Businessmirror june 19, 2018

SOON, ‘MODERNIZED’ JEEPS TO PLY ROUTES AROUND RECLAIMED AREA By Butch Fernandez

@butchfBM

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ENATE officials witnessed the turnover by Isuzu GenCars on Monday of the first batch of “modernized jeepneys” for the Senate Employees Transport Service Cooperative’s (Setsco) pilot operation under the government’s Public Utility Vehicle Modernization Program. The routes granted by the Land Transportation Franchising and Regulatory Board will start from the Cultural Center of the Philippines (CCP, fronting Star City) via Atang Dela Rama Street to Diokno Boulevard passing GSIS and ISUZU vehicles are lined up at the Senate grounds in Pasay City at the launch on Monday of the modern PUVs for the Senate Loop Route project of the Senate Employees Transport Service Cooperative, an initiative supported by the Department of Transportation. Inset photo shows officials at the launch (from left) Almazora Motors Corp. EVP Conrad Almazora (partly hidden), Isuzu Gencars President and CEO D. Edgard A. Cabangon, Isuzu Philippines Corp. President Hajime Koso, DOTr Usec. Thomas Orbos, Setsco Chairman Remedios Liton Venturina, LTFRB Chairman Martin Delgra III, Senate President Vicente Sotto III and Sen. Juan Miguel Zubiri. ALYSA SALEN

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the Senate, Earth Globe-Mall of Asia, up to the almost finished Parañaque Integrated Terminal Exchange (PITX), then back via Macapagal Avenue passing Department of Foreign Affairs-Aseana, right turn to Edsa taking a U-turn before reaching Roxas Boulevard, then to MOA, right turn to Diokno Boulevard toward the CCP terminal. “Setsco is the first to accept the challenge to formally replace old jeepneys with safe, reliable and environmentfriendly public-utility vehicles [PUVs] to ply the routes granted by the LTFRB,” Setsco Chairman Remedios Liton Venturina said. She vowed that Setsco will provide the required convenience and safety to the riding public as Isuzu Gencars-made air-conditioned PUVs are “equipped with electronic devices such as global positioning system [GPS], closed-circuit television [CCTV], Wi-fi, TV monitor and automatic fare collection [enabling cashless operations].” PITX is a 4-hectare facility along coastal road and is the first intermodal public transport terminal in the country providing seamless transfers, fixed departure schedules and a centralized ticketing system for provincial buses from Cavite and Batangas. See “Modernized jeeps,” A2

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Tuesday, June 19, 2018 Vol. 13 No. 248

BSP: Remittances surge 12.7 percent in April C

By Bianca Cuaresma

@BcuaresmaBM

ASH sent home by Filipino migrant workers surged in April, reversing the contraction seen in the previous month, the Bangko Sentral ng Pilipinas (BSP) reported on Monday. The 12.7-percent rise in remittances sent by overseas Filipino workers (OFW) across the globe represented the fastest

monthly remittance growth since November 2016. The surge reversed the 9.8-percent contraction in March this

$9.4B

The total cash remittances for January-April 2018, up by 3.5 percent from the same fourmonth period last year

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Businessmen are upbeat Manny B. Villar

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year, and brought in a total of $2.35 billion cash to the country in April.

usinesses in the Philippines are more bullish on investing more money this year. They plan to expand their operations or hire more employees because of one word—predictability. When you have political stability and strong macroeconomic fundamentals in place, there is a strong chance that you will be able to predict not only the growth of the economy, but also your own revenue and profit performance.

See “Remittances,” A2

Continued on A6

GOVT EYEING MALAMPAYA GAS FIELD TAKEOVER AFTER CONTRACT EXPIRES IN 2024 Classic Coke output cut 10 percent on tight T The stake held by PNOC-EC in sugar supply the consortium operating the By Lenie Lectura @llectura

HE government, through the Philippine National Oil Co.–Exploration Corp. (PNOC-EC), is seriously considering the possibility of taking over the Malampaya Deep Water Gas to Power project when the contract of the Malampaya consortium expires in 2024. DOE Assistant Secretary Leonido Pulido said PNOC-EC is undertaking a study that will determine if it can continue to operate the gas facility located northwest of Palawan, with plans to conduct exploration activities near the gas field. “There are two parts of that study,” said Pulido. “The first one is, will it be commercially viable? Is it more beneficial to the national government for PNOC-EC to continue the concession agreement? “The second part is, will it be commercially viable to source the 1,000 megawatts worth of natural gas to the east of SC [service contract] 38?” Whether or not PNOC-EC “should actually drill or extract that gas,” is a key question to be determined in the study, which the DOE ordered the conduct of, Pulido said. PNOC-EC is part of the Malampaya consortium that operates the Malampaya project, a joint undertaking of the Philippine government and the private sector. The project is spearheaded by the DOE, and developed and operated by SPEX (Shell Philippines Exploration B.V ) with a 45-percent

By Jasper Emmanuel Y. Arcalas

Malampaya gas field

stake in behalf of joint-venture partners Chevron Malampaya Llc.— also with a 45-percent stake—and PNOC-EC, which holds the remaining 10 percent. Under SC 38, 70 percent of the gross proceeds from the sale of natural gas would go to the contractor to recover the investment cost. The remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively. The consortium’s contract with the government will end by 2024, a matter that some concerned quarters had cited earlier to prompt the government to be more aggressive in planning for how the government can source future energy needs. The PNOC study is expected to be completed by end of the year. The DOE is then expected to forward its recommendation to the Office of the President for approval. “Assuming the recommendations to the secretary and assuming that the President approves it, the concession does not have a choice,” said Pulido, when asked how the government will go about the possibility of resistance from the consortium members. See “Malampaya,” A2

PESO exchange rates n US 53.3130

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bar for heading into riskier assets has been raised. Headlines on trade disputes that could hit Asian exporters haven’t helped. “It’s not a great setup for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase & Co., told Bloomberg TV from Singapore. “We’ve still only priced in about two-thirds of the US rate increases we expect to see over the next 12 months.

HE tightness in local sugar supply has forced beverage maker Coca-Cola Philippines to reduce the production of its Coca-Cola Original Taste to stretch its remaining sugar stockpile. Coca-Cola confirmed to the BusinessMirror that it is experiencing “market availability issues” with its Coca-Cola Original Taste product due to the company’s current sugar stockpile. “Coca-Cola is working closely with the Sugar Regulatory Administration and all other relevant stakeholders to urgently address the requirement for refined sugar in the market,” the company said in a statement sent to the BusinessMirror. “While this is in the process, the company has decided to prioritize production of specific Stock Keeping Units [SKUs] to ensure an uninterrupted supply to our customers and consumers,” it added. The “prioritization”of beverage production is caused by the current tight supply of refined sugar, according to Coca-Cola. In producing the Coca-Cola Original Taste, the company said it uses 100-percent sugar, which it sources from local sugar producers.

See “Emerging Asia,” A2

See “Coke,” A2

Phase 2-3 of the Malampaya Deep Water Gas to Power facility in Palawan is seen in this file photo from www.shell.com.

Emerging Asia hit by biggest foreign investor exodus since 2008

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FALLING tide lowers all boats, it seems. Amid an exodus from emerging markets, investors are even pulling out of Asian economies with solid prospects for growth and debt financing. Overseas funds are withdrawing from six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008—yanking $19 billion from India, Indonesia, the Philippines,

South Korea, Taiwan and Thailand so far this year, according to data compiled by Bloomberg. While emerging markets shone in the first quarter, suggesting they were resilient to Federal Reserve tightening, that image has shattered over the past two months. With American money market funds now offering yields around 2 percent—where 10-year Treasuries were just last September—and prospects for more Fed hikes, the

@jearcalas

n japan 0.4818 n UK 70.7357 n HK 6.7923 n CHINA 8.3295 n singapore 39. 4619 n australia 39.6595 n EU 61.7844 n SAUDI arabia 14.2156

Source: BSP (18 June 2018 )

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A2 Tuesday, June 19, 2018

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DOJ voids BI’s order expelling Aussie nun Fox By Joel R. San Juan

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@jrsanjuan157

USTICE Secretary Menardo Guevarra on Monday nullified the April 25 order issued by the Bureau of Immigration (BI), forfeiting the missionary visa of Australian nun Patricia Fox and compelling her to leave the country within 30 days.

In a resolution, Guevarra granted Fox’s motion for reconsideration of the BI’s decision, saying that the latter has no legal basis to expel the nun from the country. Gueverra stressed that, while the BI has powers in regulating the entry and stay of aliens in the country, it has no authority to forfeit a person’s visa. “Our existing immigration laws outline what the BI can do to foreigners and their papers—including visas – when they commit certain acts within Philippine territory. What the BI did in this case is beyond what the law provides, that is why it has to be struck down,” the DOJ chief explained.

While he agrees with the BI’s position that a visa is a privilege, Gueverra said this does mean that it can be withdrawn without any legal basis. “This Office cannot sanction BI’s resort to a visa forfeiture procedure, and [the Bureau’s] orders against [Fox] which result therefrom. To hold otherwise will legitimize [BI’s] assertion of a power that does not exist in our laws,” Guevarra explained. While the resolution declares the missionary visa granted to as still valid and subsisting, it nevertheless treats the case against her as one for visa cancellation, which according to Gueverra, is among those allowed by law and the rules.

Govt trading platform fortified vs cyberattacks By Rea Cu

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@ReaCuBM

HE TradeNet platform of the government, which aims to reduce the processing time for import and export clearances, will be reinforced with security features that will fend off various forms of cyberattacks, according to the Department of Finance (DOF). Finance Undersecretary Gil S. Beltran said the online trading platform will also be subjected to periodic vulnerability reviews to test its integrity. “Our cybersecurity system will be implemented to provide moni-

Emerging Asia. . . So the Fed is continuing to get more hawkish, but the market still hasn’t caught up.” While many emerging-market investors and analysts have praised Asian economic fundamentals, pointing to world-leading growth rates and political stability, some are starting to raise red flags as global liquidity

Coke. . .

Continued from A1

Reports received by the B usiness M irror indicated that some of the country’s fast-food restaurants have stopped selling the classic Coke for more than a week now. A notice posted on McDonald’s web site stated that the delivery of “regular Coke” and “Coke Float” products “are temporarily not available.” “In the meantime, you can still enjoy Sprite, Coke Zero and other drinks with your McDo favorites,” it added. However, Luzon-based branch managers of McDonalds’ interviewed by the BusinessM irror confirmed that the classic Coke is not also available even for dine-in customers. The managers did not disclose though the reason behind this and just said that they ran “out of stock.” Some branch managers of Jollibee in Luzon also confirmed to the BusinessM irror that their stocks of classic Coke have been depleted.

Remittances. . . Continued from A1

ING Bank Manila senior economist Joey Cuyegkeng told the B usiness M ir ror that the rise in remittances was a

toring and continuous vigilance services for TradeNet,” Beltran said in a report to Finance Secretary Carlos G. Dominguez III during a recent DOF Executive Committee (ExeCom) meeting. Dominguez said the government has also launched three parallel initiatives that form part of its “comprehensive deployment of information and communications technology to enhance governance efficiency,” aside from the TradeNet platform. These are: the Government Cloud Service (GovCloud) launched recently by the Department of Information and Communications Technology to serve as the National Government Portal for all govern-

Continued from A1

starts to shrink. The Bloomberg JPMorgan Asia Dollar Index sank to a 2018 low on Monday, extending two weeks of declines after the Fed and European Central Bank both took steps toward policy normalization. Developing nations, including Turkey, Indonesia, India and Argentina, have raised However, they said they were not allowed to disclose the reason for this. Consumers, like Efigenio Toledo IV, have also observed that the Coca-Cola Original Taste is no longer available in the menu of some local fast-food restaurants. “Last week, because of the typhoon, I was forced to work at home and because of heavy rains, I opted to buy food from Jollibee via delivery,” Toledo said. “Regular Coke was still available from Monday to Wednesday, but from Thursday to Friday, I was told that the only drink available was Sprite. Then over the weekend, they told me that their only available drink was iced tea,” he added. Jensen Arinto, a journalism student, told the BusinessMirror that during the past week, he dined in four fast-food restaurants that did not offer classic Coke. “These are McDonald’s in Manila, Jollibee in Maypajo, Chowking in Malabon and KFC along the North Luzon Expressway.” Consumers also voiced their concerns about the disappearance of the classic Coke in their “pleasant surprise,” but is not enough to cover for the deficit in trade incurred by the country due to its rising imports. Data from the BSP showed growth in both land-based and sea-based Filipino workers during the month.

ment information, transactions and services; the PHPAY platform initiated by the Bangko Sentral ng Pilipinas to function as a centralized online payment portal, transactions ledger and reconciliation system; and the Philippine Business Data Bank (PBDB), a search engine for all registered businesses in the country that will be available online for government agencies to verify records for business registration and permits. Beltran said TradeNet.gov.ph will allow traders to initially use the system to apply for import and export permits for rice, sugar, used motor vehicles, chemicals (toluene), frozen meat, medicines

and cured tobacco. The platform will eventually link 66 government agencies through a common database. It uses the PBDB for verifying business information. Launched in December 2017, the TradeNet platform will also serve as the Philippines’s link to the Asean Single Window (ASW) gateway and is expected to minimize the costs of doing business and cut the processing time for the issuance of import and export permits. The ASW is a regional initiative that aims to speed up cargo clearances and promote economic integration by enabling the electronic exchange of border documents among Asean members.

rates, while Brazil’s central bank has sold extra foreign-exchange swap contracts in an effort to stabilize their markets. In Asia this week, the Philippine Central Bank, which raised its key rate in May for the first time since 2014, is expected to lift the benchmark again by 25 basis points to 3.5 percent, a Bloomberg survey shows. The Bank of Thailand will keep its benchmark unchanged at 1.5 percent the same

day, according to a separate Bloomberg survey, though JPMorgan for one sees an increase coming next quarter. The baht has tumbled 4.7 percent against the dollar this quarter, despite Thailand having a current-account surplus in excess of a whopping 9 percent of gross domestic product, and in the midst of what the IMF sees as sustained growth surpassing 3.5 percent for the longest stretch since the early 2000s. Bloomberg News

favorite fast-food restaurants on Twitter. “Today’s observation: walang coke [regular] sa lahat ng McDo at Jollibee” Hans Castro (@ hanscastroo) wrote on June 15. Twitter user @ Alyxandraa said on June 14: “OK. Isang linggo ng walang coke sa McDo. I need my Coke.”

for their continued patronage of our products and for bearing with us,” it added. Last month Coca-Cola Femsa Philippines Director for Corporate and Regulatory Affairs Juan Lorenzo Tañada confirmed to the BusinessMirror that the company is experiencing sugar supply issues. Agriculture Secretary Emmanuel F. Piñol said the country’s total sugar production in the current crop year ending August 31 may fall below the SRA’s estimated output of 2.27 MMT by as much as 200,000 MT. This means that total sugar production may settle at around 2.07 MMT, 17.2 percent lower than the 2.5 MMT produced in the previous crop year. The government has allowed the private sector, including beverage firms, to import 200,000 MT of sugar to plug the supply shortfall and stabilize prices. The wholesale price of refined sugar as of June 8 has reached an average of P2,854 per 50-kilogram bag (LKg), 41.52 percent higher than the P2,106.67 average quotation at the start of crop year 2017-2018.

Coca-Cola’s assurance

However, Coca-Cola clarified that the CocaCola Original Taste is still available in local supermarkets, retailers and other restaurants. Coca-Cola also assured Filipino consumers that they would still enjoy their other products which use a different sweetening formula and not fully dependent on sugar. These products include: Coca-Cola Zero, Sprite, Royal, Sparkle, Sarsi, Wilkins and Minute Maid. “Rest assured that Coca-Cola Original Taste will be made available as soon as possible,” the company said. “We look forward to once again serving our customers and consumers the refreshing taste of our Coca-Cola Original Taste. We thank our customers and consumers In particular, remittances from landbased OFWs grew 15.1 percent to hit $1.8 billion during the month, while sea-based workers’ remittances grew 4.8 percent to contribute $500 million to the pool. By country source, the primary contributors to the growth in remittances during the month are the United States, accounting for 4.2 percentage points of the 12.7 percent aggregated growth; Canada, with 1.9 percentage points and Singapore with 1 percentage point. The strong growth in the cash remittances in April 2018 brought the total cash remittances for the first four months of the year to $9.4 billion, up by 3.5 percent from the same four-month period last year. By country source, the bulk of cash remittances during the period came from the US, Saudi Arabia, the United Arab Emirates, Japan, Singapore, United Kingdom, Canada, Germany, Qatar and Kuwait. The combined remittances from these countries accounted for almost 80 percent of total cash remittances.

Trade deficit still wider Just this week, BSP officials said the

country’s external position—which is expected to be weakened by the strong importation needs of the country due to the administration’s infrastructure overhaul—will continue to draw support from the “steady inflows” of remittances. However, Cuyegkeng said that despite the surge of remittances in April, the $9.4-billion remittance stock of the country in the first four months of the year will still not be enough to cover for the trade deficit of the country. “Unfortunately, the amount that such a growth represents still would not cover the worsening trade deficits. A 4.5-percent 2018 remittance growth and a weak export growth against a relatively strong import growth would not cover this year’s forecast trade deficit,” Cuyegkeng told the BusinessMirror in a response to a query on Monday. “The shortfall in financing the trade deficit from remittances is likely to be close to $16 billion, larger than last year’s $13 billion,” he added. In 2017 personal remittances to the Philippines reached $31.3 billion, accounting for 10 percent of gross domestic product and 8.3 percent of gross national income.

Thus, Gueverra directed the BI to ascertain whether the charge and the evidence against Fox make out a case for visa cancellation, for which specific grounds are stated in the law. “The BI treated this as a case for visa forfeiture instead of one for visa cancellation. As a result, the Bureau has yet to decide whether the supposed actions of Fox do indeed justify the cancellation of her visa. It would therefore be premature for us at the DOJ to decide that matter now,” Guevarra said. For this reason, the DOJ chief said the case would have to be returned to the BI for its proper disposition.

The DOJ secretary also directed the BI to hear the visa cancellation case along with the deportation case against Fox, which is already pending with the bureau. “Until a final resolution of the visa cancellation and/or deportation proceedings is reached, or until the expiration of her missionary visa, whichever comes first, Sister Fox may continue to perform her duties as a missionary in the Philippines,” he added. BI Commissioner Jaime Morente earlier said their board of commissioners decided to revoke the 71-year-old nun’s visa for violating the terms and conditions of her visa by joining protest rallies.

Bad weather stalls sale of NFA rice in Metro Manila, C. Luzon

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HE National Food Authority (NFA) has resumed selling cheap rice in three provinces but not yet in Metro Manila and Central Luzon, due to delayed discharge of imports caused by bad weather. NFA Spokesman Rex Estoperez told the BusinessMirror that, of the total 10 million 50-kilogram bags the agency imported, about 2 million bags or around 100,000 metric tons (MT) have arrived in the country. Of the total volume, 326,000 bags have already been discharged and distributed in the market following protocols under the importation guidelines, Estoperez said. He traced the delay in the arrival of rice imports to bad weather in past weeks. The little more than 1 million bags that arrived at Manila port and some 340,000 bags at Subic port have not yet been discharged as of this writing. “Yes. Within the week we will start distributing NFA rice in the market,” Estoperez said in an interview. “In fact, the mere fact that the rice imports of NFA have arrived...will now change the landscape of commercial rice prices.” Retail prices of commercial rice have been steadily increasing and breached the P44-per-kilogram level for well-milled rice and P40-per-kilogram quotation for regular-milled rice due to market speculations and absence of NFA rice. In a separate statement, the NFA said it has resumed selling its P27 and P32

per kilogram rice variants through 188 accredited retailers in Agusan and Surigao, including the islands of Dinagat and Siargao, on June 18. “The initial shipment of the 250,000 MT government-to-government rice arrived on June 2 at the Surigao and Subic ports, but the rice was not immediately unloaded due to bad weather,” it said. “Unloading of the 5,000 MT allotted for Surigao was completed only last Saturday, June 16, and after the necessary documentation and prescribed procedures, the stocks started to be distributed today, June 18, according to NFA Surigao del Norte Provincial Manager Daisy Luna,” it added. The NFA said about 126,000 bags, or around 6,300 MT, were unloaded in Tabaco, Albay, and 92,000 bags in Macabalan Port in Cagayan de Oro City. After 13 days at berth, unloading operations in Zambales started on June 18 “with the skies getting clear.” Estoperez said the whole volume of the initial 250,000 MT rice imports via government-to-government procurement scheme would be discharged and distributed in the market before the month ends. The first 250,000 MT rice imports by the NFA—with 130,000 MT from Vietnam and the remaining 120,000 MT from Thailand—is meant to be immediately sold in the market to depress the increasing retail prices of the staple.

Modernized jeeps. . .

Venturina reported that the Setsco secured funding from the Development Bank of the Philippines to acquire the 35 modernized jeepneys supplied by Isuzu Gencars. On Monday Senate President Vicente C. Sotto III, Majority Leader Juan Miguel “Migz” F. Zubiri and Sen. Sherwin T.

Malampaya. . . Continued from A1

According to the DOE official, PNOC-EC’s role in the future of Malampaya project is critical. ”We are confident in our upstream resource exploration data and we will find another source like Malampaya in the future, especially once the geopolitical situation stabilizes.” Pulido added: “If you are confident that you will find such resource, you will have to be ready to operate on your own. So, we need capacity building and it’s an opportunity to develop capacity within your own country. “That is one of the reasons we look at allowing PNOC-EC to continue the concession agreement.” He also said that PNOC-EC could take in partners if and when it takes over SC38. This takeover plan was discussed during the Senate Committee on Energy hearing held on Monday morning. The committee chairman, Sen. Sher win T. Gatchalian, said the Malampaya project is better off in the private sector’s hands. “Personally, I am not confident [that] the government can operate it properly. We have a bad history of operating the MRT, LRT and airports. I am not

Continued from A1

Gatchalian stood witness as Isuzu Gencars President D. Edgard A. Cabangon turned over to Setsco Chairman Remedios Venturina the first 15 of 35 modernized jeepneys to be operated by the transport cooperative run by Senate employees. Also in attendance was Hajime Koso, president of Isuzu Philippines.

very confident but I am willing to give PNOC the benefit of the doubt. As an observation, the government is not a good operator.” On the other hand, it will also be beneficial to the government since 100 percent of the proceeds will directly go to government coffers. The government’s share from the energy resource development fund, commonly known as the Malampaya Fund, reached P16.25 billion in 2017, or 21 percent higher than previous year’s collection. At present, the Malampaya Deep Water Gas-to-Power project is producing 3,400 MW. The gas field in offshore Palawan fuels three natural gas-fired power stations with a total generating capacity of 2,700 MW to provide 30 percent of Luzon’s power generation requirements. SPEX earlier said the Malampaya gas reserves can last up to 2027 or 2029, depending on the demand. According to Spex Managing Director Don Paulino, the group can still provide between 60 percent and 100 percent of the current demand for natural gas by 2022 due to a depletion compressor that was installed. “ We installed a depletion compressor that brought back the output of the well allowing us to recover 80 percent of the reservoir until 2027 to 2029,” he said.

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Editor: Vittorio V. Vitug • Tuesday, June 19, 2018 A3

Govt loses P51-B ill-gotten wealth case vs Marcos, cronies

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By Joel R. San Juan

@jrsanjuan1573

HE Supreme Court (SC) has junked the government bid to collect P51 billion in damages against the estate of the late strongman former President Ferdinand E. Marcos Sr. and his cronies for allegedly conniving to acquire ill-gotten wealth through behest loans.

In a 28-page decision penned by Associate Justice Noel Tijam, the SC’s First Division affirmed the August 5, 2010, ruling issued by the Sandiganbayan which dismissed for insufficiency of evidence the complaint for reconveyance, reversion, restitution and damages filed by the Presidential Commission on Good Government (PCGG). “Juxtaposing the specific allegations in the complaint with the Republic’s documentary and testimonial evidence and as against the respondents’ documentar y and testimonial evidence… the Court agrees with the Sandiganbayan that the weight of evidence fails to preponderate in the Republic’s favor,” the SC said. The Court held that the PCGG failed to present documentary evidence and testimonies from witnesses to prove its allegations in the complaint. The PCGG, in its complaint filed 31 years ago, claimed that the Marcoses and their alleged cronies engaged in “schemes, devices or stratagems” in order to supposedly acquire ill-gotten assets. It named former First Lady Imelda R. Marcos, representative of the Marcos estate, as respondent in the case, together with former construction magnate Rodolfo Cuenca, his son Roberto Cuenca, former Philippine National Bank President Panfilo O. Domingo, former Trade Minister Roberto Ongpin, former Development Bank of the Philippines officer Don Ferry and 11 others. The PCGG specifically accused Cuenca and the Marcoses of conniving to c reate t he Con st r uc t ion a nd De velopment Cor p. of the Philippines (CDCP), predecessor of the Philippi ne Nat ion a l Const r uc t ion Cor p. (PNCC), in order to obtain ill-gotten wealth. Based on the complaint, the CDCP obtained favored public works contracts amounting to billions of pesos from the Department of Public Works, which later

became the Department of Public Works and Highways (DPWH) and from the National Irrigation Administration, such as the construction of sugar centrals, the Philippine Associated Smelting and Refining Corp. (Pasar), the Philippine Phosphate Fertilizer Corp. (Philphos) and the Light Railway Transit (LRT) Project, among others, under terms and conditions manifestly disadvantageous to the government. Fur ther more, the PCGG said the C DCP sec u red loa ns a nd f i n a nc i a l assistance from government financial institutions without sufficient collateral, in contravention of banking laws and sound banking practices. The PCGG added that Cuenca and the Marcoses also organized the now-sequestered Universal Holding Corp. (UHC), a holding company for CDCP, Sta. Ines Melale Forest Products Corp. and Resort Hotels with the participation of other defendants, namely, Jose L. Africa, Roberto Cuenca, Manuel Tinio, Mario Alfelor, Rodolfo Munsayac, Arthur Balch, Nora Vinluan and Ricardo de Leon. The UHC, according to the PCGG, was controlled by the Marcoses and served as conduits or deposit abroad of illegally obtained funds and property. On August 5, 2010, the Sandiganbayan dismissed the complaint against the respondents for insufficiency of evidence, noting that most of the evidence presented by the PCGG consisted of executive issuances of then-President Marcos and of court decisions and resolutions. The Sandiganbayan explained that executive issuances are not illegal per se considering that every public official is entitled to the so-called presumption of good faith in the discharge of official duties. The Sandiganbayan further declared that in the absence of bad faith and malice, the presumption of regularity in the performance of official duties stands.

IS-Maute Group terrorists slain in Lanao del Sur military ops

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ive terrorists under Owayda Benito Marohombsar alias Abu Dar, the supposed leader of the Islamic State (IS) and its local affiliate Maute Group, were killed in continuing operation against terror groups in Lanao del Sur. Col. Romeo Brawner Jr., spokesman of the military’s Joint Task Force Ranao, said five fighters of the IS-Maute Group were killed during firefights in the mountainous areas of Tubaran, Lanao del Sur, on Sunday. Earlier, the military claimed that Abu Dar may have been among those killed in the operation, but clarified later it was his men who died during the encounters. Abu Dar, military officials claimed, has assumed the leadership of the IS and the Maute Group following the death of Abu Sayyaf Group commander Isnilon Hapilon, the recognized leader of the IS in Southeast Asia, during the government’s five-month

operation to retake Marawi City from the clutches of terrorists. Abu Dar, who is from Pagayawan, Lanao del Sur, was among the top planners of the Marawi siege, but while the other planners that included Hapilon and the Maute siblings were killed during the military operation to liberate the city, he was able to escape. The military claimed that Abu Dar later assumed the reigns of the leadership of the IS and the Maute Group. Brawner said the pursuit operations against Abu Dar and the other remnants of the IS-Maute Group began at around 9 a.m. in the mountainous areas of Tubaran, wherein the military used air strikes and artillery bombardments during the initial attack. At least 723 families were evacuated to government-run shelters in Tubaran and in the adjoining municipality of Pagayawan. Rene Acosta

OWWA assures cash aid to family of OFW mauled to death in Slovakia

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he Overseas Workers Welfare Administration (OWWA) assured on Monday it will provide cash assistance to the family of an overseas Filipino worker (OFW) who was killed in Slovakia last month. OWWA Administrator Hans Cacdac said they are ready to extend death and funeral benefits to the beneficiaries of Henry John Acorda. Under regulations, the OWWA can provide P200,000 for death due to accident and

P20,000 as burial benefits. Cacdac also said they will give livelihood aid to Acorda’s family, which usually amounts to P15,000. Acorda was beaten to death by street thugs in Brastislava, Slovakia, while protecting two women against harassment on May 26. The heroic deed of the 36-year-old OFW, who worked for a multinational company, was recognized by Slovakian government and its citizens. Samuel P. Medenilla

In its petition filed before the SC, the PCGG sought the reversal of the Sandiganbayan’s decision, insisting that it has established prima facie case against the respondents. It argued that Cuenca admitted in his testimony that CDCP obtained loans from local and Amer can banks and government financial institutions. T hus, the PCGG said, the Sandiganbayan should have only resolved whether said loans were grossly disadvantageous to the government and to the Filipino people. It also assailed the Sandiganbayan’s exclusion of its evidentiary evidence on the ground of the best evidence rule. The PCGG argued that it has proven that the documents showing the loans, financial assistance, guarantees and other favors given to Cuenca really existed and were actually executed. However, the SC held that it ca not rule on the PCGG’s claim that it has established prima facie case against the respondents since under Section 1 Rule 45 of the Rules of Court, only questions of law should be raised in appeal before it. “In order to determine the veracity of the Republic’s main contention that it has established a prima facie case against respondents through its documentary and testimonial evidence, reassessment and reexamination of the evidence is necessary,” the SC explained.

“Unfortunately, the limited and discretionary judicial review allowed under Rule 45 does not envision a reevaluation of the sufficiency of the evidence upon which respondent court’s action was predicated,” it added. Likewise, the SC said the Sandiganbayan was correct in excluding government’s documentary evidence consisting of reports, sworn statements, memoranda, board resolutions, letters of guarantee, deeds of undertaking, promissory notes letters and loan agreements for being mere photocopies. The High Tribunal explained that a photocopy, being merely secondary evidence, is inadmissible unless it is shown that the original is unavailable. The Court noted that there was no proof that the PCGG exerted efforts to produce the original. “When the Sandiganbayan inquired as to whether the Republic will present the original or certified true copy of its documentary exhibits, the Republic answered that it will do so if necessary, as the originals are kept in the Central Bank vault. Despite knowledge of the existence and whereabouts of the documents’ originals, the Republic failed to present the same and contented itself with the presentation of mere photocopies,” the SC stated. Furthermore, the SC said although the PCGG insisted that the documentary exhib-

its are public documents, it failed to show a copy attested by the officer having the legal custody of the record. The SC also likened the PCGG’s case against Cuenca et al., to the case Republic of the Philippines v. Marcos-Manotoc, et al., where it pointed out the importance of the best evidence rule in recovering ill-gotten wealth. In the said ruling, the Court noted that the best evidence rule, which regards original copy of a document as superior evidence, has been recognized as evidentiary standard since the 18th century. It added a law student could not have finished the law school and passed the bar examinations without knowing such elementary rule. In Marcos-Manotoc case, the Court noted that “despite having the expansive resources of the government, the members of the prosecution did not even bother to provide any reason whatsoever for their failure to present the original documents or the witnesses to support the government’s claims” “In sum, absent preponderant evidence to hold otherwise, the Republic failed to prove that the respondents by themselves or in u lawful concert w it h one a not her, acc u mu l ated or participated in the accumulation of ill-gotten wealth insofar as the specific allegations in the subject complaint are concerned,” the Court ruled.

A4 Tuesday, June 19, 2018 • Editor: Vittorio V. Vitug

Economy BusinessMirror

Labor strikes down 75% in first five months of the year–Bello

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By Samuel P. Medenilla

@sam_medenilla

he number of labor strikes for the first five months of the year declined by as much as 75 percent, a development that the Department of Labor and Employment (DOLE) said was made possible through its “effective” preventive mediation.

In its latest report, the DOLE’s National Conciliation and Mediation Board (NCMB) said of the number of cases, which had led to actual strikes from January to May, declined to three, compared to 12 in the same period last year. Two of the said cases—Goodyear Steel Pipe Corp. and Ateneo De Manila University—were resolved by the NCMB in Metro Manila. The case of Goodyear, which involved 70 workers, was amicably settled on March 6, while the case in Ateneo, which involved 245 workers, was resolved on February 23. Over P1.6 billion worth of monetary benefits were awarded to affected workers in both companies. The last of the three cases, Middleby Philippines Inc. was declared by the NCMB “without the requisite

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The total number of labor strikes reported by the DOLE from January to May, compared to 12 labor strikes registered over the same period last year of strike on the issue of regularization affecting 133 workers.” However, NCMB noted, the number of notices of strike grew from 96 from 112 last year.

In a news statement, Labor Secretary Silvestre H. Bello III attributed the decline in number of work stoppages nationwide to their effective preventive mediation efforts. “The settlement of the preventive mediation cases indicates the effectiveness of our counciliatormediators in preventing any occurrence of actual labor dispute, which is a great element in sustaining harmony in every workplace,” Bello said. Despite Bello’s affirmation on the quality of their mediation efforts, the number of such cases, which were submitted to NCMB from January to May, dropped to 357, from 383 in the same period in 2017. Almost P30 million were awarded to 1,133 workers, who were covered by the said mediation cases. “The settled cases from January to May 2018 were resolved within the process cycle time of 29 days,” Bello said. He also attributed this to their enhanced implementat ion of their Labor Management Cooperation, which he said helped in the resolution of labor disputes in the plant level. “Based on the same NCMB report, 3,077 out 3,173 or 97 percent of companies with Labor Management Cooperation were not involved in actual strike/lockouts, notice of strike/lockout and preventive mediation or voluntary arbitriation cases in the month of May,” Bello said.

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We need whistle-blowers–but they have to be protected!

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By Henry J. Schumacher

epresentatives of the private sector were invited to a dialogue with the chairman and the commissioners of the Philippine Competition Commission (PCC) to discuss areas where cooperation makes sense in achieving the “level playing field” we are all interested in. All participants agreed that a level playing field involves, besides “fair competition” anti-corruption, a fair taxation regime, data- privacy protection and cybersecurity. It became obvious that compliance officers/security managers will play an increasingly important role in business and government as we move forward. Another issue was also raised and discussed is the need to encourage whistle-blowers to move forward and expose fraud, tax evasion, data breaches and other misdeeds. However, without whistleblower protection it is understandable that these potential heroes will not step forward. While we have encouraged Congress for many years to pass “whistle-blower protection legislation”—without success—the group agreed that it is absolutely necessary that whistle-blowers will be given protection from retaliation. In this context, the news that the European Commission (EC) proposed a new policy on whistle-blower

protection a few days ago comes handy and will hopefully encourage Philippine lawmakers to follow suit. The proposal targets, in particular, whistle-blowers reporting misconduct in public procurement, financial services, nuclear safety, food safety, privacy and data protection, among others. The new regulations will require companies to set up internal hotlines and shield whistle-blowers from any form of retaliation. The proposal also includes safeguards against malicious or abusive reports, as well as sources of investigative journalists. The proposal requires approval from European Union countries and the European Parliament before it can become law. Currently, only 10 EU countries offer full protection to whistle-blowers. The move by the EU comes in the wake of criticisms from transparency campaigners about the lack of protection granted to individuals who report such breaches in EU laws. Critics cite the example of two former accounting firm employees who were prosecuted in 2016 for leaking data about Luxembourg’s tax deals with large corporations. The conviction of one was overturned by Luxembourg’s highest court this year. Critics also point to British regulators’ relatively lenient treatment of Barclays’s Chief Executive Jes Staley last week, who was allowed to keep his job after trying to uncover an informant at the bank. The EC said its proposal was a game changer since it will require companies setting up internal channels for whistleblowers and also shield them from reprisals, such as sackings, demotion and even litigation. There are also safeguards against malicious or abusive reports. “There should be no punishment for doing the right thing,” Commission Vice President Francs Timmermans said. “In addition, today’s proposals also protect those who act as sources for investigative journalists, helping to ensure that freedom of expression and freedom of the media are defended in Europe.” The EU executive said the proposed rules would protect those who unmask illegal activities in public procurement, financial services, money laundering, nuclear safety, food safety, privacy and data protection, among others. Transparency International said the proposal was a bold step in recognizing the importance and rights of informants. The Association of Chartered Certified Accountants (ACCA) said increasing whistle-blower protection will help businesses. “Companies have to see speak-up as something that would help them manage risks and avoid more serious issues, such as violation of law, inappropriate conduct, crime or any type of harms,” ACCA Head of Corporate Governance Jo Iwasaki said. Given this encouragement coming from the EU, it may be highly opportune to restart the dialogue with the Senate and the House regarding whistle-blower protection legislation. The bills await congressional action. Comments are welcome—contact me at Schumacher@ eitsc.com.

Group renews transparency call in fuel products pricing By Lenie Lectura

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@llectura

il companies on Monday announced they would implement an upward adjustment in the price of petroleum products effective on Tuesday morning. In separate advisories, they said gasoline prices will go up by P0.20 per liter, diesel by P0.45 per liter and kerosene by P0.45 per liter. “This is to reflect movements in the international petroleum market,” said Seaoil Philippines. Total Philippines, Phoenix Petroleum, PTT Philippines and Eastern Petroleum said their respective price adjustments will take effect at 6 a.m. of June 19. Other oil firms are expected to follow suit. Prior to the oil-price increase, oil firms implemented price rollbacks on June 3 and 12. The Department of Energy (DOE) is set to release a policy that will require oil firms to unbundle their fuel prices. “Hopefully, the DOE doesn’t blink and the reported circular on unbundling of prices of petroleum products, which LKI [Laban Konsyumer Inc.] had supported consistently, be finally issued by DOE[’s] Secretary Alfonso [G.] Cusi, amid the objections of the industry players in focused group discussions held recently,” LKI President and former Department of Trade and Industry Undersecretary Atty. Vic Dimagiba said on Monday. In the group’s most recent communication to the Office for Competition of the Department of Justice and the Competitive Enforcement Office of the Philippine Competition Commission, LKI spoke on behalf of consumers around the country, saying that “as consumers, we need to be informed whether the market behavior and retail prices of fuel products are in order and in compliance with the law.” Dimagiba went on to point out an example of his observations on oil prices and say that, just recently, oil companies have posted big-time price discounts in service stations to as high as P3 per liter under the guise of a corporate development program. “As a consumer, I benefit from these discounts but also wonder whether the pump prices should be much lower than what it should be,” the former trade official said. In addition, LKI also observed that prices are adjusted upward or downward weekly, in similar or identical amounts, and that service stations of the oil companies and the new players are selling diesel and other products at the same amount per liter in specific trading area.

Neda says BBB may fail to reach 2018 jobs target

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he Duterte administration’s “Build, Build, Build” (BBB) infrastructure program may fall short of its employment target this year, according to the National Economic and Development Authority (Neda). In a news statement issued on Monday, Socioeconomic Planning Secretary Ernesto M. Pernia said the BBB will create approximately 820,000 jobs this year, which is below government expectations that the massive infrastructure push will create 1.1 million jobs annually until 2022. “Apart from closing the country’s infrastructure gap, our aim is to create many employment opportunities and assist Filipino families in achieving the kind of life that they desire,” Pernia said. In order to boost jobs created in infrastructure, Pernia said there is a need for the Department of Labor and Employment, the Department of Education (DepEd), the Commission on Higher Education, and the Technical Education and Skills Development Authority to coordinate with industries. This will boost the government and the private sector’s chances of appropriate skills needed by the construction sector in the next few years. Pernia said labor demand can be met if education programs like the K to 12, which adds two years to basic education in the country, will produce a better trained and skilled work force. “To fully maximize gains from Build, Build, Build [program], the Philippine labor market should be ready to meet the infrastructure program’s requirements. Bodies governing the education and labor sectors have a crucial role in this,” Pernia said. Based on the DepEd, K to 12 students are required to undergo work immersion to enhance their industry skills and work ethics. This is provided for in the DepEd’s guidelines for Work Immersion, DepEd Order 30, Series of 2017 (DO 30, s. 2017). The said DepEd order states that a senior high-school student, who is 18 years old and above, has to complete a minimum of 80 hours of work immersion, while those below18 must complete a maximum of 40 hours per week. Similarly, Pernia stated that attention should also be given to returning overseas Filipino workers (OFWs) who are skilled or need retraining to be absorbed in the construction industry. The Neda, likewise, proposed that all job requirements of the BBB program be posted on www.PhilJobsNet.gov.ph, the Philippine government’s official online job site, so that returning OFWs are kept abreast of new opportunities in the country. Marc dela Paz and Pearl Gumapos

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Oil slumps near $64 as Opec clash develops and trade war escalates

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il fell near $64 a barrel as Saudi Arabia and Russia prepared for a clash with allied crude producers over whether to lift output and as China and the United States exchanged threats over trade. Futures in New York dropped as much as 2.3 percent, on course for the lowest close since April 9 after a 2.7-percent decline on Friday. Iran says Venezuela and Iraq will join in blocking a proposal to increase production that’s backed by Saudi Arabia and Russia when Organization of the Petroleum Exporting Countries (Opec) and its allies meet in Vienna this week. China said it would impose tariffs on a variety of US goods, including crude and gasoline, in response to President Donald J. Trump’s $50-billion levy on Chinese imports. Crude has dropped more than 10 percent from its high in May amid signs Saudi A rabia and Russia are seeking to lift output curbs that have eliminated a global surplus and boosted prices. Meanwhile, traders are trying to digest the impact from both the US and China issuing tariffs on goods and the threat of a broader trade war between the world’s two largest economies. “Oil is down in a knee-jerk reaction to possibilities of a trade war intensifying between the US and China, and Opec’s production increase breaking the demand and supply balance,” Takayuki

Nogami, chief economist at statebacked Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. “If the US and China continue to retaliate and Saudi Arabia and Russia keep signaling a production increase, that will further weigh on prices.” West Texas Intermediate (WTI) crude for July delivery fell as much as $1.47 to $63.59 a barrel on the New York Mercantile Exchange and traded at $63.77 at 11:34 a.m. in Tokyo. The contract declined $1.83 to $65.06 on Friday. Total volume traded was about 41 percent above the 100-day average. Brent futures for August settlement lost as much as 99 cents to $72.45 a barrel on the Londonbased ICE Futures Europe exchange. The contract dropped $2.50 to $73.44 on Friday. The global benchmark crude traded at a $9 premium to WTI for the same month. Trading on the Shanghai International Energy Exchange is closed for a Chinese public holiday. The contract fell 0.2 percent on Friday. Investors are looking ahead to what could be the most contentious Opec meeting in recent years. On the one side is Saudi Arabia and Russia, who want to relax the

Operations at the Vadinar Refinery operated by Nayara Energy, formerly essar Oil

quotas as soon as next month. In the other corner is Iran, Iraq and Venezuela, who are threatening to veto the Saudi-Russian proposal.

The opposition

“If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that’s a breach of the cooperation agreement,” Iran’s Opec Representative Hossein Kazempour Ardebili said. Opec and its allies could consider a production increase of as much as 1.5 million barrels a day, Russian Energy Minister Alexander Novak

Bloomberg photo

said on Thursday, while Saudi Arabia has been discussing different scenarios that would raise production by between 500,000 and 1 million barrels a day, according to people familiar with the matter. The group’s main event begins on Friday, and while Saudi Arabia has already said it’s inevitable that the bloc will lift output after the meeting, the question remains whether there’ll be an official agreement. Meanwhile, the brewing trade war between the US and China also stole investor focus and caused nervousness across markets. The yen and gold gained on increased

demand for safe-haven assets, while the dollar edged higher after Treasury yields steadied. Trump said that the US will impose tariffs on $50 billion in Chinese imports, with the first wave of tariffs to cover $34 billion of goods and take effect on July 6. In response, China quickly issued a list of product categories, covering about $34 billion in exports from the US, to be subject to an additional 25-percent tariff starting on July 6. A second set of China’s duties to begin at a later date listed other goods including coal, crude oil, gasoline and medical equipment. Bloomberg News

Strong quake near Osaka, Japan, kills 3 Funds wary on Malaysia as

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OKYO—A strong earthquake knocked over walls and set off scattered fires around metropolitan Osaka in western Japan on Monday, killing at least three people and injuring more than 210. A 9-year-old girl was killed by a falling concrete wall at her school, and the two other fatalities were men in their 80s. The Fire and Disaster Management Agency said 214 people were treated for injuries at hospitals. Most of the injured were in Osaka­— Japan’s No. 2 city bustling with businesses. Osaka officials did not give details, but the injuries reported in Kyoto and three other neighboring prefectures were all minor. The Osaka prefectural government’s disaster management department confirmed the girl’s death and the death of an older man. The third victim died in the nearby city of Ibaraki. A fa l ling concrete wa l l knocked down Rina Miyake as she walked by at her elementary school in Takatsuki. NHK public television aired footage showing the collapsed upper half of the high wall, which was cheerfully painted with trees, flowers and blue sky and surrounded the school swimming pool. Ta k atsu k i Mayor Ta kesh i Hamada apologized over her death because of the wall’s collapse. The structure was old and made of concrete blocks—a known risk in earthquakes. A man in his 80s died in the collapse of a concrete wall in Osaka city. An 84-year-old man in nearby I bara k i died after a bookshelf fell on top of him at home, according to city officials. Many homes and buildings, including a major

1MDB swells debt to $250B

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A crack is filled with water on a road after water pipes were broken following an earthquake in Takatsuki City, Osaka, western Japan, on June 18. A strong earthquake knocked over walls and set off scattered fires around metropolitan Osaka on Monday morning. Keiji Uesho/Kyodo News via AP

hospital, were temporarily without power, though electricity was restored at most places by midafternoon. T he 6.1-magnitude earthquake struck shortly after 8 a.m. north of Osaka at a depth of about 13 kilometers (8 miles), the Japan Meteorological Agency said. The strongest shaking was north of Osaka, but the quake rattled large parts of western Japan, including Kyoto, the agency said. T he qu a ke k noc ked over walls, broke windows and set off scattered building fires. It toppled bookshelves in homes and scattered goods on shop floors. It also cracked roads and broke water pipes, leaving homes without water. The morning commute was disrupted, as dozens of domestic flights in and out of Osaka were grounded, while train and subway service in the Osaka area including the bullet train were sus-

pended to check for damage. Passengers were seen exiting trains on the tracks between stations. Some subway services started to resume in the afternoon. T he earthquake reminded many in Japan of the 7.3-magnitude Hanshin-Kobe qua ke in 1995 that killed more than 6,000 in the region. Monday’s quake also followed a series of smaller quakes near Tokyo in recent weeks. A 30-year-old lawyer Jun Kawasaki said the quake reminded him of the Kobe quake 23 years ago, and started packing up immediately to run away. “It was not as bad as the Kobe quake,” he told the Associated Press from Osaka. His girlfriend ducked down under the table. Elevators in his office building were out of operation. “I used the stairs but I was out of breath by the time I arrived at my office on the 20th floor.” AP

he escalating scandal around troubled state-investmentfund 1Malaysia Development Berhad (1MDB) is turning bond funds against Malaysia. The disclosure that the nation’s debt is almost 60 percent higher than previous estimates at 1 trillion ringgit ($250 billion), largely because of hidden liabilities tied to the troubled state investment fund, is convincing even fans of the country’s bonds to cut their holdings. Throw in the removal of a goods and services tax last month, and Prime Minister Mahathir Mohamad’s new government faces an increasing fiscal squeeze. “Uncertainty over how the fiscal deficit will pan out will overhang,” said Wilfred Wee, a fund manager in Singapore at Investec Asset Management Ltd., which oversees $146 billion. “Until the dust settles, we have reduced our still overweight exposure to Malaysia, recognizing that Malaysia’s current account and overall fundamentals remain by and large still attractive versus peers.” A one-time crystallizing of 1MDB’s debt and writing off its assets may cost almost 3 percent of GDP, Wee said. Rating agencies are likely to downgrade Malaysia sooner rather than later if its fiscal health deteriorates significantly due to liabilities arising from 1MDB, Brown Brothers Harriman said in a report this month.

Alleged embezzlement

1MDB took shape in 2009 under former Prime Minister Najib Razak as a vehicle to drive investment into Malaysia and boost its assets abroad. Plagued by heavy debt and questions about its management and investment decisions, the fund became a scandal that culminated in global probes

into alleged embezzlement and money laundering. After the opposition’s shock election victory last month, new Finance Minister Lim Guan Eng revealed that government debt and liabilities had jumped to 1.087 trillion ringgit, inflated by state guarantees for borrowing at 1MDB. That compares with the federal debt of 685 billion ringgit estimated by the Ministry of Finance in 2017. Markets were spooked by the disclosure, with the ringgit sliding to a five-month low and overseas ownership of the nation’s bonds dropping to the lowest since August. The Malaysian currency weakened beyond 4 per dollar for the first time since January on Monday. Global funds sold almost 10 billion ringgit of Malaysia’s sovereign debt in May, the most since March 2017. “We hold a cautious view on Malaysia due to fiscal and political uncertainty, potential negative ratings action and uninspiring valuations,” said Roland Mieth, emerging markets portfolio manager in Singapore at Pacific Investment Management Co., which oversees $1.77 trillion. “The replacement of GST with service and sales taxes adds uncertainty to Malaysia’s fiscal trajectory.”

GAM overweight

Concerns about the country’s worsening debt levels are overdone, according to GAM (UK) Ltd. The government remains on track to meet its 2018 budget deficit target of 2.8 percent of GDP, and the economy is growing fast enough to ensure the debt-to-GDP ratio will gradually decline, said Michael Biggs, emerging-market fixed-income investment manager in London at GAM, which oversees the equivalent of $163 billion. Bloomberg News

Tuesday, June 19, 2018

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European Union trade commissioner: Trade liberalization has momentum

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ANBERRA, Australia — Trade liberalization continues to have global momentum despite recent United States tariffs on steel and aluminum imports, the European Union trade commissioner said on Monday as she launched freetrade negotiations between the EU and Australia. Trade Commissioner Cecilia Malmstrom said negotiators would meet for the first time in Brussels in early-July. She said “there is a lot” of global momentum for trade liberalization, despite the United States last month slapping the EU, Canada and Mexico with tariffs of 25 percent on steel and 10 percent on aluminum. All vowed to retaliate by penalizing American products. In a separate dispute, China is poised to penalize $50 billion in US goods—many of them produced by supporters of President Donald J. Trump in America’s agricultural heartland. “The rest of the world is actually speaking out and saying we need good trade agreements,” Malmstrom told reporters in Australia’s Parliament House. “Those of us who believe in open trade and rule-based trade need to stick together.” The EU is Australia’s largest trading partner after China. Australia and China have had a bilateral free-trade deal since 2015. Prime Minister Malcolm Turnbull said Australia had remained committed to a Pacific Rim trade deal despite Trump pulling the United States out shortly after he became president last year. Australia was among 11 countries that signed the Trans-Pacific Partnership in March. Trump has since signaled he might reopen talks on joining. “We are committed to free trade and open markets and we practice what we preach,” Turnbull said. Turnbull and Malmstrom agreed that a bilateral free-trade deal would be a win for both the EU and Australia. “We share similar views on how we think world trade should work, we defend open trade, rule-based and fair, and this is what we’re going to cement in our free-trade agreement,” Malmstrom said. Australia also plans to negotiate a separate free trade deal with Britain once Australia’s former colonial master has left the EU. AP

UN rights chief: US policy on migrant kids ‘unconscionable’

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ENEVA—The United Nations human rights chief is urging the Trump administration to end new policies separating migrant children from their parents after entering the United States from Mexico, saying they’ve affected nearly 2,000 kids in the last six weeks. Zeid Ra’ad al-Hussein says it’s “unconscionable” that any country would seek to deter parents from migrating “ by inf licting such abuse on children.” He spoke at Monday’s opening of a regular Human Rights Council session, his last before his term ends in August. Z eid , a Jord a n i a n pr i nce, a l s o dec r ied concer ns about countries including Syria, Myanmar, Hungary, Nicaragua, Israel, Nor th Korea and India—and Pakistan—controlled parts of Kashmir. He denounced the lack of access provided by UN member states to rights investigators, noting China has accumulated 15 pending requests in the last five years. AP

A6 Tuesday, June 19, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror

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editorial

Hope for poor candidates

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nybody who is qualified can easily run for a public post. Based on the Constitution, such qualifications are minimal. For instance, to run for senator, an aspiring candidate only has to be a natural born citizen of the Philippines, at least 35 years old on the day of the election, able to read and write, a registered voter and a resident of the country for not less than two years immediately preceding the day of the election. You don’t even need to be a lawyer or a college graduate to be a senator or legislator. One former senator even openly admitted during his tenure that he cannot converse in English. Yes, it is easy to run, meaning, to simply file your candidacy and aspire for a public post. But to run with an actual shot at winning? This is very hard today. Times have changed. The game has changed. Politics has changed. Campaigning has changed. Everything has changed. There was a time when having a famous political name, for instance, would guarantee a victory in an election. But in the 2013 national elections, former Sen. Ramon “Jun” Magsaysay Jr. and then-Zambales Rep. Milagros “Mitos” Magsaysay both failed to get a Senate seat. Political campaigns have also gotten very expensive. Even the confessed poorest presidential candidate in the 2010 elections, Nicolas Perlas, admitted to media that he spent P2 million out of his own pocket for his campaign, with another P2 million contributed by friends. Indeed, each election has the makings of being more expensive than the last, based on the sheer volume of TV ads we see from candidates. At close to P500,000 per prime-time spot per candidate, just do the numbers. The rise of multimillion peso campaigns has taken the total spending on political and so-called advocacy advertising to billions. This kind of spending changes politics. Honest and qualified candidates balk at running for public office because of the astounding cost of mounting a decent campaign, one that has a real shot at winning. They would have to be crazy to spend so much money just to run for an elective post that pays only so much. In the off chance that they win, there is no way they can ever recoup their investment, because they are not crooks. So they just threw their savings out the window all for the possibility of serving a cynical public who tend to blame politicians for everything that is wrong with their existence (and for good reason, too). Thankfully, there might be hope for poorer candidates yet. Our recent story (“Con-com pushes for ‘democracy fund’” by Elijah Felice E. Rosales, June 15, 2018) said the consultative committee (Con-com) mandated to review the 1987 Constitution wants to create a citizen-financed treasury— dubbed the “democracy fund”—that can be accessed by political parties and candidates for their campaign needs. The “democracy fund” is intended to regulate political contributions and campaign financing, which the committee believes is one root of corruption. Con-com Spokesman Conrado I. Generoso said citizens and corporations can pour money into the fund, which, in turn, will be managed by the government. Filipino individuals can chip in P10,000 to P100,000 to the treasury, while corporations are allowed to contribute as much as P3 million. Such contributions will be made tax deductible. The democracy fund, he added, will be administered by the Commission on Elections and will be monitored by the Commission on Audit. It will be apportioned to political parties and candidates, including independents, during the election period. “What we are encouraging here is, instead of giving directly to the candidates, you give it to a common fund so that everybody can benefit. It is like you will not favor one candidate, and will, instead, favor a slightly equal playing level for all the candidates,” Generoso said. This is a commendable Con-com proposal that should be pursued by Congress, even if Charter change does not push through, simply by revising and updating existing laws on campaign finance, contributions and expenditures. This so-called democracy fund could usher in a new Philippine politics where money does not rule, and candidates who have the money to outspend their opponents can’t buy public office.

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THE Entrepreneur Continued from A1

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any companies, especially the publicly listed ones, now provide profit guidance at the start of the year because they are confident about how their bottom line would look like by the end of the year. This year, almost every businessman is bullish and has big plans for the future apparently to take advantage of the Philippines’s robust economic growth, which the World Bank expects to be at around 6.7 percent for both 2018 and 2019. The Philippine economy grew 6.8 percent in the first quarter, one of the fastest in the region. In its latest Business Expectations Survey, the Bangko Sentral ng Pilipinas said the overall confidence index among businessmen remained steady at 39.3 percent in the second quarter, which means “optimists” outnumbered “pessimists” by 39.3 percent. Among the factors behind the respondents’s optimistic outlook were increased orders and volume of production, rollout of government infrastructure projects under the “Build, Build, Build” program, positive view on the TRAIN law, expansion of businesses and new product lines and sound

macroeconomic conditions. Such optimism was slightly dented by expectations of higher consumer prices, partly due to oil price hikes and the peso depreciation. The Philippines, being a member of the rapidly growing Association of Southeast Asian Nations, is one of the countries that now attract a lot of investors. An inaugural business barometer survey conducted by the Oxford Business Group in April 2018 pointed to “sky high” business ex pectations among Asean chief executives. As part of its research for its Asean survey, OBG asked over 550 C-suite

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executives from Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Vietnam. Results of the survey showed that 72 percent of business leaders were likely or very likely to make a significant capital investment within the next 12 months. Official data from the Philippine Statistics Authority (PSA) help explain the optimism shared by Filipino businessmen. Preliminary results of the Monthly Integrated Survey of Selected Industries showed that the volume of production index, or factory production, climbed 31.1 percent year-on-year in April 2018, faster than the 16.5-percent increase in March, 22.4 percent in February and 17.2 percent in January. The National Economic and Development Authority (Neda) attributed the growth in production to strong consumer demand and weaker exchange rate, which encouraged manufacturers to produce more this year. Supporting the growth of manufacturing sector is the vigorous bank lending, which surged 19.9 percent year-on-year in April. Loans to companies (production loans) increased 19.6 percent, while loans to households or individuals went up 19 percent. Another reason for optimism is the low unemployment rate, which eased to 5.5 percent in April 2018 from 5.7 percent a year ago, as more Filipinos found jobs during the period. This was the lowest jobless rate

Do not try to ‘save’ the peso

Lourdes M. Fernandez

Ruben M. Cruz Jr. Angel R. Calso

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Manny B. Villar

T. Anthony C. Cabangon

Online Editor Social Media Editor

Chairman of the Board & Ombudsman President VP-Finance VP Advertising Sales Advertising Sales Manager Group Circulation Manager

Businessmen are upbeat

OUTSIDE THE BOX

I

T is truly a sad state of affairs for the Philippines that almost all commentary about anything regarding the economy since May 9, 2016, has little objectivity because of political agenda and bias. When there are calls for the Philippine Senate to “investigate” the depreciation of the currency, it could well signal the beginning of the zombie apocalypse. Except that zombies supposedly feed on human brains, and in this case there may not be many brains to feed on. The Philippine peso reached a monthly closing low against the US dollar at 56.35 in February 2004. The currency appreciated by 27 percent in January 2008. Assuming that an appreciating currency is like winning the lotto and that the President of the Philippines is responsible, then theoretically there should be statues of Gloria Macapagal-Arroyo in every town square. Sadly what goes up also comes down by 20 percent, as did the peso in October 2008. Tear down those GMA statues!

Yet, what goes down can also go up again, as the peso rose 16 percent in February 2013. There are those— with strong religious convictions, no doubt—who saw this as an indication that the foreign-exchange deities looked with favor on the 2010 presidential election. And all the while, for a decade, there were some foolish people that believed currency exchange rates were determined by money flow, geopolitical concerns, interest rates and greedy market speculation. But the gods, as we well know,

usually act like a pimple-faced high-school boy with a new crush every week. Jealous and wrathful, good fortune can turn to thunder and lightning at a moment’s notice. Would you believe that, even without a new face in Malacañang, the peso depreciated by 15 percent from February 2013 to April 2016? And since the 2016 presidential election, the peso is down another 15 percent against the US dollar. The pundits and “experts” though choose to ignore why other currencies are “stronger.” Have you ever caused a minor traffic accident and you had to control the urge to drive away? I have been in one, and it could exactly be the same feeling as being a central banker with regard to a depreciating currency. You have the power to stop the depreciation with all the monetary resources of the central bank. But you also know, as in the case of the traffic accident, that driving away is a short-term fix, which can cause a longer-term disaster. Just look at 1997 and Thailand, which tried to control currency depreciation. The Bangko Sentral ng Pilipinas has followed a firm and often-unpopular policy of not intervening to control the peso exchange rate. The BSP

for all the April rounds of the Labor Force Survey in the past decade, according to the PSA. The Neda said the infrastructure buildup by both the public and private sectors helped boost the number of Filipinos with jobs. The Neda also said businessmen are expected to remain bullish, with the implementation of the Ease of Doing Business Act of 2018 (Republic Act 11032), which seeks to streamline procedures, shorten processing time for government transactions and create a central business portal to receive and obtain data involving business-related transactions. The Philippines has enjoyed continuous strong economic growth over the past 10 to 12 years and is in a position to sustain such expansion over the next decade. We will most likely join the group of upper middle-income countries in the next couple of years, as our per-capita GDP climbs above $3,000. With a young and dynamic population, our country is now entering what an Asian Development Bank official described as “golden age of economic growth.” However, we need to spread this sense of optimism to our people by resolving the fundamental weaknesses in our society and ensuring a long period of stability that will continue to the next generations. For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.

absolutely will intervene to create daily stability and to reduce volatility, as it should, like the thermostat on your refrigerator. But to push the peso in any particular direction is against a long-held mandate. Bank Indonesia moves—not “adjusts”—the rupiah as a matter of policy. From Reuters on April 24, 2018: “Indonesia’s central bank has been buying sovereign bonds and selling foreign currency in “quite a sizeable amount” to halt the rupiah’s depreciation since last week and will continue to stabilize the currency, its governor said on Tuesday.” The same is true of Malaysia’s Bank Negara. “The ringgit’s strength would continue to be driven by Bank Negara Malaysia’s foreign-exchange intervention policy and ringgit-supportive forex regulations.” When a central bank starts trying to determine the exchange rate, you release a dangerous beast that you may be able to ride for a while. Indonesia tried that in 2013. The rupiah then lost 30 percent in eight months. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

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Opinion

Dangerous proposal

Wrong policies that keep oil prices and power rates rising

BusinessMirror

Ernesto M. Hilario

Cecilio T. Arillo

database

ABOUT TOWN

W

hy is it that everytime there’s a spike in cases of violence against journalists, lawyers, judges and, of late, priests, the usual knee-jerk reaction is to call on the government to allow them to carry guns so they can defend themselves? The same predicable and automatic response to killings we heard from no less than President Rodrigo Duterte himself, who, during the oath-taking of 3,100 newly elected Central Luzon barangay captains in Clark, Pampanga, recently, said he was considering arming barangay chiefs so they can protect themselves amid the perceived rise in criminality and the persistence of the problem of illegal drugs at the barangay level. “I might consider arming you. If...in my assessment and evaluation—and I will also ask the police and intelligence community —if you are really into fighting crime, I may [give you the right to possess] and to carry firearms,” Duterte said. The Chief Executive also said he would give his full support to barangay officials who would get into trouble for helping the government in the war against drugs, and see to it that the armed forces and the Department of the Interior and Local Government would also stand solidly behind them in fighting criminals and illegal drugs. Not unexpectedly, members of the political opposition have expressed strong opposition to the idea of arming barangay captains. For one, Sen. Risa Hontiveros has emphasized that the proposal is fundamentally unsound, since the police should be allowed to carry firearms as part of their duty to maintain peace and order: “That is not the solution. That will only worsen the current situation.” Caloocan Rep. Edgar Erice believes that arming barangay chiefs could lead to a “wild, wild West scenario” where political kingpins at the local level could build their own private armies and use them to commit acts of violence against their political adversaries. Partylist Rep. Tom Villarin of Akbayan, for his part, said the idea is a “recipe for disaster,” since loose firearms is already a big problem, while Ifugao Rep. Teddy Baguilat opined that barangay officials should only support the police in law enforcement by monitoring the crime situation in their areas of jurisdiction and to report the more serious crimes to capable law enforcers. Arming barangay captains is not the solution to widespread criminality and the continuing proliferation of illegal drugs. In fact, allowing 42,000 of them to carry firearms could embolden them to use these to settle personal grudges or to intimidate those who oppose their policies. The potential for abuse of power is so great that, instead of controlling crime, barangay officials could themselves be crime perpetrators. Let’s leave the task of fighting crime to those properly trained for the job.

Are e-cigarettes safe?

At the Fifth Global Forum on Nicotine held at Marriott Hotel in

Warsaw on June 14 to 16, around 500 medical experts, clinical researchers, academicians, consumers, vaping advocates and tobacco executives from 60 countries pushed for the regulation of electronic cigarettes and other low-risk, noncombustible, smokeless tobacco products, which they believe can save millions of smokers from premature death. At present, some nations ban e-cigarettes, while 55 countries have some sorts of regulation. The Philippines, along with Malaysia, are the two Southeast Asian countries with large populations of ecigarette users. The electronic cigarette is a battery-operated device, which vaporizes water, nicotine, propylene glycol, glycerol and flavorings. The range of smoke-free tobacco products has expanded since then, after studies found that it is the tar from the burned cigarette, and not the nicotine, that is harmful to the body. E-cigarettes are only heated and, thus, do not produce tar, which contains thousands of chemicals. “Clearly, tobacco use is extremely dangerous to health, and there should be support and intervention available to help people switch to lower-risk ways of using nicotine,” said Dr. Caitlin Notley of Norwich Medical School, University of East Anglia (UK). Dr. Colin Mendelsohn of the University of New South Wales in Australia said the addiction to vaping is not as strong as it is to smoking. “More important, what it achieves is it removes the harm from smoking. You remove the harm by taking away the smoke. What kills people is the smoke. The nicotine is relatively harmless. It is what people get addicted to, but it has relatively minor health effects,” he said. “The tobacco harm reduction is about eliminating the harm. It is not about necessarily eliminating nicotine. We are not too worried about the nicotine. We just want to stop the smoke, which could kill them,” said Mendelsohn. Dr. Paul Newhouse of Vanderbilt University’s School of Medicine unveiled results of studies showing that nicotine stimulation improved memory and cognitive functioning, and helped alleviate depression among select study participants. Sarah Jakes, a United Kingdombased consumer group representative, said vaping is equally pleasurable but less risky than the traditional burning of cigarettes. According to the 2015 report of Public Health England, e-cigarettes are 95-percent less harmful than smoking, as the harmful chemicals present in cigarette smoke are either not present in e-cigarette vapor or only found at much lower levels.

E-mail: ernhil@yahoo.com.

Part Five

Epira

T

HERE is no subject bitterly stirring up the public’s anger more than rising electricity bills, high oil prices and gas rates, as these affect households, motorists and the commercial and industrial sectors. Unfortunately, the Executive and Congress, the two branches of government where the wrong policies originated, have not done anything to correct the problem.

When Congress and President Gloria Macapagal-Arroyo made into law the Electric Power Industry Reform Act (Epira or Republic Act 9136), they justified their action “to ensure the quality, reliability, security and affordability of the supply of electric power.” Likewise, in their declaration of policy, they made it clear that the law shall “protect the public interest, as it is affected by the rates and services of electric utilities and other providers of electric power.” More than a decade after the Epira was passed, consumers continued to bear skyrocketing electricity rates and experience brownouts. A big section of the country’s population, especially in the rural areas, remained without electricity. Incongruously, these were the striking opposite of the things promised by Epira. Why, then, do problems continue to beset the power industry? It is worth noting that another objective also written in Epira’s declaration of policy was to “provide for an orderly and transparent privatization of the assets and liabilities of the NPC.” Epira changed the Philippine energy landscape, as it accelerated the privatization and deregulation of all power-industry sectors.

Debilitating give and take policy

The fundamental question is: who benefited and suffered most from Epira? With private companies venturing into power generation, the situation reeked of profits for the oligopoly of a few corporate elite, families that were long entrenched in business interests. Under Epira, power purchase agreements are legitimized, giving birth to “take or pay” arrangements that compel consumers to pay for the production costs of electricity as projected by private corporations and not for the actual electricity they only consumed. While PPA is no longer reflected in current electricity bills, it is unbundled into other several charges, such as generation, transmission and distribution rates, as well as systems-loss charges. The public is also paying for NPC’s stranded debts, which still amounts to P698.9 billion as of 2014, in the guise of “universal charge.” These NPC debts continued to grow today despite repeated power-rate increases intended to cover it, and these rate increases were, in fact, shouldered by ordinary consumers. It is also Epira’s aim to “ensure transparent and reasonable prices

Bloomberg Opinion

T

he lawsuit filed last week by the New York State attorney general’s office makes it clear that Donald Trump and his family treated the Donald J. Trump Foundation not as a legitimate charity but as a pass-through vehicle that benefited Trump, his businesses and his presidential campaign. The key phrase in the lawsuit is “empty shell,” which is lawyer-ese for a corporation that does nothing, has no purpose and exists merely as a piece of

paper and a bank account. If the idea of the empty shell corporation is fresh in your mind, that might be because we learned in May that Michael Cohen, Trump’s former lawyer, also created and used a shell corporation, Essential Consultants Llc., to receive payments from companies seeking access to Trump. Like the Trumps, Cohen treated his shell as a pass-through for all kinds of transactions. Those included the hush-money payments from Trump to adult-film actress Stormy Daniels and the still-murky payments to a California company called Demeter Direct,

of electricity in a regime of free and fair competition.” More than a decade after its enactment, the control of more than half, or 52 percent, of the total generation capacity of the country is chiefly at the mercy of the top 4 power players: San Miguel Energy Corp., AboitizPower, the Lopez Group and the group of businessman Manuel V. Pangilinan. Other tycoons have also entered into the energy business. The unquestionable fact is that power rates have steadily increased since the private sector came to control it. In fact, the Philippines is now one of the countries with the most expensive power rates in Asia. This deterred foreign investors to build businesses here, diverting their projects to neighboring countries where power costs are much cheaper: Indonesia, Thailand, Malaysia and, especially, China.

Critical issues

Privatization of the power sector has failed to ensure public benefits as promised, as shown by the experience of New Zealand, the United States and countries in Latin America and Asia. In many cases, the reform programs created more problems for the sector itself, consumers or whole communities. In more than 10 years, the world witnessed a series of disastrous brownouts, skyrocketing power rates, increasing corruption and financial problems in the sector, bringing to light the grim consequences of deregulation and privatization of the power sector. Actually, Asian Development Bank (ADB) and World Bank’s powersector reform programs came from an erroneous diagnosis, now known as the Washington Consensus, exposed in this column on March 13, that public ownership and government monopolies inherently lead to poor performance of public utilities and, eventually, financial ruin.

This has, in turn, spawned the wrong prescriptions, focused on handing over ownership to the private sector. Meanwhile, the Freedom from Debt Coalition (FDC), a highly reliable social-economic think tank, said the government abandoned the social contract that existed with its constituents, surrendering its obligation to private hands after setting up the electricity infrastructure. Power-sector reform programs rendered the public vulnerable to high electricity cost, profit motive of private power firm and loss of control over environment regulation. The end-result pointed toward significant impairment of consumer protection and transfer of corporate debts into public hands. FDC said requiring the implementation of power-sector reform program as a condition for loan disbursements illustrated the way the ADB and other international financial institutions’ belief in a one-sizefits-all model applicable to countries everywhere. These reforms in the power sector were enforced regardless of differences in the economic level of countries, the level of development of their power sectors, the number of people connected to the grid and the roots of the crisis faced by various public or stateowned utilities. Indonesia and the Philippines have different stages of power-sector development, different models of electricity-market structure and different conditions, in terms of energy sources. Yet, the FDC said, the models and phases for power reform imposed by the ADB and the World Bank on the two countries were almost the same. To be continued To reach the writer, e-mail cecilio.arillo@ gmail.com.

What Darwin and the Model T can teach Toyota By Anjani Trivedi Bloomberg Opinion

H

enry Ford’s Model T revolutionized mobility, assembly lines and society in the early 20th century. Since then, though, it’s difficult to say whether automakers have ever truly transformed themselves and the economy, or have just continued to evolve. Toyota Motor Corp. has been trying to prove it can revamp itself. After a slew of statements in recent weeks, the Japanese car giant announced on Thursday a shakeup of its board and top executive positions, to show that it can “transcend practices of the past” and survive in what it called an era of profound transformation. That came a day after Toyota’s splashy $1-billion investment in Singapore’s Grab Holdings Inc., the biggest-ever bet by an automaker on ride hailing. In keeping with the theme, Toyota had already declared this year its intention to become a mobility company—a provider of futuristic devices and services that goes beyond merely making cars. Over the past few years, it’s pumped out a steady stream of press releases on subjects ranging from motors that are less dependent on rare-earth materials, to clean-energy batteries

like hydrogen-based fuel cell stacks, to efforts toward “mobility as a service” and connected cars. There’s also its $2.8-billion research institute, a ride-sharing partnership with Uber Technologies Inc. and a pilot program with Getaround. Investors have cheered these actions and lofty ambitions. But commercialization of these projects remains years off, as does scalability. Toyota’s filings still state that the company doesn’t consider any of its intellectual property “to be so important that their expiration or termination would materially affect” its business. Carmakers have been steering toward the services model for a couple of years, so neither the Grab investment nor the mobility proclamation is groundbreaking. Toyota announced a strategic partnership with Uber in 2016 to create leasing options, with no disclosed financial amount. General Motors Co., meanwhile, has been on an aggressive foray since 2016 when it made a $500-million investment in Lyft Inc., acquired Sidecar Technologies Inc. and set up Maven, its own car-sharing unit. BMW AG has DriveNow, and Daimler AG has Car2Go (which they are combining). How do all these look on Toy-

Temptation lies inside Trump Foundation’s shell By Noah Feldman

Tuesday, June 19, 2018 A7

controlled by a man named Mark Ko who says he has a connection to Korea Aerospace Industries Ltd. The common denominator here is the use of a company as an alter ego for an individual—essentially an all-purpose vehicle for doing whatever you want behind a corporate veil. That’s sometimes legally permissible for a limited liability corporation. It’s definitely not legal for a nonprofit charity, which is why the New York lawsuit was filed. The comparison between the Trump Foundation and Cohen’s pass-through tells us something significant about the

mind-set of Trump and the members of his family and his organization: They’re not very interested in the rules of corporate governance. They see corporations, whether for-profit or not, more like bank accounts—places to park and move money. As long as the law is being followed, there’s nothing inherently wrong with this attitude. The problem is that using corporations as pass-throughs is, in practice, an invitation to break the law. When it comes to for-profit corporations, the temptation is to evade paying taxes and obscure the flows of money

ota’s financial statements? These projects obviously cost money. The company typically uses cash generated from operations to fund capital spending and research and development. Toyota invested about ¥3.1 trillion ($28 billion) in research and development between fiscal years 2015 and 2017. Those expenses are forecast to stay flat for the next fiscal year at around ¥920 billion. It’s unclear how the Japanese automaker splits investments between its various endeavors, and difficult to determine what results the outlays have produced so far. That’s not the case for all carmakers. A look at GM’s earnings, for instance, shows spending on testing and trialing advanced technologies is treated as a sunk cost until they become viable. The annual run rate of losses due to investments is upward of $500 million for the likes of GM and Ford Motor Co., Bloomberg New Energy Finance analysts have found. Costs also show up in the form of goodwill charges on acquisitions of smaller technology companies—GM said that acquiring self-driving car unit Cruise Automation resulted in $490 million of goodwill. Toyota could be collecting data and running research projects on small samples until it lays out the

motor or battery of the future. But the ground is shifting, as Toyota itself says, and companies need to stay firmly focused on survival mode. In Toyota’s case, this means for instance strategies focused on maintaining the advantages of its Prius in the global hybrid car market, where it has lost share. The company remains behind in China, too—a key market for all automakers in the next few years. A constant for car companies is grappling with thin margins. To sustain the spending needed to keep pace with industry change, they can either cut more costs or produce more efficiently. While Toyota has heralded its cost-reduction efforts, its most recent earnings announcements show that it’s keeping expenses at 70 percent to 80 percent of sales, broadly in line with global auto peers. Investors should wonder when spending will be converted into returns. The array of technologies and new businesses that Japanese automakers are investing in “may not produce an appropriate return for a while, if ever,” according to Moody’s Investors Service. McKinsey & Co., on the other hand, estimates that artificial intelligence could help boost carmakers’ productivity by around 1 percent a year by 2025.

from shady characters to other shady characters. When it comes to nonprofits, the temptation is to ignore the public, charitable purpose of the corporation and turn it into a personal fiefdom that is nominally tax-exempt. Add federal election law into the mix, and the temptations get stronger still. If pass-throughs are used to make campaign contributions, in practice or in kind, and the contributions go unreported, federal law is typically being violated. The Trump Foundation shenanigans connected to the 2016 election may well have violated federal election law. The

New York suit alleges a “$2.83-million donation in kind” from the foundation to the campaign. That’s not only a violation of the foundation’s charter, which is what the New York suit is focused on. It also, if unreported, likely violates the federal law that requires disclosure of contributions. If this is how the Trump Foundation operated, what would law enforcement find if it got a look at the inner workings of the Trump Organization? There could potentially be more campaign finance violations, if the company also made unreported contributions.