A10 Wednesday, November 2, 2016 • Editor: Angel R. Calso
Opinion BusinessMirror
editorial
Free trade’s bleak outlook
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fter years of talks and a week or two of comic opera, Canada and the European Union (EU) stifled resistance from Wallonia—the Frenchspeaking part of Belgium—and signed their Comprehensive Economic and Trade Agreement (Ceta). It was a good result, though with disturbing implications. Ceta is a new kind of free-trade agreement. Going far beyond the elimination of most tariffs on goods, it also breaks down nontariff barriers, and aims to foster trade in services and increase flows of foreign investment. Think of it as a scaled-down version of the Transatlantic Trade and Investment Partnership (TTIP) the United States hopes to reach with the EU. Even though the Walloons’ objections to Ceta were dealt with, after a fashion, the episode inspires little confidence in TTIP’s prospects. Ceta will now go ahead in two stages. Tariff reductions and other conventional trade measures will happen “provisionally” starting next year, but some of the reforms will have to await ratification, which could yet take years. It’s not impossible the deal could still unravel. A regional parliament in one EU country was able to nearly kill Ceta because Europe had deemed the pact to be a so-called mixed agreement, as opposed to an ordinary trade deal. EU trade deals don’t require parliamentary ratification; mixed agreements do. If the EU wants to reach more Ceta-like deals, this precedent was an error. Securing agreement in all the EU’s national (and some of its regional) parliaments will never be easy. That Ceta almost failed is especially telling, because Canada’s attitude toward regulating business and investment is not that different from Europe’s. If TTIP is ever put to EU parliaments, opposition will be stronger, fueled by antipathy to American-style capitalism. Enhanced free-trade agreements with other countries—perhaps including Britain, post-Brexit—could also be harder to conclude. Would it be such a bad thing if these deals didn’t go forward? Indeed, it would, because promoting international competition in services and investment boosts growth and helps consumers everywhere, lowering costs and raising living standards in the aggregate. Complementary policies (such as income support and assistance with retraining) are also needed, to help workers who may suffer because of stronger competition. But the worst outcome will be if governments fail in that task and then retreat on trade, which is the emerging trend. That would be as dumb as responding to the labormarket downside of technological progress by throttling innovation. In some areas, admittedly, tactical flexibility might make sense. There’s a case for relenting on nonessential provisions that attract particular opposition. Arrangements for resolving disputes between foreign investors and host-country governments are proving especially contentious. Even though the complaints are mostly misguided, international arbitration measures might be more trouble than they’re worth, especially for agreements between countries that have well-functioning legal systems. The main challenge for the governments involved, though, is to make the case for trade and competition. They should press forward with Ceta, TTIP and the Trans-Pacific Partnership—but they can’t expect to succeed, unless they meet antiglobalist opinion head-on. So far, that’s something they’ve conspicuously failed to do. Bloomberg Editorial Since 2005
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Should we prepare for death? Susie G. Bugante
All About Social Security
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he long weekend commemorating All Saints’ Day and All Souls’ Day was, indeed, a time of celebration, when family members near and far came together to honor the memories of loved ones gone. It was a time of reunion and family bonding spent over plenty of food and kakanin. It was a time of remembering one’s dearly departed and reflecting on one’s mortality. Thinking about death and dying at such a time as this was inevitable. It used to be taboo to talk about how one wants to be buried when the time comes. Many people these days, however, have become more practical and want better control on how they want to be buried. From the choice of cremation to the clothes to wear, more people are now planning their own funeral. This may sound morbid, but it’s more pragmatic. Oftentimes, part of the preparation is also getting a memorial plan, so that those who are left behind will no longer be financially burdened. One other way to help ease the burden of a bereaved family is through the Social Security System (SSS). When a member passes away, his beneficiaries become entitled to the death benefit, which is a cash benefit paid either in monthly pension
or lump sum. The monthly pension is granted to the primary beneficiaries of a deceased member who had paid 36 monthly contributions before the semester of death, while the lump-sum amount is granted to the primary beneficiaries of a deceased member who had paid less than 36 monthly contributions before the semester of death. In case of secondary beneficiaries, they are paid a lumpsum benefit only. The primary beneficiaries are the legitimate dependent spouse, until he/she remarries, and the dependent legitimate, legitimated, or legally adopted and illegitimate children of the member who are not yet 21 or over 21 years old, provided they are incapacitated and incapable of self-support due to
physical or mental disability that is congenital in nature or acquired during minority. In the absence of primary beneficiaries, the dependent parents are considered the secondary beneficiaries. In their absence, any other person designated by the member in his or her SSS records is considered as the beneficiary. If there is no designated beneficiary, the benefit shall be paid to the deceased member’s legal heirs in accordance with the law of succession under the Family Code of the Philippines. The monthly pension depends on the member’s paid contributions, including the credited years of service (CYS) and the number of dependent minor children, who should not exceed five. The monthly pension is paid for not less than 60 months. The primary beneficiaries of a deceased member who had paid less than 36 monthly contributions shall be entitled to lump-sum benefit, which shall be the higher of a) monthly pension multiplied by the number of monthly contributions paid prior to the semester of death; or b) 12 times the monthly pension. The secondary beneficiaries of the deceased member shall be entitled to a lump-sum benefit equivalent to: a) 36 times the monthly pension—if the member has paid at least 36 monthly contributions prior to the semester of death; or b) monthly pension times the number
Is Japan too scared to succeed?
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By Michael Schuman | Bloomberg View
f all of the scary economic data that routinely streams out of Japan, this statistic should terrify you: $800 million. That’s the total value of venture capital deals completed in Japan in 2015, according to accounting firm Ernst & Young. Compare that to $72 billion in the US and $49 billion in China. Even tiny Israel managed $2.6 billion in deals.
It’s a staggeringly small figure, and one that explains a great deal about why the world’s third-largest economy continues to struggle, no matter how much cash the central bank pours into it. Too few Japanese are starting new companies. The reasons for their reluctance are many and complex. For one thing, Japanese seem to be more risk-averse than their peers in other countries. In a 2014 report from the Global Entrepreneurship Monitor, less than one in three working-age adults in Japan considered starting a company a smart career choice—the second-lowest proportion in the study. That sentiment grows out of a conformist culture that puts a premium on stability and success. Fifty-five percent of potential Japanese entrepreneurs admitted in the same survey that they were afraid of failure, the second-highest rate among the countries studied. Nor do Japanese youngsters get
enough experience outside the Japanese system, which could stir their entrepreneurial instincts. According to the Institute of International Education, Japanese account for a measly 2 percent of all foreign students enrolled in US universities, behind not only China and South Korea, but Brazil, Saudi Arabia and Taiwan. Worse, the ratio has been falling. Outdated business practices pose additional hurdles. Banks remain overly fixated on receiving collateral for loans—something most startups don’t have. Japan’s fussy bureaucrats make life particularly difficult for entrepreneurs. According to the World Bank’s Doing Business study, Japan ranks a dismal 89th in the ease of starting a company, behind such paragons of efficiency as Afghanistan and Burkina Faso. The government and financial sector tend to protect established firms. Japan has a long and sad history of
keeping inefficient “zombie” companies alive with continued financial support and other measures, diverting resources from potentially more productive investments. Research firm Capital Economics figures that the level of government debt guarantees, relative to the size of the economy, is far higher in Japan than in other advanced economies. What all this means is that Japan doesn’t undergo the “creative destruction” necessary to infuse fresh blood into the economy. The Global Entrepreneurship Monitor reveals that a mere 3.8 percent of Japan’s working-age population is starting a new enterprise or running a company no more than three-and-a-half years old—the lowest ratio among the countries studied, except for Suriname. By comparison, the rate in the US is 13.8 percent. The vast majority of Japanese work in older firms. Unfortunately, unlike wine, companies don’t necessarily get better with age. A 2014 study by the Organisation for Economic Co-operation and Development figured that young firms contribute more to job creation than older ones. Examining all these factors in an August report, Capital Economics concluded that Japan’s “productivity growth is unlikely to be strong enough in coming years to close the gap with the world’s most productive economies.”
of monthly contributions paid or 12 times the monthly pension, whichever is higher—if the member has paid less than 36 monthly contributions prior to the semester of death. Aside from the death benefit, a funeral grant is given to whoever pays the burial expenses of the deceased member or pensioner. Starting August 1, 2015, the amount of the funeral grant was increased to a variable amount ranging from a minimum of P20,000 to a maximum of P40,000, depending on the member’s paid contributions and CYS. It’s always better to prepare for life’s eventualities, such as death. As the saying goes, the only certainty in life is death. In ancient Rome, memento mori (remember that you are mortal or remember that you have to die) is a constant reminder to victorious conquering generals to keep their feet constantly on the ground. In Christianity, this phrase is a reminder that one can go anytime, thus, one must be spiritually ready at all times and must live a life in accordance with God’s will. For more details on SSS programs, members can drop by the nearest SSS branch, visit the SSS web site (www.sss.gov.ph), or contact the SSS call center at 920-6446 to 55, which accepts calls from 7 a.m. on Monday all the way to 7 a.m. on Saturday. Susie G. Bugante is the vice president for public affairs and special events of the SSS. Send comments about this column to susiebugante.bmirror@gmail.com.
Japanese policy-makers can start fixing this problem by streamlining regulation to make it easier to start companies and opening coddled sectors to more competition to spur entrepreneurs. In that regard, the (now troubled) Trans-Pacific Partnership could help. An overhaul of Japan’s archaic schools would also be a good idea. William Saito, an entrepreneur who encourages young Japanese to follow in his footsteps, has made the case that an exam-obsessed, competition-inducing education system renders Japanese less able to cooperate collegially in teams, a critical factor in any thriving start-up culture. Saito also argues that the Japanese business community requires greater diversity—not just more women, but greater openness to a wider range of ideas—in order to drive innovation. Japan’s entrepreneur gap gets at a much larger problem. The Bank of Japan can try its utmost to stimulate growth and inflation, but unless inventive, aggressive companies are around to pick up that cheap cash and do something productive with it, policymakers will never be able to jumpstart the economy. The lesson is simple. Before embarking on wild experiments in economic management, get the basics of business right first.