“He is a demagogue who seems to appeal to the lowest common denominator.”—Renowned theoretical physicist Stephen Hawking, discussing the rise of US presidential candidate Donald Trump. AP
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“The voters of our country have turned out in record numbers to support Mr. Trump. It is important that their votes be honored.”—Former Republican presidential nominee Bob Dole, in his support of the party’s presumptive candidate. Dole’s endorsement comes as many Republican leaders, including House Speaker Paul Ryan, have declined to endorse Trump. AP
“We never lost confidence, and every game just played with fearlessness and that confidence that we could get back to the finals however we had to get it done.”—MVP Stephen Curry, after his 36-point performance in Monday night’s 96-88 clincher of the Western Conference finals. AP
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Wednesday, June 1, 2016 Vol. 11 No. 235
PROSPECTIVE DBM CHIEF KEEN ON INCREASING CONSUMPTION TAX
‘Hike VAT to beef up budget for infra’
INSIDE
T
Homeowners, designers go back to basics where home spells relaxation
property
E2
WHY THE VINEYARD RESIDENCES STANDS OUT
By David Cagahastian
@davecaga
he prospective Department of Budget and Management (DBM) chief has backed proposals to raise the 12-percent valueadded tax (VAT) to increase government funds for infrastructure projects.
It’s better to tax consumption than income, for as long as food in its original state is exempted from VAT.” —Diokno
University of the Philippines School of Economics professor Benjamin E. Diokno said there is still room for increasing the VAT to beef up government revenues.
P25.00 nationwide | 5 sections 32 pages | 7 days a week
Megaworld to build two more office towers in Davao
M
EGAWORLD Corp. on Tuesday said it is ramping up its office developments in the 11-hectare Davao Park District in Lanang, Davao City. The company said it will build two more office towers in addition to the P1.2-billion, 10-story Davao Finance Center, currently being built near the development’s main entrance, with 20,000 square meters of leasable spaces. The two office towers, which will be named One Republic Plaza and Emperador House, will provide an additional 30,000 sq m of office spaces.
This will bring the total office inventory in Davao Park District to around 50,000 sq m. One Republic Plaza will be a 10-story office tower, while Emperador House will be a sixstory tower-featuring a European-inspired architecture. “This is just the start of our expansion of office offerings. Being one of the top BPO [business-process outsourcing] destinations in the country, we see an upward tick in the demand for office spaces in Davao City in the next three years. Megaworld is committed to respond to this demand, so See “Megaworld,” A2
See “VAT,” A2
BMReports
property
E1
No silver bullet for traffic problem
property
Inclusive growth tack benefits only the rich
E1
GOOGLE’S NEW SMART PRODUCTS MIGHT FORCE IT TO RETHINK ITS AD BUSINESS SHANTIES line a waterway in Pasay City. Economists are urging the Duterte administration to continue the previous administration’s Conditional CashTransfer Program, because it will improve the chances of the poor in accessing quality education and health facilities. NONIE REYES By Cai U. Ordinario & Mary Grace C. Padin @cuo_bm
life
d1
F
@_enren
Conclusion
OR the Philippines to continue its pursuit of inclusive growth, economists are urging the next administration under President-elect Rodrigo R. Duterte to implement various reforms, as well as continue some programs to address poverty.
PESO exchange rates n US 46.7750
However, it is important that these programs and policies are well-targeted, according to Romulo A. Virola, former secretary-general of the National Statistical Coordination Board (now part of the Philippine Statistics Authority). Virola said the next administration must implement poverty-alleviation programs that should help families who have incomes that are close to the poverty line. Continued on A2
n japan 0.4210 n UK 68.4786 n HK 6.0208 n CHINA 7.1070 n singapore 33.8581 n australia 33.5798 n EU 52.1494 n SAUDI arabia 12.4726
Source: BSP (31 May 2016 )
BMReports BusinessMirror
A2 Wednesday, June 1, 2016
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Inclusive growth tack benefits only the rich continued from A1
Doing so will prevent these families from returning to life of poverty. Likewise, such move, according to Virola, would help enable these families to bounce back when experiencing income shocks, such as sickness or temporary and permanent disability. One way is to teach them to become entrepreneurial by improving their access to capital or giving them decent pay that will allow them to absorb income shocks that may come their way, Virola said. “Since inflation is low and unemployment is not so bad, the target should be to raise income; teach them to be entrepreneurial; and provide them with easy access to capital or pay them fair wages,” he said. “Maybe business is making too much money at the expense of our poor people— meaning that it is the rich who benefit more from our economic growth.”
Continuing reforms
PROGRAMS that can improve the poor’s access to capital and basic services can also improve their chances of getting jobs, according to Virola. This may even encourage them to become entrepreneurs who can earn their keep and provide employment to other Filipinos, he added. Reforms, like improving lending facilities so that small and medium enterprises (SMEs) can access muchneeded capital or funds to expand their business, should also continue, according to some experts. Asian Institute of Management Policy Center Executive Director
Ronald Mendoza said this is a key reform that will benefit SMEs, which account for 99 percent of total firms nationwide and employ 60 percent of the country’s labor force. Mendoza and other economists are also hoping the Conditional Cash-Transfer (CCT) Program of the Arroyo and Aquino administrations would continue. They said doing so will improve the chances of the poor in accessing quality education and health facilities. Mendoza said the CCT is one of three major reforms needed for greater inclusive growth. Continuing the CCT program should be complemented with human capital investments so that young people have a fighting chance to break from poverty, he explained. The two other reforms Mendoza believes should be continued include improving lending and other support for SMEs, and foreign direct investment. The latter, he said, would “dramatically augment job creation and productivity.”
Islamic finance
ADORACION Navarro, senior research fellow of the Philippine Institute for Development Studies, said financing reforms can also take the form of mobilizing savings for investments. This is particularly important for Muslims in the Philippines because Islamic finance is not that developed in the country. PSA data showed the poorest region nationwide is the Autonomous Region of Muslim Mindanao, which has an
₧18 billion
The Incremental budget for agriculture needed to achieve inclusivity in the sector average poverty incidence rate of 55.8 percent in 2012. Navarro said one reason Islamic banking is not developed in the country is that there is only one Islamic bank nationwide. More players are needed to cater to the country’s Muslim population, he added. “If they are to strictly adhere to the tenets of Islamic banking, which prohibits riba or interest charging, they have fewer options because there is only one local Islamic bank— Al Amanah,” Navarro said. “Like in conventional banking, more players are needed in Islamic banking and Al Amanah needs other Islamic banks with which it can engage in financial intermediation transactions.” He said that in the immediate term, the incoming Duterte administration can “conduct a value chain study of Islamic finance, see what constrains its development in each stage of the value chain and modify bank regulations to accommodate Islamic finance.”“In the medium to long term, additional Islamic banks and Islamic investment instruments must be created.”
Agri growth
APART from these, economists,
including Ateneo Center for Economic Research and Development Director Leonardo A. Lanzona Jr., said there is a need to focus on agriculture development and reforms. Lanzona said the agriculture sector does not only provide a source of livelihood for farmers and fishermen, but also the source of raw materials for the manufacturing sector. Lanzona said food manufacturing accounts for 36 percent of the country’s total manufacturing sector. It has an estimated total value-added of P555.093 billion to the total worth of the manufacturing sector. Earlier, Eagle Watch senior fellow Alvin Ang said that, while agriculture only accounts for 10 percent of the country’s GDP, its share in employment is 30 percent. The slow growth of the agriculture sector in the past 20 to 30 years has prevented the rise in incomes of farmers and their liberation from poverty, according to Ang, who also teaches economics at the Ateneo de Manila University. “Actually, I would think that our biggest sector is really agriculture,” Lanzona said. “We’ve been talking about being competitive. You can
Megaworld. . . companies will not think twice of locating here,” said Jericho Go, company’s senior vice president. Megaworld is the country’s biggest lessor of office spaces today, with an inventory of around 800,000 sq m all over the country. The company also has the most number of companies—at 130—in its roster of existing clients for office spaces. Most of the companies are involved in information technology and businessprocess outsourcing (BPO). “We will bring first-time, new locators to Davao City. That’s the
VAT. . .
never be competitive in the agricultural sector, there’s no way you can be competitive if you look closely at what we’re doing.” To boost the chances of Filipino farmers and fishermen in benefiting from economic growth, Lanzona urged the next administration to examine the possibility of just taxing landowners and introduce subsidies, including those that pertain to farm technology. He added that the next president can also focus on financing other crops aside from the country’s staple—rice and corn. Lanzona said the country already missed out on opportunities presented by other commodities in terms of global and regional trade. For his part, agricultural think tank Meganomics Specialist International Inc. President and CEO Pablito M. Villegas called for policy reforms in the sector. Instead of implementing commodity-approach policies, Villegas said the government needs to focus on the comparative and competitive advantages of each province or region. “To me [the commodity approach policy] is terribly wrong. How do you promote, for example, fisheries in the inter land of Isabela? In the mountains of North Cotabato? You should go on more or less contortional approach, comparative advantage analysis. What are the comparative advantages of that area?” Villegas said. Agriculture should also be developed in such a way that it helps generate employment, he added. “It’s only by linking agriculture
More inclusive
IN the past weeks Duterte has bared an eight-point agenda to illustrat the socioeconomic priorities of his administration. The agenda includes addressing the restrictive economic provisions in the Constitution, providing small farmers support services in pursuit of agricultural development and expanding the CCT program, among others. If the next administration can implement its eight-point agenda, it may just be able to boost the country’s efforts to making economic growth truly more inclusive.
Continued from A1
same thing we are doing to other cities, like Iloilo and Lapu-Lapu City in Cebu. There are many skilled talents for the BPO sector here, and we are sure about Davao City’s being a hot pick for location,” Go said. By 2020, total direct and indirect jobs generated in the township alone will reach 100,000. Aside from the expansion of its office portfolio, Megaworld is also building a retail row around the township. A plan to put up a hospital and a school is also under way. At present, three towers of the
residential condominium cluster, One Lakeshore Drive, are almost sold out. Another two towers are scheduled for launch by Megaworld’s subsidiary brand, Suntrust Properties Inc., within the year. “Megaworld’s commitment to nation-building and spreading the economic prosperity to the provinces remains. In the next five years we hope to see more and more people coming home to the provinces because they find more opportunities here. This way, we also help decongest Metro Manila,” Go said. VG Cabuag
supposedly ease the tax burden on those earning up to P1 million in annual gross income. Under Purisima’s tax-reform study to be turned over to the new administration, the main component of the tax reform, which is the exemption from income tax of the first P1-million annual salaries of every individual wage earners, will cost the government some P151 billion to P215 billion in foregone revenues. Purisima’s proposal will also make the income-tax rate on self-employed individuals and professionals to a fixed rate of 25 percent on their taxable income, retaining the allowable itemized deductions or the optional standard deduction on gross income, but removing all other personal and additional deductions. This would prevent professionals, such as doctors and lawyers, to skirt the highest tax brackets through the deductions on their gross income, which results in a lower taxable income than those who are working on a monthly salary basis. T he projected decrease in government revenues from the adjustments to be made on the income tax to be imposed on wage earners will be offset from the increase in the VAT rate from 12 percent to 14 percent, and the removal of all exemptions from VAT, except for goods and services
relating to agriculture, health, banks and education. However, there are opposition to the proposal to increase the VAT rate, which now seems to be the most popular alternative among policy-makers to make up for the shortfall in revenues expected from the tax reform, although Mr. Duterte had earlier categorically dismissed the proposals to raise the VAT. According to the Tax Management Association of the Philippines (TMAP), the proposed increase in the VAT rate is uncalled for at this time, and will result in a minimal increase in VAT collection sans an improvement in the efficiency of the Bureau of Internal Revenue (BIR). “Not now. Increasing the VAT rate at this time is uncalled for, since the VAT effort is still very low,” TMAP President Benedict Tugonon said, when asked by the BusinessMirror whether TMAP supports the proposed increase of VAT to make up for the expected revenue shortfall from the reduced income-tax rates. “The BIR has to improve the VAT effort and improve VAT collection efficiency before increasing the VAT rate, otherwise, the rate increase will not result to substantial increase in revenue collection,” Tugonon added. However, he said the increase in the VAT and the lifting of some of the VAT-exemptions should definitely be among the government’s options in increasing revenues.
Continued from A1
Although he clarified that the Executive branch’s proposal for tax reform would be up to the incoming finance secretary, Diokno would be part of the economicpolicy team of Mr. Duterte, who offered him an appointment as budget secretary. “My personal position is that it’s better to tax consumption than income, for as long as food in its original state is exempted from VAT. It is in this sense that our VAT system is slightly progressive; the burden is heavier on the rich. But this is the call of the incoming finance secretary,” Diokno told the BusinessMirror. In a presentation before the Foreign Correspondents Association of the Philippines in 2013, the incoming DBM chief had pitched for hiking the VAT to 15 percent. Diokno is known to be averse to underspending, and had earlier alleged the Aquino administration had underspent at least P1 trillion in the past six years. Underspending in 2014 was the reason behind the low GDP growth of 6.1 percent in 2014, below the reduced target range of 6.5 percent to 7.5 percent. The proposed increase in the VAT is being floated by both the economic team formed by incoming Finance Secretary Carlos G. Dominguez III and by Finance Secretary Cesar V. Purisima as part of the tax-reform package that will
with manufacturing and processing that we can develop a green agrobased industrial clustering system.” In terms of investment, Villegas said increasing the budget allocated for the sector and making sure these funds are used properly will help the government achieve true inclusive growth. Citing the pronouncement made by President-elect Rodrigo R. Duterte in a meeting, he said the P1 billion incremental budget that may be given to each region specifically for agriculture would be “a good step.” “Duterte is talking about another incremental budget of P1 billion per region for agriculture. So if you add about P18 billion on top of the current budget for agriculture, which is P90 billion, and provided that these amounts will be used properly and local government units are given the mandate, we will be able to do it,” he said.
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Wednesday, June 1, 2016 A3
Ang ‘disappointed’ after assets sale By VG Cabuag, Lorenz S. Marasigan & Catherine N. Pillas
S
@villyg,
@lorenzmarasigan,
c_pillas29
AN Miguel Corp. experienced its most difficult decision, according to the conglomerate’s president and COO.
“I, too, was disappointed,” Ramon S. Ang told reporters at the sidelines of a subsidiary’s stockholders’ meeting on Tuesday. “In fact, it was a very hard decision for the company. And when we discussed this with the management of telco, everybody was very, very sad.” Ang said the company decided just to sell its 700 megahertz (MHz) of spectrum to the two major players, along with its thousands of cell sites lined up in the most populated areas in the country, so as to “avoid a long and dragging court battle” involving the firms. He said at the sidelines of the San Miguel Brewery Inc. stockholders’ meeting, “most of them are so scared because of the legal challenges that are in place.” “And it will be a disservice to our people and consumer by holding on to that frequency and wait for foreign technical partners to come in,” Ang added.
Sale
SAN Miguel decided to sell its telecommunications assets for P69.1
billion to the Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom Inc., two companies that have dominated the industry for several years. Ang said San Miguel started talking to both PLDT and Globe Telecom about two months ago, almost right after its talks with Australia’s Telstra bogged down. He added they were initially approached by Globe for a possible tower-sharing agreement, “but that did not materialize.” He said negotiations moved fast, because “we want to make sure that both PLDT and Globe will do this deal quickly, to provide the better broadband service [that] they were promising.” The transaction involved the sale of San Miguel’s holdings in Vega Telecom Inc., Bow Arken Holdings Co. Inc. and Brightshare Holdings Corp. These companies control Bell Telecommunication Philippines Inc., Eastern Telecommunications Philippines Inc., Cobaltpoint Telecommunication Inc., Tori Spectrum Telecommunication Inc., Hi-Frequency Telecommunication Inc., eTelco Inc.
and New Century Telecoms Inc. Ang said Globe and PLDT can easily roll out system upgrades, as San Miguel’s 2,000 cell sites are lined up in Pampanga to Batangas, the most populated areas in the region. Of the said cell sites, 400 were owned by Liberty Telecoms that were converted for mobile broadband. “Actually, even before we sold this, San Miguel has already enough war chest to invest more in other businesses,” Ang said. “At the moment, we are concentrating on investing and expanding our core businesses, such as tollways, food, power, oil refinery [and] petrochemical.”
Regulatory watch
ACCORDING to Philippine Competition Commission (PCC) Chairman Arsenio M. Balisacan, Globe and PLDT will have to prove their purchase of San Miguel’s assets will actually lead to better services. That is, if the two players seek exemption from review from the PCC. “Their exemption is for us to determine,” Balisacan said in a chance interview with reporters, after a Management Association of the Philippines’s (MAP) membership meeting on Tuesday. “The commission has the power to examine transactions, especially those that have an impact on public interest.” Section 21 of the Philippine Competition Act outlines exemptions from prohibited mergers and acquisition. Among the exemptions are if the parties involved are able to establish that the deal has brought
about or are likely to bring about gains in efficiencies that outweigh the limitation on competition. If the two players do seek exemption from prohibition, they must now take up that challenge to prove their buyout will lead to efficiency in the duopoly-dominated telecommunications sector. This burden to prove efficiency is pressing, as the deal gave Globe and PLDT access to the sought-after spectrum that regulators have given to San Miguel’s Liberty Telecoms Holdings Inc. unit. Both Globe and PLDT assert they will use the assets to improve their services, with PLDT’s Smart Communications, Sun and TNT brands, as well as Globe and its Touch Mobile brands, pledging faster mobile Internet browsing speeds within four to six months. “Bigness [of a firm] doesn’t imply inefficiency,” Balisacan said. “There has to be a determination of anticompetitive elements.”
Capital requirements
ANOTHER obser ver said San Miguel’s assets sale would hike the combined capital requirements of Globe and PLDT to $1.85 billion for 2016. Fitch Ratings Inc. said the hike in capital requirements will be used to finance respective endeavors to expand their data services, as the two telcos access the 700-MHz band. Broken down, PLDT will likely spend $1 billion to fund requirements and Globe $850 million.
The former earlier announced a $920-million capital-expenditure program, and the latter $750 million. “We believe that both PLDT and Globe will invest aggressively to expand their data services, now that they will have access to the coveted 700-MHz spectrum, which is able to penetrate walls and is useful to provide in-building coverage,” Fitch Ratings said. Given this, the two companies will see their business profiles becoming stronger, as the transaction removes the challenge of a third player, the ratings agency said. “We believe that the incumbents’ business profiles will strengthen with the acquisition, which removes the challenge from San Miguel to the duopoly market structure.” Globe, according to Fitch Ratings, could reap more benefits, as it has greater exposure to the mobile sector, which accounts for 76 percent of its revenue. By comparison, PLDT’s wireless business contributes 63 percent of its revenue. According to disclosures to the stock exchange on Tuesday, half of the deal was paid on Monday. Another 25 percent will be paid on December 1, and the balance will be delivered on May 16 next year.
Frequency allocation
OPER ATING mobile Inter net ser v ices under the 700 -MHz spectrum is cheaper and more efficient than operating under higher-frequency bands. Under the deal, the 90-percent
shareholding of San Miguel in the 700-MHz band will be distributed to the two telcos and the government. The telcos will each get 35 MHz, while the remaining 20 MHz will be returned to the government. San Miguel, on the other hand, would be having its war chest filled. Ang told reporters the proceeds of the deal will allow them to save only “a little” in interest expense. He claims the company was only able to recover its costs and did not make a profit from its telco venture. While the additional cash will be good for San Miguel’s balance sheet, Ang said even before this sale, the company already had a big enough war chest to allow it to invest in other businesses. However, the primary question whether antitrust regulators will look at all into the deal between San Miguel and the two telcos is still up in the air. The PCC appears to be content fence-sitting, as it said it will not compel the two players to submit details on the transaction. “We cannot demand the two players to submit details,” Balisacan said. “It is up to them when they will submit [details].” In a statement on Monday, the PCC said it has a keen interest in the deal and will take appropriate action on it. But Balisacan on Tuesday also noted that, since the implementing rules and regulations of the Philippine Competition Act has yet to be finalized, they cannot say when or if they can begin investigation on the deal.
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Belmonte to Duterte administration: Take ‘holistic approach’ in amending Charter
S
By Jovee Marie N. dela Cruz
@joveemarie
peaker Feliciano R. Belmonte Jr. on Tuesday urged the incoming administration of President-elect Rodrigo R. Duterte to take a “holistic approach” in amending the 1987 Constitution by not focusing only on the proposal changing the form of government from republican to federalism via Charter change (Cha-cha).
Belmonte, in a news conference, said certain economic revisions of the Constitution should also be considered in the next administration. “If I’m asked one big thing that I wish I’d done [during the 16th Congress] that was it [passing of the economic Charter change]. Definitely, if they will push the Cha-cha through constitutional convention [Con-con] they should also consider other provisions, including the economic amendments that we are proposing,” Belmonte said. T he lower chamber, under the 16th Congress, did not push through with the expected voting on third and final reading of the economic Cha-cha, apparently, due to lack of affirmative votes. The chamber needs the vote of at least two-thirds of its membership, or 217 affirmative votes, to pass the Cha-cha measure. The voting was seen affected by the Palace’s, particularly President Aquino’s, stance against Cha-cha. “I hope this new administration will collate all of them [or the proposals changing the Constitution],” he added. Returning PDP-Laban Rep. Pantaleon D. Alvarez of Davao del Norte, who is almost sure of being elected as
Speaker of the House of Representatives in the Duterte administration, said the House, under his leadership, will prioritize a measure changing the 1987 Constitution. He said they will do the Chacha through a Con-con. Under the Constitution, amendments to the 1987 Charter could be introduced either of these three modes: through a duly-elected Con-con, Congress convening itself into a constituent assembly or a people’s initiative. “Let’s take advantage of it… sa lakas ng moral demand, particularly in the initial years of his [Duterte] presidency, baka masway ’yung mga tao ito lang yung ating gagawin [and not the Chacha for the purpose of lifting the term limits of public officials],” Belmonte added. E a rl ier, B e l monte sa id he would refile his resolution, or the so-called economic Cha-cha, which seeks to amend the 60-40 rule that limits foreign ownership of certain activities in the Philippines. Several local and foreign business groups backed the passage of the measure in the 16th Congress. He said the economic Cha-cha is a larger contributor to economic growth, as foreign direct invest-
CONGRESS plenary hall
PHOTO BY NONOY LACZA
By amending the restrictive economic provisions of our Constitution, we empower Congress to enact laws that will attract the kind of investments that will reverse the deindustrialization and deagriculturalization of our economy.”—Belmonte ments are seen to increase once ownership on estates and corporations, one of the issues raised by
investors for not investing in the country, is relaxed. “By amending the restrictive
economic provisions of our Constitution, we empower Congress to enact laws that will attract the kind of investments that will reverse the deindustrialization and deagriculturalization of our economy,” Belmonte said. The resolution, filed by Belmonte and Sen. Ralph G. Recto, will include the phrase “unless provided by law” in the foreign-ownership provision of the Constitution, particularly land ownership, public utilities, natural resources, the media and advertising industries. Under Article XII of the 1987 Constitution, which was ratified during the term of the late President Corazon C. Aquino, foreign
investors are prohibited to own more than 40 percent of real properties and businesses, while they are totally restricted to exploit natural resources and own any company in the media industry. Meanwhile, Belmonte said he is now preparing to take the leadership of the House minority bloc in the next Congress. He a l so vowed to be “re sponsible fiscalizer” under the Duterte administration and the 17th Congress. Belmonte earlier said he would still join the speakership race in the next Congress, and would remain with the Liberal Party to lead the minority coalition.
Poultry growers wary over Cash supply accelerates glut, drop in farm-gate prices in April; BSP not worried 18,678.52 MT Going forward, the BSP will P continue to monitor monetary conditions closely to ensure that M liquidity growth remains consistent with the BSP’s price- and financialoultry growers on Tuesday have expressed concern over the possibility that there will be an oversupply of chicken, which could lead to a steep decline in farmgate prices. United Broilers Raisers Association (Ubra) President Jose Elias Inciong told the BusinessMirror that growers are more apprehensive over the possibility of a supply glut than La Niña. “The apprehension would be oversupply and collapse of farmgate price because of the increase in [output],” Inciong said. He said even importers have become “cautious” about deciding the volume of their shipments, lest there be an oversupply. Citing the Philippine Statistics Authority (PSA), Inciong said projections have shown an increase in chicken output starting the third quarter of the year. “Based on the data of the PSA, if I remember correctly, there will be growth in volume. The question would be the profitability. Most of the time when you have tremendous growth in volume, you have lower profit or losses,” he said. Agriculture Undersecretar y Jose C. Reaño earlier told the BusinessMirror the government is expecting a 6-percent growth in poultry output this year. He said this will be driven by more invest-
The volume of dressed chicken in governmentaccredited cold storages as of May 23 ments in the sector. Inciong added that the “increasing segmentation” of the poultry subsector could also be boosting the subsector’s growth. “The market has become increasingly segmented. In the past, when you talk of chicken prices, you refer only to grocery and wet-market chicken,” he said. Inciong noted that the increasing demand for chicken of the food-service segment has paved the way for the entry of some institutions into poultry production. He cited, as an example, the recent agreement between Cargill Inc. and Jollibee Foods Corp. to build and operate a poultry processing plant in Batangas. Cooked-chicken segments are also increasingly expanding, according to Inciong. “Go to Andok’s, for example, and aside from the usual lechon manok, they now also have cut-ups of fried chicken. These are new segments that are picking up,” he said.
Stable for now
AT the moment, the Ubra said prices
of chicken remain stable, even after the slight decline in output in the first quarter of the year. Data from the PSA showed the poultry sector’s growth slowed down to 1.01 percent in the January to March 2016 period. Duck, chicken egg and duck egg production all posted increases in output, while chicken production slightly decreased by 0.29 percent. Reaño said the decline was due to the infestation of the Newcastle disease during the period. “Most farms affected by the disease stopped producing but inventory is still high. It’s [also a] distribution problem,” he said. Data from the National Meat Inspection Service (NMIS) showed dressed-chicken inventory in cold storages as of May 23 reached 18,678.52 metric tons (MT), 15.62 percent lower than last year’s stocks of 22,137.15 MT. However, Inciong noted an “unusual” trend in the supply and price movement in the market in recent years. “Back in the days when frozen-chicken inventory reached 4 to 6 million kilos [equivalent to 4,000 to 6,000 MT], prices tend to drop. That is not the case now,” he said. “One possible explanation is that a large volume has always existed, but it was not captured in previous data because of smuggling. Or maybe there’s just really an increase in demand,” he said.
By Bianca Cuaresma @BcuaresmaBM
oney supply accelerated further in April this year as banks continued to lend strongly during the period. In a report on Tuesday, the Bangko Sentral ng Pilipinas (BSP) said domestic liquidity, also known as M3, rose to P8.6 trillion in April, representing growth of 12.7 percent. The continued liquidity expansion proved faster compared to the 11.7-percent acceleration recorded in March. An expanding cash supply is beneficial for a growing economy if it helps fuel the productive sectors and boosts the nation’s capacity to grow. However, excessively slow cashsupply expansion could prove bad, especially when it does not provide the financing required to keep productive activities going. An excessively fast cash-supply growth, meanwhile, could stoke inflationary pressures such that mindful calibration is of optimal importance. Amid the continued acceleration in money-supply growth, the BSP gave assurance that cash-supply growth remain sufficient to finance the requirements of the growing economy.
stability objectives.”—BSP
“The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth,” the central bank said in a statement. “Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity growth remains consistent with the BSP’s price- and financial-stability objectives,” it added. The central bank attributed the continued expansion of domestic liquidity to sustained demand for credit. In a separate report, the BSP said the growth of outstanding loans of banks mirrored the growth in money supply as this posted a 15.6-percent expansion in April. This was faster than the 14.8 percent bank lending growth in March. The loan expansion was traced to loans for production activities comprising more then 80 percent of the
banks’ aggregate loan portfolio. Loans for production activities grew by 15.6 percent in April, faster than the 15 percent in the previous month. The expansion in production loans was driven by increased lending to the following sectors: real-estate activities at 20.5 percent; electricity, gas, steam and air-conditioning supply at 30.6 percent; wholesale and retail trade, repair of motor vehicles and motorcycles at 15.5 percent; financial and insurance activities at 18.5 percent; and information and communication at 31.2 percent. Bank lending to other sectors, likewise, expanded during the month except for professional, scientific and technical activities, which declined by 0.5 percent; water supply, sewage, waste management and remediation activities at 1.3 percent; and public administration and defense, compulsory social security at 7.3 percent.
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Indonesian navy fires shots, seizes Chinese fishing boat
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AKARTA, Indonesia—Indonesia’s navy said on Monday it fired shots at a Chinese trawler when it refused to stop fishing in Indonesian waters, and then seized the vessel and its eight crew members. An Indonesian frigate intercepted the trawler on Friday near the Natuna islands in Indonesia’s exclusive economic zone, which overlaps with the southernmost reaches of the South China Sea, said navy western fleet command spokesman Maj. Budi Amin. Amin said the frigate fired shots, which hit the stern of the fishing vessel, Gui Bei Yu27088, after it ignored repeated warnings to stop. He said no one was injured. “This arrest was made to show the world that Indonesia will take firm action against ships that violate our territory,” Amin said. He said Indonesia followed standard international procedures in dealing with foreign ships entering its territory, including providing warnings with flags, voices and warning shots. China claims most of the South China Sea. Tensions between the two countries flared in March, when Indonesia intercepted a Chinese fishing vessel off the Natuna islands. A Chinese coast guard vessel collided with the trawler as it was being towed, allowing it to escape. Indonesia, the world’s largest archipelago nation, has taken a tough stance against illegal fishing since President Joko “Jokowi” Widodo took office in 2014. Minister of Maritime Affairs and Fisheries Susi Pudjiastuti has overseen the capture of nearly 200 foreign fishing boats accused of fishing illegally. A total of 174 foreign fishing boats have been blown up. The fates of 20 others await court rulings. AP
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PHL-China confrontation in West Philippine Sea not likely–think tank
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direct confrontation between the Philippines and China over the West Philippine Sea is not likely at this point, given the involvement of many countries in the territorial row, according to experts. T h is beca me a topic du ring a series of meetings organized by the Philippines and an international think tank, which put a spotlighton the ongoing territorial spat in the West Philippine Sea, in particular probable scenarios and sensitivities that the government of President-elect Rodrigo R. Duterte will face. The Philippine delegation included businessmen belonging to the Philippine Trade Foundation Eminent Persons Group, led by Philippines Inc. Chairman Antonio “Tony Boy” Cojuangco, as well as Dindo Manhit, president of local think tank Albert Del Rosario Institute (ADRi), which helped arrange the meetings with Washington-based Center for Strategic and International Studies (CSIS). “The discussions gave the members of the delegation a clearer perspective on the security issues in the Asia-Pacific region, such as forecasts on how Chinese sentiment will evolve over time,” Manhit said. “A direct confrontation with China does not appear likely at this point, a result of an increasingly united front by many countries regarding its claims in the disputed waters,” he said, citing the Philippines’s ongoing case at The Hague. The most important meeting for the delegation was with Brig. Gen. Suzanne Vares-Lum of the US Pacific Command, who has a key role in shaping and maintaining regional security in the region through diplomatic and economic policies, as well as military-to-military and politicomilitary relationships among the 43
A direct confrontation with China does not appear likely at this point, a result of an increasingly united front by many countries regarding its claims in the disputed waters.” —Manhit Pacific nations. With the proclamation of Duterte as the 16th Philippine president, the key to the US’s muchpublicized Asia pivot and a new era of US-Philippine security cooperation is the Enhanced Defense Cooperation Agreement, or Edca, said CSIS Director of the Southeast Asia Program Murray Hiebbert. More than a tool to fill the gap in the Philippines’s external defense weakness, Edca can also be a framework for a new era of cooperation across the spectrum of the security operations in the Asia-Pacific region, he said. With the situation in the West Philippine Sea continuously evolving, Duterte should remain apprised of every new development, whether they are from Manila, Beijing or Washington, Manhit said.
Thai wildlife officials start removing tigers from temple
Australian military personnel carry coffins during a repatriation ceremony for Australian soldiers at Subang military air base in Kuala Lumpur, Malaysia, on May 31. The Australian soldiers, many who were casualties during the Vietnam War, were buried in Malaysia along with some dependents. AP
After decades, remains of 32 Aussie soldiers repatriated from Malaysia
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UBANG AIR BASE, Malaysia —The bodies of 32 Australian service personnel and their dependents, many of them killed during the Vietnam War, were handed over by Malaysian soldiers to their Australian counterparts on Tuesday. Australian officials say it’s among the biggest single repatriations in the nation’s history. The remains handed over at Subang military air base had been interred for decades at Terendak Military Cemetery in Malaysia. Malaysia soldiers carried coffins draped with Australia flags to the tarmac, where Australian troops carried
them aboard two Royal Australian Air Force C-17 Globemaster aircraft. The bodies, plus one additional set of remains from Singapore, will arrive in Sydney on Thursday. After a formal military repatriation ceremony that will include some veterans who served with those killed, a private memorial service will be held. The Australian government offered a year ago to repatriate 36 Australian servicemen and dependents from Malaysia and Singapore. The families of 33 service men and dependents accepted that offer.
Before January 1966, Australia’s policy was to bury soldiers killed in battle in foreign countries in the nearest Commonwealth war cemetery. “As 2015 marks 50 years since the arrival of combat troops and the escalation of Australian involvement in Vietnam, it is right and proper that we honor their service with this gesture,” thenPrime Minister Tony Abbott told Parliament in May last year. Australia deployed more than 60,000 military personnel to the Vietnam conflict between 1962 and 1973, of whom 521 were killed. AP
Northern Thailand school reopens after dormitory fire killed 17 girls
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ANGKOK—A volunteer at a school in northern Thailand where 17 girls were killed in a dormitory fire last week says the school has reopened, but only about a third of the students returned because some families remain wary of safety. Thuenjai Thanachaikan, who
helps out at the Pithakkaiat Witthaya School outside of Chiang Rai, said that of the 142 students enrolled, less than 50 returned to classes on Monday. She said parents are having a difficult time deciding whether to allow their young children to return. The May 22 fire claimed 17
lives at an all-girls dormitory at the school, which provides free housing for impoverished children who are members of hill tribe minorities. The bodies have slowly been returned to their families following DNA analysis to confirm their identities. AP
Singapore state court convicts four Bangladeshi men of terror financing
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IN this May 30 photo, a sedated tiger lies in a cage at the “Tiger Temple” in Saiyok district in Kanchanaburi province, west of Bangkok, Thailand. Wildlife officials in Thailand on Monday began removing some of the 137 tigers held at a Buddhist temple following accusations that the monks were involved in illegal breeding and trafficking of the animals. AP
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ANGKOK—Wildlife officials in Thailand have begun removing some of the 137 tigers held at a Buddhist temple following accusations that the monks were involved in illegal breeding and trafficking of the animals. The director of Thailand’s Wildlife Conservation Office, Teunjai Noochdumrong, said three tigers were tranquilized and transported on Monday in an operation involving about 1,000 state personnel that
is expected to continue for a week. The animals will be taken to three government animal refuges elsewhere in Thailand. The temple, a popular money-earning tourist attraction in the western province of Kanchanaburi, has been criticized by animal-rights activists because of allegations it is not properly set up to care for the animals and flouted regulations restricting their trade. The monks resisted previous efforts to take away the tigers, and
impeded the effort again on Monday morning despite the massive show of force by the authorities. They relented after police obtained a court order. More than 300 officials remained at the temple overnight to ensure the tigers remained safe. The temple recently made arrangements to operate as a zoo, but the plan fell through when the government determined that the operators failed to secure sufficient resources. AP
INGAPORE—Singapore’s State Court says four Bangladeshi workers held on suspicion of planning attacks linked to the Islamic State group in their own country have been convicted of financing terrorism. Authorities said the men, who pleaded guilty, had raised money to buy firearms to launch attacks in Bangladesh. They will be sentenced on June 21 and face a maximum sentence of 10 years in jail and a fine of S$500,000 ($362,260). Two other workers have pleaded not guilty. Their trial dates have not been set. The men have been detained since April under Singapore’s Internal Security Act, which allows for detention without trial in cases where public safety is threatened. AP
In this November 13, 2015, file photo, elite police officers arrive outside the Bataclan theater after several dozen people were killed in attacks around Paris. A French Islamic State cell dismantled in the final stages of planning an attack has yielded a new secret in the first week of May 2016, with the release of undercover footage showing how a group of disaffected petty criminals transformed into a terror network. AP
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Amnesty says 1.2M Afghans internally displaced by war
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In this April 7, 2012, file photo, with the new high-rise buildings of downtown Doha, background, Qatari women and a man walk by the sea in Doha, Qatar. The economic slowdown gripping countries across the Persian Gulf can be seen in layoffs, slowed construction projects and government cutbacks. For the millions of foreign workers drawn by brighter job prospects, it can have a far-darker side if they find themselves deep in debt. AP
Gulf economic slowdown sees foreign workers caught in debt
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OHA, Qatar—The economic slowdown gripping countries across the Persian Gulf can be seen in layoffs, slowed construction projects and government cutbacks. For the millions of foreign workers drawn by brighter job prospects, it can have a far-darker side if they find themselves deep in debt.
Gulf countries like Qatar largely don’t have bankruptcy laws, leaving laid-off workers on the hook for huge outstanding sums, while often banned from traveling outside of the country. That leaves many unemployed begging friends and family for help, while frantically selling off all their belongings. Others have killed themselves out of desperation. “It was kind of scary for a while there,” said Robert Foster, an American from Beaufort, South Carolina, who found himself trapped for months in Qatar. “We sold everything we had.” The Middle East has weathered several boom-and-bust cycles over the last decades, both buoyed and beaten by the global price of crude oil, as well as the recent recession. In 2009 the financial meltdown in Dubai saw dusty luxury cars parked and abandoned at its international airport and across the city, as foreigners fled their debts. This recent financial collapse began with oil prices falling from over $100 a barrel in the summer of 2014 to bottom out this January to under $30, a 12-year low. In the time since, oil has clawed back to $50 on supply disruptions and lowered reserves, but the
1,500 The number of foreign workers fired from jobs at state-run Qatar Petroleum
damage already had been done in the Mideast.
Solid policy
AMONG those hard-hit was Qatar, a small oil-and-gas-rich country on the Arabian Peninsula where construction accelerated with the announcement it would host the 2022 Fifa World Cup. As oil and gas prices sank, so too did Qatar’s coffers, leading to layoffs across both private and public companies. The state-run Qatar Petroleum fired at least 1,500 foreign workers in recent restructuring, said Mohammed bin Saleh al-Sada, Qatar’s energy and industry minister. “We did not start with the idea of laying off people for the sake of laying off people,” he recently told The Associated Press (AP). “Nationals were not affected whatsoever, and
that was part of our solid policy.” Maersk Oil said in October it would cut as much as 12 percent of its staff in Qatar. Vodafone’s Qatar subsidiary announced on May 17 it would cut about 10 percent of its work force, while mobile-phone competitor Ooredoo also made layoffs this year. Al-Jazeera, the peninsula nation’s satellite news broadcaster, also shut down its American channel in April.
No notification
FOSTER, 50, a former senior operation manager for the state-linked Hamad Medical Corp.’s ambulance services, began work in March 2014 on a three-year contract, hoping to stay for at least six years to make enough to buy a house in the United States. However, he said he didn’t receive his first paycheck until three months into his job, which forced him to get a loan of 300,000 Qatari riyals ($82,000) to cover his living expenses, debts and childsupport payments in the US. “A lot of us had to get loans to catch up,” Foster said. “And that’s where it started, right there.” In January Foster said his boss called him into his office and laid him off, along with other staffers. Four days later, Qatar National Bank closed his account, putting all he had toward his remaining loan, he said. “There was no notification. It was just a text that said: ‘You’re now overdrawn,’” Foster said.
Remaining cash
UNDER Qatari law, foreign workers must apply for an exit permit through their employer to leave the country. When Foster couldn’t leave for a cruise he planned before with his wife, he realized he was trapped. Foster said he put his wife, Pepper, on a flight out, then sold all of his belongings, sleeping at night on
the floor of his company-provided villa and hiding his remaining cash in the freezer, fearful he could be arrested as a debtor. He dodged phone calls and knocks at the door while trying to pull together the cash needed to pay off his debt. “I had to give them my retirement and my dad’s retirement to leave,” he said. Hamad Medical Corp., Qatar’s main health-care provider, and Qatari officials did not respond to requests for comment. But Foster said he knew others in far worse shape, including one colleague who even purchased a rope at one point to hang himself. Others have taken their own lives.
Financial worries
A British coroner investigating the suspected suicide of an engineer from Gloucestershire found hanging in his Doha home in February 2015 ruled this March that “financial worries” may have played a part. The case remains open as Qatari authorities provided only “limited information,” according to the inquest report obtained by the AP. Suicides also affect those coming to Gulf countries for work as laborers, taxi drivers and other low-paying jobs. They often pay recruiters back home in Asia or Africa huge sums that take several years to pay off. India, one of the main countries supplying low-paid workers to the Gulf, saw at least 541 of its citizens kill themselves in the United Arab Emirates in the last three years, according to government statistics offered to parliament in December. At least 337 Indians died in suspected suicides in Saudi Arabia during the same period, while other Gulf countries saw annual suicide numbers in the double digits. In Qatar 21 Indians alone killed themselves in 2015. The deaths continue into this year. AP
Saudi human-rights activist sentenced to 8 years in prison
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UBAI, United Arab Emirates—A court in Saudi Arabia sentenced a member of an independent humanrights organization to eight years in prison in the latest guilty verdict to be issued against the group’s members, rights group Amnesty International said. Abdulaziz al-Shubaily, 31, was the only founding member of the Saudi Association for Civil and Political Rights, known by its Arabic acronym Hasem, not yet sentenced to a prison term. He acted as a legal representative
for nine other founding Hasem members. In total, 11 Hasem members have been sentenced to a combined 92 years in prison. Seven of the 11 are in jail and four are awaiting their prison terms to be implemented. Amnesty said al-Shubaily was tried on Sunday by the Specialized Criminal Court—established to try terrorism cases but increasingly used for trials of political activists whose work is deemed a national-security risk. A sweeping antiterrorism law came into effect in 2014, defining acts as
vague as “defaming the state’s reputation” as terrorism. The London-based rights group said al-Shubaily was also barred from traveling abroad for eight years after his release and forbidden from writing on social media. His charges included “communicating with foreign organizations” and providing information to Amnesty for use in its reports. He was additionally charged with inciting people to breach public order and accusing security forces of repression and torture, Amnesty said.
In 2013 prominent founding Hasem activists, Mohammed alQahtani and Abdullah al-Hamid, were sentenced to 10 and 11 years, respectively. Soon after, other verdicts against the group followed against nearly a dozen members. In April of this year, Issa al-Hamid, another founding member of Hasem and Abdullah al-Hamid’s brother, was sentenced to nine years in prison in what Amnesty International described at the time as part of a wider “ruthless onslaught against civil society” by Saudi authorities. AP
ABUL, Afghanistan—Amnesty International said on Tuesday that more than 1.2 million Afghans have been forced to flee their homes due to violence in the past three years and urged the Kabul government and the international community to tackle the country’s growing crisis of refugees internally displaced by war. In a report released in Kabul, the rights group said those numbers are growing as the war, now in its 15th year, intensifies, adding that many of the internally displaced “live in horrific conditions on the brink of survival.” The Taliban have been waging war on the Afghan government since their regime was toppled in the 2001 US invasion. With the withdrawal of most international combat troops in 2014, the insurgency has stepped up— the United Nations says that in 2015 alone, 11,002 civilians were killed or wounded, most of them by insurgents. The report quotes Farzana, a
mother of seven who has lived in a Kabul camp for internally displaced people for more than a decade, after fleeing her home in Parwan province. Since her husband left a few years ago, she has been the family’s sole breadwinner. “When you can’t put food on the table for your children, it is worse than being hit with a gun,”said Farzana, who was identified only by one name. The Afghan government is failing the displaced, even in areas where the international community is involved, Amnesty said. Pilot programs in three conflicttorn provinces—western Herat, northern Balkh and Nangarhar on the eastern border—have stalled, it said. But Hafiz Ahmad Miakhail, a media adviser at the Afghan refugee ministry, disputed Amnesty’s numbers, saying the total number of internally displaced was closer to 1 million, with many affected not just by the war but also natural disasters, including floods and earthquakes. AP
Air strikes pummel rebel-held city of Idlib
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EIRUT—A wave of air strikes on a rebel-held stronghold in northwest Syria on Monday night caused mass casualties and sparked fresh clashes. The flare up in violence came a day after the opposition’s chief negotiator resigned in frustration over the stalled Geneva peace talks with the government of Bashar al-Assad. The Syrian Observatory for Human Rights monitoring group counted 10 air strikes on the city of Idlib in the evening, which it said killed at least 14 civilians, including three children. The group said it believed Russian jets were responsible. The Local Coordination Committees, an activist network, said 10 people were killed when the city’s National Hospital was hit, but had no details about casualties elsewhere in the city. The opposition Civil Defense, which carries out rescue operations, gave a much higher casualty figure, saying dozens were killed and hundreds wounded in the air strikes in which several hospitals were damaged. The group said it had deployed its entire Idlib corps to take part in rescue operations. The Observatory said hospitals were not targeted, but suffered damage when bombs struck nearby.
Ultraconservative
IDLIB is under the control of the newly resurrected Army of Conquest coalition, which is dominated by ultraconservative insurgent groups and rebel factions. Al-Qaeda’s Syrian affiliate, the Nusra Front, leads the coalition. The Nusra Front is considered a terrorist group by the United States and United Nations, and has been excluded from previous cease-fire agreements between government forces and rebels. The Army of Conquest announced it had suspended its non-emergency civilian administration in Idlib after the air strikes, according to the Local Coordination Committees. The group responded to the air strikes by shelling the nearby besieged towns of Foua and Kefraya, according to the Observatory. The two towns are seen as loyal to the government. A day earlier, the opposition’s chief negotiator in the Geneva peace talks with the government announced he had resigned from his post, saying the international community was not “serious” about reaching a solution to the country’s five-year civil war. Mohammed Alloush, in a statement released late Sunday, said Syrian government
forces continue attacking the opposition and besieging rebel-held areas, despite the three rounds of negotiations in Geneva. The “proximity” talks that began in January have failed to make any progress, amid contrary demands by the opposition team and the government delegation.
Priority
THE Syrian opposition has insisted that political transition should come first, while the government says fighting terrorism should be the priority. The last round was held in April and no date has been set for the next talks. As evidence of the talks’ failure, Alloush said the UN has not been able to set up a transitional governing body for Syria or find a political solution to the crisis. The opposition has been insisting that Assad and top officials in his government have no role in Syria’s future—or even during the transitional period. Alloush said he handed in his resignation to the opposition’s High Negotiations Committee (HNC) and described his move as a “protest against the international community,” which he hoped would come to realize “the importance of the Syrian blood that is being shed by the [Damascus] regime and its allies.” Josephine Guerrero, a spokesman for UN special envoy for Syria, Staffan de Mistura, told The Associated Press in Geneva that the resignation is an “internal matter for the HNC.” “We look forward to continuing our work with all sides to ensure that the process moves forward,” she said.
Intense
MEANWHILE, opposition activists reported intense government air strikes in the northern province of Aleppo on Monday. The province has witnessed some of the worst violence over the past months and has also seen clashes lately between rebels and members of the extremist Islamic State (IS) group, which captured several villages last week before losing two of them again on Sunday. Also on Monday, Syrian state media said the rebels shelled government-held parts of the provincial capital, Aleppo, inflicting casualties. More than 160,000 civilians have been trapped by the fighting between IS and Syrian rebels and the aid group Doctors Without Borders last week evacuated one of the few remaining hospitals from the Aleppo area. AP
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Head of Egypt’s journalists union to stand trial; may get jailed
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briefs
Animal-rights activists disrupt Sanders rally
OAKLAND, California—A group of animal-rights activists briefly interrupted a Bernie Sanders rally in Northern California when they jumped barricades and tried to rush the podium. Sanders’s security stopped the protesters before they could reach the Democratic presidential hopeful, who was addressing supporters at Frank Ogawa Plaza at Oakland’s City Hall on Monday. Video of the incident shows two bodyguards immediately surrounded Sanders, while nearby security personnel quickly handcuffed the protesters and escorted them out of the rally, even carrying one of them by the legs and arms. Sanders continued his speech within minutes of the disruption. AP
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A IRO —Prosecutors on Monday referred the head of Eg y pt ’s jou r n a l i st s union and two board members to trial after they were formally charged with spreading false news and harboring journalists wanted by authorities. A statement by the Cairo prosecution office said their trial would begin on Saturday. The three were questioned for hours by prosecutors Sunday night. On Monday on they refused to post bail of £10,000 ($1,000) each and were detained at a police station in central Cairo, Khaled elBalshy, one of the board members facing prosecution, and defense lawyer Sayed Abu Zeid told The Associated Press. “We refused to pay because the accusations are related to publishing news and that should not involve imprisonment or bail,” el-Balshy said. The prosecution office said the three were released late Monday without posting bail. The three journalists could face prison if convicted. Amnesty International condemned the legal proceedings against the three, describing the accusations they face as a “dangerous escalation” and part of the government’s “draconian” crackdown on freedom of expression. The move against the three came less than a month after the head of the union, Yahya Qalash, called for the interior minister’s resignation and a presidential apology over an alleged police raid to snatch two journalists wanted for inciting protests who had taken refuge inside the union’s building in downtown Cairo. Authorities deny the allegation that police forcibly entered the building, saying they had an arrest warrant and coordinated in advance with union board members. Qalash, the union’s head, later sought to ease the tense standoff with the government, dropping his demand for a presidential apology and not repeating his demand for the minister to step down. President Abdel-Fattah el-Sissi’s government has significantly curbed many of the freedoms Eg y ptians won follow ing the country’s 2011 popular uprising, defending a 2013 law that effectively bans street protests and repeatedly stating that Egypt’s human-rights record must not be judged by Western standards. Progovernment media routinely defames critics and brands any opposition as either treason or motived by clandestine support for the now-outlawed Muslim Brotherhood, the Islamist group from which Mohammed Morsi, the president el-Sissi ousted in 2013, hails. On Monday el-Sissi again showed a desire to extend government influence to the media and entertainment industry. He spoke at an inauguration ceremony for a new housing project in Cairo for low-income Egyptians. The project is a substitute model for the shanty towns that ring the Egyptian capital and are often depicted in movies as violent, crime infested and morally degenerate areas. “The claim through movies that their residents are different is inappropriate, paints a negative picture and divides society,” he said. “Those people are well bred and have morals and values. We should not allow them [the movies] and they should not be produced.” It was not clear how the president’s directive would be implemented since film-making is in the hands of private production companies. Egypt has a state censor who must approve the script of any new movie before it is shot, although cases where the censor rejected a script are rare. AP
Wednesday, June 1, 2016
Gaza’s Hamas rulers execute 3 men convicted of murder
In this May 18 photo, Chinese fan web sites for Donald Trump are displayed on a computer, with the words “Donald J. Trump super fan nation, full and unconditional support for Donald J. Trump to be elected US president,” in Beijing, China. AP
As in US, Trump draws strong reactions in China
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EIJING—China features prominently in the rhetoric of presumed Republican presidential candidate Donald Trump, who accuses the country of stealing American jobs and cheating at global trade. In China itself, though, he’s only now emerging as a public figure, despite fame elsewhere for his voluble utterances, high-profile businesses and reality TV show.
And although Chinese officials and state media have denounced Trump’s threats of economic retaliation, many Chinese observers see a silver lining in his focus on economic issues to the near-total exclusion of human rights and political freedoms. That appears to make him an attractive alternative to his likely rival, Democrat Hillary Clinton, who is regarded as far more critical of China’s communist system. Trump “could, in fact, be the best president for China,” Hong Kong Phoenix Television political commentator Wu Jun said during a recent on-air discussion. “That’s because the Republican Party is more practical and Trump is a businessman who puts his commercial interests above everything else,” Wu said. Clinton, on the other hand, “might be the least friendly president toward China.” Despite his frequent evocations of China, it’s not clear how familiar Trump actually is with the country. While he’s claimed to have made “billions of dollars dealing with China,” he has no known investments in the nation, and it isn’t clear what influential figures he knows in the Chinese political and business realms. Chinese are, however, customers for Trump’s hotel, golf course and real-estate ventures, while Trumpbranded clothing and accessories have been made in China.
YouTube
TRUMP mentions China so often that a popular YouTube compilation
200+ The number of times Donald Trump mentions China in a popular YouTube compilation video
video exists in which he says the word China more than 200 times in just over three minutes. His various statements on China range from the blunt (“We can’t continue to allow China to rape our country”) to the anodyne (“I like China very much”). Still, Trump was largely unknown in China until his campaign for the Republican nomination began gathering momentum last year. Though China’s government rarely comments on American political campaigns, Trump’s advocacy of a 45-percent tariff on imports that would hit China hard has been lambasted by Finance Minister Lou Jiwei, who called Trump “one of those irrational types” and said enacting such a tariff would cost the US its global leadership. “Don’t even think of being the big boss anymore,” Lou said i n Apr i l. Tr u mp’s com ment s might’ve sparked a stronger response if Chinese hadn’t already grown accustomed to American candidates, making strong statements about their country dur-
ing elections, only to moderate their positions once in office, said Nanjing University foreign relations expert Zhu Feng said. “The most important thing is that he or she be solid in their knowledge about China and know how to strike the right balance,” Zhu said.
Sentiments
MANY Chinese may also be relieved that Trump is focused so relentlessly on China’s role in the US economy, rather on the country’s authoritarian political system, human-rights record or policies toward Tibet and the northwestern region of Xinjiang. Trump’s questioning of US foreign military commitments is also sweet music to the ears of Chinese nationalists who want China to dominate in Asia and challenge US dominance in the rest of the world. His opposition to the Trans-Pacific Partnership trade deal, which excludes China and seeks to offset Chinese influence, also goes down well in Beijing, though he has also criticized China’s construction of man-made islands in the South China Sea. The Chinese public, meanwhile, seems unfazed by Trump’s anti-immigration stance, with its overwhelming focus on Mexico, and the candidate’s vow to bar Muslims from entering the US. That could reflect anti-Islamic sentiments that have grown in China following a series of deadly attacks by radicals from the Muslim Uighur minority, even while the government promotes ties with the Islamic world.
Displeasure
IN contrast, many Chinese have qualms about Clinton that date from a speech she gave at a UN conference in Beijing in 1995 that focused heavily on human rights, to the displeasure of the hosts. As a former secretary of state under Barack Obama, Clinton is also closely associated with Washington’s “pivot” to A sia that includes an increase in the US military presence in the region. Beijing has been strongly critical of the policy shift, which was largely seen as prompted by China’s robust assertions of its South China Sea maritime claims.
Interest in Trump here is rising. Why? Because Chinese have long regarded American elections as a particularly dramatic type of spectator sport. The process of working for a candidate and taking part in rallies and political campaigns doesn’t exist within China’s staid, authoritarian political system. US politics is also a topic on which the tightly leashed state media is relatively free to report, so discussion of Trump, Clinton and Democratic candidate Bernie Sanders rages on social-media platforms and podcasts. Many have also noted that Trump’s personality-driven, publicity-fed style is also a familiar archetype for Chinese known for their love of high-profile business moguls, such as Alibaba’s Jack Ma.
Mixed
ALTHOUGH no polls have been taken, Chinese public sentiment toward Trump appears mixed. Comparing him to a figure from folklore known for sowing chaos, the official Global Times newspaper proclaimed him a symptom of an “American disease.” “I don’t think many people knew him as a businessman before the campaign,” said Shanghai information-technology engineer Kong Kong, who is unimpressed with Trump’s vaunted political outsider status. “Politics is not entertainment, and simply being fresh may not be a good thing,” Kong said. “A lack of political experience and an excess of personality may lead to an imbalance among interest groups and an abuse of authority, which are not good things for America.” Zhong Heng, a Shanghai paralegal, says she regards much of what Trump says as bluster. “He’s like an artificial performance-enhancing drug being fed to the American people,” Zhong said. Trump, though, does seem to have won some Chinese supporters, particularly online. There, chat groups, such as “Donald Trump Super Fans Club” and “God Emperor Trump,” have popped up in recent months. One posting in a Weibo messaging service chat group was unrestrained in its enthusiasm. “The more I know about Donald Trump,” it said, “the more I feel that he’s not only saving the US, but also the entire world.” AP
GAZA CITY, Gaza Strip—Gaza’s Hamas rulers have executed three Palestinians convicted of murder without the required approval of Palestinian President Mahmoud Abbas. The Interior Ministry says the executions took place on Tuesday at the central prison, after the victims’ families rejected the possibility of a last-minute pardon. It’s the first time Hamas applies death penalty since a unified government was installed in the West Bank and Gaza after an agreement with Abbas’s Fatah party in 2014. AP
South Florida officers find 2 alligators eating human body
SOUTHWEST RANCHES, Florida— Police in South Florida were called to a gruesome scene: a pair of alligators eating a human body. The Sun Sentinel reports that Davie Police Capt. Dale Engle says the body found Monday in Southwest Ranches, about 20 miles west of Fort Lauderdale, appears to have been at the location for a long time. Engle says officers were able to scare the alligators away from the body but the two lingered as officers tried to recover the body. AP
Wanted Taiwanese fugitive dies in car accident in U.S.
BEIJING—A former tycoon wanted on allegations of embezzlement and fraud in Taiwan has died in a car accident in California, the island’s foreign ministry confirmed on Tuesday. He had been hiding for years in the United States. The official Central News Agency said Wang You-theng, former chairman of the China Rebar Group, was killed in a Friday morning crash on a highway in West Covina, California. His wife was injured but was in a stable condition, the report said. AP
Rapper pleads not guilty to deadly concert shooting
NEW YORK—A rapper charged in a deadly shooting at a New York City concert hall has pleaded not guilty. Rapper Troy Ave was arraigned on Monday in the Thursday shooting during a hip-hop concert that was to feature artist TI. One person was killed and three others were injured, including Troy Ave, whose real name is Roland Collins. The Daily News reports Collins was arraigned on charges including attempted murder. After ballistics tests, the charges could be upgraded to include murder. Thirty-year-old Ronald McPhatter died in the shooting. AP
Police raid drug-infested area in Colombia capital BOGOTA, Colombia—The streets of Colombia’s largest open-air drug market look like a war zone following a police sweep through one of Bogota’s most dangerous neighborhoods. More than 2,500 riot police officers and heavily armed soldiers participated in a raid that began on Saturday in the capital’s “Bronx” area, nicknamed for its comparison to the troubled New York neighborhood. Mayor Enrique Penalosa decided to clamp down on the district in response to complaints of brazen drug consumption and crime in plain view and just blocks from the presidential palace. AP
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Wal-Mart seeks success by going native in China
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HENZHEN, China—Zhong Guoyan sifted through piles of fish at a Wal-Mart in Shenzhen, one of China’s largest cities. She studied the fins, to make sure they were bright red and firm. She peered at the eyeballs—were they bulging? “When I come here, I have a look,” she said. “If it’s good, then I will buy it. If it’s only cheap, I won’t buy it.” In American Wal-Marts, customers don’t get to fondle their fish. But America is not China, as the world ’s biggest retailer has learned. If the Arkansasbased company wants to win over foreign consumers, it has to shed some of its American ways, and cater to very different customs and conventions that are fast changing. Zhong eventually tossed a couple of fish into a plastic bag—a small victory in Wal-Mart’s struggle to build an international empire. The stakes are high: The company can’t count on much growth in the US—it’s facing challenges at home with intense competition from Amazon.com and dollar stores—so the retailer is depending more on its operations overseas. China is the ultimate prize. The Chinese grocery market, already the world’s largest at $1.1 trillion a year, is expected to grow to $1.5 trillion in sales in just the next four years, says IGD, a global consumer products research firm. “China remains a strategic market for our future,” Doug McMillon, CEO of Wal-Mart Stores Inc. recently told investors. Getting the food business right is critical for Wal-Mart. Shoppers buy groceries more often than anything else. If Wal-Mart can get them in the door to buy food regularly, perhaps they will visit more frequently for items like pajamas and coffee makers—and eventually become loyal online customers, too. The company has taken some lumps trying to cross borders in food retailing. Overall international sales growth dropped 9.4 percent last year largely because of the strong dollar. And while Wal-Mart’s overseas business had a strong start to this year, it faces long-term challenges. Wal-Mart gave up in Germany and South Korea in 2006. It’s closing stores in Brazil. Overseas, Wal-Mart lacks the scale to squeeze local suppliers on price as it does in the US. It also faces nimble competitors. And it has struggled to duplicate its bedrock strategy of constant bargains. But Wal-Mart has learned over the years from its missteps, discovering that it needs to adapt to local ways and that patience pays off. In Mexico, Canada and Japan, it’s won shoppers over time. In Chile it launched a corporate culture campaign and worked closely with suppliers to coax them into its way of doing business. “Wal-Mart,” says Bryan Roberts of the London retail consultancy TCC Global, “is a very determined organization.”
Winning over picky consumers
IN the unruly Chinese market, some competitors cut corners, mislabeling products or even selling tainted foods. The risks have made Chinese consumers unusually wary. Sean Clarke, CEO of Wal-Mart China, based in Shenzhen, previously worked in Britain, Japan, Germany and Canada. China, he says, “is easily the most challenging market to operate. There is a huge level of distrust.” Wal-Mart had a difficult time promoting “everyday low prices”— promising the lowest prices on a basket of goods every time consumers shop. Some rivals poached the “everyday low price” message, confusing customers. Wal-Mart scrambled to find the right slogan. In 2012, it in-
troduced “Worry Free”—implying quality and reassuring shoppers who worry that deals will expire before they get to the store. The company’s message: Efficiency and good management, not cutting corners, make everyday low prices possible. The message has sometimes been muddled. When Wal-Mart came to China, it was slow to tailor its offerings to local tastes. Realizing its mistake, Wal-Mart gave local managers more leeway to run their businesses. But that approach backfired, leading to a series of food-safety violations. In one particularly embarrassing episode, Wal-Mart had to recall donkey meat—a delicacy in China—after DNA testing showed it contained traces of fox meat. In response, Wal-Mart slashed nearly two-thirds of its 20,000 suppliers. Now, Wal-Mart knows exactly where each product comes from. Wal-Mart also took back some of the responsibilities from local managers and increased its investment in food safety. It introduced mobile testing labs that check for pesticides on vegetables and fruit and employed handheld devices to check temperatures of meat products.
Gaining control over suppliers, costs
IN America Wal-Mart has the clout—25 percent of the US grocery business—to force suppliers to do things the Wal-Mart way. That means cutting costs to the bone. In return, the suppliers enjoy steady demand from WalMart, so they don’t have to spend so much on advertising or worry about paying extra costs to staff their factories to meet unexpected peaks in demand. In China things are tougher. Wal-Mart accounts for just 2.3 percent of the grocery market. Ninety-five percent of all products Wal-Mart sells in China are supplied by local companies. T he C h inese supply c ha in is also notoriously inefficient. For years, Wal-Mart and other foreign companies didn’t deal directly with their suppliers, working mostly instead through a labyrinth of middlemen. Three years ago, Wal-Mart decided to cut out the middlemen and route as many goods as possible through 20 of its own distribution centers. By eliminating the go-betweens, Wal-Mart could negotiate directly with suppliers and knock down costs—often by 10 percent or more. The change also gives Wal-Mart more control over the quality of the food being sent to its stores and the efficiency with which it gets to them. Before the switch, only about 75 percent of orders would actually reach Wal-Mart stores; now 95 percent do.
Fighting competitors
WAL-MART landed in China in 1996, a year behind Carrefour, opening t wo stores in Shenzhen—a Wal-Mart supercenter and a Sam’s Club. They were the first foreign retailers to offer the big-box shopping experience, which offers everything from clothing to food. After investing in a Taiwanese-owned retail chain in 2007, Wal-Mart became China’s biggest super-sized store chain and expanded its lead for the next two years. But local and regional competitors quickly closed the gap, sometimes undercutting Wal-Mart prices because they have closer ties to local suppliers and can negotiate better deals. Wal-Mart insists its market share for the big-store sector has increased over the past three years. But Euromonitor says Wal-Mart’s market share has fallen to 9.6 percent (No. 3 in the market) after peaking at 11.6 percent in 2009. AP
In this April 16 photo, people walk on a street in Tokyo. Japan reports that its factory output fell 3.5 percent in April from the same month a year earlier, while consumer spending also edged lower. AP
Japan economy improved but weak; Abe poised to delay increasing taxes
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OKYO—Japan’s economy remains weak but did better than expected in April, the latest data showed on Tuesday, as Prime Minister Shinzo Abe looked set to delay a 2017 tax hike to minimize shocks to the fitful recovery.
Factory output fell 3.5 percent in April from a year earlier and consumer spending edged lower, though both improved from the month before and were better than most forecasts. Earlier data showed the consumer price index fell 0.3 percent in April, for the second straight month of deflation. However, excluding both energy and volatile fresh foods, it rose 0.7 percent. The world’s third-largest economy has been stuck in the doldrums despite massive monetary easing aimed at vanquishing deflation, which tends to discourage corporate investment and consumer spending. Though the latest data present a mixed picture, Prime Minister Shinzo Abe has won grudging
3.5 The percentage of factory output fall in April from a year earlier in Japan
support for a postponement of the next sales tax hike from a key ally: Finance Minister Taro Aso. “It is one option to help support consumer spending,” Aso said of the likely delay. Aso was obliged to at least try to push back: With Japan’s public
debt at nearly 240 percent of its GDP, putting the nation’s accounts in order is an urgent priority. But those favoring a delay argue the recovery is too weak to endure a fresh hit to consumer spending from a tax hike. They also contend that the tax hike could backfire if it causes such a downturn that government revenues actually contract. In April consumer spending fell 0.4 percent in April from a year earlier, though incomes rose 0.7 percent. Unemployment was flat at 3.2 percent. Industr ia l out put rose 0.3 percent from the month before, stronger than expected, in one sign the latest dip in growth may be moderating, Marcel Thieliant of Capital Economics said. But he noted that private investment remains weak. At a summit of the Group of Seven rich nations last week in central Japan, other leaders demurred at Abe’s insistence the world economy is on the brink of crisis. Abe still cited the G-7’s backing for using all policy tools the countries can as a justification for a tax-hike delay. “The government probably wants to avoid delivering a hammer blow to a fragile economy without seeing
solid improvement at the fundamental level,” Margaret Yang of CMC Markets, said in a commentary. The last time Japan raised its sales tax, to 8 percent from 5 percent in April 2014, the economy fell back into recession. Growth has been uneven since then, and Abe opted to postpone the next increase to 10 percent, set for October 2015, to April 2017. By pushing back the tax increase, Japan risks having its credit downgraded, though the impact would be limited by the fact that almost all of its debt is owned by domestic investors or the central bank. “Whichever policy decision we take, there will be a risk,” said Sadakazu Tanigaki, secretary-general of the ruling Liberal Democratic Party. The latest plan calls for the tax hike to take place in October 2019. Abe reportedly rejected the idea of dissolving the Lower House of Parliament and holding a snap election in July, when Japan is due to hold a vote for the less powerful Upper House. Parliament was due to vote later Tuesday on a no-confidence motion against Abe put forward by opposition parties. But the Liberal Democratics’ strong majority means they lack the votes to get it passed. AP
Puerto Rico’s tourist industry feels economic sting of Zika
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AN JUAN, Puerto Rico—It was the wedding of one of her best friends, and Natalie Kao was going to be a bridesmaid in a fun, tropical setting on a small island just off the east coast of Puerto Rico. But the prevalence of the Zika virus across the US territory gave her pause. Kao, pregnant with twins, knew the mosquito-borne Zika virus has been linked to a rare birth defect in a tiny percentage of cases. But even a small risk was too great. “You don’t know the impact, which is very scary,” the San Francisco woman said. She sent her regrets, as did several dozen other members of the wedding party. Puerto Rico has been hit harder by Zika than any other part of the US, with more than 1,170 confirmed cases, one death and the first microcephaly case acquired on US soil. Now, worries about the virus are starting to affect the tourism industry, which had been one of the few bright spots in an otherwise dismal economy. The full number of people who have canceled plans to visit or chose another destination is unknowable. But people have cited Zika in the cancellation of at least 42,000 hotel room reservations through 2018, which translates to about $28 million in lost rev-
enue for the lodging, restaurant and tour industry, said Ingrid Rivera, executive director of Puerto Rico’s Tourism Company.
Paralyzing condition
PEOPLE who work in the industry say they have been seeing the financial effects of Zika for months, and it appears to be getting worse. “Cancellations left and right and up and down,” said Luis Alvarez Perez, owner of a luxury travel planning and relocation company in San Juan. “People just stopped coming.” Zika is named for a forest in Uganda where the virus was first discovered in 1947 and there have been many outbreaks over the years. Global health officials issued an alert after detecting it in Brazil in May 2015 and it has been spreading rapidly through the Western Hemisphere, carried by the common Aedes aegypti mosquito. It had not been considered a particularly dangerous disease compared to dengue and chikungunya, which are carried by the same mosquito. Zika can cause headaches, fever, rash and reddened eyes. But it has now been linked to microcephaly, a rare defect in which babies are born with abnormally small heads and brain damage as well as to the unusual paralyzing condition known as Guillain-Barre syndrome.
Spiraling debt
BUT even rare complications can be scary. Kao said she was told that Zika caused a great deal of anxiety at the February wedding of a friend when some guests were inevitably bitten by mosquitoes. “Some people cried,” she said. “They were upset and went back to their room.” In the ensuing months, cancellations have started to mount. Major League Baseball scrapped a two-game Puerto Rico series between the Miami Marlins and the Pittsburgh Pirates scheduled for late May that will now be played in Miami. Tourism officials say that move cost the island $4.5 million in lost revenue. USA Swimming dropped plans to hold a training camp here in July. Other large groups also have canceled, including the California-based Internet Corporation for Assigned Names and Numbers. Dozens of people have withdrawn from an international boxing event scheduled for October. “We’re starting to see a larger impact with the groups,” Rivera said. “Clearly it’s a trend that we want to make sure that we stop.” Tourism represents only about 7 percent of Puerto Rico’s economy, but money generated by visitors has been growing in recent years while other sectors have shrunk during a
10-year recession and the struggle of the territory’s government to handle a spiraling public debt.
Alarming warnings
SOME Puerto Rican officials have criticized the US Centers for Disease Control and Prevention for what they consider overly alarming warnings. The CDC has projected that more than 20 percent of Puerto Rico’s 3.5 million people could be infected with Zika in an outbreak expected to peak by this summer. “They’ve exaggerated the numbers,” Puerto Rico’s Health Secretary Ana Rius told The Associated Press (AP). “We’re never going to reach those numbers.” The CDC told the AP that it recognizes Puerto Rico is in distress and said US legislators are working to address the island’s crisis. But it also said education is key to preventing the spread of Zika. “One of our responsibilities is to provide the best available science to people, and the more we learn about Zika, the more serious we think this virus is,” the agency said in a statement. Kao said she loves Puerto Rico and has visited the island multiple times, but noted that her pregnancy is her priority, like some of the other wedding guests who canceled. AP
ExportUnlimited
Editor: Efleda P. Campos • www.businessmirror.com.ph
BusinessMirror
PHL exports halal products to Middle East countries
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FTER the recent passage of Republic Act (RA) 10817, or the Philippine Halal Export Development and Promotion Act of 2016, the Department of Trade and Industry-Export Marketing Bureau (DTI-EMB) urged local exporters to tap unexplored halal-driven markets, such as the Middle East.
The DTI-EMB organized a seminar, entitled “Sharing of Insights on How to Access the Kingdom of Saudi Arabia [KSA] Market for Food, Cosmetics and Pharmaceutical Products,” held on May 25 at the DTI International Building in Makati City. This brought together companies from the KSA and the Philippines to discuss ways to access the Mideast market. The seminar also included a briefing and overview of the Outbound Business Mission (OBM) in the Middle East in February. T he OBM a i med to promote Philippine export products to
$553M Worth of PHL products exported to the Middle East the Mideast through business matching, market sensing and networking activities. Other concerns local exporters face in tapping the market include difficulty in translating labels from English to Arabic, strong presence of fake products in the
market and strict regulation by the government. These were also discussed during the event. Given these identified challenges, EMB intends to build and maintain a database on market requirements and regulations, and build a government-to-government trusting relationship. EMB also encourages participation from the private sector to intensify these initiatives. Presenters included Rorie Castillo, EMB-Food and Agri-Marine Division chief; Anwar Rahil Al-Taleb, CEO of Good Livelihood Esta. Trading; and Hassan A. Al Zahrani, executive manager of Famous Food Products (KSA). During the seminar, Anwar and Hassan emphasized the importance of knowing the market first and establishing good relationship with distributors to maximize opportunities offered by the Middle East market. “ T he ma in task is how to introduce the products to the mainstream; that is the rea l job,” H a ss a n s a id . DT I-EMB Assistant Director Anthony B. Rivera further encouraged the participants to take advantage of the presence of KSA compa-
nies and government initiatives to further their exports Mideast. “There is a growing Filipino population in the region. Therefore, local exporters must take all the advantage available to penetrate the mainstream market there.” In 2015 the Philippines exported $553 million worth of goods to the Middle East and imported a total of $3.5 billion, composed mainly of oil. At present, there are about 2.2 million Filipino workers in the region, where 800,000 are based in Saudi Arabia. EMB takes it as a good sign for Philippine products and sees more opportunities to go mainstream in the ME market. At present, many Gulf Cooperation companies have expressed their intention and commitment to work with Philippine manufacturers. The DTI has also been conducting a series of discussions on new regulations by the Emirates Authority for Standardization and Metrology to determine strategic action plans and recommendations for increasing Philippine exports ozn products and services to mainstream markets in the region. The next OBM to the Mideast will be held this November. Albin M.Ganchero
THE Philippines’s public-private partners in the Outbound Business Matching Mission for information technology business-process management companies participate in the recently concluded Software and Apps Development Expo (Sodec) 2016 in Tokyo, Japan. Philippine delegates include (from left) Ma. Teresa Loring, officer in charge (OIC) of Department of Trade and Industry-Export Marketing Bureau (DTI-EMB) Services Division; Senen M. Perlada, DTI-EMB director; Emmy Lou Delfin of the Department of Science and Technology-Information and Communications Technology Office (DOST-ICTO); Jonathan de Luzuriaga, Philippine Software Industry Association (PSIA) president; Commissioner Monchito B. Ibrahim of DOST-ICTO; Tae Abion of PSIA; Nathalie Hunter, PSIA executive director; and Ruel Abion of Spiceworx.
DTI-EMB leads PHL delegation to Sodec 2016
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HE Department of Trade and Industry-Export Marketing Bureau (DTI-EMB) recently led the Philippine delegation to the Outbound Business Matching Mission (OBMM) for information technology businessprocess management (IT-BPM) companies and the Philippines’s participation to the Software and Apps Development Expo (Sodec) 2016 held on May 11 to 13 in Tokyo Big Sight, Tokyo, Japan. Eight Philippine companies attended the Sodec Expo 2016 under one Philippine Pavilion. Sodec Expo is held every year and participated in by over 2,000 exhibitors and about 85,000 visitors from 145 countries around the world. This year’s Philippine booth offered business-matching areas for the eight exhibiting companies to showcase specific services to walkin or targeted clients during the
expo. The Philippines’s participation to the expo aimed to further benefit these local companies through exposure to innovations and firsthand information on buyers’ specific preferences that will help them grow their business and diversify their valued services to the Japanese market. The OBMM was in cooperation with the Philippine Trade and Investment Center Tokyo, headed by Commercial Counselor Ma. Bernardita A. Mathay, and in partnership with the Philippine Software Industry Association and the Department of Science and TechnologyInformation and Communications Technology Office. Also during the visit, a total of 16 Philippine IT-BPM companies participated in prearranged business-matching sessions on May 10. The activities that day included an IT seminar and networking sessions with Japanese
counterparts held at the Bright Core Hall in Osaki, Tokyo, Japan. A total of 177 Japanese companies, CEOs, representatives, and officers engaged in the IT-BPM industry were in attendance. T he Philippine delegation, composed of 16 local companies, included Adarna Digital, Alliance Software Inc., Advanced World Systems Inc., Compos Mentis Inc., Cybertech Corp. Ltd., Green Advance Tech Solution Corp., Ideayatech Inc., Klab Cyscorpions Inc., Magpie.Im Inc., Pointwest Technologies Corp., Spiceworx Consultancy Inc., Toon City (Morph Animation) Inc. Top Connection Asia Inc., Tsukiden Global Solutions Inc. Ubiquitous Technologies Philippines Inc., and Valtes Advanced Technologies Inc. At present, the IT-BPM industry in the Philippines employs over 1.3 million Filipinos and is expected
to meet the target of generating $25-billion revenue this year. The Philippines is now highly ranked among top outsourcing destinations in the world. On the recent global ranking for the IT-BPM destinations, nine Philippine cities made it to the top 100, including Metro Manila and Metro Cebu, which ranked second and seventh, respectively. The seven other cities are Davao (66); Santa Rosa, Laguna (81); Bacolod (85); Iloilo (90); Dumaguete (93); Baguio (94); and Metro Clark (97). As the third-largest IT market in the world, Japan is considered one of the Philippines’s major markets for outsourced services, specifically in software and business-process outsourcing industries. Sodec 2016 also marks the country’s 14th straight year of participation, through assistance from both public and private sectors. Maria Teresa S. Loring
Wednesday, June 1, 2016
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Marketing for halal certified products By Anthony B. Rivera
Assistant Director, Export Marketing Bureau, Department of Trade and Industry
Business Beyond Borders Conclusion
Market access
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N a meeting with the Food Control Department of the Dubai Municipality and Emirates Authority for Standards and Metrology (UAE-Esma) last on February 2, the team from the Department of Trade and IndustryExport Marketing Bureau (DTI-EMB) expressed its willingness to strengthen the footprints of Philippine products in the Middle East through compliance with accepted standards for food and personal-care products. “There are new rules we will be implementing soon with all exporting countries to the UAE. One is on product registration with the UAE-Esma. The exporting countries, such as the Philippines, have three options to register: One, Philippine companies may directly register their products to UAE-Esma. Two, halal certifiers may register with UAE-Esma and upon official recognition, they may accredit products based on international standards, like ISO 17065 for certification and ISO 17021 for inspection; and Hazard Analysis and Critical Control Point requirement for factories and slaughter houses. Three, UAE-Esma may also consider entering into an agreement with the Philippine Accreditation Bureau that may, in turn, recognize the Bureau of Product Standards in the assessment of applications for the registration of Philippine products in the UAE,” said Yousef Almarzooki, head of International Accreditation, Esma. Due to the recent developments, the DTI-EMB has initiated a focused group discussion on market access to the UAE together with the relevant industry stakeholders for a unified, strategic and cost-effective approach to facilitate the registration of Philippine products in the UAE as soon as possible to avoid being refused entry into the market by 2017. The current highlight on marketaccess regulations pertaining to the promotion of halal products in major markets stresses on the stringent and costly processes being implemented. The sectors of focus include food and beverages, cosmetics and pharmaceuticals. The trend also includes nonrecognition of halal certification from other countries. The same is expected from Indonesian exporters who are expected to have a longer halal-accreditation process that will be processed by the Indonesian Council of Ulama, the National Halal Product Certification Agency and the Ministry of Religious Affairs. Trade Secretary Adrian S. Cristobal Jr. said, “This development on the UAE-Esma regulations is new to us. We need to work together with Esma and all the stakeholders in the accreditation of Philippine products to UAE. We hope that through the observance of prescribed standards, such as with ISO, we would achieve smoother market access, not only in the UAE, but in the entire Middle East region for Philippine products.” New rules are now being institutionalized as part of UAE’s transformation program 2021, which intends to achieve better progress in the Islamic economy. The UAE is a major market for the Philippines and a host to almost a million Filipino overseas workers. The
Economic Intelligence Unit of the Gulf Cooperating Countries said halal food imports are set to increase to $53.1 billion by 2020, and the UAE’s annual halal food imports is expected to reach $8.4 billion by the end of the decade.
New law
WITH the growing potentials of halal products and services in international markets, and after extensive consultation and hearing from various sectors, President Aquino signed into law the “Philippine Halal Export Development and Promotion Act of 2016.” The law mandates the creation of the Philippine Halal Export Development and Promotion Board and institutionalize the creation of the Philippine Halal Export Development programs of the different government agencies with halal initiatives, particularly, the DTI, the National Commission on Muslim Filipinos, the Department of Agriculture, the Department of Tourism, the Mindanao Development Authority and two Muslim professionals recommended by Muslim Filipino people’s organizations and non-governmental organizations (NGOs). The Halal Board shall be the policy-making body on halal export development and shall set the direction for the implementation of the Philippine Halal Export Development and Promotion Program. In the performance of its mandate, the Halal Board shall institutionalize the involvement of Muslim-Filipino people’s organizations and NGOs through membership in consultative or advisory bodies, coordination of activities with government agencies concerned with halal industry development, and participation in regular consultative mechanisms, such as public hearings and roundtable discussions. It shall be attached to the DTI. The new law was formulated in recognition of the significant role of exports to national economic development, and the potential contribution of halal industries to promote economic and inclusive growth, and to ensure the integrity and quality of Philippine halal exports. It also aspires to develop and promote halal industries as a mode of achieving equity and justice among Filipino farmers and producers, and increasing employment opportunities for the domestic labor force, particularly that of the Muslim-Filipinos. The implementing rules and regulations will soon be drafted and approved by the Halal Board to put more details on the various provisions of the law. The major related sectors under halal in the global market include finance, food, travel, fashion, media, pharmaceuticals and cosmetics, with estimates amounting to $1.8 trillion in 2014. Philippine exports of food and beverage to Saudi Arabia in 2015 was $47.6 million, with a strong growth rate of 18.38 percent in the past five years, while for the same period in the UAE, $93 million of Philippine products were exported with a growth of 14.49 percent. In the Asean $249.1 million of Philippine products with a growth rate of -14.76 percent was exported. n Send your feedbacks or comments at exportunlimited@dti.gov.ph.
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A10 Wednesday, June 1, 2016 • Editor: Angel R. Calso
Opinion BusinessMirror
editorial
On the telcos, is the shoe on some LGUs?
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n the past, we have not hesitated from criticizing the country’s telecommunications companies— Philippine Long Distance Telephone Co. and Globe Telecom Co.—for their shameless treatment of their customers, gouging their eyes with high prices for services all the while providing them with one of the most inefficient services in the world.
Threatened by the possible entry into the telco market of the Australian firm Telstra, in partnership with San Miguel Corp., they committed new investments in the next few years to bring their services up to minimum expectations. Whether they will actually carry out these investments, especially now that Telstra has exited from the picture, is anybody’s guess. But now there is apparently another side to this story. And this concerns some local government units. In a recent news report, a Globe Telecom official was quoted as saying that their efforts at deploying new cell sites in the Metro Manila area were being hampered by the hostile reception given them by the cities involved. The hostility ranged from neighborhood associations opposition, homeowners’ associations restrictions, political squabbling when approving authorities involve politicians of opposing political parties. Most frustrating, according to the Globe official, were difficulties relating to documentation and municipal regulations—assessment of tower fees; cellsite permits; allowable tower heights by the Civil Aviation Authority of the Philippines; proof of ownership of the cell site; tax arrears; permit to operate a cell site; and the refusal of banks to issue a consent when the proposed cell site is mortgaged to them, among others. It is said operators needed to secure an average of 25 permits at the local government units (LGUs) level to build a single cell site. The process takes at least eight months to complete. The cost is an average of P18 million per site. This is outrageous. Whether it is a spin intended to justify telco slowness of action or lack of it does not matter. This revelation must be acted upon quickly. President-elect Rodrigo R. Duterte’s eight-point development program includes using the “Davao Model” for the enhancement of the process of doing business in the Philippines. The Davao Model requires the elimination of red tape, buck-passing, graft and corruption, and the completion of the whole application process in two days. The Davao Model must apply to Metro Manila cities. Many LGUs are models of efficiency, receiving awards from the national association of LGUs for this. But there are also a few dysfunctional ones. Prey to the propaganda of copy-cat environmentalists, they have been setting up all kinds of obstacles to the development of the mining industry in their localities, never mind that their communities suffer from high unemployment and intense poverty. If these inefficient LGUs need to be instructed on the need for consistence between local policy and national policy, let that instruction be issued as soon as possible. We cannot allow our national development to be stalled by LGU pigheadedness any more than we can permit it to be held hostage to telco infidelity.
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Advancing the welfare of informal-sector workers Susie G. Bugante
All About Social Security
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ven without looking up labor statistics, it is easy to see that the Philippines has a large pool of workers belonging to the informal economy. These own-account or self-employed workers providing small-scale goods and services comprise up to threefourths of the local labor population, based on World Bank data. Many of them come from rural areas, but even urban regions have their fair share of informal-sector workers, such as public-transport workers and market vendors, to name a few. To recognize the importance of the informally employed individuals, the Department of Labor and Employment commemorates an annual labor-day celebration for workers in the informal economy. This year’s event was held on May 18 at the Occupational Safety and Health Center in Quezon City, with the theme “Pagyamanin ang Kaalaman Tungo sa Maunlad at Disenteng Kabuhayan.” The event aimed to intensify efforts to address the needs of informal-sector workers, such as providing them with decent livelihood and access to technical knowledge. It also featured informal-sector workers who narrated their personal success stories to inspire others and help them to become more actively involved in the pursuit of inclusive growth. Meanwhile, in-
formal-sector leaders shared their invaluable knowledge on workers’ rights and privileges, as well as their insights on how to significantly contribute toward societal development. It was clear that they have innovated ways to expand their networks to further bolster and sustain programs initiated by various government agencies and civil-society organizations. From a silent segment of the work force, the informal sector is evolving as a group of individuals that is more organized and cohesive to give it a louder voice. After all, it is a sad reality that informal-sector workers are exposed to all sorts of vulnerabilities, such as loss of income, unemployment and other contingencies. Thus, it is imperative that the government should constantly
support them by providing access to essential health services, nutrition, education and care for their families, and social security. On its part, the Social Security System (SSS) has responded to the growing clamor of advancing the welfare of informal-sector workers through the nationwide launching of AlkanSSSya Program in 2012. This microsavings scheme enables informal-sector workers to be regular SSS members by providing them a system for habitually saving part of their daily income— specifically at least P11 per day— to complete their minimum SSS contribution of P330 per month. With this strategy, workers gain a more secure future for themselves and their families for they can rely on SSS benefits and privileges during times of contingencies. So far, the AlkanSSSya Program has covered over 1,300 associations of transport groups, job order and contractual workers, barangay employees and tanod, market vendors, farmers and fisherfolk, jail inmates, garbage pickers and other types of workers, with the number of covered members reaching nearly 120,000. Cooperatives and microfinance institutions were also tapped by the SSS in providing social-security protection to informal-sector workers in rural and far-flung locations through the SSS Partner Agent (PA) Accreditation Program. Servicing or
What’s behind the rise of demagogues?
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By Pankaj Mishra | Bloomberg View
N Austria last month, nearly half of the electorate voted for the presidential candidate of a party set up by former Nazis. The politics of fear unequivocally triumphed in Assam, a state in India’s northeast, where Prime Minister Narendra Modi’s Bharatiya Janata Party came to power for the first time on an explicitly xenophobic platform.
Last week an investigative journalist in Delhi offered fresh evidence implicating BJP figures in the mass killings of Muslims in the state of Gujarat in 2002. But we no longer live in the time when such moral scandals are electoral liabilities. Rodrigo R. Duterte, elected president of the Philippines last month, may have actually been helped by his brazen support of vigilante death squads. Even in the world’s oldest democracy, a presidential candidate openly advocates torture. The neoconservative columnist Robert Kagan, who once wished to spread freedom and democracy abroad by force, now raises the alarm against “fascism” at home. All our resolutions of “never again” after the 20th century’s catastrophic explosions of hateful politics are being challenged by millions of angry voters. The impulse to denounce them, along with their apparent pied-pipers, can be irresistible. Have these dupes not learned
anything from the politics of hysteria in the past? After all, rarely a month goes by without another book or film about the catastrophic outcomes of Mussolini’s March on Rome, Hitler’s ecstatic rallies in Nuremberg and Mao’s Cultural Revolution. But the global upsurge of fascism should provoke other, harsher questions, as well: What do we talk about when we talk about fascism? And have Western democrats, who assumed that fascism happened to other people and other countries, learned any deeper lessons from history? They may be quick to underscore the obvious fact about Mao —that he was a cruel megalomaniac. But can they explain why the Cultural Revolution, a festival of vindictive rage against old authority figures, was, initially at least, keenly embraced by millions of Chinese youth? Many liberals, as well as neoconservatives in the West, came to define
themselves during the Cold War through simple-minded notions about the radical evil of their adversaries. This self-image received a terrific boost in 1991, when the evil empire collapsed. History, far from ending, sprang some nasty surprises immediately afterward. But even ethnic cleansing in the heart of Europe by the genuinely popular Serb leader Slobodan Milosevic didn’t shake the belief that toxic demagoguery was something that happened elsewhere. The facile word “Islamo-fascism” that circulated widely after 9/11 made fascism seem the exclusive ideology of a few religious fanatics in Afghan caves rather than a uniquely modern mass phenomenon. Blithely associating fascism with some bad guys, and describing its supporters as victims of evil manipulators, we moved further away from understanding why and how mass politics once overwhelmed democratic institutions in several countries and could do so again. We failed to see that the demagogues rose to power offering not so much despotic authority as a new relationship between the rulers and the ruled. They shrewdly grasped a widely felt need for a new mode of sincere, dedicated leadership, as well as a more energetic way of involving the masses in politics. This is
noncollecting partner-agents (PAs) are allowed to screen and receive members’ applications for SSS registration, salary loans and funeralbenefits claims. Meanwhile, collecting PAs are authorized to collect SSS contributions, loan amortizations and other miscellaneous payments from its clients and members who are covered by the SSS. As a result, these partnerships opened up new channels for SSS coverage and collections, and helped these organized groups generate extra income from their activities as accredited PAs, since they earn P4 to P6 in service fees for every processed application and transaction. The accreditation program is continuously expanding with about 30 PAs to date, with total collections already past the P20-million mark. As it works toward increasing access to social security protection, the SSS sincerely hopes that informal-sector workers enjoy income from more lucrative and more stable livelihoods, as well as their well-deserved benefits as duly covered and actively paying SSS members. 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.
why the Nazi, Italian and Soviet regimes persuaded significantly large numbers of ordinary people that they were on the cusp of something extraordinary. The enthusiastic participation of the masses, in turn, confirmed their leaders’ sense of being at the cutting edge of politics, resolving the problems that other ruling elites could not. In the end, as we know all too well, they tried to do everything at once, unleashing many and various calamities in the process. But for a long time, and in innovative ways, the demagogues managed to address the discontent that mainstream politicians had neglected. Promising superhuman action, they poured contempt on political and economic systems that had failed to appreciate the extent to which more and more citizens felt themselves alone and powerless in the world. “It is as though,” Hannah Arendt wrote in The Origins of Totalitarianism, “mankind had divided itself between those who believe in human omnipotence [who think that everything is possible if one knows how to organize masses for it] and those for whom powerlessness has become the major experience of their lives.” Such words now evoke déjà vu, as many more people around the world recoil from their feelings of impotence by plunging into demagogic politics.
Opinion BusinessMirror
opinion@businessmirror.com.ph
Duterte must stop ‘beddings’ over government biddings
Trump and Clinton would (mostly) do what they say Albert R. Hunt
BLOOMBERG VIEW
Michael Makabenta Alunan
on the contrary
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f the incoming Duterte administration is really serious in stopping corruption in the bureaucracy, it must seriously democratize the procurement system to allow more winning bidders, instead of the usual monopoly of a winning bidder.
“Why fix if it ain’t broke?” But indeed, why change the system, if it has worked fairly well for so long? As an old saying goes, “Why fix if it ain’t broke?” But on the contrary, it is now an open secret that even public biddings that are intended to work in government’s favor and for the common good is often rigged right from the start. And as another saying that goes, “It takes two to tango,” it simply means that there are players from both government and the private sector that are insidious bed partners, colluding to corner and manipulate government biddings that result in corruption, losses and inefficiencies in public services. Oftentimes, the criteria for qualified bidders are manipulated to favor a few, or that the bidders themselves collude among themselves, on who should win in a particular contract bidding. They even deliberately push for a failed bidding, until government is forced into negotiated deals favorably priced in favor of a contrived winning bidder at the expense of government. Of course, other losing bidders secretly partake or share in varying ways the “so-to-speak loot” of the contrived winning bidder. Albeit there is collusion from the start, at least the pie is somewhat shared, but still at the expense of government and the people. Winning price and quality? A worst scenario is the case, whereby the collusion between government and a favored bidder goes too far to the extent of modifying the criteria, thus, defying the very logic and essence of a public bidding. Many years back, a small-time microentrepreneur innovator, an International Rice Research Institute (IRRI) awardee at that, lost a bidding for his prized shallow tube well technology, despite beating everybody as to price and quality. His only problem is that he could not allegedly supply the required volume. Obviously, who won was a favored supplier, who charged almost thrice the price, and even bought all the stocks our IRRI awardee could produce. Can’t our government banks provide credit to winning small players against their winning bids, which serve as collaterals being almost an effective purchase orders by themselves? “Qwerty free market.” There are other variations on how the collusion in the sharing of the proverbial economic pie is done, but whatever it is, it is still a mockery of the essence and importance of a governmentbidding process. Supposedly, there is sound logic to the argument of allowing suppliers and contractors to compete and fight it out for the best price and the best quality in government biddings. Indeed, this logic is a brand of neoliberal free market “dog eat dog” system that my friend Nonoy Oplas of Minimalist Government and columnist of Business World advocates rabidly. We have resigned to accept this system as normal, which we can only blame on “Qwerty” logic, which takes after the standard keyboard system designed by Christopher Latham Sholes, a newspaper editor and printer from Wisconsin, who patented the first typewriter— which carried the letters Q, W, E, R, T and Y on the top left letter row of the keyboard from left to right. When Sholes sold in 1873 his patent to Remington, who made it successful, the “Qwerty” system became the
While it may be difficult to change customs and ways, the Duterte slogan “Change is coming” and his penchant for going for the jugular and the unorthodox may just do the trick. standard, regardless of its inherent shortcomings. In fact, a better keyboard, the Dvorak system invented in 1936 by Dr. August Dvorak and his brother-in-law, Dr. William Dealey, was four times more efficient, but because Qwerty was ahead and people are already accustomed to it, shifting to a better system was impossible. Change is coming? While it may be difficult to change customs and ways, the Duterte slogan “Change is coming” and his penchant for going for the jugular and the unorthodox may just do the trick. Moreover, we cannot compare being accustomed to the old Qwerty keyboard system to the way people manage things. Although there are situations when a single winning bidder is appropriate, for small-ticket items and supplies, it may be advisable to allow say the top 5 or top 3 bidders a share in a supply contract. This way, you democratize wealth and break the winner-takes-all system dominated by monopolies, which, in many cases in the provinces, are the same oligarchs, who control or influence the local politics, the informal lending system, trade of goods and farm inputs, and almost every major economic activity in the community. Perhaps, as a compromise to free marketers, an institutional caveat can be set, whereby a free market for price and quality will still be put in motion in a bidding, from which the standards will be determined in favor of government. “ Do dir ty ” management style? A mechanism can be established on how an agreed supply contract will be divided openly. At least, there is transparency, unlike the current practice of the collusion done behind people’s backs. Another caveat can be institutionalized, whereby apart from a preaudit upon prebidding qualification, a performance audit can be done during and after performance. Those who fail certain performance criteria will be disqualified in the succeeding years. For inclusivity, perhaps, cooperatives and small microenterprises may be given reserved slots, provided they, too, compete fair and square on price and quality. As the devil is in the details, as the saying goes, I guess Presidentelect Rodrigo R. Duterte’s success will be in the nitty-gritty of handling things. Knowing his unusual “Do Dirty” hands-on management style, he gets things done as he leads by example by immersing himself into people’s concerns by posing as a taxi driver, etc. Being more of an executive faced with nuts and bolts problems, perhaps, it finally takes a nut like Duterte to do dirty enough to get everyone to bolt in against unholy “bedding” partners causing fiscal adultery over government biddings. You may reach Michael Alunan at e-mail mikealunan@yahoo.com.
Wednesday, June 1, 2016 A11
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number of Republicans rationalize Donald Trump’s proposals on immigration and trade as just political show. Similarly, some free-trade Democrats suggest that Hillary Clinton’s protectionist stance is merely rhetoric. They are deluded. Academic research and recent history show that newly elected presidents try to hew closely to their campaign commitments. “New presidents actually believe they have a mandate, feel empowered,” says Shirley Anne Warshaw, a presidential scholar at Gettysburg College. “There is no reason to think it would be any different this time.” Thus, politicians and voters should assume that a President Trump would start deporting millions of undocumented immigrants and building a wall along the Mexican border, threaten China with a trade war, roll back regulations concerning Wall Street and the environment and make nice with Vladimir Putin. The assumption should be that a President Clinton would seek to boost taxes on the wealthy, initiate a plethora of new social programs that fall well short of what Bernie
Sanders has advocated and stymie the proposed Trans-Pacific Partnership (TPP) trade accord. There was some skepticism whether, as candidates, Ronald Reagan and George W. Bush were serious about their huge tax-cut proposals. They were. Or whether Barack Obama really would push to overhaul the health-care system. He did. Sometimes, presidents follow campaign commitments that are politically risky. President Bill Clinton fulfilled his promise to ease a ban on gays in the military, which, at the time, was not popular. And some presidents need to be dragged into breaking an unwise promise. It took George H.W. Bush almost two years to abandon his no-new-taxes pledge. The 1990 budget deal, with tax hikes, had two effects: it helped usher in the economic good times of the 1990s and cost Bush politically. Trump, who has railed against politicians who don’t keep their
Trump, who has railed against politicians who don’t keep their promises, could be expected to start deporting 11 million undocumented workers. He says he’d do so over two years without specifying how he would cover the astronomical costs. He would also try to start building the wall along the US’s southern border, though it would cost much more than he estimates and he won’t be able to compel Mexico to pay for it.
promises, could be expected to start deporting 11 million undocumented workers. He says he’d do so over two years without specifying how he would cover the astronomical costs. He would also try to start building the wall along the US’s southern border, though it would cost much more than he estimates and he won’t be able to compel Mexico to pay for it. On trade, international and domestic laws would limit his ability to make good on his vow to impose huge tariffs on Chinese or Mexican goods. He could try to circumvent these restrictions by invoking presidential powers in responding to an “unusual and extraordinary threat.” Under a Trump administration, Wall Street and environmental regulations would be rolled back:
He could be expected to tap industry-friendly regulators and get Congress to starve funding for the affected agencies and obtain some legislative changes. Trump’s foreign policy isn’t clear to most, though he seems to have given little thought to the subject as his pronouncements are mostly generic: Other countries need to bear more of the burden for their own defense. There are some unconventional views: He has spoken of his admiration for Putin. The president can take military action against a perceived threat and Trump might not be shy in doing that. In the case of Clinton, some Wall Street backers say her proposals and tougher rhetoric on banks are just a political response to Sanders, her Democratic rival. Don’t bet on it. But you can bet that she’ll push hard to raise taxes on the wealthy. On trade, there is a view among some of her policy and business supporters that she really is a free trader and that her opposition to Obama’s Pacific trade pact and her pledge to renegotiate the North American Free Trade Agreement are just political gesturing. In reality, she wouldn’t back down and the TPP is dead if it isn’t enacted in a lame-duck session after this year’s election. Trump lacks a lot of policy specifics, but both he and Clinton have laid out a road map of where they want to take the country. Voters should take them seriously.
Europe needs investment more than budget rules
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fter vacillating for weeks over the failure of Spain and Portugal to comply with Europe’s budget rules, the European Commission decided recently to vacillate some more. It will review the countries’ excessive borrowing in July—after Spain’s general election. That’s the trouble with fiscal rules that aren’t enforceable, and that you wouldn’t want to enforce even if you could. Europe needs wholesale reform of its failed fiscal framework, but it lacks the necessary political will and popular support. Until this changes, trying harder to promote investment would be more effective than just hoping for the best. Europe’s rules require budget deficits to be no more than 3 percent of national income. Spain’s is 5.1 percent. Portugal is in breach, as well, with a deficit of 4.4 percent. In addition, countries are supposed to keep public debt at no more than 60 percent of income. Of the European Union’s (EU)
28 members, only three have consistently complied with both rules. At the moment, nine countries are subject to the provisions of the so-called excessive deficit procedure, although the commission has recommended that Cyprus, Ireland and Slovenia be let off for good behavior. In theory, after several rounds of warnings and finger-wagging, this provides for fines of as much 0.2 percent of GDP. In practice, Europe doesn’t dare. What sense would it make to punish an economy, like Spain’s, that’s already struggling—not to mention the fact that it currently lacks a government? The EU is unpopular enough already. Fully repairing the fiscal system requires a back-to-basics rethink, and the creation of a limited form of fiscal union for countries that are members of the euro zone. For the moment, with voters looking askance at any and all EU initiatives, that’s out of the question. But two less radical approaches
would help in the meantime. First, boost public investment. The need is clear: net public investment in many EU countries has been low for years and especially since the financial crisis; in Belgium, for example, it has been zero for decades. Additional infrastructure investment would create demand in the short term and boost growth in the long term. The rules are elastic enough to permit this. And a suitable EU institution exists for the purpose: The European Fund for Strategic Investments (EFSI) aims to attract private capital for worthy projects that require public support—such as building a new teaching hospital in Birmingham or improving the energy efficiency of 40,000 residences in France. Up to now, the EFSI has approved around €9.3 billion ($10.4 billion) of financing for infrastructure projects. It is a new body, but it needs to scale up—a lot and fast. Second, support wholly private
investment by accelerating efforts to develop an integrated market for capital and, especially, equities. This may be the best way to help the EU cope with economic shocks and foster catch-up growth in its poor countries—more effective, even, than a functioning fiscal union. It requires a more determined assault on regulatory impediments to intra-EU capital flows, harmonized insolvency laws, the long-promised banking union and other steps. Much of this innovation can be done without the need for a new EU treaty. The commission solemnly refers to the existing budget rules as the “cornerstone of the EU’s economic governance.” That’s nonsense; those rules are broken. But until they can be fixed, move the focus elsewhere: from austerity and restraint to investment and growth. Who knows? The right kinds of public investment might even make the EU more popular. Bloomberg View