier, Davao City

A10 Wednesday, July 27, 2016 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

The UN could use more democracy

A

S much as it demands transparency and accountability from its member-nations, the United Nations (UN) has not always been very good at providing them itself. Now more than ever, the UN needs to bring more of its backroom dealings into the light— and it can start with the process for selecting its leader.

The 15 members of the UN Security Council took their first straw poll last week to pick the UN’s new secretary-general. But they won’t tell the world the results, much less how any of them voted. That’s one of many ways in which the UN needs to improve the way it selects the secretary-general. The process has been basically unchanged for 70 years. With the blessing of its five permanent members, the Security Council presents one candidate to the General Assembly, which approves him (and so far they have all been men). It’s a long way from 1946. The UN now has to deal with crises that require cooperation among a much wider range of actors—not just states, but global corporations, philanthropists and networked activists. The UN’s future legitimacy and effectiveness depend on giving these new players more of a voice, especially with social media acting as a kind of global watchdog. The required changes to the UN’s rules wouldn’t necessarily trespass on the prerogatives of the five permanent members of the Security Council (refresher: the US, China, Russia, the UK and France). And let’s be realistic: Without the disproportionate influence granted to them by their veto power, the P-5 inevitably would have let the UN go the way of the League of Nations. But nothing prevents the UN from releasing straw poll results (more will follow) without identifying how individual countries voted. After all, the UN for the first time this year held open hearings and debates among the candidates, a welcome change that has usefully sharpened the distinctions among them. Even better would be for the General Assembly to request, and the Security Council to present, a choice of candidates—something that UN “elders” have proposed. Of the 12 candidates in the running, including several former prime and foreign ministers, eight have high-level UN experience, eight are from Eastern Europe and six are women. Another smart break from the past would be to extend the secretary-general’s term to seven years from five, with no option of renewal. This would cut back on the reelection politicking that trades high-level UN positions for votes. It would give the secretary-general more time to launch difficult institutional reforms, and strengthen his or her independence—which is all the more critical given the “crisis of relevance” facing the Security Council. Finding the ideal blend of diplomat, politician, manager and moral champion is not easy. Making the process more open can only help. Bloomberg Editorial

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The Social Security Commission Susie G. Bugante

All About Social Security

D

o you know that the Social Security System (SSS), under the Social Security Act of 1997 (Republic Act 8282) “...shall be directed and controlled by a Social Security Commission [SSC], hereinafter referred to as ‘commission,’ composed of the Secretary of Labor and Employment or his duly designated undersecretary, the SSS president and seven appointive members, three of whom shall represent the workers’ group, at least one of whom shall be a woman; three, the employers’ group, at least one of whom shall be a woman; and one, the general public, whose representative shall have adequate knowledge and experience regarding social security, to be appointed by the President of the Philippines”? The law further provides that “the six members representing workers and employers shall be chosen from among the nominees of workers’ and employers’ organizations, respectively.” In short, the SSC is the governing and policy-making body of the SSS. Its powers and authorities, as provided for under Section 4 of the social-security (SS) law, are as follows: “(1) To adopt, amend and rescind, subject to the approval of the President of the Philippines, such rules and regulations as may be necessary to carry out the

provisions and purposes of this Act; “(2) To establish a provident fund for the members, which will consist of voluntary contributions of employers and/or employees, self‐employed and voluntary members and their earnings, for the payment of benefits to such members or their beneficiaries, subject to such rules and regulations as it may promul-

gate and approved by the President of the Philippines; “(3) To maintain a provident fund, which consists of contributions made by both the SSS and its officials and employees and their earnings, for the payment of benefits to such officials and employees or their heirs under such terms and conditions as it may prescribe; “(4) To approve restructuring proposals for the payment of due, but unremitted, contributions and unpaid loan amortizations under such terms and conditions as it may prescribe; “(5) To authorize cooperatives registered with the cooperative development authority or associations registered with the appropriate government agency to act as collecting agents of the SSS with respect to their members: Provided, that the SSS shall accredit the cooperative or association: Provided, further, that the persons authorized to collect are bonded; “(6) To compromise or release, in whole or in part, any interest, penalty or any civil liability to the SSS in connection with the investments authorized under Section 26, hereof, under such terms and conditions as it may prescribe and approved by the President of the Philippines; and

“(7) To approve, confirm, pass upon or review any and all actions of the SSS in the proper and necessary exercise of its powers and duties hereinafter enumerated.” The SSC is also vested with the power to settle disputes arising from the provisions of the SS law. Since the passage of the GOCC Governance Act of 2011 (R A 10149), the term of office of the members of the SSC was changed to one year, instead of three years, as provided in the SS law. The Governance Commission for Government-Owned and -Controlled Corp., the implementing agency of RA 10149, selects and screens the nominees to the SSC and submits the list for the approval of the President of the Republic. The appointive directors then elect among themselves the chairman of the SSC and the president and COO of the SSS. For more details on SSS programs, members can drop by the nearest SSS branch, visit the SSS web site (www.sss.gov.ph), or contact the SSS call center at 920-6446 to 55, which accepts calls from 7 a.m. on Mondays all the way to 7 a.m. on Saturdays. Susie G. Bugante is the vice president for public affairs and special events of the SSS. Send comments about this column to susiebugante.bmirror@gmail.com.

‘TricyCLEAN’ and the plight of the tricycle sector Michael Makabenta Alunan

on the contrary

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ver the past decade and ever since the passage of the Clean Air Act, numerous technologies on tricycle emission reduction were imposed on the tricycle sector, and yet some have only created more problems than offered genuine solutions. n Technologies imposed? Being in the bottom of the totem pole of recognition among public-transport groups— mainly because they are less articulate, less critical and do not complain as much as the more vocal jeepney groups—the tricycle sector easily became the dumping ground of clean-air technologies imposed on them through the years. “We had the Colorado retrofit system, the LPG conversion kits, etc., many of which have been junked due to technical problems and the lack of maintenance and after-sales service support,” said Ishmael Sevilla, president of NCR Toda Coalition, the organization of 17 federations of tricycle operators and drivers associations (Todas) in Metro Manila. Years back, manufacturers phased out their two-stroke motorcycles, followed by the hasty passing of local ordinances by some local government units, forcing the shift that created huge markets for four-stroke motorcycles.

While many believe this was environmentally right, there are reports four-stroke emissions are worse, albeit invisible and odorless. Speaking in Filipino, Sevilla said “while his group supports clean air, they want government to guide them properly on the technological options and combinations available so they do not have to shoulder, unnecessarily, the costs involved.” n Bullied into poverty? Many tricycle operators and drivers slid into poverty after they were forced to purchase four-stroke engines, even if their old two-stroke engines were still working well, considering two-stroke engines are sturdy and can last 25 to 30 years, which is good for users, but means slower replacement markets for manufacturers. “While we have solved the hydrocarbons from two-strokes, we have created hazardous junk piles of two-strokes,” Sevilla said. “Worse, while still amortizing for

their four-stroke engines, we are again pushed to accept costlier electric trikes,” he added. Not only have they been bullied into accepting anything figuratively rammed down their throats, the sector has been forced into poverty. n Contributions to economy. Even if they are marginalized and bullied, the sector contributes so much to the economy, owing to its huge numbers being the most ubiquitous public transportation anywhere. At 1 million tricycles nationwide alone, although some say there are over 2 million of them, including “colorums,” easily about 2 million breadwinners depend on the industry, which includes fewer operators and with most units having two alternating drivers each. “The sector contributes P4.8 billion in value-added tax [VAT] from gasoline alone,” said Dave Garcia of ATIN’TO Development Services, a consultant of NCR Toda Coalition. This is based on 4 liters per unit, or 1.2 billion liters on 300 running days, at P33 per liter. Over the past decade, the sector has easily consumed over 12 billion liters of gasoline, worth almost half-a-trillion pesos; purchased a million units worth P70 billion at cash price; and P20 billion in tires in 10 years. Moreover, it has also provided service income of about P180 billion a year for operators and drivers, at P300 each per day. n Nothing in return? Tricycles also contribute P300 per unit to the road users’ tax, or P300 million a year, or P3 billion in 10 years, of which P2.4 billion,

or 80 percent, went to the repair of national roads. This is unfair, as tricycles are banned from using national roads; and even if allowed, their weights can never destroy these roads. On the principle that taxes are supposed to return in the form of services, the sector gets nothing. They benefit partly on the 5 percent spent on local road repair. Another 7.5 percent goes to traffic lights and signs, foot bridges, etc., benefiting more motorists and commuters on main roads. The balance of 7.5 percent goes to a Special Vehicle Pollution Control Fund (SVPCF), but remains untapped. In fact, the SVPCF from all motor vehicles remains unused and is now about P8.5 billion, and should be spent back on programs for public transport and motorists to comply with clean air, starting with education. n EMB-NCR supports TricyCLEAN. The environmental Management Bureau National Capital Region Director said, “One of our priorities is education and capacity building for transport groups, including what we jointly call with the tricycle sector as the Tricyclean program.” She explained that education implements two provisions of the Clean Air Act: 1) Section 11, which mandates government to make available all information on best maintenance practices, pollution-control techniques, state-ofthe-art technologies to reduce emissions, etc.; and 2) Section 46 requiring

See “Alunan,” A11

Opinion BusinessMirror

opinion@businessmirror.com.ph

Wednesday, July 27, 2016 A11

Seeing China through its economic history

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By Tyler Cowen | Bloomberg View

S it possible to better understand China today by looking back to the country’s economic history? I don’t mean the years of communism under Chairman Mao, but rather earlier times, those which seem to many Western observers like a blurred sequence of one dynasty after another.

Enter Richard von Glahn’s “The Economic History of China: From Antiquity to the Nineteenth Century,” a book likely to go down as one of the year’s best. Over the last 15 years, the economics profession has gone from a poor understanding of China’s economic history to knowing quite a bit. Von Glahn’s exhaustive, but readable, book is the best guide to this rapidly growing body of knowledge. I took away several overall lessons, noting these are my extrapolations and not necessarily the opinions of von Glahn, a professor at the University of California at Los Angeles. First, in thousands of years of Chinese history there isn’t much of a trend toward democracy or representative government. In an age when Turkey and Russia have been rejecting open and transparent representation, it hardly seems obvious that China will move toward greater political freedom. When Chinese leaders tell their citizens that Brexit and the Trump candidacy represent failures of democracy in action, a lot of Chinese citizens believe them. Furthermore, a lot of autocratic Chinese regimes in history have proven stable even in periods of fairly slow economic growth. It can take them centuries to fall and be replaced, and even then a foreign invasion, like ones by the Mongols or Manchus, may be required. From today’s media, one sometimes receives the impression that a Chinese growth rate below 4 percent or 6 percent could mean radical instability and a rapid fall of the government, but Chinese history does not show this pattern. That is hardly proof of how things will run in the future, but it should shift our expectations in the direction of greater Chinese political stability. It is striking how many contemporary Chinese economic policy ideas have parallels in earlier times. Going through this history, von Glahn explains the importance of state-owned enterprises, the use of fiscal policy to keep people working, commodity monopolies (then tea, now cigarettes) and population registration across many centuries. I take those continuities as signs that China today is embodying what the country was for a long time, rather than inhabiting a transitional state before morphing into something different. The book also explains how China adopted an earlier series of modernizing, market-oriented reforms during what is called the Tang-Song transition of 755-1127. The most striking feature of this relatively successful time is that it lasted for almost 400 years, in spite of periodic territorial losses to outside conquerors. The extreme instability of the 19th and much of the 20th century in China is the

Alunan. . .

continued from A10

that apart from penalties slapped on smoke-belchers, the latter have to undergo education. For the tricycle sector, Osorio said EMB-NCR will hold “Tricyclean” seminars, together with the sector itself, along with the support of the local governments, in pursuance of Section 36 on the “Role of Local Government Units” as main implementers of clean air at the local level and with the help of professional groups, non-governmental organizations, research institutions, people’s organizations, like the NCR TODA Coalition, as provided under Section 35 on “Linkage Mechanisms.”

historical outlier, not the norm, and so China today may have fallen back into one of its relatively stable episodes. If there is a single common theme running through the many centuries covered by this book, it is the never-fully-successful quest of the Chinese state for revenue and fiscal stability. One reason China fell behind Western Europe in the 18th century is simply that the Chinese state spent less on creating valuable public goods and infrastructure. In 1993 15 years after it began making market-oriented reforms, the Chinese central government’s direct revenue was only 3 percent of GDP, with the usual caveat that no Chinese numbers should be taken as exact measures. Only in the last 10 years has that revenue share exceeded 10 percent of GDP; by comparison, in the US in normal times that number sits in the range of 17 percent to 18 percent. For all the images Americans might have of China’s government as a communist behemoth, the country’s political order is better understood as still somewhat immature. State-owned enterprises, local governments and direct Communist Party control all filled the gap to boost the power of the rulers, and that helps explain why the Chinese find it hard to fully modernize their economy. Their government has had too little facility in grabbing flows of revenue and, thus, it has overspecialized in taking, owning and controlling assets. Given that choice, the central government is reluctant to reform, shut down or unload its stateowned enterprises, if only for fear that too much bankruptcy and unemployment would result, not to mention a broader loss of control. Furthermore, local Chinese governments often still do not have enough revenue, and so they rely too heavily on sales or rental income from land to keep things up and running, a revenue model that cannot last forever. In the view of this reader, China’s most likely near-term economic future is that of a relatively stable political regime whose artificial schemes for raising revenue and staying in power keep the economy distorted. In this perspective, China’s recent move toward a more comprehensive value-added tax was bigger news than many observers realized, and mostly positive, though the country has not yet achieved fiscal maturity. Like the country’s ultimate resiliency, China’s most serious economic problems may prove to be some of its most longstanding features. The Economic History of China may be an academic tome, but it is also an acute lens on the Middle Kingdom that you won’t find in your daily news feed. Meanwhile, NCR TODA Coalition wants government to allocate even a fraction of what the sector contributes to the road users’ tax back into a program for Tricycle Maintenance Centers based on their specific needs, Sevilla said. Apparently, anything without maintenance deteriorates fast (i,e., Metro Rail Transit without maintenance, breaks down easily; airport runways, roads and other facilities, etc. will erode fast without maintenance). Same with vehicles, without maintenance, education and the right technological intervention, the sector’s proposal for a clean emission-free compliance is worth a try. So kudos to the tricycle sector’s Tricyclean joint activity with the EMB-NCR regional office!

E-mail: mikealunan@yahoo.com.

Filipinas Compañia de Seguros Atty. Dennis B. Funa

INSURANCE FORUM

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ilipinas Compañia de Seguros (Filipinas Compañia) was the first domestically owned fire-insurance company in the Philippines. It was established on March 7, 1913, by Antonio Melian y Pavia (Don Antonio), together with his brothers-in-law Fernando Antonio Zobel y de Ayala (1876-1949) and Enrique Zobel y de Ayala (1877-1943), and other investors. Before the founding of Filipinas Compañia, all fire-insurance companies were foreignowned. The premiums set by these companies were erratic and claims settlement was marked by long delays. Melian was a Spaniard born in Las Palmas, Canary Islands, on May 21, 1879. He studied in Madrid, but eventually found work in Argentina and later in Peru, where he worked as an insurance agent for the insurance company La Previsora. He arrived in Manila in 1907. He met and married in the same year Margarita Zobel y de Ayala, the only daughter of Jacobo Zobel y Zangroniz, then the mayor of Manila. A few years later Don Antonio founded El Hogar Filipino, a home financing company. In 1913 he became the president of Club Filipino. He later became a director of Ayala y Cia (now Ayala Corp.), San Miguel Brewery and Banco de Islas Filipinas (known today as the Bank of the Philippine Islands [BPI]). In 1923 he was awarded the title of Conde de Peracamp (Count of Peracamps). He built the iconic building El Hogar Filipino along the Pasig River, celebrated for its architectural design, and was said to have been a wedding present during his marriage to Margarita. It became the headquarters of Filipinas Compañia, among others. In the 1920s Filipinas Compañia moved to its own building at the foot of Jones Bridge in Plaza Moraga (21 Plaza Moraga, Manila). Filipinas Compañia was not his first insurance venture with the Zobel de Ayalas. In November 1910 they established the Insular Life Assurance Co., the first Filipinoowned life-insurance company. Eventually, a descendant, Enrique Zobel y Olgado (Enzo), would orchestrate the mutualization of Insular Life, passing the company’s ownership from 173 stockholders to more than 180,000 policyholders. Ayala Corp. would later focus their insurance companies to serve specific market segments, Filipinas Life served the industrial or group

life-insurance segment, FGU served the nonlife segment; and Universal Reinsurance served the professional reinsurance market. In 1917 they established the Philippine Guarantee Co. In 1924 the Ayalas established the China Underwriters Life & General Insurance in Hong Kong. Enrique Zobel de Ayala became known as the first patriarch of the Zobel de Ayala family. He was the managing partner of Ayala y Compañia from 1901 to 1913 and from 1920 to 1943. He became vice president of Insular Life Assurance Co. and director of Philippine Guaranty Co. He owned Hacienda de San Pedro de Macati, today’s Makati City. It was earlier purchased in 1851 by his great uncle, Jose Bonifacio Roxas, for P52,800. With his brother Fernando, they founded Casino Español de Manila. In 1933 the Insurance Commission ruled that insurance companies must operate separate life and nonlife-insurance business. Filipinas Compañia, eventually, established a life-insurance business as a subsidiary, the Filipinas Life Assurance Co., on April 10, 1933. On January 24, 1990, Filipinas Life would be renamed Ayala Life Assurance Inc. and later, in 2009, as BPI-Philam Life Assurance Corp. BPI-Philam is a joint venture between the Philippine American Life and General Insurance Co. (Philam Life) and the BPI. It is the bancassurance arm of AIA in the Philippines. AIA is the secondlargest life-insurance company in the world today. Among the partners of the Zobel de Ayalas in Filipinas Compañia were the Ortigases. In the 1950s an intracorporate dispute erupted between the two families over the company. One of the lawyers of the Ayalas was a practicing lawyer named Juan Ponce Enrile. In

In 1963, Filipinas Compañia was merged with two nonlifeinsurance companies to form FGU Insurance, the largest nonlife-insurance company at that time. The term “FGU” was coined from the consortium members, “F” was Filipinas Compañia, “G” was Philippine Guaranty Company Inc. and “U” was Universal Insurance and Indemnity Co. All Ayalaowned companies. his commencement speech before the University of the Philippines College of Law in 2012, Enrile recollected the dispute: “Ortigas & Ramirez were lawyers and, at the same time, partners of the Zobel de Ayalas in Filipinas Compañia de Seguros, a nonlife-insurance corporation, whose corporate life was about to expire. The Ayalas owned 65 percent of the voting shares in the corporation, while the Ortigases owned the remaining 35 percent. “The Ayalas wanted to extend the corporate life and business of Filipinas Compañia de Seguros. But the Ortigases, through Paquito Ortigas, their lawyer and my erstwhile examiner in Commercial Law, demanded the dissolution and liquidation of the corporation. The Ayalas were short by 1 percent and 2/3 percent for the required 66 percent and 2/3 percent to amend the corporation’s articles of incorporation to extend its corporate life. “Thus, an impasse between the Ayalas and the Ortigases developed. The Ayalas insisted on the extension and continuation of the corporate life and business of Filipinas Compañia de Seguros, but the Ortigases adamantly refused to cooperate and go along. The Ortigases wanted to be paid for their 35-percent holdings in the corporation on their terms. The Ayalas refused to buy out the Ortigases. The Ayalas dropped the Ortigas & Ramirez law firm as their lawyers. “Col. Joe McMicking, an Englishman who married into the Ayala family and the actual brain and builder of the Ayala Group of Cos., engaged the law firm of DeWitt, Perkins & Ponce Enrile to represent the Ayalas against the Ortigases. I was assigned to handle the case. I studied the case thoroughly for a few days, and I devised a simple solution for the Ayalas. “When I met the executives of the Ayala group, I advised them to

agree with the Ortigases to dissolve Filipinas Compañia de Seguros and convert its board of directors into a board of liquidators to liquidate the business affairs and assets of the corporation over the three-year period, as provided in the corporation law. I also proposed that, in the meantime, a new nonlife-insurance corporation for the Ayalas be organized and all maturing nonlife insurance policies of Filipinas Compañia de Seguros be transferred for renewal to the new nonlife-insurance corporation. The Ayalas accepted my proposals in toto right away and without any question. “When I presented the plan of liquidation in a special meeting of the directors of Filipinas Compañia de Seguros, of which Paquito Ortigas was one of them, he was taken aback and dismayed by the simple solution I proposed. He realized that he miscalculated his position and legal strength. He thought that he had an unbeatable legal position and ace to exact a high price for the 35-percent holdings of his family. He was mistaken. When the board meeting was over, Paquito Ortigas left in a huff. I was glad that I proved to him that he did not err in giving me a perfect score in Commercial Law.” In 1963 Filipinas Compañia was merged with two nonlife-insurance companies to form FGU Insurance, the largest nonlife-insurance company at that time. The term “FGU” was coined from the consortium members, “F” was Filipinas Compañia, “G” was Philippine Guaranty Co. Inc. and “U” was Universal Insurance and Indemnity Co. All Ayalaowned companies. They were held under a holding company, the Ayala Insurance Holdings. In 1999 FGU was acquired by BPI, when BPI merged with Ayala Insurance Holdings, FGU’s parent holding company. On the other hand, Makati Insurance was owned by Far East Bank and Trust Co. (FEBTC). In 1998 FEBTC entered into a joint venture with Mitsui Marine. Makati Insurance became the FEB Mitsui. When FEBTC merged with BPI, FEB Mitsui became part of the BPI Group. BPI, a member of the Ayala Group of Cos., later joined with Mitsui Sumitomo Insurance Co. to form a joint venture to be known as BPI/ MS. BPI owns 51 percent, while Mitsui Sumitomo owns 49 percent of BPI/MS. Consolidated into this joint venture were FGU and FEB Mitsui. Thus, FGU Insurance became BPI/ MS Insurance in 2002 following the merger of FEBTC and BPI.