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Friday, June 1, 2018 Vol. 13 No. 230

Private firms eye bigger role in ‘Build, Build, Build’ 29 P By Elijah Felice E. Rosales

@alyasjah

RIVATE-sector leaders want economic managers to give domestic firms more space and participation in the Duterte administration’s infrastructure blitz, touting their capacity to shoulder some of the projects listed under the “Build, Build, Build” (BBB) program. In a forum hosted by CNN Philippines, representatives from San Miguel Corp. (SMC) and Banco de Oro (BDO) said their firms are just waiting for the government to tap them in its infrastructure

plans. They claimed the balance of scale for bankrolling the 75 BBB flagship projects is heavily reliant on official development assistance (ODA), governmentto-government deals and domes-

The number of months deemed ‘natural delay’ in PPP projects

tic spending, and biased against private funding under the publicprivate partnership (PPP). SMC Infrastructure Chief Financial Officer Raoul C. Romulo said the government is executing the BBB well, and admitted there is no single scheme that can fill in the country’s infrastructure gap in Continued on A2

Customs cites TRAIN, enhanced systems for P47-B revenue take in May 2018 By Rea Cu

@ReaCuBM

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HE Bureau of Customs (BOC) has reported an increase in its revenue collections of P47 billion for May this year, with the increase attributed to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law apart from its enhanced administration efforts. Customs Commissioner Isidro S. Lapeña reported to President Duterte, during a ceremony on Wednesday condemning smuggled luxury vehicles at the BOC headquarters in Manila, that as of May 29, 2018, the bureau has thus far collected revenue of P47 billion— higher by 18.7 percent compared to total collections reported by the BOC of P39.592 billion for May 2017. With two days left for the month of May, Lapeña said that he is confident that the BOC will be able to hit its target for the month. “Our May collection target is P49.2 billion, and our collection is already P47 billion. I am confident that we will hit and even surpass our May target,” he added. See “Customs,” A8

Container vans are seen stacked on top of each other at Manila’s port. The Bureau of Customs reported P47 billion in collections for May, higher by almost 19 percent over the same period last year. NONIE REYES

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Inflation in May likely breached target anew–BSP By Bianca Cuaresma

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@BcuaresmaBM

HE growth of consumer prices in May could have skyrocketed to above 5 percent, the Bangko Sentral ng Pilipinas (BSP) said. In its monthly forecast statement on inflation, the country’s central monetary authority admitted that May’s inflation rate likely breached anew their annual average target range. The gravity of its derailment from the 2 percent-to-4 percent target range, however, hit a new

high as the Central Bank said inflation could have hit anywhere between 4.6 percent and 5.4 percent in May. This is a big leap from last year, coming from 2017’s 2.9 percent inflation rate in May. It is also a certain acceleration from the 4.5 percent posted in April this year. The BSP Department of Economic Research explained that both local and international developments contributed to the potentially sharp rise in inflation for the month. See “Inflation,” A2

Palace leans on solons to resolve BBL issues By Bernadette D. Nicolas

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@BNicolasBM

AL AC AÑANG expressed gladness over passage on third and final reading of the bill for a Bangsamoro basic law (BBL) in both chambers of Congress, but expressed hope the measure can withstand judicial scrutiny to prevent it from suffering the same fate as the memorandum of agreement on the ancestral domain (MOA-AD), which the Supreme Court declared unconstitutional. On Wednesday the Senate and the House of Representatives passed their versions of BBL on second and third readings in one day after the President certified the bill as urgent. The certification was issued to advance the creation of a new autonomous region in Muslim Mindanao. Presidential Spokesman Harry L. Roque Jr. said they are pleased with the passage of BBL in both houses of Congress and that they also both agreed to come up with a final version of the bill during the break. “We are very pleased that they [lawmakers] are aiming [to have] the President...sign the final BBL on the day of the Sona [State of the Nation Address] itself. So that’s it,

and we are hoping that, you know, congressmen will also exert all efforts to make sure that this BBL will withstand judicial scrutiny, having learned already from the lessons of the earlier MOA-AD,” Roque said. Crafted during the time of President Gloria Macapagal-Arroyo, the MOA-AD was supposed to create an autonomous entity called the Bangsamoro Juridical Entity, but the SC struck it down as unconstitutional. Senate Minority Leader Franklin M. Drilon, in pushing for a thorough discussion of the BBL’s Senate version, on Wednesday had vowed to make the bill litigationproof, to avert its suffering the same fate as the MOA-AD. He and Senate President Pro Tempore Ralph G. Recto raised most of the substantive issues in the BBL bill, causing marathon deliberations that stretched the session to way past midnight. All of the 21 senators present, however, voted in favor of the bill shortly before 1 a.m. on Thursday. Roque, meanwhile, noted that the President has allayed everyone’s concerns in the last meeting he had with the transition members of the Bangsamoro Transition Commission (BTC), and members

n japan 0.4838 n UK 70.0448 n HK 6.7143 n CHINA 8.2047 n singapore 39.3525 n australia 39.9119 n EU 61.4617 n SAUDI arabia 14.0496

See “BBL,” A8

Source: BSP (31 May 2018 )

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A2 Friday, June 1, 2018

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TUCP pitches ₧320 wage hike, but defers to Congress

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By Samuel P. Medenilla

@sam_medenilla

HE country’s largest labor group said it will no longer file any wage petitions in Metro Manila and other regions next month to give way to pending legislation in Congress raising minimum wages nationwide.

Private firms eye bigger role in ‘Build, Build, Build’ Continued from a1

the immediate term. He also welcomed the inclusion of additional financing schemes, including the introduction of hybrid PPP. In funding its public infrastructure, the government makes use of a hybrid model of the PPP that utilizes a combination of the National Treasury, inflows from ODAs and funds raised from bond floats at investment-grade rates. Economic managers explained they do not want to commit on PPPs alone, and added the hybrid model is more flexible in that it can speed up the delivery of infrastructure projects. This does not bode well with SMC, according to Romulo, and he asked the economic team to consider balancing the scale of distribution for the financing of BBB projects by involving the private sector more instead of seeking grants and loans from foreign governments. “There is no one single bullet that can address all the neglect of government deficit throughout the decades,” he stressed. “What we would like to see—and we are

very grateful that the government is supporting a lot of the projects that are still unfinished—is some more balance, opening and distribution of these different kinds of budget funding. You have the ODA, you have the hybrid and also the unsolicited proposals, which we are one of the most prolific submitters to you. “But we would like to see a more balanced approach, if possible, to see all of these projects rolled out more efficiently as it is now. We understand that a lot of the projects that you put together [still have to be completed] from the previous administration, but we also like to see the different agencies [having] more people to help us analyze all of these projects [so they] can go into fruition faster. “Yes, this hybrid is a welcome avenue, but we also like to see the reopening again on the thrust of the PPP side,” Romulo said. BDO Capital and Investment Corp. President Eduardo V. Francisco agreed with Romulo, and said domestic firms are always up in arms should the government need them in

LOW PRESSURE AREA ESTIMATED AT 115 KM SOUTH SOUTHWEST OF PUERTO PRINCESA CITY, PALAWAN LOW PRESSURE AREA ESTIMATED AT 980 KM EAST SOUTHEAST OF HINATUAN, SURIGAO DEL SUR as of 4:00 pm - May 31, 2018

rolling out the BBB. He said the hybrid model is working, but they will appreciate it better if they were tapped as a whole in some of the projects under an organic PPP. “Our request is that even if you go into ODA, maybe as a bridge, we’re there to support. If there are some delays, use us,” Francisco said, adding private banks have liquid capital as of present. Former Finance Secretary Margarito B. Teves told the economic team to look at the private sector as a strong partner in the rollout of the government’s infrastructure program. He said allowing domestic firms to finance some of the projects will make them take the burden of the risk, and will subsequently give the government some flexibility. “Get them [domestic firms] to bear more of the risk, but at the same time, we would like you to assure us that the timetable is within our own timeline. The burden of the risk will be on the private sector, and then that will give some flexibility on the part of the government to also anticipate other requests in the future—social, education and so. “I would, in effect, suggest a more open attitude toward private participation, including unsolicited proposals, and look at the macroeconomic indicators. They were not as comfortable as they were from a few years back,” Teves said. In the gover nment’s defense, Budget Secretary Benjamin E. Diokno said the government is making use of different financing schemes to hasten the rollout of public infrastructure. He said the PPP is infamous for delays, and the administration—wanting to be known for getting things done immed iately— cannot commit to that. “We’re opening many financing roads for us. We do not commit to PPP alone because there is a natural delay for PPP—29 months from project identification to takeoffs. We cannot afford that long, so we decided to have a hybrid PPP,” Diokno explained.

“We will not file [wage petitions] in the regions because we already filed a new wage increase bill,” Trade Union Congress of the Philippine (TUCP) Assistant General Secretary Vicente C. Camilon Jr. told the BusinessMirror in an interview on Thursday. Part y-list Rep. R ay mond Mendoza of TUCP filed on Tuesday House Bill (HB) 7805 to implement a P320 increase on all prevailing minimum wage rates in the country. TUCP said the bill is based on their supposed wage petition in Metro Manila to give workers their due share from the country’s economic growth and restore the lost value in the current minimum wage rate, which has been eroded by inflation. Camilon said the breakdown of their proposed wage hike is as follows: P35.15 from government-mandated deductions like Social Security System premium; P145 for the “equity supplement” of workers in the last 29 years since Republic Act (RA) 6727, or the Wage Rationalization Act, took effect; P62.09 for rise in the cost of living based from the computation of the National Wages and Productivity Commission (NWPC). Camilon added the new round of wage increases aims to provide minimum wage earners nationwide a fighting chance to “survive” the rising cost of living. The TUCP official said they decided to use their wage increase computation for the National Capital Region in the bill to ensure even workers in other regions will be given proper compensation for their contribution to the economy. “Why did we propose a P320 [increase] even in other regions? Because there are more incidents of poverty in the rural areas,” Camilon said. He added they opted to bring the wage hike issue to Congress instead of the regional wage boards after the latter has failed to implement significant wage hikes in the past. “How much did the wage boards able to grant before? Only P10, P15 and even P21. Those are not substantial increases,” Camilon said. TUCP filed HB 7805, a day after the Makabayan Bloc in Congress filed HB 7787 implementing a P750 national minimum wage.

Higher chance

While TUCP said it also supports HB

Inflation. . .

Continued from A1

“Higher domestic petroleum prices amid geopolitical tensions in the Middle East, as well as the sustained increase in rice prices, present upward price pressures for the month,” the BSP said in a statement released on Thursday. Inflation could have gone higher, the BSP added, if not partly offset by lower electricity rates in Meralco-serviced areas, along with lower prices of selected fruits and fish items as supply conditions normalized for the month. The BSP forecasts inflation to average at 4.6 percent this year before normalizing back to within-target levels for 2019 at 3.4 percent. In its last monetary-policy meeting, the BSP hiked its main policy rate by 25 basis points to temper inf lation pressures in the coming months. This is the first hike coming from the BSP since 2014. W he t he r or not t he B SP w i l l decree another rate hike before the year ends, analysts are still looking

7787, it said it is less likely to passed into law since it will set all existing minimum wage rates to P750. “In our proposed bill, the current rates will be retained but will only be increased by P320,” Camilon said. Despite multiple attempts from lawmakers and labor groups, no legislated wage hike for the private sector was implemented since R A 6727, which transferred the minimum wage-setting power of Congress to the regional wage boards, took effect. TUCP Vice President Luis Manuel Corral, however, said they are more confident their proposed measure will be passed into law this time around. “We take it as positive sign that some senators have already said they will support wage increase like Sen. Loren Legarda. It also helps that election is now just around the corner...now that is a national problem...it is going to affect everybody’s poll and approval numbers,” Corral said. He also said there will be even higher chances of the passage of the pending wage legislation if it will get the support of President Duterte.

Employer reaction

In response to the concerns of the Employers Confederation of the Philippines (Ecop) that wage hike will trigger mass displacement, Camilon said this is unlikely due to the country’s growing economy. “[Labor] productivity and GDP [Gross domestic product] has been increasing in previous years, while real wages continue to decline.... This is why employers could afford this,” Camilon said. Real wage is wage adjusted to the effects of inflation. No less than the International Labor Organization (ILO) noted in its Decent Work Country Diagnostics: Philippines 2017 report that the growth of real wages in the country is “slow and lagging behind GDP growth.” “The average real daily basic pay of wage and salary workers in 2005 was about P259. In 2015 it was P268. Though inflation rate in 2014 [1.4 percent] was lower than in 2005 [6.5 percent], the minimal growth of real wage in spite of strong GDP growth means the well-being of wage earners improved little, underscoring noninclusive growth, especially for low-paid wage workers,” ILO said. for cues from the BSP. “BSP’s move should calm investors in the equity and bond side, signaling to them that inflation will likely come down now that the central bank is in a tightening bias,” ING Bank Manila senior economist Joey Cuyegkeng earlier said. “However, with another rate hike less likely in the very near term and with weak external payments fundamentals, the peso would be volatile with a weakening bias,” he added. The BSP monetary board will reconvene for their next monetary-policy decision making on June 21. In its statement on Thursday, however, the BSP vowed to remain vigilant against further risks to price stability in the country. “Going forward, the BSP will remain watchful of evolving price trends and ensure that the monetary-policy stance remains appropriate to maintain price stability that is conducive to a balanced and sustainable economic growth,” the BSP said. The Philippine Statistics Authority is expected to release the country’s May inflation numbers within June’s first week.

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Rehabilitated Virac Airport terminal set to open June 1 By Recto Mercene @rectomercene

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he Department of Transportation (DOTr) and the Civil Aviation Authority of the Philippines (Caap) is set to inaugurate the newly rehabilitated passenger terminal building of the Virac Airport on June 1. Transportation Secretary Arthur P. Tugade, together with DOTr Undersecretary for Aviation and Airports Manuel Antonio Tamayo and Caap Director General Jim Sydiongco, will lead the inauguration. The terminal rehabilitation project began in January 2016, and it involved turning the old design of the passenger terminal building into a modern structure. The P39-million project, whose initial completion date was on July 20, 2016, was suspended on May 23, 2016, after additional retrofitting works were considered necessary to provide stability for the old structure originally built in 1963. It was suspended once again in December 2016 due to damages brought by Typhoon Nina. The government spent P4.5 million more in repairs on the passenger terminal building. T he rehabi l it at ion project was finally completed on May 14, 2018. “When President Duterte appointed us in his Cabinet, he gave us one important directive: ensure

that we make the Filipino comfortable. That is why we continue to build, build and build. We build to enhance mobility and connectivity, not just to improve movement of transportation of people and goods, nor just to improve travel. We do this to enhance the Filipino’s way of life,” Tugade said. After the inauguration, the rehabilitated passenger terminal building will increase its capacity from 100 passengers to 300 passengers. The ground floor and second floor pre-departure areas have been expanded, and the arrival area in the ground floor has also been rehabilitated. Rep. Cesar V. Sarmiento of the Lone District of Catanduanes, Gov. Joseph Cua and Virac Mayor Samuel Laynes are also expected to grace the inauguration, with representatives from the local governments of Catanduanes and Virac. Virac Airport is the only airport serving the island province of Catanduanes. It started its operations in 1946 as a feeder airport with its first commercial flight landing in 1947. On October 27, 2013, Cebu Pacific launched the first Airbus flight to Virac and its Manila-Virac-Manila route every Monday, Wednesday, Friday and Saturday. In December 2017 Philippine Airlines launched its Clark-Virac-Clark route every Monday, Wednesday, and Saturday.

Editor: Vittorio V. Vitug • Friday, June 1, 2018 A3

Sison will only come home after signing of peace pact

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By Rene Acosta

@reneacostaBM

ommunist party founder Jose Ma. Sison welcomed President Duterte’s assurance that he would not be assassinated like the late Sen. Benigno Aquino Jr. if he returns to the country, but added he will only come home after the signing of the peace agreement between the government and the National Democratic Front of the Philippines (NDFP). “I welcome the assurance of safety by President Duterte. It is much better that there is such an assurance,” Sison said in a statement on Thursday. “ The most important thing is that we can dialogue and agree on how best we can serve the interest of the Filipino people, especially the toiling masses of workers and peasants through

the peace negotiations and cooperation under the principles of national sovereignty, democracy and social justice,” he added. Duterte has asked Sison to come home as the government and the NDFP agreed to resume the scuttled peace negotiations, even offering to allow communist rebels to guard the communist founder.

SISON: “I welcome the assurance of safety by President Duterte. It is much better that there is such an assurance.”

The President said there would be no “Aquino-style” assassination, referring to the killing of Aquino in 1983 upon his return to the country. Sison sa id he wou ld come home only after the peace agreement is signed, which he expected to happen in the next couple of months. “For sure I shall return to the Philippines after the signing of the interim peace agreement, which is already being prepared for June, and the subsequent mutual approval of the comprehensive agreement on social and economic reforms by the GRP [Government of the Republic of the Philippines] and NDFP either in July or August,” he said.

Meanwhile, soldiers and New People’s A r my ( NPA) rebe l s clashed on Thursday in Isabela. Armed Forces Northern Luzon Command Spokesman Col. Isagani Nato said elements of the 86th Infantry Battalion clashed with about 20 NPAs at Barangay Benguet, Echague, Isabela, at around 8:50 a.m. “The firefight lasted for almost five minutes. No casualty on the government side was reported by the operating troops, while the rebels sustained an undetermined number of casualties,” Nato said. In Agusan del Norte rebels repor ted ly k i l led a barangay kagawad on Wednesday. Capt. Anthony Pueblas, civilmilitary operations officer of the 402nd Brigade, said Edgar Rosal Panisan of Barangay Mahaba, Cabadbaran City, Agusan del Norte, was shot by members of the Guerilla Front 21C of the NPA’s North Eastern Mindanao Regional Committee. “Panisan is the first councilor of Barangay Mahaba,” Pueblas said, adding that the barangay official was also serving as a member of the Cafgu.

A4 Friday, June 1, 2018 • Editor: Vittorio V. Vitug

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Cheap diesel from Russia ‘coming soon’–DOE By Bernadette D. Nicolas

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@BNicolasBM

BOUT 240 million liters of cheaper diesel would come from Russia soon, according to a senior official of the Department of Energy (DOE). Energy Undersecretary Felix William B. Fuentebella said the government is currently negotiating with its newfound ally and seeks to buy the diesel “as soon as possible” to beef up the country’s stockpile and help slow inflation. However, the amount is just equivalent to a three-day supply and the importation would fail to make a dent on the upward pace of local oil prices. Still, Fuentebella said the move reflects what could be considered the new normal in the government’s energy policy. According to him, the President’s marching order is to head toward that direction with the DOE directing state-owned Philippine National Oil Co.-Exploration Corp. (PNOC-EC) to prepare for oil trading and compete with local oil industry players to ease

the impact of rising oil prices. This development came following strong calls for the suspension of the Tax Reform for Acceleration and Inclusion, the law being blamed for rising inflation. “What we are pushing is enhancing competition to add more players,” Fuentebella said in an ambush interview. He added the move to import oil via a government-togovernment scheme is an “out of the box” practice for the DOE. “Through enhancing competition, there will be an impact on prices.” If the government is going to continue using this route and which results to lesser prices, then the private sector will copy it, according to Fuentebella, believing there would be a “rippling effect” on the prices of oil and petroleum products.

A worker overlooks the low-temperature isomerization unit at the Novokuibyshevsk oil refinery plant in Russia. The Philippine government is now in talks with Russia for the purchase of 240 million liters of diesel. Andrey Rudakov/Bloomberg

“We pass [on] the risk to the private sector,” he said. “The government has commitment on deregulation but, nonetheless, [the] GOCC [government-owned and

-controlled corporation] factor is there to enhance competition some more.” Fuentebella is referring to PNOC-EC, a GOCC, which would bankroll the importation

costs, “not taxpayers’ money.” He added he cannot say how much is involved as he hasn’t seen the terms of negotiation. He said it would be the members of the PNOC-EC board

who will approve the budget. However, the government expects the diesel from Russia would arrive earlier than the six-month window, Fuentebella said. He added the importance of stockpiling is to have that third level of security for emergency purposes. The PNOC has already secured some of the storage facilities in Subic for the stockpiling, Fuentebella said. Aside from Russia, he added, the government is also looking into importing diesel from Thailand and Saudi. On Tuesday Malacañang said Petron Corp. and Phoenix Petroleum Philippines Inc., headed by Ramon S. Ang and Dennis A. Uy, respectively, have voluntarily offered to sell cheaper Russian diesel, amid the rising oil prices in the world market. “There is already a voluntary offer from at least two companies that, if we succeed in the importation of cheap Russian diesel, they will sell it to the public even though we do not own Petron anymore,” Presidential Spokesman Harry L. Roque Jr. has said. Earlier, the government said it is eyeing oil from countries outside the Organization of Petroleum Exporting Countries to cushion the impact of rising oil prices.

‘Plan B’ for infrastructure push not needed, Duterte’s econ managers say By Cai U. Ordinario

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@cuo_bm

h e D ut e r t e a d m i n i s t r a tion is bent on implement-

ing and completing public inf rastr ucture projects despite “ hicc ups” t hat may occ ur in the medium ter m, according to

the President’s economic team. Dur ing Wednesd ay night ’s CNN Business Forum in Taguig City, Budget Secretar y Benja-

min E. Diokno said changes in the countr y’s economic condition, or even implementation challenges, will not hinder the administration from pushing through with its projects. This was his response to concerns raised by former Finance Secretary Margarito B. Teves on the matter of creating a “Plan B” for the implementation of public infrastructure projects. “This is my third stint in the government, I know how we make some adjustments in the middle of the game and do you know what the result is? Half-finished projects. We won’t do that. We’ll go full steam ahead and construct all the projects that we have chosen,” Diokno said. Teves, who is now part of the private sector, asked how the businesses can take on and participate in more projects in the government’s infrastructure program, dubbed as “Build, Build, Build” (BBB). He said the government should consider allowing private firms to take on public infrastructure

projects, including those that have already been approved. Te ve s ad de d t h at , du r i n g implementation, projects could encounter situations such as higher inflation or delays, which could imperil projects. “[Is there] a Plan B approach where the private sector will be ready and available to assist the government even in those approved projects and where the government says ‘I am committed to it now, but willing to make adjustments provided private sector will meet these conditions,’ which will be win-win for all of us,” he said. A mong t he possible c h a llenges to the BBB are r ightof-way acquisition issues. It is common for Rowa problems to delay projects because this involves not only the purchase of land but also the relocation of affected families. However, Public Works Secretar y Mark A. Villar said the government has the power of eminent domain, which is en-

shrined in the Constitution, and there is a mechanism in place that allows the government to exercise this power. Villar assured that the President ’s econom ic tea m is on top of t he sit u at ion a nd t he “ h igh level ” of coord inat ion between infrastr ucture-intensive agenc ies help in fac i l it ating t hese u nder t a k ings. “You can see this reflected in the speed in which I think a lot of our projects are being done now. At least for the ones we are opening, we’ve acquired about 90 percent of the right-of-way and this was done in a very short period of time,” Villar said. Based on data obtained by the BusinessMirror, the national government will spend P8.09 billion for Rowa and P2.25 billion for resettlement between 2018 and 2021. Earlier, the Department of Public Works and Highways has created a team to focus on Rowa concerns to ensure that projects are not delayed.

PHL to tap loans from S. Korea for several projects By Rea Cu

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@ReaCuBM

anila is seeking South Korea’s funding support and expertise to implement the Philippines’s big-ticket infrastr ucture and information technolog y projects, according to the Department of Finance. During his recent meeting with South Korean Ambassador Han Dong-Man, Finance Secretary Carlos G. Dominguez III expressed the hope that at least six Philippine projects in the pipeline would get financing support from the Export-Import Bank of KoreaEconomic Development Cooperation Fund (KEXIM-EDCF) under the Framework Arrangement formalized between the two countries on May 4. Under the arrangement, the Philippines can access South Korea’s loan facility under the EDCF up to an amount not exceeding $1 billion over a five-year period until 2022. Among the projects proposed by the Philippines under this Framework Arrangement is the New Cebu International Container Port Project with an estimated loan amount of $172.64 million, with the finance chief hoping for the loan agreement to

be signed during the first week of June. Other projects that the Philippines plan to present to South Korea for funding support include: a project-preparation facility of the National Irrigation Administration (NIA), which includes the Asbang Small Reservoir Irrigation Project in Davao del Sur; the development of a new airport in Dumaguete City, Negros Oriental; and the implementation of an electronic receipt and invoice system; and electronic salesreporting system. President Duter te, accompa n ied by a de legat ion t h at includes Dominguez, is set to visit South Korea from June 3 to 5 for a summit with President Moon Jae-in. On behalf of the Philippine government, Dominguez also thanked South Korea for its support in constructing the Panguil Bay Bridge, which will connect Misamis Occidental and Lanao del Norte. The 3.4-kilometer bridge is among the 75 flagship infrastructure projects of the Duterte administration’s “Build, Build, Build” infrastructure program. “Thank you for all the assistance you have provided us. Panguil Bay Bridge is coming along, and you have funded a lot of proj-

ects. I want to assure you that we will not waste your taxpayers’ money, we will make sure that it will benefit the Filipino people,” Dominguez said. During the meeting, Ambassador Han said he has encouraged South Korean businesses to “invest, invest and invest here” in the Philippines, particularly in Mindanao where, he said, there are “more opportunities.” Among the top South Korean companies with current investments in the Philippines are Samsung, Sunjjn, Kepco, Daewoo International and Asiana Airlines. The ambassador also said he has urged the South Korean government to help in rebuilding the devastated city of Marawi. “I have asked [South] Korean companies to join many projects in Mindanao,” Han said. S o ut h K o r e a i s t h e Ph i l i p p i n e s ’s s i x t h - l a r g e s t p r o vider of official development assist a nce, w it h loa ns a nd grants provided to the countr y amounting to $570.60 million as of December 2017. South Korea is also among the top sources of foreign tourist arrivals to the country for the past three years, with some 1.6 million South Koreans visiting the Philippines in 2017.

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Banking&Finance BusinessMirror

Problematic preneed firm seeks rebirth as single-plan provider

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By Rea Cu

@ReaCuBM

he preneed firm now known as Abundance Providers and Entrepreneurs Corp. (Apec) has asked the Insurance Commission (IC) for a license to operate as a single-plan preneed provider by selling memorial plans. A license will allow the former Pacific Plans Inc. to generate revenues and settle the education and pension claims of its longsuffering policyholders.

“This application was made pursuant to a court order issued by the Regional Trial Court of Makati, Branch 66, where the Petition for Rehabilitation of Apec Plans is pending,” the IC said. The court approved the socalled alternative payment program (APP) proposed by the courtappointed rehabilitation receiver, Mamerto A. Marcelo Jr., in 2015 and requires Apec to contribute to a trust fund that services the settlement of the educational and pension claims of its plan holders.

“The ability of Apec to generate revenue and contribute to the trust fund is dependent on the issuance of a license in favor of Apec for the continuation of the memorial plans line of business, which constitutes approximately 77 percent of the total preneed plan portfolio of Apec,” the regulator said. Under the APP, the required Apec contribution is equivalent to 40 percent of its earnings before interest, taxes, depreciation and amortization or the amount

required to ser vice insurance premium payments, whichever is higher. The contribution, however, may proportionately decrease in the event that not all pension plans and fixed value education plan holders elect to participate in the APP. Acting on the application, the IC required Apec to submit a business plan and its latest audited financial statement for 2016 to determine compliance with the minimum paid-up capital required by law. Under the Pre-Need Code of the Philippines, preneed companies must maintain a minimum and unimpaired paid-up capital depending on the number of the types of plans offered. Republic Act 9829 mandates preneed and insurance companies that started operations after the enactment of the code a minimum paid-up capital of P100 million. Existing preneed insurance

companies, on the other hand, are required to comply with the following minimum unimpaired paid-up capital: P100 million for those selling at least three types of preneed insurance products, P75 million for those selling at least two types of plans and P50 million for those only selling one type of preneed insurance plan. Apec volunteered to be placed under rehabilitation in 2005 when the industry was still supervised by the Securities and Exchange Commission. The jurisdiction over preneed companies was later transferred to the IC by virtue of the Pre-Need Code of the Philippines in 2010. In 2017 some 450 angry plan holders of Pacific Plans Inc. filed a syndicated estafa complaint with the Department of Justice against top executives, claiming nondel iver y of promised benefits on their pension and education plans.

This application was made pursuant to a court order issued by the Regional Trial Court of Makati, Branch 66, where the Petition for Rehabilitation of Apec Plans is pending.”—Insurance Commission.

Editor: Jun B. Vallecera • Friday, June 1, 2018

A5

Key operating ratios for associations

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inancial management is one of the key tasks of an association executive. A consistently healthy financial condition is necessary for the growth and sustainability of an association. Many associations fall in the wayside because their board and/or management do not know or are not familiar with the financial operations of an association that has distinct characteristics as compared to a business enterprise. This is where operating ratios come in: Nondues revenues (NDRs)­—Reliance on membership dues has decreased, so associations are continually looking to develop NDR streams. Simply defined, NDRs are money derived by an association other than membership dues. (Read my column, “Beyond traditional revenue sources,” published on October 5, 2017.) In the United States, according to a report of the American Society of Association Executives, trade associations’ (whose members are institutions) NDRs look like this: meeting/convention registration fees (10.4 percent); exhibit/trade show booth fees (9.7 percent); certification/accreditation/standardization/ evaluation revenue (5 percent); meeting sponsorship revenue (4.6 percent); and educational program fees (4.5 percent). Altogether, these comprise 34.2 percent of trade associations’ total revenue. For professional societies (whose members are individuals), the NDRs are: meeting/convention registration fees (12.5 percent); educational program fees (7.5 percent); contributions/grants/ contracts non-government (7.2 percent); exhibit/trade show booth fees (6 percent); and certification/accreditation/ standardization/evaluation revenue (4.7 percent), totaling 37.9 percent of total revenue. Efficiency—The operating efficiency ratio, represented as a dollar figure, is an organization’s total revenue divided by its total assets. $1.20 is the average amount of revenue associations reported generating for every dollar in assets. Membership dues—Membership dues are the largest single source of association revenue, but its share has been shrinking over the long term. The extent to which membership dues con-

Association World Octavio Peralta tributes to an association’s bottom line varies widely by association grouping. The average membership dues revenue as a percentage of total revenue is 41.4 percent for trade associations and 34.2 percent for professional societies. Net profitability—This is defined as the difference between the organization’s total revenue and its total expenses, shown as a percentage of total revenue. Net profitability as a percentage of total revenue is 0.7 percent for trade associations and 1.7 percent for societies. Productivity—A good overall measure of employee productivity is total revenue per employee. Keep in mind that total revenue per employee can be distorted by inflation, so use caution when analyzing this ratio over time. The average total revenue associations reported per employee is $216,471. It would be worthwhile for associations here to refer to these operating ratios and compare theirs to the US benchmarks. This would help them analyse their current financial situation and adopt measures to adjust, improve and innovate. The column contributor, Octavio “Bobby” Peralta, is concurrently the secretary-general of the Association of Development Financing Institutions in Asia and the Pacific (Adfiap) and the CEO and founder of the Philippine Council of Associations and Association Executives (PCAAE). PCAAE is holding a mini-conference, entitled, “Show. Shout. Stand Out: Learn Branding, Public Relations, and Communications in a Day,” on July 4 at the Philippine International Convention Center (PICC). The event is supported by Adfiap the Tourism Promotions Board, the PICC, Springtime Design, International PR Association and Writers Edge. E-mail inquiries: @adfiap.org.

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Friday, June 1, 2018

US, North Korea officials meet in NYC to salvage summit

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The World

EW YORK—A senior North Korean official and the top US diplomat had dinner in New York as President Donald J. Trump and Kim Jong Un try to salvage prospects for a high-stakes nuclear summit. It’s the highest-level official North Korean visit to the United States in 18 years. Kim Yong Chol, the former military intelligence chief and one of the North Korean leader’s closest aides, landed midafternoon on Wednesday on an Air China flight from Beijing. Associated Press journalists saw the plane taxi down the tarmac before the North’s delegation disembarked at JFK International Airport. During his unusual visit, Kim Yong Chol had dinner for about an hour-and-a-half with Secretary of State Mike Pompeo, who traveled from Washington to see him. The two planned a “day full of meetings” on Thursday, the White House said. Their talks will be aimed at determining whether a meeting between Trump and Kim Jong Un, originally scheduled for June 12 but later canceled by Trump, can be restored, US officials have said. The talks come as preparations for the highly anticipated summit in Singapore were barreling forward on both sides of the Pacific Ocean, despite lingering uncertainty about whether it will really occur, and when. As Kim and Pompeo were meeting in New York, other US teams were meeting with North Korean officials in Singapore and in the heavily fortified Korean Demilitarized Zone. “If it happens, we’ll certainly be ready,” White House Spokesman Sarah Huckabee Sanders said of the Singapore summit. Regarding the date for the meeting, she added, “We’re going to continue to shoot for June 12th.” AP

Editor: Lyn Resurreccion • www.businessmirror.com.ph

China’s factory gauge beats estimates on global trade

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hina’s official factory gauge rose more than estimated as export orders accelerated, signaling trade continues to drive expansion as the global economy powers through risks.

The manufacturing purchasing managers index (PMI) rose to 51.9 in May, exceeding all forecasts in Bloomberg’s survey of economists, who projected the gauge to remain unchanged at 51.4. T he non m a nu fac t u r i ng PMI, cover i ng ser v ices a nd const r uct ion, rose for a t h i rd st ra ight mont h t o 5 4 . 9, t he s t at i s t ic s bu reau sa id on T hu rsd ay, f rom 5 4. 8 i n Apr i l. L e ve l s above 50 i nd ic ate i mprovement. The PMI for new export orders increased to 51.2 from 50.7, readings of input and output prices climbed and inventories and backlogs of work declined. Activity is holding up even as debt curbs, trade tensions with the United States and political strife from Turkey to Italy cloud the overall outlook.

A temporar y truce between the two big gest economies on trade is in danger of breaking dow n after President Donald J. Trump said this week that the US w ill pursue tariffs on Chinese goods, a potential headw ind for domestic manufacturing. The PMI strength “ highlights resilience of the economy at a time of external threats, such as trade tensions with the US,” said Dariusz Kowalczyk, senior emergingmarket strategist at Credit Agricole SA in Hong Kong. “Improved sentiment bodes well for activity in coming months across industries.” The economy is stable with improvement and the trend is sustainable, China National Radio reported on Thursday, citing Premier Li Keqiang’s comments at a May 29 meeting.

St i l l, t he propor t ion of companies with tight funding conditions went up for a third month to 40.1 percent in May, underscoring the need to further strengthen financial support for the real economy, the statistics bureau said in a statement on its web site.

Short-lived?

The rebound “might be shortlived, as growth of end demand, such as infrastructure a nd p ro p e r t y i nv e s t me nt slumped in the past several months due partially to the government’s deleveraging efforts,” said Lu Ting, chief China economist at Nomura Holdings Inc. in Hong Kong. “We’re going to see strong headwinds in the second half.” More than 40 percent of businesses complained about labor and input prices, showing higher costs remain a major difficulty, the bureau said. An input prices subindex rose to 56.7 from 53 a month earlier. “On the back of the concern about a slowing economy and the need to prioritize expanding domest ic dema nd, t he

gover nment has a lso been taking measures to boost inf rastr ucture spend ing and front-load budgeted projects since a few weeks ago,” Chang Jian, chief China economist at Barclays Plc. in Hong Kong, said in a Bloomberg Television interview. The World Bank said in a report released on Thursday that external risks for China have become more prominent and high corporate debt is the main domestic challenge. Bank economists maintained their forecast for the expansion to decelerate to 6.5 percent this year. T he strong PMI reading should offer some relief for those concerned about an economic slowdown, according to Raymond Yeung, chief greater China economist for Australia and New Zealand Banking Group Ltd. in Hong Kong. “A n out per for ming f irst half can offer a buffer for China to deal with global uncertainties, including a potential softening of European demand and Trump’s ad hoc measures,” he said. Bloomberg News

India’s growth recovery runs into emerging-market chaos

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ndia is rebounding from an economic slowdown, with growth seen at more than 7 percent, only to find itself ensnared by the volatility engulfing emerging markets. Growth in the fourth quarter of the fiscal year that ended in March 2018 is set to pick up to 7.4 percent, according to a Bloomberg survey. While that makes it one of the fastest-expanding major economies, the sustainability of the recovery is now in question as the nation battles a currency slump and faster inflation brought about by surging oil prices. To add to that, India’s nearly $1.7-trillion formal banking sector is coping with $210 billion of soured or problem loans and fraud scandals have erupted at some regional banks. That’s set to curb lending and limit growth even more, and makes the central bank ’s job even more complicated ahead of next week’s policy meeting. “A sustained rise in oil prices to $100 a barrel could even lead to a re-emergence of some of the external and currency risks that existed pre-2014,” said Priyanka Kishore, head of India and South East Asia economics at Oxford Economics Ltd. “The banking sector remains in a fragile state, and such problems have the potential to derail the ongoing growth recovery.” Expansion for the fiscal year 2018 is forecast at 6.7 perce nt , t he slowest pace since Prime Minister Narendra Modi took power in 2014. Goldman Sachs Group Inc. cut its growth projection for the year ending March 2019 to 7.6 percent from 8 percent, amid concerns that the banking system’s woes are more widespread.

Rupee slump

New risks have emerged just as the economic disruption caused by a cash ban late in 2016 and the chaotic rollout of a national sales tax fade. India has been swept up

in the maelstrom that’s hit emerging markets as rising US interest rates and a stronger dollar prompt investors to pull money out of stocks and bonds. The rupee has been the hardest hit in Asia, dropping more than 5 percent against the dollar this year. For oil-importing India, the combination of a weaker currency and surging oil prices is a threat not only for the current-account deficit, but also inflation. Consumer-price growth is already picking up—reaching 4.6 percent in April—and for a central bank that aims to keep inflation around the 4 percent midpoint of its target band, an interest-rate hike can’t be far away. Viral Acharya, the deputy governor in charge of monetary policy, said last month he’ll vote for a withdrawal in monetary accommodation in June.

What the economist say

Soaring crude prices are likely to exert pressure on the government to cut excise duties on oil, which will reduce public expenditure. Higher input costs will either directly lower the gross value add by firms or will lower demand if passed on to consumers. Higher cost of financing is also likely to slow investment and consumption spending across government, households and firms, said Abhishek Gupta, of Bloomberg Economics. There’s also limited room for a fiscal boost to support growth. India’s budget gap is one of the widest in Asia, and Modi has to walk a fine line to keep the deficit in check while trying to woo voters ahead of next year’s election. Nevertheless, green shoots are emerging in Asia’s thirdlargest economy. The industr ia l sector is ex pected to pick up while services, which contributes over 50 percent to gross domestic product, is set to remain robust. Even farming, which has been a laggard, is recovering. Bloomberg News

briefs Trump plans to impose steel, aluminum tariffs on EU WASHINGTON—President Donald J. Trump’s administration is planning to impose tariffs on European steel and aluminum imports after failing to win concessions from the European Union, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions. The tariffs are likely to go into effect on the EU with an announcement by Friday’s deadline, according to two people familiar with the discussions. The administration’s plans could change if the two sides are able to reach a last-minute agreement, said the people, who spoke on condition of anonymity to discuss internal deliberations. Trump announced in March the United States would slap a 25-percent tariff on imported steel, and a 10 percent tariff on imported aluminum, citing national security interests. But he granted an exemption to the EU and other US allies; that reprieve expires on Friday. Europe has been bracing for the US to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs. AP

Press con on journalist’s ‘death’ shows him alive MOSCOW—Russian journalist Arkady Babchenko may have been the last person reporters expected to see at a news conference in Ukraine’s capital about his shooting death. But with a flourish, the chief of the Ukrainian Security Service produced the 41-year-old Babchenko in the flesh on Wednesday and revealed the slaying reported by Kiev police a day earlier was staged. Vasyl Gritsak says the deception was needed to thwart an alleged plot by Russia’s security services to assassinate the journalist. He says a Ukrainian citizen allegedly paid $40,000 to arrange the hit has been arrested. Babchenko says even his wife was led to think he died. He apologized to her “for the hell she had to go through in the past two days. There was no choice there, either.” AP

Nicaragua march ends in shooting MANAGUA, Nicaragua—A massive march in Nicaragua against President Daniel Ortega’s government ended in violence on Wednesday after gunmen opened fire on marchers. The gunshots sent thousands of demonstrators running for cover in Managua, Nicaragua’s capital, and there were unconfir med reports of about a dozen people wounded. An Associated Press photographer saw one person with a wound to the head carried off in a stretcher with a sheet covering his upper body, apparently dead. The gunfire appeared to come from government supporters near the end of the march, but demonstrators armed with improvised bottle-rocket launchers also opened fire in the skirmish. Human-rights observers say more than 80 people have been killed amid a harsh crackdown by gover nment secur it y forces and allied civilian groups on protests that began in April, along with nearly 900 wounded and over 400 arrested. AP

Macron rewards migrant hero who saved child PA R I S — P r e s i d e n t E m m a n u e l Macron lauded as a hero a migrant from Mali who scaled an apartment building to save a child dangling from a balcony, and rewarded the young man’s bravery with an offer of French citizenship and a job as a firefighter. “Bravo,” Macron said to 22-yearold Ma moudou Gassa ma dur ing a meeting in a gilded room of the presidential Elysee Palace where Gassama also received a gold medal from the French state for “courage and devotion.” Gassama climbed five stories up the apartment building, mov ing f r o m b a l c o n y t o b a l c o n y, a n d whisked a 4-year-old boy to safety last Saturday night as a crowd below screamed. His actions went viral on social media, where he was dubbed “Spiderman” AP

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A8 Friday, June 1, 2018

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Senate to resume Cha-cha debates in July

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By Butch Fernandez

@butchfBM

ENATE leaders committed to fasttrack Charter changes (Cha-cha) facilitating the shift to a federal system of government favored by the Duterte administration, along with other pending legislation, when Congress reconvenes regular sessions on July 23. Senate President Vicente C. Sotto III confirmed on Thursday their priority list also inc ludes t he Un iversa l Hea lt h Package bill, as well as proposed amendments to the Public Service Act, along with other pending bills that were relegated to the back burner to allow quick passage of the Bangsamoro basic law (BBL) before senators adjourned the Second Regular Session of the 17th Congress past midnight Thursday. The Senate and the House of

Representatives are set to reconvene in joint session on July 23 for their Third Regular Session, at which President Duterte will deliver his third State of the Nation Address (Sona). After the traditional Sona rites, minority senators, however, are also poised to press deeper legislative scrutiny of the controversial “quo warranto” petition ousting Chief Justice Maria A. Lourdes Sereno that preempted the Senate and the House of Representatives’s constitutional duty to

open congressional impeachment proceedings and try Sereno. Sen. R isa Hontiveros told reporters on Thursday minority senators were “not satisfied” with Duterte administration officials’ explanation on why they effectively skirted congressional impeachment proceedings as provided in the Constitution. “They should respect a coequal branch of government,” Hontiveros said, adding that senators will resume interpellations on their pending resolution of Sereno’s case. “We are disappointed the resolution was not put to a vote, but we hope the process will continue when we resume sessions,” the senator said, adding: “We expect to vote on it when we resume.”

10-hour deliberations

Sotto formally adjourned the session at 2 a.m. on Thursday, concluding nearly 10 hours of plenary deliberations on Senate Bill (SB) 1717 embodying the BBL which senators approved on third and final reading, voting 21-0.

Before Sotto banged the gavel adjourning their marathon session, the Senate likewise passed other pending measures: ratifying the bicameral conference committee reports for SB 1762 embodying the proposed retirement law of the Office of the O mbud sm a n wh ic h see k s to increase retirement benefits of the officials and employees of the Office of the Ombudsman, as well as SB 1459 on the proposed Personal Property Security Act, which aims to provide entrepreneurs with expanded access to loans. Before adjour ning their reg u l a r sessions, t he Senate also passed six other pending bills converting the Land Transportation Office’s extension offices into regular centers, as well as 11 local bills establishing, converting or renaming high schools and colleges nationwide. The senators also voted to ratify the bicameral conference report on SB 1738, or the proposed Philippine Identification System

Act of 2018. They adopted Resolution 746, lauding the heroism of soldiers and police officers in the Marawi crisis, and Senate Resolution 748, which confirmed Aecom as the winning architectural firm to design a new multistory Senate building in Bonifacio Global City, Taguig. The Senate also passed, before going on a seven-week recess (June 2 to July 22), several pending bills and resolutions, including pro-consumer legislations, such as the Lifetime Cellphone Number Act (SB 1636), Recoverable Systems Loss Act (SB 1623), the Energy Efficiency and Conservation Act of 2017 (SB 1531); pro-overseas Filipino worker (OFW) legislation, such as the Handbook for OFWs Act of 2016 (SB 192); as well as prohealth legislations, including the bill embodying the Pagkaing Pinoy para sa batang Pinoy Act (SB 1279); and the proposed Magna Carta for Scientists (SB 1534) and the Reservist Employment Rights Act (SB 1698).

Granting Duterte power to tap Malampaya for fuel reserve eyed

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LAWMAKER has filed a resolution allowing President Duterte to use the Malampaya Fund for the creation of Philippines Strategic Fuel Reserves (PSFR) and for the expansion of the

government’s Pantawid Pasada program. In House Resolution 1936, Party-list Rep. Michael L. Romero of 1-Pacman said the proposal would have the chamber grant authority to the President

to draw the necessary funds from the Malampaya Fund to initially establish the Philippine Strategic Fuel Reserves and implement an expanded Pantawid Pasada cash grants program.

Romero, citing data from Budget Secretary Benjamin E. Diokno, said the Malampaya Fund has a reported balance of P198.567 billion. The Malampaya Fund was established by virtue of Presidential Decree 910 on March 22, 1976. It has been used to cushion the impact fuel-price hikes on the Filipino people. “Expanding the government’s Pantawid Pasada program, creating a Philippines Strategic Fuel Reserves and boosting the private oil firms’ buffer stocks to 45 to 60 days are the trio of measure,” Romero said. The lawmaker, meanwhile, said President Duterte may create the PSFR via executive order. “A national strategic fuel reserve has been an option the Department of Energy [DOE] has had on its shelves to address energy crises,” he said. He also asked the President to task the Department of Finance, DOE and the Philippine National Oil Co. to set up and operate the PSFR using current available, viable and secure storage facilities. He also said the Energy Regulatory Commission can direct the oil firms operating in the Philippines to maintain their own fuel reserves at levels sufficient to meet 45 to 60 days of daily consumer demand. Romero also said the DOE can, using the Malampaya Fund, “implement an Expanded Panta-

Customs. . .

Continued from A1

“I am happy to report that despite the additional P113 billion in our 2018 target collection, as compared with the 2017 target, we have hit and even surpassed our collection target from January to May 2018,” Lapeña said. From January to May 29 this year, the BOC has already collected P224.86 billion, rising by 0.4 percent, or P1 billion, from its collection target for the period of P223.86 billion. The collection for the period also posted a growth of 28.6 percent compared to the collections for the same period in 2017, or P174.864 billion. “From January to May 29, 2018, our collection target is P223.86 billion and we have already collected P224.86 billion, exceeding our target by P1 billion or 0.4 percent, and [it] grew by P50 billion, or 28.6 percent compared to last year,” he said. Lapeña added that the implementation of TRAIN or Republic Act 10963 has helped the bureau strengthen its revenue collections starting this year, with a substantial amount of excise taxes being collected from the fuel, tobacco and sugar-sweetened beverages, among others. BOC data showed that with the implementation of the TRAIN law, collections for petroleum products by the bureau amounted to P14.47 billion, excise taxes from motor vehicles accounted for P2.87 billion and P18.63 billion from the other items excisable under the law; this results in a total of P35.97 billion. “As to the implementation of the TRAIN, I

wid Pasada cash grants program to cover not just public-utility jeepneys and buses, but to include transportation network vehicle service units, commuter taxis and freight forwarding cargo trucks, provided that the Pantawid Pasada cash grants apply only to motor vehicles with valid and current vehicle registration, certificates of public convenience and provisional authority.” The Pantawid Pasada Program of the DOE was first implemented in April to May 2011, authorized by Executive Order 32, series of 2011. The program is now included in the government’s list of mitigating measures against the impact of the Tax Reform for Acceleration and Inclusion Act. However, the Department of Transportation admitted that the lack of a drivers’ database has delayed the implementation of the Pantawid Pasada program. The Department of Budget and Management said the government has until end-2018 to spend the P900million budget for the program. Under the TRAIN law, the government shall implement the Pantawid Pasada program—a socialassistance project for commuters and public transport—and the jeepney modernization program to ease the impact of the oil excise tax increases on commuters and the land transport sector. Jovee Marie N. dela Cruz would like to report that it helped us surpass the target from January to May 2018,” he added. The customs chief said the public can expect more reforms in the bureau under his watch, to rid it of corruption, following the President’s directive for the BOC to eliminate instances of smuggling, facilitate trade, shore up government revenues and deliver an improved efficient and effective customs administration. “Although there are efforts to slow me down or even stop me because my reform initiatives are already hurting and affecting the operations of the smugglers and their protectors...please be assured that it will just make my resolve stronger to accomplish the marching order of the President. This will not stop me even at the risk of life, in the service of God, country and people,” he said. The BOC reported that 116 motorcycles and six vehicles worth a total of P34.71 million were destroyed during the condemnation of the smuggled luxury vehicles on Wednesday at the Port Area. Broken down, the BOC destroyed 112 units of brand-new Vespa scooters and used BMW motorcycle, Harley Davidson, two units Triumph motorcycle, Mitsubishi Pajero, two units of Land Rover, and Volvo car. Simultaneously destroyed at the Port of Cebu are a used 2002 Ford Ecoline E350 and 2005 Ford Ecoline E350. The destruction of the vehicles was in line with President Duterte’s warning to all smugglers to pay the proper tax for their vehicle importations, as well as putting a stop to the “fixing” schemes of smugglers conniving with some Customs employees in the usual public auction of seized cars.

Luzon grid on yellow alert for third week

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H E Lu zo n gr i d w a s placed on yellow alert on Thursday for the third consecutive week. “Luzon grid is on yellow alert due to unexpected shutdown and limited generation of some power plants and high power demand,” the National Grid Corp. of the Philippines (NGCP) said. The yellow alert notice was issued from 10 to 11 a.m. and from 1 to 4 p.m. of May 31, when electricity peak demand was recorded at 10,532 megawatts as against a capacity of 11,387 MW. A yellow alert means there are not enough reserves to cover the largest -unning generating unit at the time but it does not necessarily lead to power outages. The power plants on unplanned outage are QPPL (456 MW), Malaya 2 (320 MW), Makban 5 (55 MW) and SLPGC (150 MW). Meanwhile, the de-rated plants are Calaca 1 = 230 MW (rated 300 MW) and SCPC (SMC Consolidated Power Corp.) = 75 MW (rated 150 MW). The plants on planned outage are: ■ San Roque 1 to 3 units (124 MW per unit); and ■ Angat U3-(58 MW); Binga u1-(35 MW ); Malaya 1-(150 MW); and Tiwi 5-(44 MW). The yellow alert for Luzon grid was lifted at 4:01p.m. “The yellow alert has been lifted by NGCP for the Luzon grid due to sufficient generating capacity.” On May 29 and 30 the grid operator issued the same alert due to insufficient operating reserve brought about by higher system demand, forced outages and derated capacities of various power plants which coincided with the maintenance shutdown of several other plants. I n p a s t ye l l o w a l e r t s, Meralco has placed its Interruptible Load Program on standby. At least 160 accounts have earlier committed to participate in the program— for an aggregate of 315 MW— in case the need arises .

Lenie Lectura

BBL. . .

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of the House and the Senate. The President appealed to them to agree on a “common ground.”

Sticky issues

Roque also cited some contentious issues with the BBL, such as having a separate Bangsamoro police and Bangsamoro Armed Forces—features that the President objected to. “It seemed like the President was able to convince them that [these] cannot be allowed because that is his bare minimum,” he said. Other contentious issues included the opt-in provision, particularly on the number of times that the plebiscite can be conducted to allow cities and provinces to share a common border with the Bangsamoro. “Congressman [Celso L.] Lobregat only wants one. BTC wants five over a period of 25 years,” he said. Asked if the Palace agreed to having just one plebiscite, Roque said they will wait for the final version of what will be agreed upon in the bicameral conference committee.

www.businessmirror.com.ph • Editor: Efleda P. Campos

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Only 3.5% of Boracay establishments are compliant with govt regulations By Ma. Stella F. Arnaldo

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Special to the BusinessMirror

NLY 38 establishments out of the 1,070 inspected in Boracay Island are fully compliant with government regulations.

This was the disclosure of Interior Undersecretary Epimaco V. Densing III in a recent presentation at the American Chamber of Commerce and Industry, at its office in Makati. He said there were actually 1,552 establishments on the popular island resort, but “482 were not inspected because they were closed,” as of May 23. The inspections of Boracay establishments are still ongoing, he added, and started in the week of April 26, the first day of closure of the island. President Duterte had ordered the island closed for six months after the Department of Tourism (DOT) presented a video during a Cabinet meeting, which included a drainage pipe spewing black muck and effluents into Bulabog beach, where kite surfing and other wind-sea activities are

conducted. This moved Duterte to dub Boracay a “cesspool.” Densing said the inspections were done by interagency teams composed of representatives from the Department of the Interior and Local Government, the Department of Environment and Natural Resources (DENR), local government units, the Bureau of Fire Protection and the Bureau of Internal Revenue, among others. The inspection teams will check if each establishment has the necessary permits to operate, such as a fire-inspection certificate, business permit, environmentalclearance certificate and sewer-line connection certificate, among others. As this developed, the Boracay Island Water Co. Inc. (BIWC) will beef up its sew-

erage system on the world-famous tourist destination, and ensure the main white beach is free of pollutants. In an interview with the BusinessMirror, Tourism Infrastructure and Enterprise Zone Authority (Tieza) Assistant Chief Operating Officer Joy Bulauitan said, “We are putting new pipes to decongest those [sewerage] pipes, which we intend to finish in four months.” This is to help ease sewerage flows along the 1990sera sewerage pipe built by Tieza’s predecessor, the Philippine Tourism Authority. Tieza, the infrastructure arm of the DOT, owns 20 percent of the Ayala-led BIWC. These new pipes are part of the BIWC’s plan to upgrade and expand the sewer network along the Balabag Main Road, said Acs SC. Aldaba, business operations head of the water firm, in a separate interview. The Balabag Sewer Network Rehabilitation Project will be built at a cost of “P40 million,” and is designed to “accommodate higher flows coming from the beachfront.” The project was recently presented to Environment Secretary Roy A. Cimatu. “This is a faster and more feasible alternative to relocating the sewer network, which may affect more establishments and require acquisition of rights-of-way

that may take a longer time to complete beyond the closure period,” Aldaba said. Meanwhile, Bulauitan clarified that what Cimatu discovered last week were “43 illegal pipes throwing wastewater on the [main white] beach. They aren’t connected to our sewerage pipes that’s why they throw their effluents directly to the beach.” She said the DENR will be tracing which establishments own those illegal pipes. The discovery by Cimatu of the illegal pipes prompted him to comment that it may take more than six months to rehabilitate Boracay Island. Soon after, he said the popular resort island could be reopened in four months. President Duterte has ordered the closure of Boracay for six months from April 26, to implement the government’s rehabilitation program. Citing a report by Tieza’s resident scientist, Bulauitan said the main white beach has already eroded by some 18 meters, which is why the sewer pipes seem quite near to the shoreline. BIWC, the main water service provider on resort island, said in a news statement, it continued to remain compliant with the stringent pollution control standards of the DENR.

Friday, June 1, 2018 A9

DPWH starts work on P997-M Northern Samar road project

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he public works department on Thursday broke ground for a P997.5-million road project that will connect coastal towns in Northern Samar. In a statement, Public Works Secretary Mark A. Villar said the government will soon start the construction of the Samar Pacific Coastal Road Project to help facilitate growth in the area, and improve transportation means between municipalities in Northern Samar. “ This 11.6-kilometer road project from Junction Simora to Junction Palapag segment of Samar Pacific Coastal Road in the town of Palapag, Northern Samar will complete the circumferential road of Samar Island, benefiting motorists from the so-called Pacific Coastal towns heading to the provincial business center of the capital town of Catarman and vice versa,” he said. Public Works Project Director Sharif Madsmo H. Hasim said the road project will shorten the travel time by linking Catarman and the coastal municipalities of Northern Samar up to Taft, Eastern Samar, without the need to pass Laoang, a municipality that is two rivers away. The road, funded by the Korean government, also covers the construction of three bridges, namely, the 161-meter Simora Bridge, the 31-meter Jangtud 1 Bridge and the 69-meter Jangtud 2 Bridge. The project is expected to be completed in March 2020. Sharmaine O. Paden

A10 Friday, June 1, 2018 • Editor: Angel R. Calso

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editorial

Constructively divided or broken?

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t is difficult to find a specific national issue that Filipinos can agree upon as to the objective in solving the problem. Certainly, it is easy to talk about “ending poverty.” But most of the “solutions” are presented at a forum in an air-conditioned venue, and the attendees drive their own cars home. For great national concerns like the direction of our foreign policy, particularly in regard to the United States and China, everyone wants what is favorable for the country. However, the way to achieve that goal sees both sides far apart. It is disturbing and frustrating to witness the positions on these issues always being framed in terms of “right” or “wrong” and “good” and “evil.” There can never be positive movement if no one is willing to listen to the “other side” and refuses to find a common ground. There is this attitude and behavior that any sort of compromise is unacceptable as if “a compromise is an agreement whereby both parties get what neither of them wanted.” What it should be is, “compromise means working out differences to forge a solution, which fits the diversity of the body politic.” In other words, what is good for the nation. And there is too much personality and politics and not enough objectivity and reflection. Nonetheless, this is not a situation unique to the Philippines. Earlier this year, the British Broadcasting Co. commissioned a global survey by the Ipsos MORI group, titled “A World Divided?” Carried out in 27 countries, BBC noted that “the study finds that three in four people on average [76 percent] think society in their country is divided. The greatest causes of tensions are felt to be between people with different political views at 44 percent.” Yet, “the majority of people [65 percent] think that people across the world have more things in common than things that make them different.” But not all countries felt that the divide in their society had the same root causes. “Countries that are most likely to say there is tension between people with different political views are Malaysia [74 percent], Argentina [70 percent] and Poland, Turkey and Serbia [all 63 percent].” In China and Russia, the divide was attributed to differences between rich and poor, according to 65 percent of the answers. As to how much division there is in their country (“Very/Fairly Divided”), 84 percent of Americans felt great division, while only 48 percent in China (the second lowest of the 20 nations) saw their country as being split. Interestingly, also asked was the question: “Generally speaking, would you say that most people can be trusted, or that you need to be very careful in dealing with people?” Sixty-one percent of the Chinese felt that people could be trusted. Only 7 percent in Malaysia believed that other people were trustworthy. When the issue of who people do or do not trust is broken into subgroups like political views, religion, foreign or local origin, and ethnic group, there is some correlation between the greater the division and the lower amount of trust. Yet, only a small minority (14 percent) thinks that mixing with people from other backgrounds, cultures or points of view causes conflict. It would appear that people are prejudiced against those who are different, and this does cause division, but when asked, they do not want to admit their true feelings. We must remember this, though. In the biblical book of Matthew, Jesus of Nazareth is quoted as saying, “Every kingdom divided against itself is brought to desolation, and every city or house divided against itself will not stand.” Since 2005

BusinessMirror A broader look at today’s business ✝ Ambassador Antonio L. Cabangon Chua

Think out of the SOCE box James Jimenez

spox

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ith the 2018 barangay and Sangguniang Kabataan elections over, the candidates have one last thing to do: submit their Statements of Contributions and Expenditures (SOCE) on or before June 13.

If you didn’t already know, the SOCE is the primary means by which the Commission on Elections (Comelec) enforces the campaign spending limit imposed by law; in this case, P5 per voter in the barangay where the candidate ran for office. Unfortunately, it is a deeply flawed tool. Let me explain. Even the most basic understanding of human psychology will tell you that in order for a prohibition to be effective, two conditions must be present: first, the potential offender’s belief that violating the prohibition will certainly be discovered; and second, that upon discovery, dire consequences are sure to follow. In the case of the SOCE, neither of these two conditions are actually present. First of all, it is an open secret that the Comelec is woefully

undermanned and is unlikely to be able to check every single SOCE submitted by the millions of candidates who run in any of our elections. And considering the vast range of expenses required to be catalogued in a SOCE, keep in mind that each SOCE is actually a voluminous document, often requiring that it be carried around in boxes or small suitcases. Back-checking every item in just one SOCE can most likely take weeks to complete. Imagine having to repeat that process for more than a million other SOCEs. And, secondly the fact is that noncompliance can, in the immediate term, only delay a winner’s assumption of office—it isn’t actually disqualifying, no matter what some partisans would have people believe —recidivism is required before the law allows the Comelec to levy any meaningful punishment, such as a

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tarp or television commercial— spent before that time will ever be counted against the candidate’s spending limit. If you think that this makes the “spending limit” effectively fictional, you would be right. At this point, the Comelec brandishing the SOCE requirement probably presents as great a threat to moneyed candidates as a kitten to a carabao. Clearly, the SOCE—regardless of how valiantly the Comelec tries to buttress it—cannot be even remotely effective enough to fulfil the function for which it was intended. But this is a systemic issue with many contributing elements that cannot be solved simply by focusing on one part of the problem or the other. The ridiculously low spending limits, for instance, is one such part of the puzzle that looks like it may be addressed soon. But then, even increasing the amount of money a candidate can spend still won’t guarantee no overspending, much less accurate reporting. To my mind, the only rational way of looking at this is to reexamine every single element that goes into the whole idea of regulating campaign spending—everything from where the controls have been located in the entire system to how those controls are activated and enforced. In fact, if we were to think out of the box, we might even ask, should there be spending limits at all?

Valuation of life insurance policy reserves

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permanent disqualification from holding public office. Otherwise stated, even if the offender were discovered to have fudged his SOCE, the consequences of the violation are virtually nonexistent. Given these conditions, it is a safe bet that many candidates would take the slap on the wrist rather than go through the trouble of complying, and that of those who actually do comply, only a handful would actually be 100-percent accurate. As if all of that weren’t bad enough, the SOCE—as a tool for enforcing the campaign spending limit—suffers from one very glaring handicap: Its coverage simply does not start early enough. Under the applicable law—or more specifically, under the law interpreted in the light of the doctrinal pronouncement of the Supreme Court in Penera v. Comelec—the transactions that must be reported in the SOCE are those that transpired only during the campaign period. Not to put too fine a point on it, this means that if a candidate were to spend two, three, 10, 100 times more than what he is legally allowed to, he will be able to get away with it for as long as those expenses were incurred prior to the start of the campaign period. To put it another way, the SOCE only covers transactions entered into during the 90 or so days immediately prior to Election Day. Not a single peso—for any

INSURANCE FORUM

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ife insurance policy reserves are the money an insurance company must set aside today to pay expected future life insurance claims. This (statutory) reserve is not a separate fund that must be set up but rather a mere “recognition” in the books of the company.

Section 216 of the Amended Insurance Code provides that “every life insurance company, doing business in the Philippines, shall annually make a valuation of all policies, additions thereto, unpaid dividends and all other obligations outstanding on the thirty-first day of December of the preceding year. All such valuations shall be made according to the standard adopted by the company, as prescribed by the Commissioner in accordance with internationally accepted actuarial standards.” Reserves “provide for the minimum amount of obligation that should be recognized by an insurance company for insurance-benefit claims that are expected to be settled in the future to its policyholders.” It “represents the measure of the company’s main liability

on in-force policies as at the valuation date.” Indeed, reserving has “provided security and stability for the insurance industry.” Prior to the amendment of the Insurance Code, Section 210 of Presidential Decree 612 (1974) expressly provided for the Net Premium Valuation of reserves. It is an actuarial calculation, used to place a value on the liabilities of a life insurer. No Circular Letter (CL) was issued in implementation of the Net Premium Valuation. This actuarial valuation was prevalent across jurisdictions until the Gross Premium Valuation (GPV) became the internationally accepted norm. Prior to the adoption of the Net Premium Valuation (NPV), however, life insurance companies had to submit a “valuation exhibit,” which

simply shows the total number of policies and the total amount for each of the different kinds of insurance, classified according to plan, year of issue and age at issue” (Circular 15, dated August 20, 1924). With the amendment of the Insurance Code in 2012, CL 2014-42-A was issued, which shifted the valuation method of reserves from NPV to GPV. Today the prevailing framework is provided by CL 2016-66, dated December 28, 2016, and which became effective on January 1, 2017. The GPV has been lauded for “applying market-based assumptions.” It has been heralded as “an improvement in determining policyholder liabilities for traditional policies.” Where under the NPV method the only inputs to be considered were the discount rates and mortality rates, under the GPV method, other inputs are considered such as morbidity, lapse and/or persistency, expenses, nonguaranteed benefits and Margin for Adverse Deviation (MfAD). Certainly, the process has become more complex and sophisticated. According to PwC, “the shift to GPV supports a market-based approach and reflects the best estimate of reserve for insurance-policy obligation. The new reserving framework further provides for the use of the current market rate in discounting to present value the future cash flows in the settlement of insurance-benefit obligation, which

was capped at the rate of 6 percent under the old framework. Also, the new reserving framework requires consideration of additional assumptions, such as lapse and/or persistency, morbidity and MfAD of 10 percent, in determining the reserve requirement.” Let us take a look at the application of discount rates. Under the NPV method, discount rates were capped at 6 percent. Under the GPV method, current market rates are used to discount future cash flows. Thus, where the interest rates are volatile, determining liability will be unpredictable. The MfAD is also a new feature that certainly increases the computed reserves. Net premium value is “the expected present value of a policy’s benefits less the expected present value of future premiums. The net premium calculation does not take into account future expenses associated with maintaining the policy.” Gross premium value takes into account future expenses. Thus, gross premium valuation is defined as “the sum of the present value of future benefits and expenses, less the present value of future gross premiums arising from the policy discounted at the appropriate risk-free discount rate.”

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

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Finding God through tithing

Friday, June 1, 2018 A11

For a year-old grief, or even more Tito Genova Valiente

annotations

Rev. Fr. Antonio Cecilio T. Pascual

SERVANT LEADER

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y dear brothers and sisters in Christ, As we are on the ordinary time, it is a good opportunity for us to reflect on two questions: “When did we give tithe?” and “Where do we put God in tithing?” Perhaps these questions are simple but might be hard to answer. It is indeed that everybody can earn money from the fruit of labors, but when it passes in our hand, do we ever think about God? Do we ever give a portion of our income to Him? As what the Church taught us, let us not become a slave of earthly things like money, but not necessarily to wash its value. Instead, we are asked to use it not out of abundance but out of generosity for the goodness of our poor brothers and sisters. This teaching of the Church is urging us to portion the tenth of our income, as it is our duty to help in any form of resources that we have. The Catholic Church is still grateful to those generous hands who keep their assistance in the charities of the Church through tithing, as it “teaches us how to be pure and undefiled before God, to visit orphans and widows in their affliction and to keep one unstained from the world.” (James 1:27) Let us all remember that as a Catholic faithful, it is also our mission to “heal the sick, raise the dead, and cleanse lepers, cast out demons. Receive without paying; give without pay” so that “each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.” (Matthew 10:8) (2 Corinthians 9:7)

As what the Church taught us, let us not become a slave of earthly things like money, but not necessarily to wash its value. Instead, we are asked to use it not out of abundance but out of generosity for the goodness of our poor brothers and sisters. This teaching of the Church is urging us to portion the tenth of our income, as it is our duty to help in any form of resources that we have. We should also try to reflect on the phrase written in the upper portion of our money that says “Pinagpala ang bayan na ang Diyos ay ang Panginoon.” Let us use this as a reminder to find God by sharing our blessings through tithing and putting Him first. May God continue to bless and prosper all the generous Catholic faithful in our society. To know more about Caritas Manila, visit or follow us on Facebook: CaritasManilaInc. For your donations, please call our DonorCare lines 563-9311, 564-0205, 0999-7943455, 09054285001, and 09298343857. Make it a habit to listen to Radio Veritas 946 in the AM band, or through live streaming at www.veritas846.ph and follow its Twitter and Instagram accounts @veritasph and YouTube at veritas846.ph. for your comments, e-mail veritas846pr@gmail.com.

“It is no good thinking that the sensitive man is happier or greater. No one cares for your tragedy until you sing it, and you require peace of mind to do this.” —V. S. Naipaul in Between Father and Son: Family Letters

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ow does one grieve? How does one talk about death again? It was one in the afternoon, an ordinary day in our home, when my mother’s caregiver announced to us that my mother was…perhaps, dead already. No one waits for death. One slowly prepares for it, but no one sits the whole afternoon in anticipation of it. But the caregiver was blunt. She did not say, excuse me, Sir, but I think…. No, she stood there, and I apprehending her through my peripheral vision, turned at the same time she said those words. When death comes, you cannot be angry at all. You cannot even summon the more august of anger, which is rage. Not tears and not sadness—you cannot command them. The caregiver’s words brought my sister-in-law and I to my mother’s room. During the last visit of my sister, Ebit, my mother was still strong enough to see her off. My mother was 92 then, but she managed to be there at the porch, to hug her youngest, her only daughter who bears half of her lovely name, Lily. My sister would tell me upon her return after our mother passed on that, in the car, that night, she cried, for no reason and for some reasons her heart told her not to confront. “Ebit, amo na ini gad…,” I spoke to her through the phone using the language of the island of our birth. “This is it indeed…” Tokyo, where she lives, sounded so far that afternoon, the geography of her sadness beyond my reach. In a more ideal season, we could

have hugged each other, and she could have embraced our mother. In the absence of presence, there is, believe me, good technology. When I sensed that she was able to get hold of herself already, I advised her that I would bring the phone close to the ears of Mama, and she could…talk to her. Even for the most mysterious but ultimately quotidian of occurrences like death, we are at a loss for words. We speak of people being gone, of people embarking on a long journey that will bring them to infinity. We write of loved ones going on to live a life after death or, more positively, life after life. Even those who find it a task to hang on to transcendence will find it, suddenly and for consolation, wiser to believe that there is indeed something beyond the fact of a human being who stops breathing and is declared dead. “What is the use of all this” is, therefore, a question that could be the most prosaic and yet more gripping than all poetry about the eternal. If one wants a sense of the power that reaches out there, of the semblance of the generally inscrutable divine, then standing before a loved one who is there but, in the words of our belief, whose soul has gone away, is the closest to having that knowledge. We stop fearing death when, finally,

Back to school with better When hunger hurts facilities for K-12 students By Virgie P. Lagundino

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t is common knowledge that the school environment greatly affects the health and learning condition of every student. The government, the Department of Education (DepEd) in particular, has for the past few years been investing and building more school buildings, and hiring highly qualified teachers for the K to 12 program. With more than 21 million elementary and high-school students trooping back to school in June, the government looks prepared to welcome the next batch of K to 12 learners. With a more than P600-billion education budget, the department is gearing toward the achievement of pagbabago or inequality-reducing transformation under the Philippine Development Plan Targets for basic education. According to DepEd, the recommended funding will continue to provide basic education resources to support the K to 12 Program, allocating 81,100 teacher items; 38.9 million total learning materials; construction of 46,998 new classrooms; 81,201 sets of school seats; electrification of 2,398 on-grid schools; construction of 24,076 workshops and laboratories; 22,046 information and communications technology packages; 1,365 schools to receive technical-vocational tools and equipment; 3,183 sets of science and math equipment packages; and 2.5 million learnerbeneficiaries of the school-based feeding program. In promoting the completion of public and private schools and learning centers, the proposed budget is set to benefit 1,077,230 learners and 35,945 teachers under the Education Service Contracting;

78,250 students under the Voucher Program for non-DepEd Public Senior High School and State Universities and Colleges/Local Universities and Colleges; 1,577,722 students under the Voucher Program for Private SHS; and 115,996 students under the Joint Delivery Voucher for SHS. To solve the shortage of classrooms in the National Capital Region (NCR), the DepEd is seen constructing high-rise buildings. However, this would entail considerations, such as cost and safety concerns to ensure that it will be safe for students, especially during earthquakes and other natural calamities. Classroom shortage is among the major reported concerns on school opening, especially in the NCR. However, DepEd Assistant Secretary Nepomuceno Malaluan said this issue should not be looked at “in proportion to the total schools that we have.” Malaluan said that, based on the DepEd’s data, there are fewer schools that actually need “support and interventions” compared with those that are “adequately equipped.” He also noted that, of more than 38,000 public elementary schools, only 1.51 percent needs support. Of 8,282 junior-high schools, only 1.96 percent needs support. Meanwhile, 6.56 percent of around 6,000 public SHS nationwide also need support. With the completion of hundreds of new school buildings in the NCR and across the country, the DepEd, with the assistance of the Duterte administration, is on the right track of improving basic education in the country with 20 million K to 12 graduates in the next few years. The author is Principal III at Rebecca National High School in Gonzaga, Cagayan.

Val A. Villanueva

Businesswise

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find it absurd that some senators are now moving for the suspension of Republic Act (RA) 10963, more popularly known as the Tax Reform for Acceleration and Inclusion Act (TRAIN), a law they themselves deliberated on and approved. They remind me of a doctor who stops in the middle of a major surgical operation when he realizes he has recommended the wrong procedure for his patient. This whole episode reflects how our elected senators and representatives have been so blinded by partisan politics that they have failed to take into account the law’s inimical effect on their constituents. I cannot put the blame squarely on our economic managers. After all, they just delivered on the task given to them: to raise the wherewithal for President Duterte’s ambitious “Build, Build, Build” program. The thing is, when they do number-crunching for an economic model, they don’t see the faces of those who are going to be affected by their actions. We the people become mere segregated demographics on their Excel spreadsheets, and dots on their computer screens. It is the job of our elected officials to feel the pulse of the people and protect the rights of those they have sworn to serve. Have they developed a plan B or even a plan C? Have they taken into account the repercussions of levying taxes on goods and services, which are indispensable to our way of life? Now that prices of oil and other commodities are skyrocketing, and the people are complaining, these politicians are pushing the panic button, frantically searching for radical solutions. The only way to suspend the TRAIN is to enact another law to repeal it. This unfortunate chapter betrays how our government is being run whimsically, ad hoc style. Ba ngko Sent ra l ng Pi l ipinas Governor Nestor A. Espenilla Jr. in a Viber message to BusinesWise says that

the “TRAIN, even if not perfect, will be very destabilizing to the markets if it is halted and reviewed.” He argues that, at the time when the TRAIN was being sponsored, it has already been acknowledged that it will lead to higher prices for some key products because of excise taxes. “In that sense, there’s inflationary effect but relatively modest. And also temporary, since the price adjustments are mostly one-off. However, it seems sellers have opportunistically taken advantage of the situation to raise prices generally.” He adds: “Beyond this, international oil prices have significantly increased as well, along with rice and fish, due to supply disruptions. These events have worked together to spike inflation this year.” For his part, Sen. Panfilo M. Lacson Sr., who voted against the measure and predicted the inflationary effect of the TRAIN law, said: “When the stomach protests, prepare for revolution.” He explained in a radio interview that this is the experience not only in our country but in countries in Latin America. “It was a different story when the people’s stomachs began complaining,” he added, “Let us not wait for things to go badly.” The tax law was passed last year and took effect on January 1 of this year. Last year, Sen. Lacson advised the Department of Finance (DOF) against raising the excise on fuel and, instead, review 143 exemptions to the 12-percent value-added tax. He explained then that Malaysia’s 6-percent VAT had only 14 exemptions, and Thailand’s 7-percent VAT had only 25 exemptions. He said eliminating many of the VAT exemptions could have generated an additional

death of any of its act is now in front of us. We, in fact, deny death when it takes over life as we define life. We did that as we looked at my mother. My sister-in-law, Ate Naomi, who is a nurse, was already taking Mama’s blood pressure. The device was registering error. I looked at Mama and started calling her, waiting for her to respond, to move. I touched her forehead. She was warm. I gently moved her legs and covered them with her favorite blue blanket, in anticipation of the coldness of the travel she was about to have. And yet, the blanket was meant for us, and the chill of sadness left in her wake. On May 28 of this year we commemorated her first death anniversary. We planned to have a grand event. During the last night of her wake, we asked a friend, a very good singer, to sing her favorite song. For this anniversary, we wanted again to request the same singer to sing another of her beloved song, Jo Stafford’s “You Belong To Me.” Because we would not be able to hear again the voice of Mama, we wanted, at least to hear the lines she loved: See the pyramids along the Nile/Watch the sunrise on a tropic isle/Watch the sunrise on a tropic isle/Just remember darlin’, all the while/You belong to me. I even thought of inviting two Tango dancers; my parents loved to dance the Tango. In the end, we opted to have a simple, small gathering of relatives.

That day, her best friend, a colleague when she was still teaching in a public elementary school, came all the way to Naga City from Bulacan. Tita Ampy Ferrer and her husband, Tito Alex, brought back pleasant memories. They reminded us not of Mama’s passing but of her life and that of Papa when they were young and happy, and we were all together. That night, we once more lived in the universe of happy home— of grandparents and aunts and uncles and cousins all at one dining table, sharing food creating the past, which, as the Irish writer John Banville, “beats inside me like a second heart.” That morning of the 28th, I went alone to the memorial park, and placed on her grave marker a bunch of white roses and lilies. I prayed a bit and looked up. It is a naïve act, this looking up, when we are visiting cemeteries, because we know that our loved ones are not here buried deep, but somewhere there, up in the skies, with the clouds, with the signs of Heaven. Well, I would like to think that, wherever she is now, Mama is having fun looking at the origins of pyramids along the Nile, as she watches forever and ever sunrises on the most splendid tropic isles and, every now and then, saying a prayer that says, “Just remember when a dream appears/You belong to me.”

revenue of P117.5 billion a year. The government is correct when it points out that the overall higher inflation of this year cannot simply be attributed to the tax changes contained in the TRAIN. Higher global crude prices, the depletion of rice buffer stocks and the weakening of the peso have also likely contributed to the broad increase in prices over the past few months. Over the past few weeks, the DOF has been trying to explain this to deflect or avoid blame from the mounting complaints against the TRAIN. Undersecretary Kendrick T. Chua says it is responsible for only 0.4 percentage points out of the 4.5-percent inflation rate posted so far this year. He is probably within the ballpark. This is the economist’s point of view, and a rational explanation that is largely correct. The DOF faces the difficult challenge of dispelling the popular belief that TRAIN is disproportionately responsible for the inflation. The problem is more a matter of psychology rather than numbers. Economists often assume people are rational, and that they will absorb all the information presented to them, evaluate them objectively and then make a calculated decision or assessment. Applying this to the TRAIN situation, the government will explain the peso’s weakening, the increase in global oil prices and the rice problem, and then ask people to accept the explanation that RA 10963 was only a minor contributor. As Roberto M. Herrera-Lim, Managing Director at Teneo Holdings Llc., explains it: “People absorb and process information imperfectly, especially those who have limited time or resources. The lower the income levels, the more likely they will have less information to what the middle class has because they don’t have the fast Internet access or are too busy working to survive. Their experience is that TRAIN was the initial kick in fuel prices earlier this year, and that TRAIN also raised prices for soft drinks, iced tea and other sugary drinks, cigarettes and alcohol—all things that they consume regularly. Simultaneously, rice prices also increased, and even though it had nothing to do with TRAIN, people will draw their conclusions [especially given the generally low credibility of the

government on economic issues with the lower-income classes].” He correctly points out that, since many in the informal economy don’t pay taxes, they did not benefit from the cut in income-tax rates, with their benefit from the TRAIN primarily being the minimal unconditional-cash transfer. The issue of where to lay the blame for these rising prices is a political one. The bigger problem for the government, however, is that they are likely now feeding inflationary expectations—a phenomenon difficult to catch but which could lead to more structural increases in prices. Lim says: “As workers believe that inflation is starting to increase, they will demand more, whether in terms of wages or other benefits from their employers; the self-employed may start to charge more; transportation providers from the tricycle operators to the large logistics firms will ask for higher rates. Ultimately, manufacturers more broadly will start to ask for higher prices, which could, as the year goes on, feed into a higher overall inflation rate.” Inflationary expectations may increase because of speed at which prices have picked up. This year, April inflation was 4.5 percent year-on-year. At the same time last year, inflation was 3.2 percent; just two years before, it was at only 0.7 percent. The government should stop making whimsical decisions, and should act with more prudence and foresight. It will not be easy or cheap to get people, especially those in the broader economy, to accept and understand their premise that the TRAIN is not to blame. The government could attempt to push the peso up, but that’s a strategy that will require the use of reserves or a faster rate of policy tightening, but both strategies have real risks. Suspending the TRAIN would probably be very unpopular with financial markets. Bringing oil prices down would require subsidies, which is legally impossible. The government’s best hope is for the oil market to stabilize, and the peso to stay where it is in the next few months to head off higher inflationary expectations.

E-mail: titovaliente@yahoo.com.

For comments, suggestions e-mail me at: mvala.v@gmail.com.