Businessmirror march 20, 2018

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Tuesday, March 20, 2018 Vol. 13 No. 160

Carriers to take a ‘big hit’ from closure of Boracay By Ma. Stella F. Arnaldo

@akosistellaBM

Special to the BusinessMirror

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OCAL carriers will be incurring massive losses from the planned closure of Boracay Island, even as they continue to wait for the final word from the government when the closure will start and for how long.

142,000 The reported number of Cebu Pacific passengers with confirmed flights to Caticlan and Kalibo from April 26 to June 25

Sources in the aviation sector have raised some rough estimates on the industry losses based on a two-month closure, from April 26 to June 26, 2018, after the airline representatives met with Tourism Secretary Wanda Corazon T. Teo on March 13. Continued on A2

House ignores Palace, okays divorce bill

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Bridging the gap Manny B. Villar

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THE ENTREPRENEUR

he booming economy and the government’s massive infrastructure program are generating a lot of employment opportunities for Filipino workers. The Duterte administration’s flagship “Build, Build, Build” program requires an estimated 2.5 million workers in the construction industry.

In the private sector, the continuing construction of shopping malls, which is driven by growing consumption and higher purchasing power of consumers, is expected to increase demand for employees in the retail business, including accountants. Continued on A10

By Manuel T. Cayon @awimailbox Mindanao Bureau Chief

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The bill approved by the House of Representatives allowing absolute divorce By Jovee Marie N. dela Cruz @joveemarie

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See “House,” A2

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Is Davao growing faster than the city can handle?

HB 7303 espite the opposition from Malacañang, the Hou se of R epresent atives on Monday approved on third and final reading a measure institutionalizing absolute divorce and dissolution of marriage in the Philippines. Voting 134 affirmative, 57 negative and two abstention, members of the lower chamber

2016 ejap journalism awards

HIGH FIVE Araneta Center Inc. (ACI) Senior Vice President (SVP) for Operations Antonio Mardo (from left), ACI SVP for Business Development John Castro, Megawide Construction Corp. Assistant Vice President Romeo Furigay and ACI Senior Management Consultant Rowell Recinto hold up painted palms during the topping-off ceremony for the high-rise Cyberpark 2 Tower in Araneta Center, Cubao, Quezon City. A topping off is a builders’ rite traditionally held when the last beam (or its equivalent) is placed atop a structure during its construction. Cyberpark 2, a Philippine Economic Zone Authority-registered facility, will cater mostly to the business-process outsourcing sector. See story on B1. NONOY LACZA

AVAO C I T Y— M a n i l a’s congest ion and Cebu’s saturating business panorama are turning opportunities over to this city, whose snowballing attraction for business and investment started way before President Duterte became the country’s 16th Chief Executive. But when Duterte became President, what used to be a convention destination for years also saw a steady influx of relocating or expanding corporate operations. This city is now experiencing a sudden swell in inquiries and actual corporate and business operations, and tourism and housing. Naturally, concerns over sustainability and its ability to continue

absorbing the robust growth have been raised. As of last year alone, it breached the 2-million mark in tourist arrivals. “This, as travel advisories have come in succession in the last two years for foreign nationals visiting Mindanao.” “Now, hotels are reporting overflowing guests and could not accommodate any more guests if national conventions or national gatherings are held simultaneously,” Arturo Milan, president of the Davao City Chamber of Commerce and Industr y, told the BusinessMirror. Milan brushed off the explanation that the trend was due to the usual convergence of business and politics into the hometown of any incumbent President to seek favor and political clout. Continued on A12

Risk Assessment/ Penetration tests/ Ethical hacking

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By Henry J. Schumacher

NUVOLANEVICATA | DREAMSTIME.COM

hether we like it or not, compliance and ethics management cannot be ignored when doing business locally and/or internationally. Successful compliance programs rest on a foundation of successful risk assessments. Continued on A12

PESO exchange rates n US 52.0020

n japan 0.4910 n UK 72.5012 n HK 6.6301 n CHINA 8.2165 n singapore 39.4523 n australia 40.1403 n EU 63.8949 n SAUDI arabia 13.8669

Source: BSP (19 March 2018 )

A2 Tuesday, March 20, 2018

BMReports BusinessMirror

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Carriers to take a ‘bighit’ from closure of Boracay Continued from A1

But Environment Secretary Roy A. Cimatu said a news briefing two days after that the closure could reach a maximum of one year. (See, “Cimatu’s decision: Close Boracay for up to 1 year,” in the BusinessMirror, March 16, 2018.) Paolo Misa, marketing head for Air Juan, which operates scheduled and charter flights between Manila and Boracay, and Busuanga and Caticlan, told the BusinessMirror “we’ll take a big hit,” adding that the Boracay/Caticlan routes account for about 15 percent of the airline’s business. The Manila-Boracay nine-seater seaplanes cost about $4,000 (P208,000) to charter, one way. With summer being the peak travel season, he added, the carrier usually has about one chartered flight a week to Boracay. For a two-month closure alone, that will cost the airline at least P1.66 million, based on the fare quoted above. Misa admitted that the impact on the airline’s finances will be higher if carriers are made to absorb cancellation or rebooking fees. He noted that the carrier’s flights usually have a passenger load factor of 90 percent, meaning that each plane carries eight confirmed passengers per flight. The airline’s route between Busuanga and Caticlan using its nineseater land planes, for another, is also a profitable operation, as it carries mostly European tourists who travel to the country’s beach destinations. “We were actually contemplating to increase the flights

House. . .

Continued from A1

approved House Bill (HB) 7303, or the Absolute Divorce Act of 2018, which seeks to institutionalize absolute divorce and dissolution of marriage in the country. The bill will now be transmitted to the Senate for its own deliberation. The measure refers to absolute divorce as “the separation between married couples that is total and final where the husband and wife return to their status of being single with the right to contract marriage again.”

from the current five times a week because of the summer season, but now we can’t do that because of the planned closure,” he said. The Busuanga-Caticlan flight, one-way costs an average of P5,000 one way, per person. With a 90-percent passenger load factor, the airline is estimated to lose at least P1.6 million, if Boracay is closed for eight weeks. Aviation sources also concurred that carriers like Philippine Airines (PAL), Cebu Pacific Airways (CEB), SkyJet Airways and AirAsia Philippines, which operate scheduled flights, will incur “opportunity losses” on routes going to Caticlan or Kalibo, especially if they are made to absorb the rebooking fees of passengers. They said many of the passengers on these routes may have taken advantage of seat sales by these carriers, and if their tickets have to be rebooked, the fares on the new destinations will not cost the same as when the ticket was first booked. “For instance, the passenger bought ticket at P500 one way last year, then they will reroute to Siargao or Batanes, the airline will absorb the fare difference. That’s revenue loss or opportunity loss,” an aviation source pointed out. Charter partners of these carriers have already expressed concern about the ongoing issues in Boracay, aviation sources noted. “We are talking to our charters. Most are Chinese. This Boracay issue is wreaking havoc outside the Philippines. Our partners in South Korea, Singapore, Australia, Dubai, etc. are all worried,” said

one airline official, who requested anonymity because he had no authority to speak on the matter. The official also asked, “Where do you divert the passengers bound for Boracay? Are the other destinations in the Philippines ready? Save for Boracay, the other destinations haven’t quite caught up on tourism; the area might just be destroyed because they don’t have support systems.” Another aviation source confirmed that “January to May are usually the highest months” for bookings for local airlines for flights to Boracay via Kalibo and Caticlan, which include Chinese New Year, Holy Week and the summer break. “So definitely, the airlines will lose a big amount of money,” if the closure pushes through even for just two months starting April 26. “What more if it will for a year?” the source retorted. CEB insiders said the airline has about 142,000 passengers confirmed for scheduled flights to Caticlan and Kalibo from April 26 to June 25. The carrier has about 14 scheduled flights to Caticlan from Manila, Clark and Cebu, and two flights from Manila to Kalibo. The airline also has chartered flights to Kalibo from several destinations in China “about once or twice a month,” with each flight carrying 180 passengers, insiders added. PAL insiders said inquiries from passengers on flights to Boracay have “definitely” been received. “They’ve asked us, ‘what are you going to do? Are you going to cancel?’ We can only answer, ‘we don’t know yet.’ We will, of course, adjust

Under the bill, petition for absolute divorce or dissolution of marriage shall be filed in the proper court by the interested party or parties within five years of the accrual or cause of action. The measure also provides for the finality of the decision or decree. Except for decisions or decrees in summary proceedings, it shall immediately be executory, barring an appeal before the Court of Appeals. It added that petitioners seeking divorce are ensured inexpensive and affordable court proceedings in securing an absolute divorce decree.

T h e b i l l a l s o s t at e s t h at grounds for the grant of an absolute divorce decree shall include the reasons for legal separation and annulment of marriage under the Family Code, de facto separation for at least five years, legal separation by judicial decree for at least two years, psychological incapacity, gender-reassignment surger y, irreconcilable differences and joint petition of spouses. In addition, the measure said overseas foreign workers shall be given priority with respect to court hearings. The court shall set the reception of evidence,

[the schedules and routes] when the government announces its plan.” PAL has at least five scheduled flights a day to Caticlan from Manila, Clark and Cebu, and at least five scheduled flights to Kalibo from Manila and Cebu. The carrier also has “multiple charter flights by tour groups from China, as well as scheduled flights from Taipei and Korea to Kalibo,” said the airline insiders. Meanwhile, PAL and CEB issued official statements regarding the planned closure of Boracay. “We will wait for the final directives from the government. We had meetings with our charter partners and have given them our plans for their review and support,” PAL President Jaime Bautista said. CEB Spokesman Charo Logarta Lagamon said: “We have been monitoring the developments regarding the government’s rehabilitation of Boracay Island. We will take the necessary actions as soon as we have clarity on the government’s plans and timeline.” She added: “In the event we are required to cancel services, we will offer full refunds along with opportunities to transfer to other destinations where seats are available.”

‘Awkward’

DENR Undersecretary Jonas R. Leones, the designated spokesman of Secretary Roy A. Cimatu, said: “It will be awkward to see the demolition while there are tourists nearby.” A stop in tourism activities, he said, means respite from pollution, particularly the direct discharge of upon availability of the petitioners, for not more than two consecutive days. Summar y judicial proceedings, or the expeditious manner of resolving a divorce petition without regard to technical rules, are also provided for under the bill. Petitioners may or may not be assisted by a lawyer in summar y judicial proceedings, and the proper court may allow presentation of evidence ex parte, as needed. Grounds under summary judicial proceedings include when one of the spouses has contracted a bigamous marriage or has been

untreated wastewater to the beaches and aquifer, encroachment on forestland, wetlands and beaches; as well as excessive garbage production. Boracay is the country’s top tourist destination, chipping in around P56 billion a year to the economy. “As early as 2008, the population of Boracay because of tourism has exceeded the island’s carrying capacity,” he said. “By all indications, Boracay has exceeded its carrying capacity: water pollution, traffic and garbage problem and perennial flooding.” He confided that the DENR chief’s decision to recommend the closure of Boracay was due to the failure of the two water concessionaires and other stakeholders to commit support to the government’s rehabilitation effort. “When the secretary spoke with the water concessionaires, he was dismayed because the water concessionaires cannot give any assurance of fixing the sewer lines,” he said. On the demolition of illegal structures, Leones said the Task Force Boracay is banking on the cooperation of the concerned local government unit—the provincial government of Aklan and the municipality of Malay. Sought for reaction on allegations that the ongoing crackdown on Boracay will pave the way for foreignfunded, multibillion-dollar development projects, Leones assured that construction in Boracay will not be allowed unless the Task Force Boracay is done fixing the many problems besetting the island. A six-month construction mora-

torium is now in effect on the entire island. As early as February this year, the DENR has ceased accepting online applications for environmental compliance certificate for projects on Boracay Island. Leones, however, said he is not fully aware of the status of big-ticket projects that are in the pipeline on the island. “It is awkward to allow construction of new projects while we are demolishing in other areas.” However, Leones said that if a project will be constructed in a private land and will comply with various environmental laws, it will be allowed. “The government has no right to stop construction, especially if it is on private land, as long as all environmental regulations are observed,” he said. Two big development projects are currently in the pipeline targeting the world-famous tourist destination. Property developer DoubleDragon Properties Corp. is planning to construct a “green hotel” at a 2-hectare beachfront property on the island. Based on news reports, Galaxy Entertainment and its local partner Leisure Resorts World Corp. are seeking regulatory approval for the $300-million to $500-million casino project in the country’s top tourist island. L a st we e k t he Ph i l ip pi ne Amusement and Gaming Corp. said the plan of the Macau-based casino operator and its local partner to build the integrated casinoresort on the island will proceed despite the impending closure of Boracay.

sentenced to imprisonment for six years, among others. Except for grounds under summary judicial proceedings, the court shall start trial only after a six-month cooling-off period after the filing of a petition. During this time, the court shall exercise all efforts to reunite and reconcile the parties and the court shall await the submission of the report of the public prosecutor. The mandatory cooling-off period shall not apply in cases that involve acts of violence against women and/or children of the petitioner, under the Anti-Violence Against Women and Their Children Act of 2004. Neither shall it apply in cases involving an attempt against the life of the other spouse, a common child or a child of the petitioner. If the petitioners agree to reconcile, the court shall recognize the reconciliation through a joint manifestation under oath duly signed by the petitioners and submitted to the same court where the divorce petition was filed.

President has saved the Filipino family with his strong position against d ivorce. We strongly agree with the President that divorce would be very detrimental to mothers and children,” Atienza said in reaction to the statement of Presidential Spokesman Harry L. Roque Jr. that the President is against the proposal. Atienza had earlier expressed his strong opposition to HB 7303 during plenary deliberations. “We admire the President’s display of strength and character. He did not allow himself to be stampeded by the mob on this critical issue. His strong leadership will forever be remembered for saving the Filipino family and future generations. I am sure that, with his strong position against divorce, this bill will most likely be relegated to the archives [in Congress, particularly the Senate],” Atienza said. The Gabriela party-list said the divorce bill was filed in response to the clamor of women trapped in abusive relationships and “the need for the government to provide another option for irreparable marriages, in recognition of this reality.” “It is not at the President’s bidding that we file legislation. Let the legislative bill take its course,” it added. Moreover, Party-list Rep. Edcel Lagman of Albay, one of the principal authors of the bill, said the institution of absolute divorce and dissolution of marriage is definitely not for couples in harmonious, happy and vibrant marital relationships, which accounts for the overwhelming majority of Filipino spouses. “It is a legislation for exceptional cases when the marital bond is irremediably severed, since marriage still is a human institution, which could collapse and wither because of human frailty and mortal limitations. Unfortunately, what God had put together, couples in shattered marriages beyond repair have put asunder,” Lagman said. “In divorce and dissolution of marriage proceedings, there is no more marriage to protect or union to destroy because the marriage has long perished.

Unconstitutional

Senior Deputy Minority Leader Lito Atienza of Buhay on Monday criticized the leadership of the lower chamber for passing the proposed divorce law. According to Atienza, the proposed law is against the Philippine Constitution. “It is definitely unconstitutional. It is expressly stated in Article XV on The Family, Section 2, that ‘Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State.’” “The Constitution is very clear and there is no room for misinterpretation. So, how can they interpret their proposed law as constitutional. Every definition that can be found on the word inviolable states that it is unassailable, cannot be broken, cannot be interchanged and anything inv iol able is considered ha llowed, holy, sacred, sacrosanct and untouchable,” he said. Atienza welcomed President Duterte’s stand against the passage of the divorce law. “We welcome and fully appreciate President Duterte’s stand against the divorce law. T he

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Dismissal of drug-related cases lined up for presidential review By Rene Acosta @reneacostaBM

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till reeling from the dismissal of the complaint against alleged drug lord Kerwin Espinosa, among others, National Police (PNP) chief Director General Ronald M. dela Rosa said that President Duterte will review every case relating to illegal drugs that will be dismissed by the Department of Justice (DOJ). “He told me that he is going to review. He is going to use his power to review over resolutions coming out from the DOJ, especially resolutions dismissing drug cases,” the PNP chief told reporters at a news briefing on Monday. Dela Rosa said he was told by the President of his decision during their conversation in Baguio City, where they both attended the graduation ceremony at the Philippine Military Academy on Sunday. Duterte’s decision had been prompted by the dismissal of the charges against Espinosa, tagged as the top drug lord in Eastern Visayas, and several others by DOJ prosecutors, due to a weak evidence, according to government prosecutors. The PNP has since filed for an appeal through an automatic review by Justice Secretary Vitaliano N. Aguirre II. Dela Rosa echoed the disappointment of the PNP over the dismissal of the case, saying policemen are putting their lives on the line just to get those involved in the illegal- drugs trade, and yet in the end, the suspects will just go scot free. “We are the ones building up those cases. Do you expect us to be happy? Our policemen are getting killed in this war on drugs…[and

yet[ the cases are [being] dismissed. What do you expect?” he said. In a 41-page resolution approved by Acting Prosecutor General Jorge Catalan dated December 20, 2017, a panel of prosecutors declared that the “uncorroborated statements” of the complainant’s witness, Marcelo Adorco, could not be admissible evidence against Espinosa and several other drug personalities. The resolution described Adorco as an “evidently self-serving witness.” Aguirre has already formed a three-man panel of prosecutors tasked to handle the motion for reconsideration filed by the PNP-Criminal Investigation and Detection Group (CIDG). In Department Order 152, Aguirre had also ordered the National Bureau of Investigation to probe the state prosecutors who composed the panel that dismissed the charges. Dela Rosa said there is a need for the PNP, particularly the CIDG, and the DOJ to work together in strengthening cases against suspected big-time drug lords. “This should serve as a wakeup call for us to work harder,” he said. He also vowed there will be no letup in the PNP’s war against illegal drugs despite the setback. Dela Rosa stuck to his earlier statement that Duterte hurt his hand after punching a wall in Malacañang in frustration after learning the dismissal of the case against the suspected druglords who were all included in his “narco list.” Earlier, Presidential Spokesman Harry L. Roque Jr. said that he did not see the hand of the President which dela Rosa claimed was hurt. “I already said so, that’s it,” dela Rosa said.

Lower chamber resets barangay and SK elections to October 8

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he House of Representatives approved on Monday the postponement of the May 14, 2018, synchronized barangay and Sangguniang Kabataan (SK) elections to the second Monday of October 2018. With 164-27 votes, the lower chamber passed House Bill 7378 calling for the amendment of Republic Act 10952 to effect the polls resetting. Based on the calendar, the election date falls on October 8, 2018. The barangay and SK elections were so far postponed twice, from October 2016 to October 2017, and then to May 2018. Rep. Reynaldo V. Umali of the Second District of Oriental Mindoro, one of the principal authors of the bill, said postponing the barangay and SK elections would give lawmakers more time to determine the proper structure of the federal government. Under the bill, all incumbent barangay officials shall remain on a holdover capacity, unless sooner removed or suspended for cause, until their successors shall have been elected and qualified. It provides that subsequent synchronized barangay and SK polls shall be held on the second Monday of October 2021 and every three years thereafter. It also provides that the term of office of the barangay and SK officials elected under the proposed Act shall commence at noon of November 30 following their election. Meanwhile, the term of office of barangay and SK officials elected in the October 2021 elections and subsequently thereafter, shall start at noon of November 30 following their election. Until their successors shall have been duly elected and qualified, all incumbent barangay officials shall remain in office, unless sooner re-

moved or suspended for a cause. Barangay officials who are exofficio members of the Sangguniang Bayan, Sangguniang Panlungsod or Sangguniang Panlalawigan, as the case may be, shall continue to serve as such members in the Sanggunian concerned until the next barangay election. The Liga ng mga Barangay at the municipal, city and provincial levels shall, not later than December 31, 2018, conduct elections for ex-officio positions in the Sanggunian under the supervision of the Department of the Interior and Local Government. The Commission on Elections shall, within 15 days after the effectivity of the Act, promulgate such rules and regulations necessary to implement the Act. For his part, Rep. Edcel C. Lagman of the First District of Albay voted against the postponement of the barangay and SK elections, saying another postponement is inordinately offensive to the right of suffrage. “It is not only grossly aggravating. It is also patent recidivism. Elections constitute the bedrock of a democratic republican system. They are the veritable periodic and anticipated political exercise by the sovereign people of retaining or purging the elected officialdom,” he said. “It is for this reason that the right of suffrage is constitutionally guaranteed. It is equally accorded to both the powerful elite and the marginalized sectors,” he added. According to Lagman, village elections are held to assure that barangay and youth officials are periodically fortified by the requisite electoral mandate for definite terms of office. “Twice, the barangay and SK elections have been postponed by the present administration for no overriding reasons, even as in the past village polls were also repeatedly reset,” he said. Jovee Marie N. dela Cruz

Editor: Vittorio V. Vitug • Tuesday, March 20, 2018 A3

Voting 33-1, House panel approves Articles of Impeachment vs Sereno By Jovee Marie N. dela Cruz

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@joveemarie

fter recommending the impeachment of Chief Justice Maria Lourdes A. Sereno, the chairman of the House Committee on Justice on Monday expressed confidence that the House of Representatives would have enough plenary votes to endorse the Articles of Impeachment to Senate impeachment court.

This, after House Committee on Justice—voting through 33-1, approved its 45-page committee report finding probable cause to impeach the chief magistrate. The committee chaired by Rep. Reynaldo V. Umali of the Second District of Oriental Mindoro, likewise, approved the accompanying 56-page Articles of Impeachment, detailing the charges against Sereno. The approved committee report and the accompanying Articles of Impeachment will be sent to the Committee on Rules which will then decide, within 10 session days, when to calendar the matter for plenary deliberation. Congress is expected to take a Lenten break on Wednesday. Once the matter is in the plenary, the House has 60 session days to finally vote on whether to send Sereno’s impeachment to the Senate for trial. “The writing is already on the wall. It will not be difficult to obtain the one-third vote [in favor of the Articles of Impeachment against Sereno]. This will probably happen after the [Lenten] break,” Umali said. Under the rules on impeachment, a vote of one-third, or at least 98 lawmakers, of the total number of House members is

needed to send the impeachment complaint to the Senate. According to Umali, the six Articles of Impeachment that the committee has prepared “will be the foundation in prosecuting this impeachment case before the Senate, as an impeachment court.” The first Article of Impeachment charges Sereno for culpable violation of the constitution and betrayal of public trust for nonfiling and nondisclosure of her sworn Statement of Assets, Liabilities and Net Worth (SALN). The committee said Sereno misled the Judicial and Bar Council (JBC) in 2010 when she claimed it is not possible to retrieve her SALNs from 1996 to 2006. She is also accused of failing to declare in her 2011 SALN 2.24 hectares of land in Mariveles, Bataan, regis-

tered under her and her husband’s name, worth around P44 million. He added Sereno failed to declare in her 2006 and 2009 SALNs the amount of P13.8 million, which is part of the more than P32 million she earned from the Piatco cases. Moreover, the committee said Sereno failed to file her SALN 17 times: for 1987 to 1997, for 1999 to 2001, and 2003 to 2005. The committee also accused Sereno of tax fraud. In the second article, Sereno was charged for corruption and betrayal of public trust for misusing a total of P18 million in public funds in the purchase of a brand-new Toyota Land Cruiser, hiring of information-technology consultant for a fee of over P11 million, and using Shangrila, Boracay for the meeting of Association of Southeast Asian Nations chief justices. Under the third article, Sereno was accused of arrogating the collegial power of the Supreme Court (SC) en banc by issuing resolutions and order without the approval of the body, or contrary to what was agreed by the en banc. In the fourth article, Sereno was charged for deliberately and maliciously abusing her position as Chief Justice and ex officio chairman of the JBC through efforts to exclude thenSolicitor General Francis H. Jardeleza from the short list of nominees to the vacant SC post, among others. The fifth article accuses Sereno of deliberately undermining and violating the principle of separation of powers among the three branches of government when, among others, she interfered in the

The writing is already on the wall. It will not be difficult to obtain the one-third vote [in favor of the articles of impeachment against Sereno]. This will probably happen after the [Lenten] break.”—Umali

investigation of the House on the misuse of tobacco excise tax funds by the Ilocos Norte government by asking Court of Appeals justices to challenge the House order by elevating the issue before the SC. The panel charged Sereno for betrayal of public trust by “willfully and deliberately” failing to comply with her oath of office and by tyrannical abuse of discretionary power. Moreover, Umali said based on the expert opinion of Dr. Geraldine Tria, who reviewed Sereno’s psychiatric evaluation that she displayed the following 5 out of 9 symptoms of mental disturbance: interpersonally exploitative; preoccupied with fantasies of unlimited success, power and brilliance; lacks empathy; has sense of entitlement and a grandiose sense of self-importance. Umali added the Judiciary is divided, noting the unprecedented move of the SC en banc to force Sereno to go on an indefinite leave. “The situation of our Supreme Court today and the Judiciary is turning from bad to worse,” Umali said, saying that several organizations within the Judiciary have joined the demand for Sereno’s resignation. “This clearly shows the divided Judiciary that would only escalate if the leadership in the third branch of government continues to be dysfunctional,” Umali added. Meanwhile, the committee rejected three charges against Sereno, namely: embellished personal data sheet in applying for the Judiciary, the issue on the judges in the case of Sen. Leila M. de Lima and the issue on the Chief Justice’s speech against the Marcos regime in 2017. Earlier, the leadership of the House of Representatives said it will wait first for the SC ruling on the removal petition against Sereno through quo warranto petition before the plenary voting on the Articles of Impeachment. According to Umali, the impeachment against Sereno will be rendered “functus officio” should her appointment be deemed invalid.

DOLE to probe hotel’s OSHS compliance after deadly blaze

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he Department of Labor and Employment (DOLE) on Monday said it is now looking into possible occupational safety and health standards (OSHS) violations of the Manila Pavilion Hotel, following a Sunday noon fire within its premises that killed five workers. DOLE Undersecretary Joel B. Maglunsod said the department will immediately deploy a quick-response team to probe the incident. “They will check the report that the [fire] sprinklers [of the hotel] did not work during the fire,” Maglunsod said in media forum on Monday. The Manila Pavilion management could face charges from the DOLE if it will proven it violated OSHS. “If the fire was due to unsafe and unhealthy workplace, the DOLE is supposed to file proper charges if warranted,” DOLE Undersecretary Jacinto V. Paras, for his part, said in a news statement. Aside from investigating OSHS compliance of the Manila Pavilion, Maglunsod said, the DOLE will also assess the needs of the workers, who were affected by the fire. He added they are ready to extend emergency employment aid and other assistance to the affected employees. The Manila Pavilion, in a news statement, categorically denied news reports, saying the

Season of penance A shopper checks on a display of religious images and articles at a shop in San Lazaro, Manila. hotel’s sprinkler system malfunctioned during the fire, and that it was caused by welding works on its second floor. “The hotel management is urging the public and media to await the final and official report from the Bureau of Fire Protection (bfp) investigation before assumptions should be made,” the statement read. “The Manila Pavilion Hotel Management is cooperating with the fire investigators and the management will see to it that the families of those affected are assisted and taken care of,” it added. Samuel P. Medenilla

Palace ready to suspend classes for whole week amid jeepney strike

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alacañan Palace has announced that it will call for a class suspension for the entire week this week if the Pinagkaisang Samahan ng mga Tsuper at Operator (Piston) pushes through with its threat to continue its nationwide strike. “If and when Piston pushes through with its threat to continue its nationwide strike, despite its unsuccessful staging today, we will call for a class suspension in Metro Manila starting today, March 20, until Friday, March 23,” a Malacañang news statement released to the media read. Piston held a transport strike

on Monday to protest the government’s public transportation modernization program, which would junk old jeepneys. Malacañang also suspended classes in Metro Manila amid the transport strike. Presidential Spokesman Harry L. Roque Jr. said they will leave it to the sound discretion of local government unit heads to suspend classes in their respective areas. The Palace also appealed to the public for their patience and understanding, especially to those who were duly inconvenienced by the strike. Bernadette D. Nicolas

Economy

A4 Tuesday, March 20, 2018 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

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DOF urges LGUs to avail of PSF and MDF kitty

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By Rea Cu

@ReaCuBM

he Department of Finance (DOF) is urging local government units (LGUs) to tap the People’s Survival (PSF) and Municipal Development Funds (MDF) created by the government to bankroll the implementation of climate changeadaptation projects in vulnerable communities and improve the delivery of basic services through the construction of water systems, roads and other infrastructure projects. Finance Secretary Carlos G. Dominguez III emphasized that LGUs should take advantage of the two funding programs administered by the DOF to build climate-resilient communities and

implement development projects in their respective cities and municipalities through grants and low-cost loans. In his recent visit to the town of Guiuan in Eastern Samar, the

finance chief gave local executives an overview of the two funding sources, and added that he would send personnel from the Municipal Development Fund Office (MDFO) and the Bureau of the Treasury (BTr) to provide detailed presentations and accept applications from interested LGUs. “The first one is a grant fund that we prov ide for climatechange adaptation. So these are protection of your shores in case there are higher tides due to the adverse effects of climate change, maybe solar electricity that we can help fund, water projects and projects sort of like building shelters for emergencies,” Dominguez said. Guiuan was the first point of impact of Supertyphoon Yolanda, which devastated large parts of Eastern Visayas in 2013. Dominguez, along with United States Ambassador to the Philippines Sung Kim and Rep. Ben P. Evardone of the Lone District of Eastern Samar, were in Guiuan on a site visit to the Secondary National Roads Development Project

that was funded through a grant by the US through the Millennium Challenge Corp. “We also have the MDFO, which

provides long-term and low-cost loans for municipalities to build public markets, build water systems, build roads, as well as municipal

The [PSF] is a grant fund that we provide for climate-change adaptation. So these are [for the] protection of your shores in case there are higher tides due to the adverse effects of climate change, maybe solar electricity that we can help fund, water projects and projects sort of like building shelters for emergencies.... We also have the MDFO, which provides long-term and low-cost loans for municipalities to build public markets, build water systems, build roads, as well as municipal halls. We are very open to that and it’s our office that manages these funds.”—Dominguez

SSS revenue reaches ₧200.5 billion in 2017

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he Social Security System (SSS) has raked in revenues amounting to P200.5 billion in 2017, with total earnings coming from members’ contributions and investment and other income. Based on the SSS’s unaudited financial report, the state-run pension fund’s total revenue for the period of January to December 2017 increased by P26.04 billion, or 14.9 percent, amounting to a total of P200.5 billion, compared to the P174.46 billion recorded in 2016. Total revenue for 2017 was also 5.6 percent higher than its target revenues for the year of P189.79 billion. “We achieved good numbers in 2017 on the back of our intensified campaign to increase our collections. We are pleased that the efforts of the SSS management and employees paid off,” SSS President and CEO Emmanuel F. Dooc said. Member contribution collections reached P159.72 billion, up by 10.6 percent, or P15.36 billion, from P144.36 billion in 2016, which represent the bulk of the pension fund’s revenue for 2017. The SSS added that the remain-

ing P40.78 billion in total revenues came from investment and other income, which soared 35.5 percent from P30.10 billion in 2016. Meanwhile, expenditures for the period, which include benefit payments and operating expenses, jumped 26.5 percent to P180.2 billion, from P142.46 billion in 2016. Broken down, P170.68 billion of the total expenditures were released for benefit payments, which climbed 28.4 percent from P132.98 billion in 2016. “In 2017 SSS fulfilled President Duterte’s promise to give higher benefits to our pensioners. We have disbursed roughly P33.5 billion to cover the additional benefit to pensioners starting January 2017. As a result, our expenditures, which were made up largely by benefit payments, saw a huge increase compared to 2016, wherein no additional benefit was enjoyed by the pensioners,” he added. Last year President Duterte approved the proposed SSS pension hike of P2,000 with the disbursement to be done in two tranches at P1,000 per tranche. Rea Cu

Lawmakers file bill to end ‘endo’ in govt

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awmakers from the Makabayan bloc in the House of Representatives on Monday filed a measure prohibiting all forms of labor contractualization in the public sector. The seven-member bloc filed House Bill 7415, which seeks to provide security of tenure and civil service eligibility to all nonregular employees who have worked continuously for at least six months in the government. Members of the Makabayan bloc are Party-list Reps. Arlene Brosas and Emmi de Jesus of Gabriela, Antonio Tinio and France Castro of ACT Teachers, Rep. Carlos Zarate of Bayan Muna, Rep. Ariel Casilao of Anakpawis and Rep. Sarah Elago of Kabataan. The government offices covered in the bill include national government agencies, local government units, state universities and colleges, government-owned and -controlled corporations, and all other government instrumentalities. A similar measure, which seeks to strengthen the security of tenure of workers in the private sector, has been approved on final reading. In a news statement, Tinio said the government should prohibit and penalize the abuse in the use

of contracts of service (COS) and job orders (JOs), as well as grant regular items to all qualified contractual workers. “Labor contractualization, in all its forms, goes against the constitutional mandate to promote full employment for all. Employees in both the public and private sectors must be regularized,” Tinio said. Tinio noted the number of COS and JOs has ballooned to 721,282 as of July 2016. “The majority of these workers are at the forefront of the delivery of social services like social workers and personnel for the distribution of the 4Ps under the Department of Social Welfare and Development, and clerks and other administrative and support personnel under the Department of Education. They are left suffering, deprived of job security, decent salaries and benefits,” he said. The progressive lawmakers also called for the scrapping of Joint Circular 1, Series of 2017, issued by the Department of Budget and Management, Civil Service Commission and the Commission on Audit, which allows government agencies to hire JOs and COS instead of ending contractualization in the public sector. PNA

halls. We are very open to that and it’s our office that manages these funds,” he added. The MDFO administers the MDF, a special revolving fund that was established for relending to LGUs to enable them to tap funds from local and international sources for the implementation of their respective development projects. Meanwhile, with a programmed annual fund of at least P1 billion in the BTr, the PSF is intended to fund climate change-adaptation projects of LGUs and accredited community organizations. The PSF Board, chaired by Dominguez, manages and administers the PSF. The PSF is on top of the annual appropriations allocated to LGUs for climate change-related programs and projects. Among the activities eligible for funding by the PSF are projects on water-resources management, land management, agriculture and fisheries, and health, and other activities that serve as guarantee for the risk insurance needs for farmers, agricultural workers and other stakeholders.

Gas steady, but diesel, kerosene pump price go up on Tuesday By Lenie Lectura

@llectura

O Plastic man A street entrepreneur braves the summer heat daily to peddle his cartful of merchandise comprised mostly of items for

household use.

China vows to finish PNR South project before 2022

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hina has promised to finish the Philippine National Railway’s (PNR) south railway rehabilitation and restoration project before President Duterte’s term expires in 2022, Malacañang said on Monday. Presidential Spokesman Harry L. Roque Jr. said the assurance was made by Chinese Ambassador to the Philippines Zhao Jianhua during their meeting two weeks ago. “I’ve talked to the ambassador of China and he told me that the term [of President Duterte] will not be finished without the revival of the south railway,” Roque said at a news conference in Camarines Sur. He added the construction of the PNR’s South Line Manila to Legazpi City in Bicol has been

awarded to China. “So be patient, the south railway will be finished, and even the President had said he will not leave without fulfilling this promise,” Roque said. The revival of the PNR’s south railway stretching from Paco, Manila, to Matnog, Sorsogon, will be funded by a loan from China reportedly worth P175 billion payable in 20 years at 2-percent interest per annum. The South Line is one of the flagship projects under the Duterte administration’s “Build, Build, Build” infrastructure program. The 683-kilometer South Line will have nine train stations in Paco, FTI, Los Baños, Lucena City, Gumaca, Pili/Naga, Legazpi/Camalig, Sorsogon City and Matnog.

Meanwhile, Roque welcomed the signing of a loan agreement with Japan worth P51.3 billion for the construction of the initial phase of f lagship subway system project. “We are moving a step closer to having our first subway system that would help alleviate traffic congestion in Metro Manila,” Roque said. He added the construction of the 36-kilometer subway will begin next year and is expected to be completed by 2025. “The subway will begin partial operations by 2020. Once completed, the subway will have 16 stations and will run from Mindanao Avenue in Quezon City up to the Ninoy Aquino International Airport,” Roque said. PNA

il firms are expected to raise the price of diesel and implement a rollback in kerosene effective on Tuesday morning. In separate announcements on Monday afternoon, a P0.40 per liter increase in the pump price of diesel will be implemented by Phoenix Petroleum, Seaoil, PTT Philippines and Eastern Petroleum. They will adjust diesel price at 6 a.m. of Tuesday, March 20. Seaoil, meanwhile, announced it will reduce kerosene price by P0.55 per liter on the same day. Other oil firms are also expected to follow suit. There is no price movement in gasoline. “This is to reflect movements in the international petroleum market,” the oil companies said. Last week gasoline and diesel prices were reduced by P0.35 per liter and P0.55 per liter, respectively. The price of kerosene was also reduced by P1.20 per liter on March 13. At the start of the month, oil firms implemented a price increase of P0.50 per liter for gasoline, P0.30 per liter for diesel, and P0.80 per liter for kerosene.

Jobs in Japan await repatriated OFWs from Kuwait–DOLE

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mployment opportunities in Japan now await distressed overseas Filipino workers (OFWs) recently repatriated by the government from Kuwait. T he Depa r t ment of L abor and Employment (DOLE) said a group of Japanese businessmen have offered to hire 1,000 OFWs from Kuwait for their f light catering business. “ They are offering a good salary of $800 dollars. That is twice what they [repatriated OFWs] receive [in Kuwait],” Labor Secretary Silvestre H. Bello III told reporters in an interview last week.

Bello said he is confident many of the 2,000 OFWs they were able to repatriate from Kuwait will qualify for said vacancies once they undergo the necessary training in the next two months. “ M a ny of t he m a re H SW [household service workers] who do cooking and cleaning, so they will not have hard time adjusting in the catering [business],” the labor chief said. In preparation for the processing, the Technical Education and Skills Development Authority (Tesda), for its part, urged the repatriated OFWs to apply for the training during its two-day special National Technical and Vocational

They are offering a good salary of $800 dollars. That is twice what they [repatriated OFWs] receive [in Kuwait].”—Bello

Education and Training enrollment next month. Tesda Director General Guiling A. Mamodiong said the event will be held on April 5 and 6 at Tesda technology institutions nationwide. “They can apply in the jobs that will be offered by our partner companies and industries in the job fair and they could also register in

out technical-vocational courses for frees skills training or upgrade their skills,” Mamondiong said in a news statement. The Tesda said the nationwide enrollment aims to address the needs of the repatriated OFWs from the Middle East, as well as the manpower needs of the local construction and business-process outsourcing industries. Samuel P. Medenilla

A BusinessMirror Special Feature

E U R O PAY M A S T E R C A R D V I S A Tuesday, March 20, 2018

www.businessmirror.com.ph

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EMV chip card: A global industry standard for secure payment transaction

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By Leony R. Garcia

ITH the BSP’s (Bangko Sentral ng Pilipinas) directive for banks to shift to EMV chip-enabled cards by June 30, 2018, more monetary institutions have turn to the global standard for secure payment transactions. No less than BancNet, Philippine-based interbank network connecting the ATM networks of local and offshore banks, has sought the help of FIME, the world’s leading EMV migration service providers for domestic and international card payment schemes, to support the country’s migration to chip card technology. FIME is a trusted provider of consulting services, certification and tools. It enables customers to bring seamless card and mobile transactions services to market effectively and confidently using secure chip or cloud-based solutions. The mandate comes as the country continues to experience robust growth in electronic payments. With an average Filipino consumer owning more than one payment card and the positive attitude of Filipino consumers towards electronic payments, BancNet sees the need to reinforce the importance of security best practice. The main component of the migration program was the signing of a memorandum of agreement with VISA for them to help BancNet’s accelerate its migration to EMV chip card. The agreement allows BancNet to access VISA’s EMV implementation standards to facilitate

EMV chip conversion for all domestic transactions. This includes issuing chip-enabled cards and working to ensure ATMs and point-of-sale terminals meet the internationally recognized chip-standards. This includes, not just issuing chip-enabled cards, but also working to ensure ATMs and point-of-sale terminals meet the internationally recognized chip-standards originally by January 1, 2017. The deadline was extended to June this year. Visa Inc. is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. In addition to assisting local banks with the implementation of the EMV chip standard, Visa constantly develops strategies designed to approach risk management and innovation holistically. This involves fraud prevention measures, consumer protection, threat and fraud detection and response, and partnerships that allow Visa to build on the security introduced by technical innovations. EMV chip card contains an embedded microprocessor which creates a new transaction code every time the card is used. This anti-

counterfeit fraud measure was not possible with traditional magnetic stripe cards. Upon the completion of the migration, BancNet’s member banks will be highly protected against counterfeit fraud and less likely to be targets for skimming and data theft. BancNet will thus be able to4 further strengthen the security of its ATMs as well as fundamentally bring greater security to the delivery of financial services across all channels. FIME has operations across America (Canada and the United States), Asia (Japan, South Korea and Taiwan), Europe (France), India and the Middle East (Dubai). With 11 offices around the world, serving more than 3,000 clients, FIME combines its global expertise and local knowledge to support its customers. FIME’s EMV team is supporting BancNet with consulting services to bring the best practices for EMV and the migration process. Visa’s Card Specification VIS1.5 is being used as the foundation for the migration. Currently, FIME’s EMV team in on board to setup and define the EMV Certification program for host, terminal and card personalization; develop the test tools and provide validation services for Host, Terminal and Card Personalization; and help prepare the necessary process guides to administer and operate the testing and certification activities. The EMV chip standard, a global industry standard for a secure payment transaction, is developed by EMVCo – which is collectively owned by American Express, Discover, JCB, MasterCard, UnionPay and Visa. “As the country’s largest multi-bank, multi-channel payment gateway, BancNet is committed to ensuring that its members’ cardholders receive the best and most stable security in all transactions. Visa’s proven standard, backed by years of global experience and expertise, gives us a lot of confidence that we will succeed in our EMV migration,” BancNet said.

Why Get an EMV Card? E MV—named after its developers Europay, Mastercard, and Visa—is the global standard for debit, prepaid, and credit card payments using chip card technology. A card equipped with EMV technology has a computer chip (that looks like a SIM card) embedded on its front side. Debit cards include ATM cards, cash cards and pre-paid cards, Card information is stored securely in the chip. This makes it harder for anyone to steal data while the card is being used in a transaction at a chip-enabled ATM or payment terminal.

Why is my card being changed into an EMV/chip card?

Is it more secure than my old ATM and credit cards?

THREE things differentiate the chip card from the magnetic stripe card:

YES. The old card has a magnetic stripe at the back where card information is stored. That info is “static”, which means that it’s always the same information for every transaction – making it relatively easy for fraudsters to skim or copy and transfer to a counterfeit card. In contrast, the chip in an EMV card generates a unique code for every transaction. Even if a criminal manages to steal the code, it is useless as the code will not work a second time, and cannot be traced back to the cardholder’s account.

THE chip card offers more security for your card data and transactions hence reducing the possibility of fraud due to skimming and counterfeit cards. The card is also advantageous for those who need to withdraw cash or make payments abroad as the chip card is aligned with global standards. At a certain point in time, your old magnetic stripe cards will be blocked by your bank.

What makes a chip card different from the magnetic stripe card?

nAn embedded chip which can be seen on the front. nAn expiry date (month/year) – which is a requirement of the EMV standards. nThe CVV (Card Verification Value), a three-digit number printed on the signature panel on the back of the card.

How to Get a New EMV Card

HERE are the simple steps to replacing your non-EMV card with a new one: Go to your branch of account (Some banks such as Maybank,

Metrobank, and RCBC allow claiming of EMV cards at any branch.) Present at least one valid ID. Your bank may also require you to surrender your old card. Wait for the bank to issue your EMV card. You may get it on the same day or several banking days after. Once you receive your new card, the bank will automatically deactivate your old card. Activate your EMV card immediately. You can’t use the card until you’ve activated it. Follow the bank’s instructions for your card activation. Banks advise their clients to personally claim the replacement ATM or debit card at their branch of account. However, your bank may let you request for card pickup at your preferred branch if your original branch’s location is too far from your home or office. If your ATM card is linked to a payroll account, you don’t need to go to the bank. Coordinate directly with your HR department regarding your new EMV card. OFWs can assign an authorized representative to take care of their non-EMV card replacement. Banks require authorized representatives to present a copy of the OFW’s ID, their own valid ID, and an authorization letter.

A6

The World

Tuesday, March 20, 2018 • Editor: Lyn Resurreccion

BusinessMirror

www.businessmirror.com.ph

US, S. Korea, Japan discuss denuclearization, summits

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EOUL, South Korea—Top United States, South Korean and Japanese officials discussed how to achieve the complete denuclearization of the Korean Peninsula during weekend talks ahead of upcoming inter-Korean and US-North Korean summits, Seoul said on Monday.

South Korean officials who visited Pyongyang recently say North Korean leader Kim Jong Un agreed to hold talks with South Korean President Moon Jae-in in late-April. Seoul says Kim proposed a meeting with P resident Don a ld J. Tr u mp, who agreed to meet him by the end of May. The developments have raised hopes for a potentia l brea kthrough in the North Korean nuclear crisis. But many experts say animosities would flare again if the summits fail to produce any progress and leave the nuclear issue with few diplomatic options. North Korea has yet to confirm North Korea-US talks. US National Security Adviser H.R. McMaster met his South

Korean and Japanese counterparts, Chung Eui-yong and Shotaro Yachi, in San Francisco for talks over the weekend on denuclearization and the summit talks, South Korea’s presidential office said in a statement. They agreed to maintain close tr i latera l cooperation in the next several weeks and shared a view that it’s important not to repeat past mistakes, the statement said. It didn’t elaborate but likely refers to cr iticism t hat Nor t h Korea prev iously used disarmament negotiations as a way to ease outside pressure and win aid while all along secretly pressing its weapons development. Appearing on CBS’s Face the Nation aired last Sunday, South

Choe Kang Il, a senior North Korean diplomat handling North American affairs, is seen at the Beijing Capital International Airport in Beijing on March 18. Choe is heading to Finland for talks with the US and South Korea. Kim Jin-bang/Yonhap via AP

Korean Foreign Minister Kang Kyung-wha said Kim had “given his word” that he was committed to denuclearization. “He’s given his word. But the significance of his word is—is quite—quite weighty in the sense that this is the first time that the words came directly from the North Korean supreme leader himself, and that has never been done before,” she said. Kim’s willingness to negotiate

He’s given his word. But the significance of his word is—is quite—quite weighty in the sense that this is the first time that the words came directly from the North Korean supreme leader himself, and that has never been done before.”—Kang

over his nuclear program is a step forward, but many experts remain skeptical about how sincere he is about giving up a nuclear program that his country has built for decades despite toughening international sanctions. Chung, who headed a highlevel delegation to Pyongyang and met Kim during his March 5 and 6 trip, says North Korea told his delegation it won’t need to keep its nuclear weapons if military threats against it are removed and it receives a credible security guarantee. T he North has long maintained such a stance, saying it won’t abandon its nuclear weapons unless the United States pulls out its troops from South K ore a a nd Japa n a nd s to p s reg u l a r m i l it a r y d r i l l s w it h South Korea that it views as an invasion rehearsal. A senior North Korean diplomat, meanwhile, flew to Finland last Sunday for talks with former United States officials, as well as American and South Korean civilian academics. The meeting, set for Tuesday and Wednesday, is a possible oppor t u n it y to e x a m i ne t he Nor t h ’s s i nc e r it y a b out it s denuclearization pledges. North Korean officials and former US officials and experts have often held such talks, known as “Track-2.” Bloomberg News

Putin sweeps to new term as tensions spiral with West Saudi prince defends

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ladimir Putin cruised to a landslide victory in Russia’s presidential vote, extending his 18-year rule, amid escalating confrontation with the West. The Kremlin’s longest-serving leader since Soviet dictator Joseph Stalin had almost 77 percent of the vote with about 99 percent of the ballots counted, putting him on track for a new six-year term. The results represented record support for Putin, who barely campaigned before last Sunday’s vote and faced no real competition in an election that even some of his seven rival candidates described as a farce. “Thank you very much. Together, we’ll take on a great task in the name of Russia,” a triumphant Putin told a crowd of flag-waving supporters at a rally near Moscow’s Red Square last Sunday evening. “Success awaits us.” The Russian leader, 65, rules unchallenged at home even as the economy stagnates after the longest recession in two decades. Abroad, he faces spiraling conflict after the United Kingdom directly accused Putin of ordering the poisoning of former double agent Sergei Skripal earlier this month. He has defied United States and European Union sanctions over his 2014 annexation of Crimea and diplomatic pressure over Russia’s support for Syrian President Bashar al-Assad. Putin’s defiance of the West has played well in the campaign with an electorate nostalgic for Russia’s superpower status.

No retreat

“Putin isn’t going to retreat an inch,” said Evgeny Minchenko, a Moscowbased political consultant who advises the Kremlin. “He’ll push for maximum independence from the

West and build alliances with other centers of power.” Putin, who’s also been accused of cyberattacks and election meddling, including in the US 2016 presidential vote, secured the results, despite opposition calls for a boycott. Turnout was reported high at about 67 percent. “I came here to vote for stability,” said Larisa Kuznetsova, a 62-year-old pensioner, outside a polling station in central Moscow. “That’s what we count on from our president in such a frightening world.” Official turnout figures in different regions of Russia are being inflated by as much as 18 percentage points, opposition leader Alexey Navalny said on Twitter, citing data compiled by his observers at polling stations. Navalny, who was barred from contesting the election, had called for a boycott of the vote in protest. There’s been “widespread fraud” and observers have caught many instances of ballot-rigging on camera, according to Open Russia, an opposition organization founded by former oil tycoon and Kremlin opponent Mikhail Khodorkovsky. Election officials said violations were limited and didn’t influence the result.

Poisoning attack

In addition to accusing Putin, the UK expelled the largest number of Russian diplomats from London in 30 years. Russia retaliated by ordering out an equal number of British envoys, as well as demanding the closure of the British Council cultural office and the UK consulate in Saint Petersburg. The United States, Germany and France rallied behind the United Kingdom, saying there’s “no plausible

alternative explanation” to Russian responsibility for the first use of a chemical weapon on European soil since World War II. It’s unclear so far if they’ll back new measures to isolate Russia, which denies any involvement. European Union foreign ministers will discuss the crisis when they meet on Monday in Brussels. Speaking to reporters last Sunday, Putin gave his most detailed public comments on the case, saying, “It’s complete nonsense to imagine that anyone in Russia could resort to such tricks ahead of the presidential elections and World Cup. It’s unthinkable.” Putin campaign spokesman Andrei Kondrashov credited the tension with the UK for boosting turnout for the president with its tough line. “We need to say thank you to Great Britain because they, again, misread the Russian mind-set,” he said, according to Interfax. Putin’s ability to confront the West has increased after President Donald J. Trump’s election exposed fault lines between the US and Europe and the UK’s vote to leave the EU, said Roderic Lyne, former British ambassador to Russia. “The West at the moment is rather fragmented because of transatlantic tensions and Brexit,” he said. In the latest challenge, the Kremlin leader brandished new “invincible” nuclear weapons in his state of the nation speech this month, amid confrontation with the United States over allegations Russia meddled to help Trump win. Russia has been accused of deploying cyber tools to encourage separatists in Spain’s Catalonia, as well as opponents of German Chancellor Angela Merkel and French President Emmanuel Macron in elections last year.

Officials in Washington also said last Thursday that Russian government-backed hackers are carrying out rolling attacks on “critical infrastructure” including the electric grid, water-processing plants and air-transportation facilities that are relied upon by hundreds of millions of Americans.

Clear message

Confrontation ultimately could work against Putin because it’ll deprive Russia of investment and knowhow needed to lift the economy out of the doldrums, said Oksana Antonenko, visiting senior fellow at the London School of Economic and Political Science. Russians, who’ve seen living standards steadily erode, are focused on issues such as low incomes and pensions, not foreign policy, according to opinion polls. “If Putin wants Russia to build a modern economy, he can’t do that in conflict with the West,” Antonenko said. He’ll be judged at the end of his term on whether he’s improved living standards, she added. Even so, Putin will use his next six years to assert his vision of a strong Russia, according to Joerg Forbrig, senior program director of the German Marshall Fund of the US. “Putin now has a feeling of success, he feels the West is splintering,” Forbrig said by phone from Berlin. “The priority in the next term is to build on that.” Constitutional limits ban Putin from seeking another term in 2024. Asked last Sunday if he might consider running in 2030—when he would be 77—Putin dismissed the question as “funny,” saying “Am I going to stay around until I’m 100? No.” Bloomberg News

Turkey-backed forces capture Syrian Kurdish town of Afrin

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STANBUL—Turkish military and allied Syrian forces marched into the center of the northern Syrian town of Afrin last Sunday, raising their flags and shooting in the air in celebration nearly two months after launching their offensive on the Kurdish enclave. The advancing troops faced little resistance from the Kurdish militia that retreated and vowed to turn to guerrilla tactics. Turkey’s President Recep Tayyip Erdogan announced the capture of

Afrin, previously controlled by the Kurdish militia known as the People’s Defense Units, or YPG. “Many of the terrorists had turned tail and run away already,” Erdogan said in a speech in western Turkey. “In Afrin’s center, it is no longer the rags of the terror organization that are waving but rather the symbols of peace and security.” The Kurdish militia called the assault on Afrin an “occupation” and vowed a “new phase” of guerrilla

tactics against Turkish troops and its allied Syrian fighters. It is not clear what Turkey would do after the capture of Afrin. Turkey views the Kurdish forces in the Afrin enclave along the border as terrorists linked to the outlawed Kurdistan Workers’ Party, or PKK, which has waged a decades-long insurgency within Turkey’s borders. Erdogan has repeatedly said that Turkey will not allow a “terror corridor” along its border and has vowed

to push east after Afrin. He threatened to move to Manbij, a Kurdishrun town to the east where US troops have also maintained a presence after it was cleared of Islamic State (IS) militants in 2016. Washington’s support to the YPG, including arming the militia and relying on it to battle IS militants in eastern Syria, has strained relations between Turkey and the United States. A push east could further inflame tension. AP

Yemeni bombing action

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audi Crown Prince Mohammed bin Salman defended his country’s bombing campaign in Yemen at the outset of a United States tour to generate good will for his nation, accusing rebel forces of exploiting the situation there to win sympathy from the international community. The prince spoke about his nation’s relationship with Iran during an interview on CBS’s 60 Minutes that aired last Sunday. The interview covered topics ranging from easing strict adherence to Islamic orthodoxy in his country to and nuclear arms. Su n n i Mu sl i m Saud i A rabia has been warring for three years with Yemen’s Houthi rebels, who the prince maintains are backed by predominantly Shi ite Ira n. T housa nd s have died in air strikes and from a naval blockade that impeded humanitarian aid. Bin Salman said the rebels have launched missiles at his nation’s capital, Riyadh, and that the US wouldn’t tolerate comparable attacks on its cities from, for example, Mexico. Still, when asked to acknowledge the Yemeni death toll, the prince called the situation painful while shifting responsibility for it to the enemy. “I hope that this militia ceases using the humanitarian situation to their advantage in order to draw sympathy from the international community,” he said, according to a transcript provided by CBS. “They block humanitarian aid in order to create famine and a humanitarian crisis.”

Trump meeting

Bin Salman is expected to meet with President Donald J. Trump, as well as executives from Apple Inc. and Alphabet Inc.’s Google during his first United States trip since becoming crown prince, according to a person briefed on its details. His itinerar y also may include stops in New York, Boston, Houston, San Francisco and Los Angeles, where he’ll meet with top movie industry executives,

the person said on condition of anonymity because the plans aren’t final. The crown prince will use the trip to promote investment opportunities in the biggest Arab economy, the person said. In the 60 Minutes interview, bin Salman touted his nation’s economy as being larger than that of Iran, dismissed that nation as a “rival,” and repeated a comparison he made last year between its ruling cleric, Ayatollah Ali Khamenei and Adolf Hitler. “He wants to create his own project in the Middle East,” bin Salman said. “Many countries around the world and in Europe did not realize how dangerous Hitler was until what happened, happened. I don’t want to see the same events happening in the Middle East.”

‘Will follow suit’

A sked whet her h is cou nt r y needed nuclear weapons to counter Iran, bin Salman said, “Saudi Arabia does not want to acquire any nuclear bomb, but without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible.” In further rebukes of Iran, he accused it of harboring members of al-Qaeda, including a son of Osama bin Laden, and blamed that nation’s 1979 Islamic revolution for Saudi Arabia’s turn toward a more conservative interpretation of Islam that severely restricted the rights of women. Bin Sa lman promised that under his less-restrictive rule, women would be allowed to drive and work for equal pay. “Saudi women still have not received their full rights,” the prince said. “There are rights stipulated in Islam that they still don’t have. We have come a very long way and have a short way to go.” The prince also downplayed his fortune and lavish spending. “I’m a rich person and not a poor person. I’m not Gandhi or Mandela,” bin Salman said, adding that he spends at least 51 percent of his personal income on charity. Bloomberg News

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Germany steps up push to foil tariffs in talks in Washington

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erman Chancellor Angela Merkel is intensifying efforts to thwart a trade war with the United States, sending a close ally to Washington for critical talks aimed at defusing a tit-for-tat on tariffs that could undermine the European country’s export-driven economy. Peter Altmaier, Germany’s economy minister and a longtime confidante of Merkel, headed to Washington last Sunday for discussions this week with Commerce Secretary Wilbur Ross and “anyone in Washington who is willing to talk,” he said in an interview with public broadcaster ARD. “What’s dangerous about the current situation is that it threatens a spiral of one-sided measures that contradict the idea of free trade,” Altmaier said. “That would counter what we’ve done for the past 60 years and that’s why we need to talk.” The trip marks the first highlevel talks between the US and Germany since President Donald J. Trump announced plans to levy tariffs on steel and aluminum earlier this month, sparking threats of retaliation by the European Union. Germany’s export strength has been a frequent target of Trump’s ire over US trade imbalances. Altmaier’s trip is a sign that Merkel’s response is gathering momentum after drawnout efforts to build a governing coalition ended last week with her inauguration to a historic fourth term. While Altmaier is US-bound, German Finance Minister Olaf Scholz is meeting his American counterpart Steven Mnuchin at a gathering of Group of 20 (G20) finance chiefs in Buenos Aires to lobby for free trade. “We must think about how we can ensure growth for the future and, of course, also how we can keep stable one of the most important resources for future wealth—the possibility to trade freely,” Scholz told reporters. Free-trade benefits many countries “and that’s why it would be difficult if protectionism played a bigger role now again.” Merkel last Saturday spoke with Chinese President Xi Jinping and the two leaders discussed deeper relations, according to a statement by the chancellery. The prospect of closer ties between Germany and China could prod the US to ease up on its European ally. Both countries need each other to thwart China’s growing economic and political influence. In a renewed sign of tension ahead of the G20 meeting in the Argentine capital, a top US official broke off economic talks with Beijing, before saying that he “mis-spoke.” Still, given the complexity of the situation, Altmaier expressed doubt that concrete results could be reached in talks this week. He did, however, offer an olive branch to Trump, who has targeted Germany for not doing its fair share in North Atlantic Treaty Organization. Germany’s new government is committed to increasing defense spending toward the level of 2 percent of GDP as called for by the security alliance, Altmaier said, adding that the country plans to move toward this level by 2024. “Americans are still our allies,” he said. “I want to prevent that we get into a trade war.” Bloomberg News

Tuesday, March 20, 2018 A7

Dozens of US business groups warn Trump vs imposing tariffs on China

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he United States Chamber of Commerce and 44 other associations are urging President Donald J. Trump not to impose sweeping tariffs in response to China’s trade practices, warning the action would “trigger a chain reaction of negative consequences for the US economy.” The business groups wrote a letter to Trump last Sunday acknowledging “serious concerns” regarding what they described as China’s theft of trade secrets and other practices and policies, but they urged a measured response that avoided tariffs. The groups represent companies, such as Apple Inc., Google and Wal-Mart Inc. “The [Trump] administration should not respond to unfair Chinese practices and policies by imposing tariffs or other measures that will harm US companies, workers, farmers, ranchers, consumers and investors,” the groups said in the letter. Trump has announced he would impose tariffs of 25 percent on steel and 10 percent on aluminum, with some exclusions and exceptions, to curb cheap imports from China and other countries. The administration is also considering clamping down on Chinese investments in the US and imposing tariffs on a broad range of its imports to punish Beijing for alleged theft

Japan’s exports expand for 15th month

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apan’s trade balance returned to surplus in February, with strength in the global economy supporting export growth even as lunar New Year holidays caused a drop in sales to China. The value of exports increased 1.8 percent in February from a year earlier (forecast 1.4 percent). Imports grew 16.5 percent (forecast 16.0 percent). The February trade balance was a surplus of ¥3.4 billion ($32 million) versus the forecast of ¥89.1 billion. The continued growth in exports suggest the global recovery remains firm, and sales to China should bounce back after the decline caused by the holidays. Yet, a stronger yen poses some risks to the Japanese economy by making exports less competitive and weighing on inflation by reducing the price of imports. The chances of a trade war breaking out due to US President Donald J. Trump’s tariffs is another potential source of downside for Japan. “Japan has been in an export-led recovery and I think that will continue this year,” said Masaki Kuwahara, a senior economist at Nomura Securities Co. in Tokyo. “Year-on-year exports slowed quite a bit due to the lunar New Year. February is a month when it’s easy for them to drop off.” Japan’s adjusted trade balance showed a deficit of ¥201.5 billion (forecast negative ¥90.8 billion). Exports to China, Japan’s largest trading partner, slipped 9.7 percent in February from a year earlier. Shipments to the US rose 4.3 percent. Those to the EU increased 11.5 percent. Exports of automobiles and aircraft-related goods increased, while imports of clothing from China, LNG from Australia and petroleum products from South Korea showed strength. Bloomberg News

of intellectual property, according to people familiar with the matter.

Higher prices

Sweeping tariffs would provoke retaliation, stifling US exports and raising costs for US businesses and consumers, the groups said in their letter to Trump. They highlighted the potential impact, including higher prices for electronics, apparel and other products, and harming US companies that sell component pieces of final products exported from China. US manufacturers would face more expensive product components and disrupted supply chains, affecting jobs, the letter said. Manufactured products comprised more than 85 percent of exported goods from the US in 2017, totaling $1.3 trillion, the trade associations said. Tariffs that result in reduced consumption of products would also depress financial markets, the groups said. They urged the administration

A U.S. Customs and Border Protection officer signals to a truck entering from Mexico at the Otay Mesa Cargo Port of Entry in San Diego, California, on May 23, 2017. David Maung/Bloomberg

to work with them to find effective, alternative responses to Chinese trade practices. “Imposition of unilateral tariffs by the administration would only serve to split the United States from its allies, hinder joint action to effectively address shared challenges, and ensure that foreign companies take the place of markets that American companies, farmers and ranchers must vacate when China retaliates against US tariffs,” the letter said.

The [Trump] administration should not respond to unfair Chinese practices and policies by imposing tariffs or other measures that will harm US companies, workers, farmers, ranchers, consumers and investors.”—US Chamber of Commerce

Bloomberg News

China new-home prices rise in fewest cities in 5 months

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hina’s home prices rose in the fewest cities in five months in February, as the government’s almost two-year campaign to curb property speculation started to bite. New-home prices, excluding government-subsidized housing, gained in 44 of 70 cities tracked, compared with 52 in January, the National Bureau of Statistics said on Monday. Prices fell in 16 cities from the previous month and were unchanged in 10. The increase is the fewest since September, according to Bloomberg calculations. The slower growth comes as authorities sent a

stronger signal at the National People’s Congress (NPC) on efforts to curb property speculation and tame runaway prices. Earlier this month, an NPC spokesman said a property-tax bill is being drafted, and the head of the nation’s banking regulator again called for steps to reduce household debt. That followed home-buying restrictions in at least 125 cities, according to data provider Fang Holdings Ltd. “As long as President Xi Jinping wants deleveraging of the economy, I think the property market is on a long-term downward trend,” Andy Xie, an independent analyst and a former chief Asia

economist at Morgan Stanley, told Bloomberg TV. Chinese developers fell in Hong Kong trading. China Evergrande Group shares fell 2.7 percent, China Vanke Co. dropped 1.9 percent and and Country Garden Holdings Co. declined 2.2 percent. Top cities led the price declines, leading values to drop from a year ago. Prices in Shenzhen had the biggest decline in three quarters, falling 0.6 percent from a year earlier. Values slid 0.4 percent in Guangzhou, 0.3 percent in Beijing and 0.2 percent in Shanghai. Bloomberg News

Rivals circle as Egypt’s debt loses shine that drew $20B

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gypt, prime territory for risk-hungry debt traders for the past 15 months, could be upstaged by other emerging markets as it begins to cut rates to spur the economy. Turkey, Argentina and Nigeria could capture investors’ attention, and their money, if yields on Egypt’s Treasury bills (T-bills) fall sharply this year, especially as the prospect of higher interest rates in the US fuels a battle for funds. Lured by high yields, more than $20 billion from overseas have surged into short-term Egyptian local-currency debt since authorities floated the pound and secured an International Monetary Fund loan in 2016. The money has helped Egypt finance its deficit and boosted supplies of hard currency, paving the way for an economic recovery that President Abdel-Fattah El-Sisi says will vindicate reforms painful for many Egyptians. “If yields drop enough, then Egypt’s market could be compared to Turkey, for example,” whose greater liquidity and longer history of foreign investment might swing sentiment in its favor, said Anthony Simond, who helps manage $13 billion of emerging-market debt at London-based Aberdeen Asset Management Plc. “That’s something to watch out for, but we’re not there yet.” With inflation falling to within the central bank’s target range for the first time last month, the regulator has started reversing the tight monetary policy it presided over in 2016 and

2017. Officials shaved 1 percentage point off the benchmark interest rate in February, and economists expect additional cuts of as much as 400 basis points this year.

Sizable exit

The yield on Egypt’s one-year T-bills began falling this year, even before interest rates were cut, as investors priced in lower returns. It’s now 1.6 percentage points below the beginning of January. Cairo-based CI Capital Asset Management sees a 3-percentage point plunge through 2018 to 11.8 percent, it said in a report. If yields in competing countries rise by 1 percentage point in the same period, as CI Capital estimates, investors could begin to exit Egyptian debt unless authorities take precautionary measures, it said. “Authorities need to ensure yields don’t fall at the same pace as rate cuts,” said CI Capital’s Noaman Khaled, who wrote the report. Ways to do that could include lowering or removing the 20-percent tax levied on foreign T-bill investors, and continued efforts by the central bank to absorb liquidity and reduce local demand for the debt. Egyptian officials have said a drop in yields won’t necessarily mean a foreign exodus, as investors are likely to accept lower returns in exchange for an improving risk profile. Egypt is rated B3 at Moody’s Investors Service, six levels below investment grade.

Currency gains

The improvement in the economy’s fundamentals provide room for the central bank to cut rates without seeing outflows, said Oliver Weeks, economist at London-based Emso Asset Management Limited. “But they need to be cautious.” Yields after tax “will need to remain in double digits even with much lower inflation,” he said. Egypt might also be buoyed by potential gains in the pound. Bloomberg surveys of economists show that, of the five countries in question, Egypt is the only one with a currency expected to appreciate by the end of 2018. Aberdeen’s Simond said the pound’s direction might ultimately prove crucial. “It’s too early to say now what we may do in six to 12 months time,” he said, “especially since the Egyptian pound is a large part of the investment thesis.” Bloomberg News

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The Regions

Tuesday, March 20, 2018 • Editor: Efleda P. Campos

BusinessMirror

SBMA cites sustained robust economic growth last year

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By Henry Empeño | Correspondent

UBIC BAY FREEPORT—Despite a nationwide drop in foreign investment pledges last year, the Subic Bay Metropolitan Authority (SBMA) maintained a steady economic growth in the Subic Bay Freeport Zone and even performed strongly in key financial operations like income generation and job creation in 2017. SBMA Chairman and Administrator Wilma T. Eisma said the Subic agency recorded more than P91 million in net income last year, which was 34 percent more than the P68 million it made in 2016. Other than this, Eisma said the SBMA posted a total revenue of P3.08 billion in 2017, compared to the P2.95 billion it recorded in 2016, an increase of 4 percent; and logged P1.55 billion in operating income, an increase of 8 percent over the P1.44 billion in 2016. At the same time, the SBMA’s cash and investments grew by 4 percent to P4.43 billion, compared to P4.24 bil-

lion in 2016, while its total debt went down by 5 percent from P6.55 billion in 2016 to P6.2 billion last year. “These are indicators of robust financial health,” Eisma said during the State of the Freeport Address she delivered last Tuesday before the Subic Bay Freeport Chamber of Commerce. “If this is not success, then I don’t know what is,” she added. Subic’s robust performance last year came amid an overall 51-percent decline in foreign investment pledges among the country’s investment promotion agencies, which include the SBMA, the Board of Investments, the

Philippine Economic Zone Authority, the Clark Development Corp., the Authority of the Freeport Area of Bataan, BOI-Autonomous Region in Muslim Mindanao and Cagayan Economic Zone Authority. The Philippine Statistics Authority said the seven investment agencies only approved a total of P105.6 billion in new investments last year, compared to P219 billion in 2016. Eisma said the SBMA managed to soften the effects of the investment downturn by signing in 239 new investors last year, compared to just 144 in 2016. Thus, while committed investments in Subic went down to P2.54 billion in 2017 from P6.35 billion in 2016, projected employment still grew to 3,488 from 3,868 in 2016, or a slight dip of less than 10 percent. Eisma also pointed out that existing business locators in Subic put up 63 expansion projects last year, compared to 37 in 2016, thus generating an additional P1.09 billion in committed investments. Overall, Eisma said the SBMA earned a total of P3.08 billion in revenues from seven sources: leases, which yielded P1.52 billion; port services, P961 million; regulatory fees, P338 million; common-use service area fees, P103 million; tourism, P16 million; environmental and tourism admission fee, P10, million; and

other revenue sources, P126 million. She said the Subic agency was just as successful in its major thrust of job creation, as it facilitated the entry of 15,500 workers into Subic’s active workforce last year, thus, increasing the manpower count here by 14 percent, or from 112,600 workers in 2016 to 128,100 in 2017. Eisma also said with the increasing number of ship calls in Subic, the SBMA recorded a total port revenue of P1.2 billion, which was 6 percent higher than the P1.13 billion recorded in 2016. The Port of Subic also reported $2.3 billion in total export-trade value and $1.7 billion in importtrade value last year, an increase of 38 percent and 11 percent, respectively, over 2016 figures. With these positive financial inputs, Eisma said the SBMA contributed a total of P19.6 billion to the national economy in 2017, an amount that was 14 percent higher than the total contributions in 2016. These included P16.8 billion in cash collections by the Bureau of Customs, which increased by 11 percent over the 2016 figures; P2.2 billion in taxes collected by the Bureau of Internal Revenue, an increase of 0.8 percent; P92 billion in dividends, or a whopping increase of 533 percent; and P0.3 billion in shares to local government units, or an 18-percent increase.

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DILG chief: Barangay execs must activate antidrug abuse council By Jonathan L. Mayuga @jonlmayuga

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NTERIOR Secretary Eduardo M. Año on Monday urged barangay officials to activate their respective Barangay AntiDrug Abuse Council (Badac) to help fight the drug menace or face administrative charges. In a statement, Año said local barangay officials should prove that it is one with President Duterte in the campaign against illegal drugs. “Act and activate your Badac,” he said. Año said that as the first line of defense, barangay captains should lead the fight against illegal drugs by activating the Badacs to ensure there is a convergence of efforts among barangay leaders to carry out the anti-illegal drugs campaign in the community level. If barangay leaders refuse to organize their Badacs or fail to activate their Badacs , Año said they could face administrative charges from the Department of the Interior and Local Government (DILG). He said the department is looking at what case or cases will be filed against barangay captains

who fail to perform their mandate. The DILG chief designated Undersecretary for Barangay Affairs Martin Diño to monitor compliance with his directives and to recommend the immediate filing of charges against nonperforming barangay officials. There are over 42,000 barangays nationwide. Año said Badac plan, strategize, implement and evaluate programs and projects on drug-abuse prevention in the barangay, as well as organize and orient Badac auxiliary teams on their roles and functions and in formulating a plan of action to address the problem. The Badacs are also expected to coordinate and collaborate with other institutions like the Philippine National Police (PNP) and the municipal or city government in implementing programs and projects on drug-abuse prevention at the barangay level. Also, part of Badac’s job is to gather information about drugrelated incidents in their respective areas, and list down suspected drug users and pushers in their barangay for submission to the PNP or the Philippine Drug Enforcement Agency for validation.

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Global Eye BusinessMirror

Death of Iran’s nuclear deal seen setting oil bulls loose By Julian Lee Bloomberg

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ormer Secretary of State Rex Tillerson put a break on President Donald J. Trump’s desire to tear up the Iran nuclear deal. Rather than go against his top diplomat’s advice, the president got rid of him, making it more likely that he will now pull the United States out of the agreement as early as May 12, the next deadline for him to extend the waiver on the sanctions that are suspended by it. The State Department doesn’t seem to be entirely behind killing it. “We believe we can work within the nuclear deal,” Brian Hook, director of policy planning, said after last Friday’s quarterly meeting of the joint commission overseeing the 2015 agreement. If his former boss’s fate is anything to go by, Hook’s time at Foggy Bottom may be limited. Trump appears determined to nix it. But there would be no point for the US to withdraw if everybody else was just allowed to go on buying Iranian oil. If he does succeed in imposing new measures to slash the country’s exports—as he will surely seek to do—the result would be a slump in Iranian flows that would make the decline in Venezuelan supply look modest by comparison. And if he does it at his next opportunity, Iranian oil flows could begin to dry up just at the time when both the Organization of Petroleum Exporting Countries and the International Energy Agency see the global oil market returning to supply shortage. In 2012 the imposition of tough sanctions targeting Iran’s oil industry cut the country’s exports by around 1 million barrels a day. A repeat would double the expected supply deficit in the second half of this year. The government in Tehran argues that it is not seeing any of the benefits of inward investment that it was promised in return for giving up its nuclear program, though I’ve noted it is making slow progress in attracting investment from Russian and Chinese companies. However, the relaxation of sanctions has allowed it to boost oil production and sales by more than a million barrels a day from the beginning of 2016. That recovery has come with a partial realignment of the country’s oil flows. While the biggest jump in Iran’s post-sanctions oil sales was to countries in the European Union— principally Italy, Spain, Greece and France—it’s recovered only about three quarters of its presanctions oil sales to that market. It has fared even less well in the developed Asian markets of Japan and South Korea, which together bought around half a million barrels a day of Iranian crude

before sanctions were imposed. Combined crude oil shipments to these two countries now run at around half that level. In contrast, China and India have both become more enthusiastic buyers of Iranian crude, as their demand for imported oil soars. The sanctions that bit so heavily into Iran’s oil exports in 2012 had broad international support— former President Barack Obama convinced the EU to ban imports, while Asian buyers were persuaded to reduce their purchases of Iranian oil by the threat of losing access to the US banking system. Obama imposed sanctions on foreign banks that “knowingly conducted or facilitated any significant financial transaction with the Central Bank of Iran or another Iranian financial institution designated by the Secretary of the Treasury,” though they got six-month waivers if they showed that they’ve “significantly reduced” Iranian crude purchases. Both those restrictions were lifted as part of the Joint Comprehensive Plan of Action (JCPOA), as the nuclear deal is formally known. It is unlikely that the EU would be willing to re-impose its sanctions at the behest of Trump. So how can he ensure that US withdrawal from the nuclear deal has a real impact on Iran’s oil exports? One approach would be to impose similar banking sanctions, though he might balk at reviving his predecessor’s approach. It’s not a perfect solution, as, according to Credit Suisse analysts, buyers from China and India could switch to making payments in their local currencies, bypassing the United States banking system altogether. Still, their purchases probably couldn’t increase enough to offset the likely drop in sales to Europe that would result. Alternatively, Trump could seek to target insurers who provide cover for Iranian crude cargoes and the ships that carry them. US-domiciled reinsurers can’t participate in coverage of Iran’s fleet because of other sanctions, and have been replaced with others from Europe to provide cover for Iranian cargoes. He would have to find a way of targeting foreign insurers, perhaps by denying them access to the United States market if they take on Iranian risk. I don’t pretend to know how Trump will seek to give his withdrawal from the JCPOA real teeth, but I’m pretty certain he will try. Doubling the global supply deficit would allow Saudi Arabia and Russia to reverse most of the output cuts they have made since the beginning of last year. It would also severely reduce the amount of available spare oilproduction capacity, just as geopolitical risks are rising. That will surely be bullish for oil prices.

A Latvian bank shows ECB needs new powers

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ithout a doubt, the European Central Bank (ECB) is the euro zone’s most powerful policy-making institution: It sets monetary policy for 19 member-states and supervises the bloc’s most important lenders. Even so, the failure of a Latvian bank shows that the ECB doesn’t have all the powers it needs. Gaps remain, and they put Europe’s financial system at risk. At the end of February, the ECB ruled that ABLV, Latvia’s third-largest bank, was“failing or likely to fail.” The bank had suffered a run after the US Treasury alleged it was involved in money laundering. The Single Resolution Board—the euro-zone body in charge of winding down big banks—then deemed ABLV too small to pose a systemic danger, a ruling that passed the liquidation over to national insolvency procedures. That’s a problem. ABLV has started a voluntary liquidation under the supervision of the local regulator. Pending this appraisal, ABLV retains its banking license—despite the ECB’s finding that it is failing or about to fail. Meanwhile, a Luxembourg court rejected calls from

yet another national regulator to close ABLV’s local branch, saying it was financially strong, which flatly contradicts the ECB’s assessment. This ongoing muddle calls the credibility of the euro zone’s top financial regulator into question. The ABLV case highlights another anomaly. The ECB is in charge of prudential supervision, but money laundering —the proximate cause of ABLV’s troubles—remains a national responsibility. The ECB could probably have done more to ensure that ABLV was being properly run, but its powers are limited. So long as policing money laundering is left to member states, banks will be watched more closely in some countries than in others. That undermines the supervisory system and makes it harder to build a single capital market for the euro zone. Responsibilities over money laundering should be handed to a European institution, and European Union rules should be changed to give the ECB more freedom to promptly withdraw banking licenses. If the EU can learn from the ABLV saga, a struggling Latvian bank will have done the euro zone a favor. Bloomberg View

Editor: Angel R. Calso • Tuesday, March 20, 2018 A9

China’s new monetary chief to follow Zhou’s reform path

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hina’s incoming central bank governor, Yi Gang, signaled that he’ll push to maintain the course of financial liberalization set by his predecessor Zhou Xiaochuan. The National People’s Congress, China’s legislature, voted on Monday to approve President Xi Jinping’s choice for governor of the People’s Bank of China. Liu He, Xi’s top economic adviser, was named as a vice premier, indicating that he will take the lead role in policy-making with Yi in support. “The main task is that we should implement prudent monetary policy, push forward the reform and opening-up of the financial sector, and maintain the stability of the entire financial sector,” Yi told reporters on Monday at the Great Hall of the People in Beijing following his appointment. By promoting an official who has served as No. 2 to Zhou for more than a decade, China is signaling that it is seeking policy continuity at the central bank. Now set to retire, Zhou, 70, has steered the institution through the global financial crisis, overhauled monetary-policy tools and overseen the elevation of the yuan to reserve-currency status during his record 15-year term. Speaking on Bloomberg Television last Sunday, US Treasury undersecretary for international affairs David Malpass said Yi is a “very strong technical leader with lots of skills” and that the US looks forward to a “strong dialog with the leaders that China designates.” Yi, 60, inherits an institution that, while more influential at home

and abroad than the one that Zhou took over in 2002, faces much more complex challenges. The most pressing will be pushing forward with Xi’s financial cleanup without crashing an economy that’s heading toward a debt-to-output ratio exceeding 300 percent. Separately, Liu Kun, a former deputy finance minister, was nominated to replace Xiao Jie as chief of that body, while Commerce Minister Zhong Shan was renominated to his post. The People’s Bank of China (PBOC) faces those tasks at a time of major institutional changes. China this month merged its bank and insurance regulators, a move that gave the central bank power to write rules for the financial sector, and likely makes it the most powerful body in the new Financial Stability and Development Committee. Still, with Liu He as vice premier, Yi’s appointment as PBOC governor signals that the central bank will be run by a tested official while overall policy direction will be set by Xi’s top economic adviser. What our economists say: “Like Ben Bernanke when he took Alan Greenspan’s hot seat at the Federal Reserve, Yi has some big shoes to fill,” Tom Orlik, Bloomberg’s chief Asia economist, wrote in a note. “Also like Bernanke, Yi inherits a major problem. On Zhou’s watch, a credit bubble of epic proportions expanded.

Yi Gang

Now it’s up to Yi to manage it down.” The succession comes amid changes atop global central banks and their shift away from years of easy money. Jerome Powell succeeded Janet Yellen as Fed chairman in February and Bank of Japan Governor Haruhiko Kuroda is set to begin another term. And though European Central Bank President Mario Draghi doesn’t conclude his time in office until late next year, jostling over his replacement has already begun. Yi faces an immediate task of calibrating the PBOC’s response to monetary policy normalization in the United States.

Domestic concerns

“China’s monetary policy should be mainly based on domestic economy and finance situations. We need to consider it comprehensively,” Yi said at a news conference on March 9 when he was asked about whether the PBOC will follow prospective Fed rate hikes. Yi joined the central bank in 1997 and served in a succession of roles before promotions to deputy

governor and administrator of the State Administration of Foreign Exchange. As head of the currency regulator, he presided over expansion of the world’s largest foreign reserve stockpile, which peaked in 2014 at nearly $4 trillion, along with more loosening of currency trading restrictions and greater emphasis on increasing the yuan’s international use.

US education

Like Zhou, Yi is a fluent English speaker with longstanding links to global economic leaders. Yi earned a business degree at Hamline University in Saint Paul, Minnesota, and a PhD in economics at the University of Illinois before moving to Indiana University at Indianapolis as a professor in 1986, according to his official PBOC biography. While lacking the independence afforded the leadership of most major central banks, Yi will influence decisions that help shape the global financial landscape in an economy that contributes about a third of world growth. Bloomberg News

Modi under fire as $2-B India fraud hits anti-graft image By Iain Marlow & Archana Chaudhary Bloomberg

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hortly after a $2-billion bank fraud was uncovered last month at India’s state-owned Punjab National Bank (PNB), a picture emerged of Prime Minister Narendra Modi with the alleged fraudster. The photo showed Modi posing at the World Economic Forum in Davos on January 23 with a large business delegation that included billionaire jeweler Nirav Modi, who is at the center of the unfolding scandal. That was enough for opponents and even one of Modi’s coalition partners to question the prime minister’s commitment to rooting out corruption —a key part of his pitch to voters. Government officials said the jeweler was just part of a separate, nonofficial business delegation, and that the prime minister had only stopped by for a photo. Still, the scandal may already be having an impact: On March 14 Modi’s ruling Bharatiya Janata Party (BJP) lost three by-elections in the populous and politically crucial states of Uttar Pradesh and Bihar. While investigations continue into India’s biggest-ever bank fraud, the by-election results show the BJP’s reputation is on the line as it faces several state-level polls and a general election over the next 12 months. Riding to power on a pledge to unearth unaccounted wealth, Modi justified a move to ban 86 percent of the country’s currency in November 2016 on an anti-graft push, a policy that hurt the economy due to its botched implementation. “This case could well deliver a blow to the Modi administration’s anticorruption bonafides,” said Michael Kugelman, Asia program

Narendra Modi Bloomberg

director at the Woodrow Wilson Center in Washington, D.C. “The government’s response will be subjected to ample scrutiny in India and beyond, not just because it has emphatically and repeatedly called for crackdowns on corruption but because of Modi’s close ties to big business.” Nirav Modi, who’s dressed actresses including Kate Winslet and Priyanka Chopra, has been accused —along with his uncle Mehul Choksi —of defrauding PNB. The bank alleges the duo and their associates worked with some rogue employees and used fake guarantees to obtain loans from abroad. Both deny the allegations. Though Nirav Modi shares the same surname as the prime minister, the two are not related. In addition to the photo, critics are also looking to undermine the government with a video from 2015 of the prime minister addressing Choksi as Mehul-bhai—an affectionate term for brother. Jagdish Thakkar, a spokesman in the Prime Minister’s Office, didn’t respond to a call seeking comment. Government opponents say the fact that the alleged fraudster

remains abroad and beyond Indian law enforcement shows that Modi’s administration takes a lax approach to the country’s globetrotting industrialists. They also cite the case of Vijay Mallya, the tycoon behind India’s best-selling beer who’s battling extradition in a British court to avoid fraud charges.

Allies wary

Even some of Modi’s political allies have spoken out. “This has affected the image of this government,” said Anil Desai, spokesman for the Shiv Sena, a BJP ally and national alliance partner. “We will be after the government very rigorously on this issue.” Modi’s government has dispatched four ministers and his party’s powerful national president, Amit Shah, to distance itself from the scandal. It also barred 91 people from traveling abroad because of their involvement with companies that have defaulted, Bloomberg News reported last week. Soon after the scandal broke, Modi’s law minister, Ravi Shankar Prasad, promised that “nobody, irrespective of their status or stature, shall be spared.”

The Finance Ministry also launched a high profile attempt to deflect blame away from the government, which owns PNB, toward the bank’s management and the regulator— the Reserve Bank of India. Meanwhile, the defense minister and the junior foreign minister blamed the previous Congress Party-led government for the scam. They suggested that a few days before Modi took charge in 2014, the Congress administration opened up a gold program earlier restricted to state-run firms to include private businesses like Nirav Modi. The government on March 12 announced a probe into the 2014 program, which forced jewellers to export 20 percent of gold imports because of India’s then-stressed current account deficit. “The allegations about the gold import scheme are a red herring,” Congress Spokesman Sanjay Jha said. “These baseless allegations are being made because the heat is on the government and especially on Narendra Modi.”

Opposition weakness

Some doubt the opposition Congress Party can effectively wield the scandal against Modi. Party leader Rahul Gandhi has failed to turn even more disruptive and sensational events to his advantage, including demonetization and the chaotic roll out of a national sales tax in 2017. But this time has the potential to be different, particularly with a slew of crucial elections on the way. “The risk of this one sticking is more than any other,” said Shailesh Kumar, an Asia analyst with Eurasia Group. “Even though a lot of the scam took place before the BJP, it’s a complex scandal unlike a straight bribery allegation, which further gives the opposition an opportunity to spin it.”

A10 Tuesday, March 20, 2018 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

03202018

Responsible driving

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ummer is just around the corner, and the Holy Week as well, ushering in family vacations, more cars on the road and everything that goes with them.

Driving can either be a pleasurable or a hellish experience, depending on the circumstances and one’s perspective. In the Philippines no one can argue the experience is unique. The Philippines was ranked the worst place to drive, according to self-reports of users of the community-driven and GPS-based navigation app Waze in the 2017 edition of the app’s Global Driver Satisfaction Index, which it released last November. In 2012 CNNGo, the travel news web site of the Cable News Network, ranked Manila as the third worst in its list of the 10 worst cities in the world for driving. In 2014 Manila was included in the Huffington Post’s Top 10 Absolute Worst Places to Drive in the World. These and other similar listings may not be scientific, they may be perceptionbased surveys, but they are also all consistently bad; and commuters and drivers in the country have more than enough anecdotal evidence not to argue against their findings. Let’s face it, nowhere is the airlines pitch that air travel is safer than road travel truer than in the Philippines, particularly in Metro Manila. Government data show that the number of deaths due to traffic accidents in the country has been increasing since 2006. Last year the Metropolitan Manila Development Authority (MMDA) said it recorded an average of 23 vehicular accidents per day on Edsa alone. The Metro Manila Accident Recording and Analysis System reports an average of 299 road-crash incidents every day in Metro Manila. A few years ago, that number was just around 160. We were hoping these deadly accidents would be significantly cut down after the MMDA and traffic authorities imposed speed limits and other stricter rules along roads that have become death traps, like in Commonwealth Avenue in Quezon City and Diosdado Macapagal Boulevard in Pasay, and along Edsa. But every day we still read, see or hear about some car, bus, truck or jeep killing or maiming people on our roads. We talk of accidents as if they are predetermined by fate when, the fact is, they are very preventable. Our roads could be a lot safer if we only try to make it so. Of course, the government ought to take responsibility to make our roads safer, but it’s not the government’s burden alone. Most road mishaps, according to statistics, happen because of human error like vehicle neglect, speeding, overloading, reckless driving, drunk driving and other violations of traffic rules. Much of traffic congestion, which costs us billions of pesos in wasted fuel and lost time, could be blamed not just on poor roads but also on the lack of road discipline and basic road courtesies. Consider your typical commuting or driving experience in the metropolis. You see jeepneys that weave in and out of traffic to load and unload passengers, not caring about the bottlenecks they are causing. You’ve got buses that operate the same as these jeepneys. There are hardly any designated bus stops or, if there are, nobody really waits there, and the buses don’t really stop there. Private car owners can be just as undisciplined, attacking metro roads as if they were in a slalom race. Drivers of government vehicles, including police cars and motorcycles, think traffic rules don’t apply to them. In Metro Manila the bigger the vehicle, it seems the bigger the bully behind the wheel. Drivers of sport-utility vehicles, trucks and buses seem to think they own the roads, hogging lanes and cutting into lanes without a care in the world. Pedestrians can be just as reckless too, darting across traffic like cats daring to be roadkill. Often, for both drivers and pedestrians, traffic lights are merely suggestions. You get the picture, we all get the picture or, more appropriately, we are all part of the picture. The government can spend billions on new traffic infrastructure, on safety upgrades, road-widening projects, flyovers, pavement constructions, traffic lights and other safety signs; it can hire thousands of traffic enforcers and put closedcircuit television on every corner; but if drivers, commuters and pedestrians are not disciplined enough to follow rules, and if they don’t practice the most basic of road courtesies, deadly accidents would still be commonplace, and traffic would still be problematic. Every day, our individual behaviors can either lead to peace and safety on our roads, or to traffic congestion and even more tragic consequences. We don’t need any survey to tell us that. This is not perception. It’s the truth.

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Bridging the gap Manny B. Villar

THE Entrepreneur Continued from A1

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N the next three years alone, mall developers are planning to add as much as 630,000 square meters (sq m) of shopping space, despite the growth of the e-commerce retail business.

For instance, my Vista Land & Lifescapes Inc. is targeting to have 60 malls by 2030, a three-fold increase from the current 22 malls. This year alone, we plan to spend P50 billion for capital expenditure, a significant portion of which will be used to expand our malls’ gross shopping space to 1.4 million sq m, from the current 1 million sq m. Of course, other players in the mall sector are pursuing their respective expansion plans in different parts of the country, which will open up more employment opportunities. Other sectors of the real-estate industry, like housing and office buildings for the businessprocess outsourcing, are also in expansion mode, as the Philippines

continues to realize its economic potential. That’s the good news. As I said a few weeks ago, it’s a nice kind of problem. But the not-so-good news is that, as of January 2018, the country’s unemployment rate stood at 5.3 percent, and the underemployment rate at 18 percent. The unemployment is lower than the 6.6 percent in January 2017, but it still translates to 2.761 million jobless members of the labor force. The latest underemployment rate is up from 16.3 percent in January 2017, and translates to 7.498 million workers who are still looking for additional jobs. Also, in a few months, more than a million students will graduate and join the army of jobseekers.

PSE: Stock buybacks John Mangun

OUTSIDE THE BOX

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tock-market investors get excited when a company announces that it is buying back its own shares in the open market. Here are two recent examples of major companies engaging in this practice. “Semirara Mining [SCC] launches P2-B share buyback” on December 7, 2017, and previously “AGI [Alliance Global Group, Inc.] sets P5B stock buyback” in September 2017. A publically listed company announcing a share buyback program is like getting a beautifully wrapped Christmas present from your Tita Malou. The problem is that Tita is getting on in years and becoming forgetful. You are hoping that she is gifting you with the PIN number to her fabulously large bank account. However, the box may contain a plastic bag of dirty clothes that was supposed to go to the labandera. Why would a company use its cash to buy back its own shares? Isn’t a corporation supposed to share the profits with shareholders in the form of cash dividends?

Warren Buffett’s holding company—Berkshire Hathaway—does not pay cash dividends but uses the excess funds to buy its shares. Buffett says this method of returning value to the owners is “cleaner” in that there are no tax consequences until the shares are sold. But how do shareholders benefit? If the company buys back 1.5 percent of the outstanding shares, that reduces the amount of shares in circulation and theoretically increases the value of those shares by 1.5 percent. A corporation may decide that its shares are “undervalued” and buys the shares at what it considers a

So we have a paradox: millions of workers looking for jobs, while many employers can’t find the workers they need. In addition, local companies must also compete with other countries, which prefer to hire Filipinos because of their skills and work ethics. The main reason for this paradox is the problem of job mismatch: the education and training of applicants do not match the requirements of the jobs available. According to the Labor Force Survey, 21.9 percent of the unemployed as of January 2018 were college graduates, 13.7 percent were college undergraduates and 29.4 percent have completed junior high school. A few years ago, I emphasized the need for the educational institutions to align their courses to the demand of industries, as a solution to the mismatch problem. Today, we are pressed for time, because the need for workers is becoming urgent. The government must consider adopting a massive retraining program for the unemployed, as well as returning overseas Filipino workers. The government’s Technical Education and Skills Development Authority (Tesda) is targeting as many as 100,000 enrollees in construction-related courses alone to cope with the demand in the infrastruc-

ture program, as well as in private construction projects. Aside from construction-related courses, Tesda last month registered a total of 192,654 enrollees as new scholars under the agency’s Technical and Vocational Education and Training program. The top 5 in-demand courses for students were driving, computer-systems servicing, bread and pastry production, cookery and dressmaking. The Tesda is doing a laudable job, but the demand for workers, particularly in the construction industry, will require a more significant expansion of training programs, which will also benefit the millions of Filipinos still unemployed. For this effort, even the private sector must contribute its share. We have to take advantage of the big and growing demand for workers—both professionals and nonprofessionals —as we move the economy forward. We need to focus on bridging the gap between labor availability and the industries’ demands. We all know that increasing employment, which means reducing the number of jobless Filipinos, will also help us solve another persistent national problem: poverty.

“cheap” price with the intention of selling those shares in the future at a higher price. That is a business decision with the company making an investment in itself as it might in buying another company. It is a hybrid of a merger and acquisition. But let’s be realistic. The investing public figures the stock price is going up and wants to make a quick buck. Financial analysts look at the transaction to see if the company is diverting funds that could be used to expand the business and make a longer-term profit. The bean counters are worried that the company is borrowing money to buy the shares. The market capitalization—the value of all shares—of the 30 issues on the Dow Jones Industrial Average index increased in 2016 by almost the same amount as the amount of money spent by those companies on share buybacks. In other words, the share buybacks increased the value of the shares, not public buying. At least, that is what it looks like on paper. At the announcement of the buyback program, AGI was trading at about P15, and SCC was around P38. The current prices are approximately P14.50 and P31, respectively. But who is to say what the prices might

be if the company had not bought its own shares? The best Christmas presents do not always come in the package with the big fancy ribbon. The best profit opportunities are not always found with the big headlines. Company stock buybacks can have a much better function. Quietly and without either hype or price increase, a company may be buying its shares for another long-term purpose. A corporation looking for a strategic partnership involving either a share swap between companies or a joint- venture buy-in for shares may slowly acquire additional shares from the open market. This should be done at a price below what the fair value of the company happens to be. If and when an outside merger is announced, the company can use its cheaply acquired buy-back shares to fund the new arrangement and make a substantial profit both short and long term. That is where you want to be.

For comments, e-mail mbv.secretariat@gmail. com or visit www.mannyvillar.com.ph.

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.

Opinion BusinessMirror

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Tuesday, March 20, 2018 A11

The Stockholm Consensus Who stands to gain from Dengvaxia mess? In 2016 Garin would implement (Numbers 4-6) the school-based immunization Ernesto M. Hilario

Cecilio T. Arillo

database Part Two

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. The need to balance market, state and community In the face of these objectives and the global challenges facing the world community, development policy has to build on a judicious balance among market, state and community. It is important to recognize that markets are, themselves, social institutions that need a framework of efficient regulation to deliver on their promise of efficient economic allocation of resources. Further, even where markets deliver on efficiency, they have no natural propensity to deliver on inclusiveness and equity. As we now know, famines are compatible with free-market efficiency. The trend toward unfettered markets of the last quarter century explains a range of outcomes the world is now living with, including financial crises, untenable levels of inequality and unsustainability. While recognizing the limits of what markets on their own can do, we appreciate that the state itself needs to operate efficiently. There are many ways in which countries can go beyond markets—there are important roles to be played by the government at different levels and by the myriad forms that civil society can take, such as cooperatives, associations and non-governmental organizations. The nation state should not take on tasks that are better left to the market or to communities. Frequently, these institutions work together in complementary ways. There are contexts where the well-being of the most deprived is best served by actions by local groups at the community level. Even though we cannot be unmindful of the fact that local community institutions have been known to be captured by retrograde forces, civil society organizations, at all levels, have an important role in promoting and maintaining social cohesion. We reiterate that the state is indispensable in setting the rules of the game and in establishing a regulatory framework in which markets and communities can flourish and engender progress. The greater social cohesion and trust that better rules of the game foster will also result in less inequality, simultaneously promoting growth and well-being in all of its dimensions. The state also has an indispensable role in areas where markets do not work well—finance, health and environment being prominent examples—and where there are clear inclusivity imperatives, such as women’s empowerment, the protection of vulnerable groups and addressing excessive wealth and income inequality. It also has a role to play in shaping industrial policy and effective agricultural and servicesector policies. The state must prevent the cycles of rising inequality, leading to state capture, which, in turn, enforces social, political and economic inequality. 5. Providing macroeconomic stability A lot of traditional policy advice centered on the need for macroeconomic stability. Economies with greater stability succeed in having greater growth, with further enhancement of well-being. Macroeconomic stability entails managing policies to keep the economy on an even keel and paying attention to longer-term implications of today’s policy actions, notably ensuring fiscal and external financial sustainability. Countries should use periods of strong growth to build up fiscal resources, so that they are in a position to use this medicine when the need arises. Yet, while long-run fiscal discipline is important and traditional economics is right in emphasizing this, policy-makers often ended up making a fetish of balancing the budget.

It has to be recognized that fiscal stimulus and public investment are often critical to escape stagnation traps, and they are safe as long as indebtedness is carefully managed and the inflationary consequence of monetization is contained. Public investment is important to build infrastructure and green technology, where the benefits are too far stretched into the future to attract private investment. Further, macro-prudential measures can supplement monetary policy to discourage the development of bubbles, to moderate potentially unstable capital-movements, and to prevent excessive buildup of external liabilities. 6. Attending to the impact of global technology and inequality In the arena of policy-making, a special challenge has arisen with recent advances in technology. New technology is linking up the global labor market, making it possible for workers in developing countries to work for global markets and consumers, without having to relocate themselves. This has created new opportunities for workers but has, at the same time, exacerbated inequality within nations. There is an increasing tendency in high-income nations to characterize this as a labor-versus-labor problem, one pitting the interests of workers in advanced nations against the interests of workers in developing countries. This is unfortunate. What is overlooked is that this is, in reality, largely a labor-versuscapital problem. Automation, the rise in robotics and the globalization of the labor market not only displaces labor, it replaces the earnings of workers with higher profits for corporations and the owners of machines. These consequences are a concern that must be addressed without converting this into a global labor-versus-labor tussle. This creates three policy compulsions. First, we must invest in human capital and increase skills in ways that complement technology and hence boost labor income, alongside the rise of technology. Second, we have to create new instruments of income transfers within nations. The fall in the share of wages in GDP must not be treated as an inevitable consequence of the rise of technology. Governments have to create systems of taxes and profit-sharing to break this equivalence, and they have to create rules of the game—such as strong enforcement of competition laws and labor legislation that enhances workers’ bargaining power and gives them a greater voice in society and within firms. Finally, this creates a special need for multicountry policy-making. It places a responsibility on multilateral institutions to encourage policy harmonization across nations and to promote policies that take account of the interests of not just rich, industrialized nations but also emerging economies, which are often deprived of voice in international decision-making. To be continued To reach the writer, e-mail cecilio.arillo@ gmail.com.

ABOUT TOWN

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re there vested interests behind the Dengvaxia immunization program of the health department? That question begs for clear answers amid the ongoing probe into the botched immunization program. When he appeared before the Senate recently, former President Benigno S. Aquino III said it was then-Health Secretary Enrique Ona who introduced the concept of dengue immunization during his term. Ona pushed for approval of a vaccine called ActRx Triact a supposed dengue cure, way back in October 2014. He even issued a directive, Department Order 2014-161, supporting its use for a national program in view of what he said was the high rate of dengue incidence in the Philippines that had already assumed epidemic proportions. A Department of Health undersecretary, Dr. Ted Herbosa, headed the bids and awards committee that approved trials of the anti-dengue vaccine. When Janette Garin took over as Acting Health Secretary, she ordered an investigation based on the allegations of Dr. Anthony Leachon that ActRx Triact did not have Food and Drug Administration approval, and later discontinued the trials. Leachon, the same whistle-blower in the current Dengvaxia fiasco, supported Garin’s move. He said, “The trials were unethical, mumbo-jumbo and voodoo type of study,” referring to the tests of ActRx Triact. He also said that, “while there is no medicine for dengue right now, a vaccine is already being developed,” obviously referring to CYD-TDV or what was to become Dengvaxia. Leachon knew about Dengvaxia because of studies by the World Health Organization (WHO), which had expressed concern over the experimental drug. Leachon was part of the panel of experts that Garin had consulted about ActRx Triact. In 2016 Garin would implement the school-based immunization program in three regions with the

highest incidence of dengue using the WHO-approved dengue vaccine Dengvaxia as developed by Sanofi. Leachon, who was a director of PhilHealth under Garin in 2015, would later on lead the opposition to the Dengvaxia immunization program. But his attacks on current Health Secretary Francisco T. Duque III has fueled speculation that he may simply be presenting himself as an alternative to Duque. Former Health Secretary Paulyn Jean B. Rosell-Ubial had defended the school-based dengue immunization program. She continued the program and expanded it during her term by adding Cebu and the administration of doses to over 10,000 policemen and their families. According to Rosell-Ubial, she agreed with the decision of a panel of experts she had formed, which included Leachon, who advised her to go on with the second and third doses to schoolchildren. What about Dr. Susan PinedaMercado, who has been saying that Dengvaxia is no good and has been giving credence to the findings of the Public Attorney’s Office (PAO), particularly its medico-legal chief, Dr. Erwin Erfe? Is it true that she still has an axe to grind with PNoy because he did not follow Ona’s recommendation for her to assume office as health secretary, appointing Garin instead? The doctor is also raising issues against Duque, who’s in charge of resolving the Dengvaxia fiasco. And there’s PAO chief Persida V. Rueda-Acosta, who’s banking on the findings of Dr. Erfe and his team that Dengvaxia is to blame for the death of several children. Is it also true that she may just be fanning the embers of dissent and making noise for a political agenda?

program in three regions with the highest incidence of dengue using the WHO-approved dengue vaccine Dengvaxia as developed by Sanofi. Leachon, who was a director of PhilHealth under Garin in 2015, would later on lead the opposition to the Dengvaxia immunization program.

One cannot help but wonder if all this is really about the welfare of children given Dengvaxia or simply a convenient platform for vested interests to gain control of the health department.

Who’s afraid of open-pit mining?

President Duterte recently said that, after seeing firsthand the negative effects of open-pit mining in the country, he was inclined to uphold the ban on the mining practice imposed in April 2017 by the Department of Environment and Natural Resources under then-Secretary Regina Paz L. Lopez. The ban on open-pit mining has been staunchly opposed by the Chamber of Mines of the Philippines, which said the mining industry would suffer heavily from it. The mining companies under COMP assert that, officially, it adopted a mining sustainability standard developed by the Mining Association of Canada called Toward Sustainable Mining. TSM requires mining companies to conduct an annual assessment of their performance in key areas, including tailings management, community outreach, safety and health, biodiversity conservation, crisis management, energy use and greenhouse-gas emissions management. Not surprisingly, the interagency Mining Industry Coordinating Council is also opposed to the ban on open-pit mining and has recommended its lifting to Duterte as it asserted that mining companies are willing to abide by mining laws, rules and regulations. For his part, Environment Secretary Roy A. Cimatu has said that he would defer to the opinion of the experts, but the final decision lies with the President. Research on the Internet yield interesting information about the subject.

Open-pit mining is a type of mineral extraction that does not require tunneling into the earth. When a mineral is near the surface, companies typically opt for openpit mining due to its lower costs and increased efficiency. Open-pits are typically dug in tiers and with angled walls to cut-down the risk of collapse or falling rocks. These holes can be tens of kilometers wide and thousands of feet deep. Generally, these pits increase in size until the minerals are thoroughly depleted. Furthermore, large trucks can enter an open-pit mine, allowing for a more efficient transition from extraction to processing. Open-pit mining is much more efficient compared to underground mining. Those who advocate openpit mining believe that the recovery rate of materials is higher using the method. It is estimated that about 80 percent to 90 percent of the material can be recovered compared to the 50 percent recovered using tunnel mining. As open-pit mining requires no underground infrastructure, it offers safer working conditions. Injury rates among workers are significantly lower. Cave-ins or the collapse of a tunnel are virtually eliminated, as workers aren’t exposed to risks like the collapse of a tunnel—a risk that is inherent in underground mining— and buildup of toxic gases, which can cause sudden explosions or contribute to chronic illnesses, does not occur. Finally, open-pit mining is significantly less costly than underground mining. Infrastructure and labor savings are passed on to the buyer of mined materials, which eventually trickles down to the consumer. Open-pit mining is an internationally accepted method for mining and is in accordance with the Mining Act of the Philippines. But companies doing open-pit mining also have big responsibilities. The most important, from where we sit, is that they should undertake rehabilitation of the open-pit mine after it completes its operation. The mining companies should also ensure that host communities would benefit in terms of road infrastructure, education and health facilities, among others.

E-mail: ernhil@yahoo.com.

‘Huge’ trade deficits are smaller than you think By David Hoffman and Erik Lundh Bloomberg View

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here are many good economic reasons why President Donald J. Trump is wrong to obsess over the United States trade deficit with China. One is that this bilateral deficit isn’t as severe as he thinks—and, in any case, the structural factors that caused the imbalance in the first place are changing. Before launching a US-China trade war, the White House needs a more accurate picture of how the world, in fact, trades. America’s goods deficit with China indeed hit a record level last year —around $375 billion. But, that’s arguably a data point from another era. The rise of global value chains in the 1990s and 2000s has fundamentally recast the landscape of world trade. Gone are the days when cargo ships primarily carried finished goods from one country to another. Instead, vast streams of manufacturing components now crisscross borders to feed globally diverse and fragmented production networks. Simply measuring gross exports and imports, which the trade deficit does, fails to capture this new reality. Take mobile phones. Inside any “Made in China” phone, you’ll find all manner of processors, circuits and parts from South Korea, Taiwan, Japan and elsewhere—even the US. Yet, according to official trade statistics, the entire value of the phone counts as an import from China. New data can be used to map how these global value chains are structured and, thus, to assess bilateral trade relationships more accurately. One such data set comes from the University of Groningen’s World Input Output Database (Wiod), which can be used to calculate a metric

called “value-added trade.” Valueadded exports and imports isolate the actual economic value produced in one country and consumed in another, stripping out the value of foreign-made components. Using this data, we calculate that the US trade deficit in goods and services with China in value-added trade terms in 2014 (the most recent year for which Wiod data sets are available) was $200 billion. This compares to the official estimate of $315 billion. Meanwhile, United States value-added imports from China were worth $320 billion that year, not $483 billion as the official statistics would lead one to believe. (US value-added exports to China totaled $121 billion, not $167 billion.) This recalculation captures both goods and services exchanged directly between the US and China, as well as indirect trade, or goods and services exchanged via intermediary countries. Not only is the deficit less severe than commonly thought, but United States trade balances with nations that supply China with components are distorted. Factories in South Korea that produce memory chips for Chinese-assembled mobile phones, for example, benefit from United

The Trump administration should be focused on the mercantilist features of Chinese trade policy, rather than the decreasingly relevant transactional inequities of the past. Instead of raising barriers to “Chinese” imports, the US should be pressing China to open up its own markets wider, to allow greater investment access and a level playing field for US firms vis-à-vis local players.

States demand for these phones. These chips constitute indirect South Korean exports to the US that don’t show up in traditional United StatesSouth Korean trade data. Adding to this increasingly complicated picture, a significant volume of our imports from China emanate from US manufacturers producing there. Blunt, China-focused tariffs won’t consider these nuances; the casualties will include United States companies and their suppliers and resellers, many of them in the US. It’s also important to recognize that the real trade deficit with China may be plateauing. This is because the structural factors that drove United States manufacturing to China in the late-1990s and early-2000s—low labor and other production costs—are diminishing. Production costs in China are rising markedly and outpacing productivity growth there, which means that Chinese competitiveness in manufacturing is on the decline. At the same time, the digitalized goods of the future will likely be manufactured closer to home. When it comes to highly technical export categories—such as smart, interconnected

devices and new-energy vehicles— localized technology requirements and the benefits of market proximity should encourage considerable “reshoring.” Those structural drivers help explain Foxconn Co. Ltd.’s major investment in an intelligent, flat-screen TV production facility in Wisconsin, for instance. They also explain why China is pouring so much money into advanced manufacturing industries, through its “Made in China 2025” plan. The Trump administration should be focused on the mercantilist features of Chinese trade policy, rather than the decreasingly relevant transactional inequities of the past. Instead of raising barriers to “Chinese” imports, the US should be pressing China to open up its own markets wider, to allow greater investment access and a level playing field for United States firms vis-à-vis local players. The US has leverage to press these demands, given China’s obsession with economic stability at this critical juncture. The aforementioned value-added trade data also tell us that only 0.7 percent of United States GDP depends on Chinese consumption of American-made goods and services, while 3.1 percent of China’s GDP is derived from US demand. So, in any tariff battle, China would likely suffer more. That said, the earnings, employment, investment and shareholder value of United States firms dependent on China would undoubtedly be hurt badly by Chinese retaliation. The Trump administration should be cautious about launching a trade war that’s aimed at the wrong problem—and will only create new ones.

2nd Front Page BusinessMirror

A12 Tuesday, March 20, 2018

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Aviation experts doubt if plane that crashed in Bulacan was really on maintenance flight By Recto Mercene

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@rectomercene

f the Piper Lance2 PA-32-300 twin-engine plane that crashed in Bulacan last Sunday, which caused the death of 10 persons, was on a “maintenance check flight,” why was it carrying passengers? This is the question the Civil Aviation Authority of the Philippines (Caap) has to answer after its spokesman, Eric Apolonio, admitted that the plane was on a maintenance check when the accident happened. “After its ferry flight to Laoag, it’s supposed to go to Itbayat in Batanes for a check flight, meaning to have its maintenance check or to check on other aircraft.”

“It probably is going to have a maintenance check, but the Caap approved its flight because the plane was good to go, otherwise it will not allow the plane to fly if there are problems,” Apolonio was quoted as saying in the local media. Airport authorities, however, have different views. A Caap official who requested not to be named because he is not part of the investigation said: “If

the flight of Piper Lance2 PA-32300 was for [a] maintenance-check flight, there should be no other on board except the pilot, copilot and the mechanics.” “Check flights are prohibited from carrying passengers according to current aviation laws. At the same time, check flights are supposed to be conducted only within a certain distance from the Naia [Ninoy Aquino International Airport]. Why go all the way to Batanes to conduct the check flight there?” the source added. An employee of the Flight Safety Inspectorate Service contradicted Apolonio, saying: “ I am 100-percent sure it was not a maintenancecheck flight,” and agreeing that check flights are not supposed to carry passengers other than those checking the airplane. He added, however, that only the flight plan of the plane would reveal the airplane’s actual purpose. “The

flight plan is in Plaridel, Bulacan,” the source said. The source, who asked not to be identified, said the Aircraft Accident Investigation Board (AAIB) is on top of the investigation. The AAIB chief Renier Baculinao told the BusinessMirror: “Definitely, it was not a maintenance check.” He agreed that, if it was a maintenance check, the airplane would have simply gone around within the vicinity of the airport: “It would have flown only on the traffic pattern around the Naia.” He said, however, that the investigation is going on to establish what kind of flight the pilot wrote in his flight plan. The six-seater, single-engine aircraft crashed upon takeoff from Plaridel Airport at 11:21 a.m. because it was not able to gain height and got snagged on a high-power electric line, as video of the scene would show.

According to eyewitnesses, they heard the plane’s engine sputter before the high-power lines caught it. The plane then tumbled into a residential area in Purok 3, Barangay Lumangbayan, Plaridel, Bulacan, where a family of five was reportedly having lunch. Senior Supt. Romeo Caramat, provincial director of Bulacan Police Provincial Office (PPO), confirmed the identities of the victims aboard the plane as Captain Ruel Meloria; Romeo Huenda[ chief mechanic, Alicia Necesario; Maria Vera Pagaduan; and Nelson Melgar. Also killed while having lunch were Risa de la Rosa, her mother Louisa Santos, 80, and children John John, 17, Timothy, 11, and Trish, 7. The Bulacan PPO said they were still conducting a follow up investigation to verify why the Piper Lance2 PA-32-300 aircraft crashed, as witnesses have different versions of what happened before the crash.

Is Davao growing faster than the city can handle? Continued from A1

Rather, it is the attraction and the emerging potential of places to turn in real production and income numbers that has magnetized business, investment and tourism. “Businessmen and investors don’t just rush in to places without actual potentials for a return in their investment.” The Davao region is actually turning in good production statistics for investors in the several years that they were here, Milan said. “With the President pouring in the much-needed support not given before by other presidents, the attraction has become much publicized now and is more attractive to do business in.”

Investment swell THE City Investment and Promotion Center said the city has now more than 40,000 new and renewed businesses, with a total aggregate capitalization of P270 billion, or more than $5 billion. The total number of businesses was an 18-percent increase from the previous year. This year the total number of businesses would likely surge by another 6 percent. Tourism had also another great year, breaking the 2-million mark by the end of last year. It was double what the Chinese ambassador promised last year, that he would be bringing in 1 million Chinese visitors to the country. Tourism arrivals are likely to get another boost, as Qatar Airways announced it would mount direct flights to Davao City any time this year. It officially announced its new route during the opening of the ITB Berlin Convention in Germany, Milan said. Not only local businesses were agog with the swelling inquiries and actual investments but foreigners, as well. Japan, China and Malaysia were the top-3 countries where their investors

have been frequenting the city for local partnering and site inspection. One Japanese businessman would be coming over by the end of the month to finalize his plan to put up a chocolateprocessing business here. Cacao production here and the rest of the region accounts for more than 80 percent of total national cacao production. Next week, the Taiwan International Trade Development would pack 25 businesses in food processing, fishery and equipment to a business match with local businesses. Last week Chinese businessmen in agriculture, medical supply and water distribution also went around for prospective partners and location finding. Canadian businessman Asaad Qureshi, president and CEO of Skynora Premium Offices, opened early this month his business-process outsourcing seat-leasing office at the fourth floor of Robinson’s Cybergate Delta building along Bajada Avenue here. “It’s the peace and secured feeling to be here that convinced me to establish my first business venture,” he told the B usiness M irror. “It’s an exciting time for Davao City,” Milan said.

Absorptive capacity MILAN expressed his concern, though, with the absorptive capacity of local businesses. “Foreign business and investment operations need local partners because of the constitutional prohibition of foreigners to own wholly their business here.” Many local businesses continue to hesitate in going big time, he said, as he corroborated the earlier observation of the regional Department of Science and Technology, which disclosed that few avail themselves of the department training and acquiring of new gadgets, technology and machines that would

CLARIN BRIDGE Public Works Secretary Mark A. Villar, Cabinet Secretary Leoncio B. Evasco Jr., Rep. Arthur C. Yap of the Third District of Bohol, Department of Public Works and Highways (DPWH) Undersecretary Emil K. Sadain, Japan International Cooperation Agency representative Keisuki Fukui, Embassy of Indonesia in the Philippines representative Ibu Budi Dewayante, Bohol Provincial Administrator Alfonso Damalerio II, Loay Mayor Rochelle Brigitte Lim Imboy, DPWH Project Director Virgilio Castillo and DPWH Region 7 Director Ador Canlas led on March 16 the ceremonial groundbreaking for the construction of a bridge at Clarin, a fifth-income class municipality in Bohol province.

have improved processing, production and efficiency. “There are many who remained contented with the current small magnitude of their businesses,” he said. Not only Davao City, but the composition of the businesses in the country was still accounted by the micro, small and medium enterprises. “There are some who already graduated to become big. Unfortunately, many are still MSMEs [micro, small and medium enterprises].”

Preparation under way “THE city, and many other cities, should now have taken the posture of investment capture, not only investment promotion,” he added. He said there should be already export processing zones, not only accreditation of buildings as economic zones. It was laudable though, he said, that City Mayor Sara Duterte has ordered the discussion of the Davao City and the Davao region master planning,“enlarging

the horizon of development so that not one city or province would be congested.” For example, he warned, the concentration of condominiums, offices and malls along the stretch of Bajada highway here has posed serious congestion in this northern approach to the city. “We are creating an Edsa here,” Milan said. “It’s good that Mayor Duterte foresaw the traffic situation in the city and prepared a plan,” he added.

BoP deficit nears $1B, breaches 2017 level

$961M The country’s balance of payments deficit as of end-February By Bianca Cuaresma

@BcuaresmaBM

D

ollar outflows continued to impair the Philippine economy in February, as the country’s Balance of Payments (BoP) deficit hit $429 million against the previous month’s $531 million, according to the Bangko Sentral ng Pilipinas (BSP). The BoP is the summary of all Philippine economic transactions with the rest of the world. A surplus in BoP means more dollars entered the economy against the volume of outflows. A deficit, on the other hand, means the country’s dollar earnings are not enough to cover dollar expenditures during a given period. For the first two months of 2018, the Philippines incurred a BoP deficit of close to a billion dollars at $961 million, larger than the deficit for the whole of 2017, which was recorded at $863 million. In the first two months of last year, the Philippines’s BoP deficit stood at $445 million. The BSP said the country’s BoP deficit stemmed mainly from its foreign-exchange operations and the payments made by the national government for maturing foreign-exchange obligations, the same two reasons that brought last month’s deficit. The deficit could have been larger, the BSP said, if the outflows were not offset by the national government ’s net foreign- currency deposits and the BSP’s income from its investments abroad in February. The BSP par ticipates every so often in the foreignexchange market as part of its mandate to smoothen out the peso’s volatility. BSP data showed the peso averaging at P51.786 to a dollar in February, weaker than January’s P50.509 to a greenback.

Risk Assessment/ Penetration tests/ Ethical hacking Continued from A1

No amount of policy, procedure, internal control or tone at the top will accomplish much, if those tools are addressing the wrong risks in the wrong way, because the risks themselves were misunderstood in the first place. That said, performing effective risk assessments can be a difficult art to master. The very phrase—“compliance risk assessment”—can encompass a dizzying range of risks: ■ anti-bribery; ■ whistle-blower retaliation;

■ data privacy; ■ workplace harassment; ■ cyber security and cybercrime;

anticompetition; ■ product safety; and much more. And within each of those risks are more risks to assess. Consider anti-bribery alone: ■ What are the company’s risks from third parties? ■ What are the risks of poor due diligence? ■ What are the risks that compensation schemes will lead sales agents to bribe their way to a performance bonus? ■ W hat are the r isks that

internal controls won’t detect bribery payments? That complexity is now a permanent fixture of corporate compliance and risk-management programs. More risks will emerge in the future, whether they come from business operations, government regulation, or external forces (bad hackers, for instance). All of this drives the imperative for astute risk assessments—performed with rigor, following an efficient methodology and embracing flexibility to meet whatever new risk is barreling up the audit committee’s agenda.

A s compl i a nce tec h nolog y improves, and we get closer to “automating” risk assessments— say, with sophisticated systems to manage regulatory change or to monitor internal controls— the lines may blur between formal compliance risk assessments; and more precise, rapid updates about compliance risk exposures on any given day. The goal for any risk assessment, however, is to articulate the amount of harm a risk can pose to the business and whether any internal controls the company has will work to prevent it. As articulated

by the UK Ministry of Justice, “Procedures should be proportionate to the risks faced by an organization…. A risk-based approach will…serve to focus the effort where it is needed and will have most impact.” This leads me to my favorite topic: Ethical hackers. They are also known as penetration testers or white hat hackers, who work to hack a client’s system to find their security vulnerabilities. These freelancers are familiar with common attack vectors, mitigation techniques and webapplication vulnerabilities, and

they also know how to fix these vulnerabilities. It may be good for you to know that there are support organizations that offer a variety of services in the compliance field: ■ Gap analysis regarding data privacy protection and cyber security; ■ Software for the analysis, including the risk assessment mentioned above; and ■ Vulnerability and penetration testing/ethical hacker service. If you need assistance, contact me under Schumacher@eitsc.com.