Businessmirror november 22, 2017

BMReports

Large dams: Bulwark or conduit to growth? By Jonathan L. Mayuga

Part Three

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ITH the increasing population and expansion of service areas of both Maynilad Water Services Inc., Manila Water Co. Inc. and the Bulacan Bulk Water project, the Metropolitan Waterworks and Sewerage System (MWSS) is eyeing to serve around 20 million people by the end of the Duterte administration. Aside from the construction of the Kaliwa Dam, the government is also looking at the construction of the Laiban Dam and the revival of the Wawa Dam. The former can store up to 1,800 million liters per day (MLD) of water. The MWSS is also eyeing additional water capacity with the ongoing project of Manila Water to source additional 50 MLD from Laguna de Bay and 150 MLD for Maynilad through the Putatan Expansion project.

Photo from the Wikimedia Commons shows the Angat Dam viewed from the San Lorenzo hilltop in Norzagaray, Bulacan. Environmental advocates claim the dam's capacity to store water has been significantly reduced.

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Wednesday, November 22, 2017 Vol. 13 No. 42

Duterte to issue EO adding teeth to fight vs biopirates

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By Jonathan L. Mayuga

@jonlmayuga

he government is now putting the finishing touches on an executive order (EO) that will guard the country’s genetic resources and ensure the Philippines will get its fair share in the commercial use of its biodiversity.

According to estimates, the global market for pharmaceutical and food products that use genetic resources is valued at about $200 billion. Environment Undersecretar y for Climate Change Service Analiza Teh said a draft EO on “Access and

By Jovee Marie N. dela Cruz

Teddy Locsin Jr.

free fire Statement delivered by H.E. Teodoro L. Locsin Jr., permanent representative of the Philippines to the United Nations, during the Third Committee Debate on Agenda Item 73 (b): Promotion and Protection of Human Rights—Human rights questions, including alternative approaches for improving the effective enjoyment of human rights and fundamental freedoms on the 72nd Session of the United Nations General Assembly, UN Headquarters, New York, October 30, 2017.

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awmakers in the House of Representatives on Tuesday urged the Board of Investments (BOI) to set clearer rules and regulations in implementing the Motor Vehicle Development Program (MVDP) to attract new industry players. This after the House Committee on Ways and Means started its probe on the reported BOI move to cancel the authority granted to the Hyundai Asia Resources Inc. (Hari) to participate in the MVDP, allegedly for failing to comply with requirements set under Executive Order (EO) 156. During the hearing of the House Committee on Ways and Means, Deputy Speaker Party-list Rep. Sharon S. Garin of Aambis-OWA said the BOI’s seeming bias might discourage new but willing investors in the country’s car industry. “What you are doing is discouraging them from participating in the MVDP. It is quite disappointing,” Garin said. Party-list Rep. Rodel M. Batocabe of Ako Bicol said the government should clarify the ambiguity in the implementation of rules and regulations of the MVDP. According to Batocabe, a clearer regulation, which will govern the

BSP has ready tools to prevent overheating of local economy By Bianca Cuaresma

GARIN: “What you are doing is discouraging them from participating in the MVDP. It is quite disappointing.”

@joveemarie

MVDP, will put the Philippines on a par with other Association of Southeast Asian Nations membercountries in terms of automotive manufacturing. “The BOI’s investment policy should be corrective, not punitive.” “The BOI seems too eager to impose the extreme penalty of license cancellation, but did it consider what will happen to Hari’s employees and their families? What about the millions already invested by the company?” the lawmaker asked. Rep. Manuel F. Zubiri of the Third District of Bukidnon said conflicting rules and regulations on investment will only push investors away. Trade Undersecretary Ceferino S. Rodolfo said the BOI has decided to cancel Hari’s license for allegedly lacking painting and welding activities in its assembly plant. These “violations” disqualified Hari from the tax privileges extended under the program. See “Lawmakers,” A2

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Lawmakers chastise BOI for failing to set clear rules for MVDP

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@jonlmayuga

T The Canadian Chamber of Commerce of the Philippines (CanCham) launches the 12th annual International ICT Awards Philippines, that will be held on March 22, 2018, at the Marriott Grand Ballroom in Pasay City. The International ICT Awards Philippines gives recognition and tribute to outstanding contributors in achieving sustained growth and excellence in information and communications technology. Present during the launch are Globe Telecomm Inc. Business Senior Vice President Peter Maquera (from left), CanCham President Julian Payne, Information Technology and Business Process Association of the Philippines President Rey Untal and PLDT Alpha Inc. First Vice President and Head Victor Tria. See related story on B2. ALYSA SALEN

‘BPO sector to end 2017 on positive note’ By Catherine N. Pillas @c_pillas29

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he Information Technology and Business Process Association of the Philippines (Ibpap) remains optimistic that the business-process outsourcing (BPO) sector will post positive growth by the end of the year. The Ibpap noted that investment pledges registered at the Philippine Economic Zone Authority (Peza)

continues to show signs of recovery. Rey Untal, Ibpap’s president and CEO, noted that the proposed Tax Reform for Acceleration and Inclusion (TRAIN) has also buoyed the sentiment of major BPO players. “We will definitely end the year in growth, but I can’t give a figure. The latest version of the TRAIN bill at the Senate has been very favorable and supportive of what the industry is espousing,” Untal told the BusinessMirror.

Untal said the improving sentiment of BPO players has helped turnaround the performance of the sector in terms of Peza investment pledges. “The reduction in investments does not constitute a contraction, it means we grew less compared to the previous year. But with these numbers narrowing down, I’m very pleased, and it validates the information I’ve been getting from the ground,” Untal said. See “BPO,” A2

@BcuaresmaBM

he Bangko Sentral ng Pilipinas (BSP) again moved to assuage fears over economic overheating, assuring the markets that it is ready to take action to avoid such a scenario. In his keynote address in the 2017 Security Bank Economic Forum on Tuesday, BSP Governor Nestor A. Epenilla Jr. said the Central Bank is ready to deploy tools in its arsenal should pockets of instability become more evident in the economy down the line. “The risk of economic overheating has been raised by some analysts. We do not believe that we are there yet, and we remain very vigilant to avoid it,” Espenilla said, adding that the level of credit growth remains “manageable.” Latest data from the Central Bank show bank lending growing by 21.1 percent in end-September, faster than the previous month’s 20.4 percent. Espenilla said the credit-toGDP ratio of 63.6 percent as of the second quarter was still one of the lowest by far in Asia, indicating relatively low overall leverage. “Bank loans are diversified

n japan 0.4523 n UK 67.4140 n HK 6.5218 n CHINA 7.6833 n singapore 37.5415 n australia 38.4444 n EU 59.7577 n SAUDI arabia 13.5837

See “BSP,” A2

Source: BSP (21 November 2017 )

A2 Wednesday, November 22, 2017

BMReports BusinessMirror

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Large dams: Bulwark or conduit to growth? Continued from A1

MWSS Administrator Reynaldo V. Velasco said the regulator will be forming a new technical working group comprising of the MWSS, Maynilad, Manila Water and Luzon Water to map out a new 10-year road map or development plan on new water sources that will zero-in on ongoing and future projects. “Having these additional flagship projects approved and started in the next five years would be enough water security and legacy of the Duterte administration for the next generations of Filipinos,” he said.

Opposition

AS the construction of large dams has been debated in many parts of the world, the issue of constructing large dams in the Philippines also triggered howls of protest. The issues raised range from lack of consultative process to alleged failure of the government to conduct more in-depth study of its impacts and a comprehensive and science-based risk assessment. Critics also assailed government for failing to identify the positive and negative effects of the large

BPO. . .

dams or undertaking a cost-benefit analysis to back such undertaking. While the Duterte administration is determined to push for the construction of the Kaliwa Dam and other large dams, such as the Laiban Dam and the revival of the Wawa Dam, some groups are not as excited. Critics have cited the potential risks to the communities downstream and adverse socioeconomic and environmental impacts of building large dams. Citing a report of the World Commission on Dams (WCD), titled “Dams and Development of a New Framework,” environmental advocate Clemente Bautista said large dams are proven to have adverse impacts, aside from the huge cost of such infrastructure. The WCD report said dams have made an important and significant contribution to human development. However, the WCD said in too many cases an acceptable and often unnecessary price has been paid to secure those benefits, especially in social and environmental terms, by people displaced, by communities downstream, by taxpayers and by the natural environment. In a telephone inter v iew,

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He noted that investments in the information-technology and busines-process management (IT-BPM) sector has been slowly recovery. In May investments fell by 34 percent, but this improved to -27 percent in August, and then to -21 percent in September. As of October, Untal said this has fallen further to -10 percent. Earlier, Senate Ways and Means Committee Chairman Sen. Juan Edgardo M. Angara pledged not to alter the existing incentives given to the IT-BPM industry. Peza has already successfully lobbied to keep the VAT exemption on locally made inputs purchased by its locators to be used in finished exports.

Bautista told the BusinessMirror even indigenous peoples strongly oppose large dams. “Large-dam projects are environmentally destructive, not economically beneficial and cause social disruptions, such as the displacement of affected communities,” said Bautista, national coordinator of the environmental organization Kalikasan-People’s Network for the Environment.

Adverse impact

BAUTISTA said the construction and operation of large dams eventually leads to flooding of terrestrial ecosystems, killing the natural habitats of species in surrounding areas. Hence there results to biodiversity loss, he explained. “[A large dam] has been proven to have adverse impacts as shown in a study by the WCD,” Bautista said. “They induce earthquake, they cause flooding and contribute to carbon emission.” He cited one of the adverse impacts of large dams is the destruction of forests as dams tend to accumulate a huge volume of water with the construction of the vertical structure to prevent the natural flow of water through rivers.

There were also proposals to remove the VAT exemption of those exporting services. Aside from this, the end of the war in Marawi, which is near Cagayan de Oro—a destination that is increasingly becoming popular among BPO firms—has also boosted the confidence of BPO players. Given these developments, Untal said businessmen have approached and have broached the possibility of locating their facilities in the Philippines. The IT-BPM road map assumes an average yearly growth rate of 9 percent for the sector from 2016-2022, or from an estimated $23 billion last year to close to $40 billion in six years’ time. Employment is seen to grow 8 percent annually, from 2016’s 1.15 million to 1.8 million by 2022. In 2016 the Ibpap reported that the

“There is also a study wherein large dams can induce earthquake,” Bautista added. In the end, large dams are not economically beneficial, first because it entails huge investment, and second, it is costly to the environment and communities, he said. “Third, it is difficult to maintain as it reaches the end of the lifespan or cycle.” He added the ecosystem in fishproducing rivers are also affected by the construction and operation of dams, citing the case of salmons, that make the journey from the ocean into raging rivers to breed in lakes upstream. He said as large dams are constructed, certain freshwater species that breed up in bodies of waters streams are prevented from reaching their breeding sites, thereby preventing reproduction. “Definitely, dams will lead to biodiversity loss as it prevents certain freshwater species from breeding because of the structures,” Bautista said. Many upland dwellers depend on natural lakes because naturally, they provide food, such as freshwater fishes as fish breed the lake. Freshwater species become

industry provided direct employment to some 1.15 million Filipinos, and generated $23 billion in revenues. According to data from the Peza, investment pledges in the IT sector continued to tumble in October due to uncertainty over fiscal incentives. Government data showed investments in the business-process outsourcing sector declined by 8.4 percent in the Januaryto-October period. Investments reached P14.4 billion in the 10-month period, lower than the P15.73 billion recorded last year. The number of projects also fell to 183 from 168 seen last year. The value of IT service exports declined slightly to $8.023 billion, from $8.1 billion in 2016. Despite this, workers directly employed by IT sector rose to 658,892 in January to September, from last year’s 633,393.

extinct in dams as the government starts to release fingerlings invasive alien fish species like tilapia and bangus to boost fisheries production, Bautista claims. Worse, as dams prevent the natural flow of water in rivers and streams, it also affects the natural regeneration of forests downstream, eventually affecting its productivity, he added.

Management issues

ACCORDING to Bautista, large dams will eventually be the subject of privatization. He added the government needs to pass on the burden of maintaining the dam to the private sector. “In the Philippines the management of dams is a major issue, because of the failure of the government to stop the degradation of watersheds where dams are built,” he said. Bautista and his group advises against the construction of large dams, especially because of the lack of capacity of the government to protect and conserve forests and ensure the structural integrity of dams in the long run. “Dams are constructed in watershed areas. But because our

BSP. . .

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across economic sectors and are backed by durable economic activity, with 89 percent going into production sectors,” Espenilla argued. “Moreover, BSP monetary operations indicate just sufficient domestic liquidity to support expansion and, amid strong growth in liquidity, inflation dynamics remain very manageable,” the governor said. The International Monetary Fund (IMF) recently flagged the rapid expansion of the economy and the risks of overheating down the line. “The combination of high-credit growth, buoyant private investment and fiscal expansion without tax reform could lead to overheating of the economy,” the IMF said.

watersheds are already degraded, large dams accumulate silts because of soil erosion,” he explained. “As dams become silted, like in the Angat Dam, the capacity of the dam to store water is reduced.” Bautista said the San Roque Multi-Purpose Dam has been adversely affected by the environmental degradation, which was aggravated by mining activities. Foremost of the latter is when mine tailings of Philex Mines dumped 2 million tons of mud into the Balog Creek and Agno River. The National Power Corp., which is operating the San Roque Dam, filed a case against Philex and sought for P6.4 billion to compensate for the damage and the lost revenues the spill caused. Currently, some of the dams in the Philippines are now privately run or privately managed, and the production of electricity is not even benefitting the communities, according to Bautista. Worse, he said some dams built for irrigation, as well, such as Angat, are often deprived of much-needed water, because of the conflicts with power generation and domestic supply for Metro Manila. To be concluded

Lawmakers. . . Continued from A1

Under MVDP, incentives like reduced importation duties are given to car manufacturers that will bring in to the country completely knocked down kits or automobiles and have them assembled locally before they can be sold. Hari Senior Technical Adviser Alex Cabrera said it is operating under the BOI authority granted under EO 877A, or the Comprehensive Motor Vehicle Development Program, which governs the manufacture of knocked-down vehicles. Cabrera said EO 877A is an amendment to EO 156. According to Cabrera, Hyundai has already submitted all requirements to the BOI, including the technical license agreement with Hyundai Motors Corp. of Korea, showing Hari ’s assembly process, including the complete list of knocked-down car parts and components for importation. “All these were received and approved by the BOI,” he added. House Committee on Ways and Means Chairman Dakila Carlo Cua of Quirino ordered an ocular inspection on the assembly plant of Hari in Sta. Rosa, Laguna. On questioning by Rep. Prospero Pichay of the First District of Surigao del Sur, customs officials confirmed that Hari ’s shipments consist of car parts in knocked-down condition, belying claims that the items being imported by the company were completely built vehicles.

Senators. . .

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“This is why I filed Senate Bill 1441, which seeks to amend the antiquated Public Service Act that would confine the definition of ‘public utility’ to natural monopolies, which are the transmission and distribution of electricity, and water works and sewerage systems as it should.” She noted that these “natural monopolies” will still be restricted by the constitutional limitation on foreign ownership (60-40). But Poe assured that “as chairman of the Committee on Public Services, I will push for its immediate passage in the Senate, and have, in fact, scheduled for a hearing on this as soon as the Senate concludes its deliberations on the TRAIN [Tax Reform for Acceleration and Inclusion] and budget bills.” Senate Minority Leader Franklin M. Drilon, in a text message, affirmed that a third telco would need to go through the process of getting a franchise from Congress.“Yes, it would require a legislative franchise for the third telco to operate in the Philippines.”

Economy

A4 Wednesday, November 22, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

Meralco outlines cost of DU disaster-resiliency program

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By Lenie Lectura

@llectura

proposed Department of Energy (DOE) policy meant to ensure that energy-related facilities are resilient enough to continue providing power in case of disasters will entail additional investments on industry players, the Manila Electric Co. (Meralco) told the agency.

Meralco, in a comment submitted to the agency, said the adoption of resiliency measures will require additional capital expenditures (capex) and operational expenditures (opex). As such, distribution utilities (DUs), such as Meralco, would need to be allowed to recover the expenses consequent to these resiliency measures within a reasonable period. “In the case of regulated entities, such as DUs, the recovery of capital and operational expenses is subject to the approval of the Energy Regulatory Commission [ERC],” Meralco said. The utility firm did not say how much should be set aside to comply with the proposed policy. The energy-resiliency policy, dubbed as the “Adoption of Resiliency

Planning and Program in the Energy Industry to Mitigate Adverse Effects Brought About by Disasters,” is anchored on President Duterte’s directive to heighten disaster resilience. Among others, the proposed policy seeks to strengthen the existing energy infrastructure and systems; institutionalize the “build back better” principle; improve existing disaster-resilience operations; and develop resiliency practices, systems and standards. “With this policy, we are building with the industry players a structure on how to plan and address humaninduced disasters that compromise existing power facilities,” Energy Secretary Alfonso G. Cusi earlier said. Cusi added that the issuance of this policy will cement the DOE’s

commitment to mainstream disaster risk reduction to increase the reliability of energy systems and reduce their vulnerability to disasters. “We are fast-tracking the issuance and implementation of the energyresiliency policy as this would guide us, especially in rebuilding Marawi City,” Cusi added. Meralco also said that industry players may need more time to prepare their respective resiliency-compliance plans. It proposed to extend to 90 days from 60 days upon the effectivity of the policy within which industry participants shall submit their respective resiliency-compliance plans.

With this policy, we are building with the industry players a structure on how to plan and address humaninduced disasters that compromise existing power facilities.”—Cusi

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5 steel mills to undergo DENR pollution probe By Jonathan L. Mayuga @jonlmayuga

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nvironment Secretary Roy A. Cimatu has ordered an investigation into possible violations committed by five steel mills accused of using “bad” technology that causes air pollution. In a news statement, Cimatu said he wants concerned Department of Environment and Natural Resources offices to look into the complaints against the Pampanga-based Melter Steel Corp., Real Steel Corp. and Wan Chiong Steel Corp.; Metro Dragon Steel Corp. in Caloocan City; and Davao Mighty Steel Corp. “Given the veracity of the allegations, the investigation must be completed as quickly as possible so that we can take immediate measures to address the problem, and, if necessary, hold these companies accountable for their pollution,” Cimatu said. The investigation stemmed from reports about the alleged labor and environmental violations of the five steel mills. According to the labor rights group Philippine Association of Free Labor Unions (Paflu) and environmental group Clean Air Philippines Movement Inc. (Capmi), the air pollution at the five steel mills have exceeded the maximum level set by the World Health Organization. Paflu and Capmi had earlier

CIMATU: “Given the veracity of the allegations, the investigation must be completed as quickly as possible so that we can take immediate measures to address the problem, and, if necessary, hold these companies accountable for their pollution.”

lodged a complaint with the Department of Labor and Employment against the five steel mills based on their findings. According to the complaints, workers of iron and steel factories are constantly exposed to a wide range of pollutants depending on the particular process, the materials involved, the effectiveness of monitoring and the control measures. The detrimental effects of air pollutants at these working conditions can lead to deadly diseases not just to the workers, but to the communities surrounding the steel and iron plants, as well. Acting on Cimatu’s orders, the Environment Management Bureau (EMB) formed a team to investigate the erring steel mills. “Upon orders from the secretary, we have formed a team that will be in charge of the investigation,” EMB Air Quality Management Chief Jerry Capulong said.

‘No place for BNPP in PHL’s nuclear power development program’

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l awm a k er has e xpressed concern over the looming possibility of reviving the Bataan Nuclear Power Plant (BNPP), saying the mothballed power facility has “no place in the future of Philippine nuclear energy.” Sen. Sherwin T. Gatchalian, also the chairman of the Senate Committee on Energy, said he welcomes the cooperation deal between the Department of Energy (DOE) and the Russian Federation State Atomic Energy Corp. (Rosatom). Last week the DOE and Rosatom signed a memorandum of cooperation (MOC) during the 12th East Asia Summit in Manila.
 
 “The partnership forged between the DOE and Rosatom signifies the start of a new chapter for the prospects of nuclear energy in the Philippines. I welcome this opportunity for our country’s energy experts to gain more knowledge and craft strong regulatory frameworks as we seek to build a comprehensive national nuclear-energy policy,” Gatchlian said. But the lawmaker is lukewarm to the possibility of reviving the mothballed plant. “I remain cautious about the proposal to revive the Bataan Nuclear Power Plant. The controversial 40-year-old plant is a remnant of the failed nuclearenergy policies of the past. It has no place in the future of Philippine nuclear energy,” he said. The DOE-Rosatom cooperation will be implemented in the form of joint working groups that will undertake specific projects and tasks, exchange of experts, workshops, training and education of personnel and sharing of technical information. 
 The MOC will run for five years, and is renewable for the same period, unless one notifies the other in writing through diplomatic channels of its intention to suspend or terminate the same. 
 Energy Secretary Alfonso G. Cusi said the undertakings in the MOC would support the Philippines in coming up with a national position and the crafting of a nuclear-energy policy that may lead to a

nuclear energy program. 
 The Philippines and Russian Federation will cooperate in several areas under the agreement.
 These include the following: Nuclear infrastructure studies toward national energy policy development and nuclear-energy program implementation in the Philippines; 
 Audit and assessment of BNPP’s technical condition, including the option of its rehabilitations and, 
 Feasibility studies on construction in the Philippines of small modular nuclear-power plants, onshore or offshore, but not limited to analysis of technical, commercial, financial and legal aspects.
 
 Both may also carry out similar studies on nuclear-power plants in general as may be deemed necessary and consistent with national energy development plans and policies of the Philippines. 
 The Philippines and the Russian Federation are members of the International Atomic Energy Agency and are parties to the Treaty on the Non-Proliferation of Nuclear Weapons of July 1, 1968. The 620 -megawatt (MW) BNPP is the country’s first and only attempt at nuclear-power development. It was supposed to be the first of two nuclear plants to be built in the northern province of Bataan. It was also the first nuclear-power plant in Southeast Asia, and was identified as a solution to the 1973 oil crisis that had adversely affected the global economy, including the Philippines. The project, however, was mothballed in the wake of the Chernobyl disaster in 1986. But clamor for the commissioning of the BNPP was revived during the power crisis in the 1990s and the skyrocketing oil prices in 2007. During these periods, the DOE actually came close to reconsidering nuclear power as a potential energy source for the country. But then the Fukushima nuclear-plant incident happened in 2011, creating global panic and concerns about the safety and integrity of nuclear plants. Lenie Lectura

“Of course, the investigation is confidential and the release of information is sensitive, but we have already started operations on this case and we will be expecting a report in the immediate future,” Capulong added. Cimatu said the investigation should focus on possible violations of Republic Act (RA) 8749, or the Clean Air Act of 1999. RA 8749 provides the policy framework for the country’s airquality management program. It seeks to uphold the right of every Filipino to breathe clean air by addressing air pollution from mobile and stationary sources. The law focuses primarily on pollution prevention rather than control by encouraging cooperation and self-regulation among citizens and industries. It also enforces a system of accountability for adverse environmental impacts to heighten compliance to government environmental regulations. Some of the programs or activities implemented to achieve this objective are: Linis/Ligtas Hangin Program with the Bantay Tambutso, Bantay Tsimneya and Bantay Sunog; industrial enforcement program for stationary sources; designation of attainment and nonattainment area sources; promotion of clean fuel; and strong collaboration between government and stakeholders on measures to address pollution.

Senators laud House approval

of mental-health bill on 3rd reading

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enators have lauded the move of the House of Representatives for passing on third and final reading its version of the mentalhealth bill. With 223 affirmative votes, zero negative votes and no abstentions, the House had approved the Mental Health Act on third and final reading. Sen. Risa N. Hontiveros-Baraquel, sponsor of the counterpart bill in the Senate, said that she’s looking forward to working with her colleagues in Congress to finalize the bill. “I am looking forward to working with my colleagues in Congress in finalizing the bill and having it signed into law before the year ends as a wonderful Christmas gift to the Filipino people,” HontiverosBaraquel said in a news statement. Hontiveros-Baraquel said that, after being one of the few countries left without a mental-health policy, the Philippines is now one step closer to implementing a policy that would respond to the mentalhealth needs of Filipinos. “Once enacted into law, the measure will integrate mental health into the general health-care system,” she added. Sen. Joel Villanueva described the legislation as “an important policy that addresses the concerns of our fellow Filipinos who are in dire need of accessible mental-health care.” As one of the authors of the bill’s counterpart version, Villanueva said that he had inserted a provision that proposes to standardize collection and management of data and promote evidence-based research on youth suicide and institutionalize the 24/7 national hot line for suicide prevention. He, meanwhile, expressed hope that during the bicameral conference-committee hearing, both chambers would be able to reconcile the differences. Sen. Juan Edgardo M. Angara, like his colleagues, is also hopeful that the bicameral committee will meet immediately to come up with a draft that will be submitted to President Duterte for his signature. “It’s about time that we enact a mental-health law. We are one of the very few countries today that has no national mental-health policy,” Angara said. Angara added that the measure is necessary so people would no longer “suffer silently in the dark.” PNA

Agriculture/Commodities BusinessMirror

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Editor: Jennifer A. Ng • Wednesday, November 22, 2017

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PHL rice output to hit 19.4 MMT

A farmer piles up grain harvested from a rice field in Nueva Ecija. FILE PHOTO

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he country’s paddy production for 2017 would settle at 19.4 million metric tons (MMT), 10.11 percent higher than the 18.15 MMT produced last year, according to the latest report of the Philippine Statistics Authority (PSA).

The PSA said in the October round of its report, titled “Rice and Corn Situation Outlook,” the projected paddy output of 7.45 MMT in the October-to-December period would allow the Philippines to end the year with a bigger rice supply. “Probable palay production for the October-to-December period may surpass the 2016 level by 6.26 percent. The anticipated increment in output may be attributed to increase in yield resulting from sustained use of high-yielding varieties

coupled with sufficient water supply during the early stages of crop development,” the PSA report read. The PSA said its forecast for the fourth quarter was based on standing crop. Despite the contraction in harvest area to 1.86 million hectares, from last year’s record of 1.88 million hectares, the report noted that yield per hectare may improve by nearly 6 percent to 3.99 metric tons (MT), from 3.73 MT last year. “Substantial increments in output may be anticipated in the

Onion, garlic farmers from Iloilo to get govt assistance

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he Department of Agriculture (DA) has recently inked a P1-million agreement with the municipal governments of Iloilo to expand their onion and garlic hectarage to as much as 1,000 hectares. Agriculture Secretary Emmanuel F. Piñol and the local government of Miag-ao led by its Mayor Macario Napulan signed an agreement, which seeks to increase yield of onion and garlic by enhancing farmers’ technical skills and increasing areas of production, according to the DA. “The Memorandum of Agreement also aims to enhance the knowledge and empower the local farmers and agricultural technicians,” the DA said in a statement on Monday. “Under the agreement, which calls for the implementation of bulb onion and garlicproduction trainings, the DA will provide technological-training activities, more specifically on the cultural management of garlic and onion,” the DA added. Under the agreement, the DA targets to increase production areas to a total of 1,000 has to enable a more sustainable production in some towns of Iloilo. “At present, Miag-ao has 130 hectares for garlic and onion production, and intends to expand areas to 370 hectare more, while the neighboring towns are expected to allot a total of 500 hectare to complement the production,” it said. The project, which has a total funding support of P1.169 million, intends to benefit 180 farmer-beneficiaries thru the conduct of various trainings and on-site demonstrations, according to the DA. Jasper Emmanuel Y. Arcalas

Cordillera Administrative Region (CAR), Cagayan Valley, Central Luzon, Bicol region and Central Visayas,” the report read. “Probable growths in production may be attributed to possible increase in yield in most regions except Western Visayas, Davao region, Caraga and the Autonomous Region in Muslim Mindanao [ARMM]. This may be attributed to sustained use of high-yielding varieties coupled with sufficient water supply/rainfall,” it added. Because of the projected hike in fourth quarter output, the PSA added paddy production in the second half of the year would reach 10.8 4 MMT, 8.61 percent higher than the 9.98 MMT produced in 2016. “Harvest area may expand by 3.46 percent to 2.72 million hectares, from 2.63 million hectares. Yield per hectare may rise to 3.99 MT or by 4.98 percent, from 3.8 MT,” the report read. For the whole of 2017, the improvement in yield is expected to settle at 4.03 MT per hectare, from

last year’s 3.87 MT, while harvest area would expand to 4.81 million hectares. Based on farmers’ planting intentions, the PSA said paddy output in the first quarter of 2018 would go up by nearly 3 percent to 4.53 MMT, from 4.41 MMT recorded in the same period in 2017. “Probable increments in production may be expected among regions except CAR, Western Visayas, Zamboanga Peninsula and the ARMM,” the report read. The PSA report also noted that corn production for calendar year 2017 would rise by 9.72 percent to 7.92 MMT. Data showed this was due to the 30-percent hike in output in the first half of the year. The PSA noted that the Julyto-December output may decline to 4.22 MMT, from last year’s 4.39 MMT, or by 3.79 percent. This is becase harvest is seen contracting to 1.45 million hectares, from 1.58 million hectares last year. However, yield may improve by 4.89 percent to 2.91 MT per hectare, from last year’s 2.77 MT. “ T he October-to-December 2017 forecasts based on standing crop, production and harvest area may decline by 5.41 percent and 7.81 percent, from their respective levels in 2016. Yield per hectare may improve by 1.26 percent to 2.88 MT, from 2.8 MT,” the report read. According to the PSA, corn output in the January-to-March period next year would rise by 5.45 percent to 2.5 MMT, from 2.37 MMT in the first quarter of 2017. “Harvest area is foreseen to be larger by 6.17 percent—from 6,960 hectares to 7,390 hectares. Yield per hectare may diminish from 3.4 MT to 3.38 MT in 2018,” the report read. In the first quarter of 2018, the PSA expects production increases in Cagayan Valley, Northern Mindanao, and Soccsksargen. The PSA said estimates and forecasts of production and harvest area of palay and corn are generated from the Quarterly Palay and Corn Production Survey of which there are four survey rounds in a year.

Palace to review return of NFA to DA supervision @awimailbox Mindanao Bureau Chief

By Manuel T. Cayon

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AVAO CIT Y—President Duterte said he would consider the suggestion of Agriculture Secretary Emmanuel F. Piñol to revert the supervision of the National Food Authority (NFA) to the Department of Agriculture (DA). Duterte told reporters here over the weekend that he would consult the NFA Administrator Jason Laureano Y. Aquino regarding the possibility of returning the supervision of the NFA to the DA. “We have to hear his opinion also.” The NFA, National Irrigation Administration, Philippine Coconut Authority, and the Fertilizer and Pesticide Authority were transferred to the Office of the President in May 2014. Former President Aquino signed Executive Order 165 which authorized the transfer. The President said he agreed with the suggestion of Piñol that the NFA should be given a bigger role in ensuring that the country would have a steady food supply. During the launch of the TienDA farmers’ market at the Ayalaowned Abreeza Mall here, Piñol said that while the NFA “is not under me, as the secretary of Agriculture I am recommending that the NFA be given a wider role in ensuring food supply.” “The NFA should not only be a rice-importing agency, especially so that we are expecting to produce enough rice by 2020. We will not be dependent anymore in importing rice,” he said. Piñol said the NFA “should be consolidator of products, from their regions to be repositioned in other parts of the country where these are needed.”

“If there is an abundance of fish in Zamboanga, Basilan, Sulu and Tawi-Tawi, let the NFA put up a regional food depot that would consolidate all fish produce to Cebu or Manila,” he said. “If there is abundance of vegetables in Baguio, let the NFA consolidate these products to the other parts of the country where the commodity is needed.” Piñol’s suggestion came after he lambasted traders and middlemen for taking advantage of farmers and fishermen, causing them to “lose their enthusiasm to produce more.” “The sad story in this food-supply chain in this country is that, the traders and middlemen dictate how much a fisherman would earn from his catch, or how much the farmer would earn from his produce. He also determines the price of his goods in the market,” he added. For example, Piñol noted that, in February 2018, “when the Bureau of Fisheries and Aquatic Resources lifts the three-month closed fishing season in the Visayan Sea and Zamboanga Peninsula, the price of tamban and bangsi is expected to go as low as P5 per kilogram [kg].” But this would only be in the communities near the fishing grounds. “Brought to the market by the traders who own the fish vans and fish cars, the same fish sold by the fishermen would fetch at least P100 per kg.”

Top palm-oil growers go on defensive against EU curb threat

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s concerns about palm oil’s sustainability simmer in Europe, the world’s second-biggest grower is ramping up its defense of the most-consumed edible oil. Malaysian Prime Minister Najib Razak and Indonesian President Joko Widodo will this week discuss concerns that a resolution passed by the European Union (EU) in April, calling for tougher environmental standards for palm oil may hurt the industry. The two countries are the world’s top palm-oil producers, accounting for 85 percent of supply. “If such a resolution affects our exports, it will be a major blow,” Mah Siew Keong, Malaysia’s Plantation Industries and Commodities minister, said in an interview in Kuala Lumpur. “Any form of discrimination is not acceptable, and we will be compelled to act if it’s enforced to protect our own interest.” The European Parliament’s nonbinding resolution urged the bloc’s executive arm to step up efforts to prevent deforestation as a result of palm-oil production. The expansion of plantations in the two countries has seen farmers accused of illegally using slash-andburn methods to clear land, destroying rainforests and habitats for animals, and causing a severe haze that can blanket parts of Asia. Indonesia has said it is ready to retaliate against further attempts to curb palm-oil exports. The EU is Malaysia’s biggest export destination, accounting for about 13 percent of shipments of palm oil and palm-based products last year, according to the Malaysian Palm Oil Board. About 90 percent of Malaysia’s biodiesel exports also go to Europe, Mah said. Mah met with 18 European ambassadors on Monday, according to a statement from the ministry. European Union officials are consulting with stakeholders from palm-oil producing countries and the resolution is be-

measures to alleviate poverty by increasing agricultural output. Palm plantations began replacing rubber from 1961 and became Malaysia’s main economic crop in 1989. In terms of net exports, palm oil exceeds petroleum and electronics, Mah said, and makes up 4.3 percent of GDP.

Amazed and shocked

Workers use palm-fruit spears to remove bad bunches at the Bukit Senorang Palm Oil Mill in Pahang, Malaysia, on October 27. Sanjit Das/Bloomberg

ing worked through European commissioners and the European Council before possible legislative measures are proposed, the statement cited Maria Castillo Fernandez, ambassador and head of the EU’s delegation to Malaysia, as saying. Indonesia’s president has asked the European Union to end discrimination against palm oil as it harms economic interests. Palm oil is the country’s No. 1 export commodity to the EU, representing 49 percent of the region’s imports, according to the European Union. The industry helps alleviate poverty, narrow the development gap and develops an inclusive economy, according to Widodo.

Economic lifeline

Farmers are the most vulnerable group, according to Mah. In Malaysia there are about 650,000 smallholders who depend on palm oil

as an economic lifeline and the ministry estimates another 3 million workers are involved directly and indirectly in the industry. While most of the large, listed plantation companies are certified by the Roundtable on Sustainable Palm Oil, additional stringentsustainabi lit y criteria “will be very detrimental” to the smallholders, he said. M a l a y s i a ’s commercial palm-oil industry began in 1917, with expansion supported as part of government

A major part of the concern about Europe’s resolution is that the region is often seen as a trend setter in food and nutrition, Mah said. Most members of the European Parliament who support the resolution on tougher environmental standards probably have little knowledge about palm oil, Mah added. That’s spurred invitations to regulators and parliamentarians to visit. “We need to get more of them to come over to Malaysia to see for themselves. Those who come to Malaysia are always amazed and shocked when they see that we really do look after the environment,” Mah said. “Someone commented that when he looked down from the plane, he saw that there’s actually forests and greenery. The perception is that here we burn and destroy all the forests. That’s a very wrong perception.” Bloomberg News

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The World BusinessMirror

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Saudi billionaires seeking ring-fencing assets amid purge

briefs Mugabe’s impeachment set to begin

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HARARE, Zimbabwe—Zimbabwe’s ruling party is set to begin impeachment proceedings against longtime President Robert Mugabe, while a party official says government ministers have been instructed to boycott a Cabinet meeting called by the president. Ruling party chief whip Lovemore Matuke tells The Associated Press minutes before the Cabinet meeting is expected to start that ministers have been told to instead attend a meeting at party headquarters to work on the impeachment. Parliament resumes on Tuesday. Mugabe’s chief secretary on Monday summoned ministers to the Cabinet meeting at State House, the president’s official residence. The military on Monday night said the vice president he recently fired, sparking the political turmoil, will return to Zimbabwe “shortly” and has made contact with Mugabe. AP

Justice Dept. sues to stop AT&T’s $85-B Time Warner deal

NEW YORK—The Justice Department is suing AT&T to stop its $85-billion purchase of Time Warner, setting the stage for an epic legal battle with the telecom giant. It could also create a new headache for President Donald J. Trump, whose public statements have raised suspicions that he might have interfered with the department’s decision, potentially undermining its legal case. The Department of Justice’s antitrust chief, Makan Delrahim, has said the president did not tell him what to do. White House spokesman Sarah Huckabee Sanders said on Monday that she wasn’t aware of any specific action related to the case taken by the White House. AP

U.S. ending temporary permits for almost 60,000 Haitians

W A S H I N G T O N —T h e Tr u m p administration said on Monday it is ending a temporary residencypermit program that has allowed almost 60,000 citizens from Haiti to live and work in the United States since a 2010 powerful earthquake shook the Caribbean nation. T he Homeland Secur it y Department said conditions in Haiti have improved significantly, so the benefit will be extended one last time—until July 2019—to give Haitians time to prepare to return home. “Since the 2010 earthquake, the number of displaced people i n Ha it i h a s dec rea sed by 97 percent,” the department said in a press release. “Haiti is able to safely receive traditional levels of returned citizens.” AP

CBS suspends Rose, PBS halts his show following allegations

NEW YORK—Charlie Rose is the latest public figure to be felled by sex ua l-misconduct a l legations, with PBS halting distribution of his nightly interview show and CBS News suspend ing him on Monday following a Washington Post report with the accusations of eight women. The women, who all worked for Rose or tried to work for him, accused the veteran newsman of groping them, walking naked in front of them and telling one that he dreamed about her swimming nude. Rose, 75, said in a statement that he was “deeply embarrassed” and apologized for his behavior. AP

Moore campaign fires back vs. media, accuser

WA SHINGTON—A labama Republican Roy Moore’s campaign is going on the offensive against the media and one of the women who accused him of sexual misconduct. Moore’s campaign has issued a Mond ay-night statement questioning the account of Beverly Nelson, who said Moore assaulted her when she was a 16-year-old waitress. The campaign is quoting two restaurant employees who did not remember Nelson or Moore eating there. AP

A Rohingya Muslim child runs on a dirt track between tents at Kutupalong refugee camp in Bangladesh on November 19. More than 620,000 Rohingya have fled Rakhine for neighboring Bangladesh since late-August. AP/Wong Maye-E

AI calls apartheid Myanmar’s treatment of Rohingya Muslims

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ANGKOK—Myanmar has subjected Rohingya Muslims to long-term discrimination and persecution that amounts to “dehumanizing apartheid,” Amnesty International (AI) said on Tuesday in a report that raises questions about what those who have fled a violent military crackdown would face if they returned home.

Since late-August, more than 620,0 0 0 Rohing ya have f led Myanmar’s Rakhine state into neighboring Bangladesh, seeking safety from what the military described as “clearance operations.” The United Nations and others have said the military’s actions appeared to be a campaign of “ethnic cleansing,” using acts of violence and intimidation and burning down homes to force the Rohingya to leave their communities. United Nations Secretary-General Antonio Guterres said earlier this month that the world body considered it “an absolutely essential priority” to stop all violence against the Rohingya and allow them to return to their homes. They are now living in teeming refugee camps in a Bangladesh border district, and officials in Dhaka have also urged

that Myanmar allow them to return with their safety assured. Amnesty International compiled two years’ worth of interviews and evidence in its report, detailing how Rohing ya lived within Myanmar, where they were subjected to a “vicious system of state-sponsored, institutionalized discrimination that amounts to apartheid,” meeting the international legal definition of a crime against humanity. Rohingya Muslims have faced state-supported discrimination in the predominantly Buddhist country for decades. Though members of the ethnic minority first arrived generations ago, Rohingya were stripped of their citizenship in 1982, denying them almost all rights and rendering them stateless. They cannot

travel freely, practice their religion or work as teachers or doctors, and they have little access to medical care, food or education. Amnesty’s report said the discrimination had worsened considerably in the last five years. “I wanted to go to Sittwe hospital for medical treatment, but it’s forbidden,” Abul Kadir, 36, was quoted as telling the humanrights group. “The hospital staff told me I couldn’t go there for my own safety and said I needed to go to Bangladesh for treatment. It cost a lot of money.” Rohingya have fled en masse to escape persecution before. Hundreds of thousands left in 1978, and again in the early-1990s, though policies subsequently allowed many to return. Communal violence in 2012, as the country was transitioning from a half-century of dictatorship to democracy, sent another 100,000 fleeing by boat. Some 120,000 remain trapped in camps outside Rakhine’s capital, Sittwe. Rohing ya were thought to number around 1 million people in Myanmar until late last year. That October, a Rohingya militant group killed several officers in attacks on police posts, and the military retaliation sent 87,000 Rohingya f leeing. A larger militant attack on August 25 killed dozens of security forces, and the military response was s w i f t a nd compre hen sive. By the tens of thousands, Rohingya

began fleeing, their villages set af lame, some of the survivors bearing wounds from gunshots and land mines. Though the waves of refugees are now thinner, people are still crossing the Myanmar border nearly three month later. Amnesty International’s report cautioned that economic development of Rakhine should not be a tool of further discrimination. Myanmar has supported an international expert panel’s recommendations on developing the impoverished state, but the same report urged Myanmar to grant citizenship and ensure that other rights of Rohingya were protected. Foreign ministers and representatives of 51 countries began a meeting in Naypyitaw, Myanmar’s capital, on Monday in a forum that aims to further political and economic cooperation but takes place against the backdrop of the refugee crisis. “The international community must wake up to this daily nightmare and face the reality of what has been happening in Rakhine State for years,” said Anna Neistat, Amnesty International’s Senior Director for Research. “While development is an important part of the solution, it cannot be done in a way that further entrenches discrimination. The international community, and in particular donors, must ensure that their engagement does not make them complicit in these violations.” AP

Global electric-car sales jump 63% as China demand surges

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lectric-vehicles (EVs) sales surged to a record in the third quarter, largely driven by strong demand in China. Sales of battery EVs and plugin hybrids exceeded 287,000 units in the three months ended in September, 63 percent higher than the same quarter a year ago and up 23 percent from the second quarter, according to a report released on Tuesday by Bloomberg New Energy Finance (BNEF). China accounted for more than half of global sales, as its market for electric cars doubled amid government efforts to curb pollution.

“ T he C h i nese gover n ment i s ve r y fo c u s e d on pu s h i n g up EV sales,” said Aleksandra O’Donovan, advanced transport analyst at BNEF and one of the authors of the report. “One reason for that is the local pollution levels in the cities, and a second is for China to build domestic heroes to compete internationally in this market.” BNEF expects global EV sales to surpass 1 million units this year for the first time. The market for electrified transport is starting to pick up speed as charging infrastructure becomes more accessible

and manufacturers roll out models with longer driving ranges. In 2017 many established carmakers, from Jaguar Land Rover to Volvo Cars, announced plans to bring electric versions of their vehicles to market in the next few years. Several governments have also announced targets for cleaner transport, some driven by the emissions-cheating scandal that engulfed Volkswagen AG. France and the United Kingdom said they will ban sales of new gasoline and diesel-burning cars by 2040, while the Nether-

lands is targeting that all new cars sold by 2030 will be emissions-free. China—the world ’s largest auto market—is mulling its own ban, and even California is considering following suit. Europe was the second-biggest market in the third quarter for EVs, with 24 percent of sales, followed by North America. The rising volumes in China are supported by government incentives. “The national subsidies can make EVs up to 40-percent cheaper than regular internal-combustion cars,” O’Donovan said. Bloomberg News

ealthy Saud is a re seeking to restructure t hei r bu si nesses to ring-fence assets in case authorities widen their declared crackdown on corruption, according to three people with knowledge of the matter. Several family groups and businessmen who aren’t implicated in the purge are talking to local banks and international law firms about how to structure their companies to make it harder for the kingdom to confiscate or seize assets, the people said, asking not to be identified because the discussions are private. One option could be to split assets between more than one holding company, one of the people said, though it’s not clear how successful these plans could be because the government is closely scrutinizing business activity in the kingdom as part of the crackdown, he said. Such discussions reflect the fear among many wealthy Saudis that the unprecedented purge, which is seen by many as an attempt by Crown Prince Mohammed bin Salman to tighten his grip on power, is set to widen. Dozens of officials, princes and billionaires, including Prince Alwaleed bin Talal, whose Kingdom Holding Co. owns stakes in companies, such as Citigroup Inc. and Twitter Inc., have already been targeted. Some Saudi billionaires and millionaires are selling investments in neighboring Gulf countries and turning them into cash or liquid holdings overseas to avoid the risk of getting caught up in the sweep, people familiar with the matter said this month. Few, however, are trying to shift money out of Saudi Arabia amid fears of attracting unwanted attention from authorities, they said. The crackdown has involved some of the kingdom’s richest families who, for decades, have benefited from close relations with the country’s rulers. These ties have helped them win major contracts and partner with international companies seeking a foothold in the Arab world ’s biggest economy. One senior Saudi official, who asked not to be named, said over the weekend that suspects are being offered settlements to avoid trial. If they accept, talks are held with a special committee to work out the details. Authorities estimate they may be able to recover between $50 billion and $100 billion from settlement agreements, the official said. Bloomberg News

Trump to dissolve foundation as promised

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resident Donald J. Trump’s charitable foundation said in a tax filing that it intends to dissolve, as Trump promised it would last December to avoid conflicts of interest. The Donald J. Trump Foundation said in its annual tax return for 2016 that it raised $2.9 million over the course of the year and gave away $3.1 million, much of it to veterans’ organizations. It received a $1-million donation from Laura Perlmutter, the wife of Marvel Entertainment Chairman Isaac Perlmutter, a prominent Trump supporter, and another from casino magnate Phil Ruffin. Ivanka Trump gave her father’s foundation $100,000. The foundation said in a statement attached to the return that it has “announced its intent to dissolve and is seeking approval to distribute its remaining funds to highly qualified and important section 501(c)(3) charities.” It didn’t say when it would close or set a deadline to distribute its assets. The tax filing was due to the Internal Revenue Service on November 15 and was made public on Monday by the web site Guidestar.org, which collects the documents after they’re filed by nonprofit organizations. NBC News reported the filing earlier. Bloomberg News

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Wednesday, November 22, 2017

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Trump: N. Korea a state sponsor of terrorism

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ASHINGTON—President Donald J. Trump on Monday officially designated North Korea as a state sponsor of terrorism, a provocative diplomatic move that he said was aimed at drastically increasing pressure on the rogue nation to abandon its pursuit of nuclear weapons. North Korea will join Sudan, Syria and Iran as countries that the State Department identifies as those that have “repeatedly provided support for acts of international terrorism.” “Should have happened a long time ago,” Trump told reporters at the start of a Cabinet meeting at the White House. The president said the designation would be followed on Tuesday by the “highest level of sanctions” against Pyongyang to force the end of the development of its nuclear and ballistic missiles. Trump has vowed to seek “complete denuclearization” in North Korea and has threatened “fire and fury” aimed at the country if it endangers the United States. This year, the president ordered an end to the policy of “strategic patience” that was pursued by former President Barack Obama, in the hopes that North Korea’s leader, Kim Jong Un, would eventually agree to negotiate. “This just continues to tighten the pressure on the Kim regime,” Secretary of State Rex W. Tillerson said after Trump’s announcement, “all with an intention to have him understand that this is only going to get worse until you are ready to come and talk.” Still, it is unclear whether the terrorism designation will give the president and the secretary of state new and powerful leverage to force nuclear negotiations—or simply deepen the war of words between Trump and Kim. Long a pariah in the international community, North Korea was put on Washington’s list of state sponsors of terrorism in 1988 after Pyongyang’s agents planted a bomb on a South Korean passenger jet, killing all 115 people aboard, in 1987. That attack was instructed by Kim Jong Il, the father of Kim Jong Un, according to one of the agents, who was caught alive. North Korea was removed from the official State Department terrorism list nearly 20 years later by President George W. Bush, who in 2008 saw it as an opportunity to salvage a fragile nuclear deal in which North Korea would agree to halt its nuclear program. Bush’s decision to take the country off the list was part of a package deal—one that was opposed vociferously by Vice President Dick Cheney—in which Pyongyang agreed to move toward denuclearization in return for coming off the list and receiving some limited international aid. North Korea blew up a giant cooling tower at its main nuclear reactor at Yongbyon, and invited CNN in to record the event, appearing to declare that it had reversed course and was willing to give up the nuclear path. It was not. The cooling tower

was a decrepit part of a fallingapart facility. And the next steps proved far harder for Kim Jong Il, who was the country’s leader at the time. His government refused to own up to its past, and would neither declare to nuclear inspectors how much nuclear fuel Pyongyang had produced, nor what it had done with uraniumenrichment equipment. John R. Bolton, a former State Department official and United Nations ambassador under Bush, praised Trump for taking an aggressive stance against North Korea’s government. “It’s exactly the right thing to do,” he said. Bolton, who argued against removing North Korea from the terrorism list in 2008, said he does not believe restoring the designation will bring Kim Jong Un to the negotiating table. But he said it was “important to say what the truth is about the regime.” Christopher R. Hill, who negotiated the 2008 deal and helped persuade Bush to drop the terrorism designation against North Korea, said on Monday that he was “surprised that it took this long” to relist the country. “I had thought that maybe the Obama administration would do it,” Hill said in an interview. “What I always told everyone in 2008 was that, if the North doesn’t do what it’s supposed to do, we can put them back on the terrorism list.” Certainly, the Obama administration had some cause to consider doing so. During Obama’s time in office, North Korea was suspected of killing dozens of sailors aboard a South Korean naval vessel that sank, and it shelled a South Korean island. North Korea also conducted a cyber attack against Sony Pictures Entertainment, in retaliation for a comedic movie about an assassination plot against Kim Jong Un. But Hill, who also served as ambassador to Iraq during the Obama administration, added that the State Department list was “largely symbolic.” For example, a country listed on it cannot receive American military equipment. That has not been an issue with North Korea for more than seven decades. Demands to return North Korea to the state-sponsored terrorism list have grown since Kim’s half brother, Kim Jong Nam, was assassinated in February at Kuala Lumpur International Airport. North Korean agents were blamed for plotting his death, which involved the use of a rare nerve agent that is banned by international treaty. Trump and Tillerson both cited the assassination as evidence that North Korea sponsors international terrorism and deserves to be on the State Department list. In recent weeks, administration officials had hinted that the president was considering adding North Korea back to the terrorism list in light of the assassination and the country’s nuclear ambitions. But some veterans of North Korean diplomacy questioned whether the killing of a family member qualifies as international terrorism. New York Times News Service

President Donald J. Trump promised a huge tax cut during a Cabinet meeting at the White House on Monday. AP/Evan Vucci

‘Huge tax cut’ promised to Americans for Christmas

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ASHINGTON—President Donald J. Trump on Monday promised a tax overhaul by Christmas, even as a nonpartisan taxanalysis group said the Senate package would leave half of taxpayers facing higher levies by 2027. Spea k ing before a Cabinet meeting, Trump said, “We’re going to give the American people a huge tax cut for Christmas—hopefully that will be a great, big, beautiful Christmas present.” Trump spoke as the Tax Policy Center said that, while all income groups would see tax reductions, on average, under the Senate bill in 2019, about 9 percent of taxpayers would pay higher taxes that year than under current law. By 2027 that proportion would grow to 50 percent, largely-because the legislation’s personal tax cuts expire in 2026, which Republicans did to curb budget deficits the bill would create. The policy center, a joint operation of the liberal-leaning Urban Institute and Brookings Institution, found that low-earners would generally get smaller tax breaks than higher-income people. In 2019 those making less than $25,000 would get an average $50 tax reduction, or 0.3 percent of their after-tax income. Middleincome earners would get average cuts of $850, while people making

at least $746,000 would get average cuts of $34,000, or 2.2 percent of income. The center also said the Senate proposal would generate enough economic growth to produce additional revenue of $169 billion over a decade. That’s far short of closing the near $1.5 trillion in red ink that Congress’s nonpartisan Joint Committee on Taxation has estimated the bill would produce over that period. T he top Democ rat on t he S e n at e F i n a n c e p a n e l , S e n . Ron Wyden of Oregon, said the study showed that “middle-class Americans will ultimately see

a tax hike under Republicans’ plan while corporate sponsors l ine t heir ow n poc kets w it h multitrillion-dollar giveaways.” Antonia Ferrier, spokesman for Senate Minority Leader Mitch McConnell, Republican-Kentucky, cited a separate study by the Tax Foundation. That conservativeleaning group has said the Senate bill would produce higher wages, nearly 1 million new jobs and enough economic growth to generate nearly $1.3 trillion in federal revenue. “The Tax Foundation has laid out in unambiguous terms how critical the Senate tax bill is to hard-working families and job creators,” Ferrier said. T he House approved a ta x measure last Thursday slicing cor porate and personal ta xes by $1.5 trillion over the coming decade. That evening, the Senate Finance Committee approved a similar plan, which, like the House version, devotes the bulk of its reductions to corporations and other businesses. The Senate bill would repeal a requirement that Americans have health insurance or pay a fine. The

Middle-class Americans will ultimately see a tax hike under Republicans’ plan while corporate sponsors line their own pockets with multitrillion-dollar giveaways.” —Wyden

provision is not in the version of the tax overhaul passed last week by the House. Striking the healthcare provision might satisfy some GOP moderates who oppose repealing the language, but would also blow a hole in the senators’ tax-cut plan, leaving them $338 billion short of their revenue goal over the next 10 years. Trump did not directly address the issue on Monday. He said that the administration would focus on health care, infrastructure and welfare “soon after taxes.” Trump’s budget director, Mick Mulvaney, said last Sunday that the White House is open to scrapping the provision, which would repeal a key component of the health-care law enacted by President Barack Obama. Trump had pressed for the provision to be added to the bill, partly to show progress on the GOP goal of undoing the health-care law following Congress’s failed attempts to repeal it earlier this year. “If it becomes an impediment to getting the best tax bill we can, then we’re OK with taking it out,” he added. Moderate Republican Sen. Susan Collins of Maine, whose vote the W hite House needs, said last Sunday the ta x advantage that some middleincome consumers would reap under the tax bill could be wiped out by repealing the mandate under the Affordable Care Act. Collins is among several GOP senators who say they’ve not decided how to vote on the bill. Republicans hold a slim 52-48 Senate majority. AP

Brexit-hit banks to start moving staff abroad in 2018 U

n i t e d Kingdom politicians are fighting to get a deal early next year that will ease businesses’ panic about Brexit. For some industries, it’s probably too late. Barring some major breakthrough, g l o b a l b a n k s w i l l i m p l e m e nt t h e i r relocation plans early nex t year to guarantee they’re able to have new offices inside the European Union (EU) running by the time the UK exits, people with knowledge of the matter said. There’s little Prime Minister Theresa May can do to stop lenders from executing their contingency plans, if they haven’t already, said one of the people.

“If there is no precise direction at the beginning of next year, I would say that the banking-industry players would have to take decisions, early decisions in the worst-case scenario,” Société Générale SA Deputy CEO Severin Cabannes said earlier this month, adding that the bank intends to create 300 new roles in Paris. “We would need about one year to make that transformation movement.” With Brexit talks deadlocked for months, firms, including Goldman Sachs Group Inc., Morgan Stanley, UBS Group AG and Royal Bank of Scotland Group Plc., will start moving people, infrastructure and capital into their new trading hubs

inside the bloc in the first quarter, said the people, who declined to be identified, as the plans are not public. While banks would like to delay or ideally avoid implementing their c o n t i n g e n c y a r r a n g e m e n t s — l i ke l y to cost more than $500 million per firm—they need at least 12 months to establish full-scale operations inside the EU staffed by significant numbers of senior employees. “It’s the very beginning of next year when we need to have a clear view on what’s going to happen,” Sylvie Matherat, chief regulatory officer at Deutsche Bank AG said earlier this month. If no Brexit

deal is reached soon, banks will have to brace for the worst, she added. Th e wo r s t s ce n a r i o i s g e n e ra l l y regarded to be Britain crashing out of the EU with no trade deal or transitional arrangement. European Union chief Brexit negotiator, Michel Barnier, said on Monday that UK-based banks would lose access to the single market as a “legal consequence” of the country’s divorce. UK Brexit Secretary David Davis has said recently he was determined to maintain the competitiveness of Britain’s financial district and would negotiate a two-year transition deal. But banks fear it is too little, too late. That’s certainly

the message they’re getting from EU regulators, with one calling the first quarter of 2018 “the point of no return” for banks to trigger their contingency plans and start moving people. Amid the impasse, 20 banks are already in advanced discussions with European Union regulators about s e c u r i n g t r a d i n g p e r m i t s. B a n k o f Americ a Corp., G oldman S achs and Morgan Stanley have signed leases on new office space, and more than half a dozen other firms are scouting new sites inside the EU. “ You want to have it right from day one,” Bank of America COO Tom

Montag said, adding that they plan to move around 200 people. “Who knows what happens on this, but that’s what our plan is now, and we feel pretty comfortable with it.” Firms will initially move a few hundred sales, trading and back-office staff each from London to cities, including Frankfurt, Paris and Dublin, though the final number could swell to thousands depending on the outcome of the negotiations, the people said. The UK could lose as many as 75,000 jobs in banking and insurance if it leaves the European Union without a trade deal, said Sam Woods, Britain’s top banking regulator. Bloomberg News

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Banking&Finance

Wednesday, November 22, 2017 • Editor: Jun B. Vallecera

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BSP seen riding rate-hike series in 2018

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By Bianca Cuaresma @BcuaresmaBM

aybank Philippines forecasts the Philippines putting on dampeners on the economy with a series of interest-rate adjustments beginning next year to help ensure continued economic expansion over the long horizon.

Although the Bangko Sentral ng Pilipinas (BSP) has thus far made only token policy-neutral moves to bleed price pressures every now and then, the chief economist at Maybank, Suhaimi Ilias, said the BSP would likely deliver two 25-basis point hikes in 2018. The first adjustment was seen implemented in the second quarter, and the other adjustment expected in the October-to-December period the same year. The BSP only recently kept the policy settings unchanged, despite the elevated inflation forecast averaging of 3.4 percent in 2018. This compares against government target inflation averaging 2 percent to 4 percent.

“We have different economic and business cycles, and adjustments in monetary policy by the US [Federal Reserve] does not necessarily warrant a corresponding response in monetary policy from the BSP,” BSP Deputy Governor Diwa C. Guinigundo said at the November 9 ratesetting meeting of the Monetary Board. But Ilias said the BSP will eventually have to shift into a more hawkish stance to manage pockets of risks that are even now beginning to get more pronounced. “Obviously, there’s a need to manage or address domestic macro issues, especially [now] that the pressure on the peso has skewed to the [upside], the

Protection gap expanding each year in Philippines

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he countr y’s so-called protection gap is fairly large and has continued to grow, based on estimates made by Allianz SE based in Munich, Germany. According to Olaf Kliesow, president and CEO at Allianz PNB Life Insurance, the protection gap, which measures property or asset losses or the so-called economic losses versus losses sustained even with insurance cover, was estimated at some P1.2 million on per-capita basis. He particularly said that gap keeps expanding in the case of the Philippines, where losses sustained as a result of natural disasters like typhoons, and severe weather disruptions like the El Niño are substantial and frequent. Nevertheless, Kliesow said the Philippines has a huge pent-up demand in terms of access to financial services and financial deepening. He cited a World Bank report showing that less than a third of the population aged 15 and older have an account

at a financial institution, and that only 14.1 percent of Filipinos have a deposit account, based on another report by the Bangko Sentral ng Pilipinas. “In India, for example, more than 53 percent of the population aged 15 and older, and in China 79 percent of the respective age group have an account at a financial institution. “It is, therefor,e not surprising that a sset d iversif ic at ion is a s good a s nonexistent among Philippine households: only 0.2 percent hold securities or other investment products. “The same holds true with respect to insurance coverage: Despite the fact that 24.2 percent of households are reported to have retirement insurance and 27.5 percent are said to own a car, insurance penetration is also still rather low in comparison to the regional average, with premium income in life insurance amounting to 1.3 percent of local output or the gross domestic product and that of poverty and casualty insurance to 0.5 percent of GDP,” he said.

FPH program wins recognition at PSE Bell Awards

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opez-led First Philippine Holdings Corp. (FPH) won the maiden launch of recognition for the Best Sustainability Program during the 2017 Philippine Stock Exchange (PSE) Bell Awards for Excellence in Corporate Governance (Bell Awards) held on November 9. The honor was one of five new categories that the PSE included in the Bell Awards tilt, which the PSE holds as a way of giving recognition to listed companies and trading participants that show excellence in their corporategovernance programs and practices. According to the PSE, the Bell Award’s Best Sustainability Program category aims to recognize listed companies that best promote and enhance the quality of their sustainability programs to balance the interest of the environment, people and business. Through this award, the PSE envisions to inspire all listed companies to improve the quality and communication of nonfinancial information between them and the investment community; and to level up their standard of corporate governance in engaging their shareholders and the investing public. “As experts assessed, business cannot thrive in a failed society and a damaged planet. Business needs

people to flourish so people can buy the products and services of business and both business and people will flourish if they work within the limits of the environment,” FPH explained in its entry. FPH is a holding company with interests in key industries, such as energy, property development, construction, health care and energy services. Among its subsidiaries is First Gen Corp., the country’s leading clean and renewable-energy (RE) company with 3,477 megawatts (MW) in total installed capacity, including 1,458 MW of pure RE from First Gen’s own subsidiary Energy Development Corp. FPH, likewise, won the PSE award in the first year that it formalized its sustainability program. Under the program, FPH prepared for 2016 a Sustainability Report that adhered to standards set by the Netherlands-based Global Reporting Initiative. Its maiden Sustainability Report attested that FPH and its subsidiaries as a group offset or canceled out 52 percent of their total carbon footprint in 2016. No other local conglomerate has so far attained that level in offsetting their carbon footprint. FPH earned the PSE recognition also a year after the holding company declared to commit all its businesses to low-carbon operations.

current account has shifted from surplus to deficit, as well the effects of inflation, which is actually on an upward trend,” the economist said at a public forum that Maybank hosted on Tuesday in Makati City. According to Ilias, the Philippines will be riding a wave of higher interest rates seen developing next year, starting with the US Federal Open Market Committee executing a total 75 basis-point interestrate increase in 2018. T he Mayba n k econom ist f u r t her said the country’s neighbors were to make their own interest-rate adjustments, as well, in 2018, with the Indonesian benchmark policy rate likely adjusted higher to 4.5 percent, from the current 4.25 percent. Thailand was also seen to lift its benchmark rate to 1.75 percent next year, from the current 1.5 percent. Ilias also forecasts Malaysia’s policy rate raised higher to 3.25 percent toward the end of 2018, from the current 3 percent, while Singapore’s were to hit 1.55 percent, from estimated 1.2 percent by year’s end. At the recently concluded rate-setting meeting of the Monetary Board, the seven-man MB once again kept the overnight reverse repurchase rate at 3 percent, while also keeping steady the interest rate on overnight lending and the special deposit windows. The banks’ deposit-reserve ratios were also left unchanged.

SSS bent on ensuring fair fund-mess inquiry

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he Social Security Commission (SSC) welcomes the investigation to be conducted by Congress and third-party institutions in support of the SSC’s housecleaning efforts, particularly on the conduct of officials handling the pension fund’s investment portfolio. According to SSC Chairman Amado D. Valdez, a committee is already evaluating the responses submitted by Rizaldy T. Capulong, Reginald G. Candelaria, Ernesto D. Francisco Jr. and George S. Ongkeko Jr. to the complaints filed against them. “The Commission gave the respondents ample time to respond in compliance with due process,” Valdez said. The SSC is the policy-making body of the Social Security System (SSS), under Republic Act 8282, or the Social Security law. The SSC is composed of the secretary of labor and employment or his duly designated undersecretary, the SSS president and seven appointive members. Earlier, the SSC began looking into the charges made against four SSS officials who were allegedly linked to the stock-trading controversy. The SSS has assured the public that its

Case clippings

By Justice S J Ranada Jr.

LAND REGISTRATION–burden to prove classification Proof of the classification, alienability and disposability of the subject property is of particular significance in applications for the registration of land. Given the general rule that public lands may not be alienated, it is the burden of applicants to prove that the land sought to be registered falls within the classification enumerated in Section 14 of Presidential Decree 1529; in particular, the specific paragraph they invoke as basis for registration. Republic v. Nicolas GR 181435 02 Oct. 2017 Sereno, CJ

investment-reserve fund is well protected no matter the recent reports that some officials illegally profited from the contributions and investments of SSS members. SSS Commissioner Jose Gabriel La Viña has filed a complaint against Capulong, SSS EVP for investments, whom he accused of serious dishonesty and grave misconduct along with Candelaria, who is SSS equities-investment division vice president; Ongkeko, who is the chief actuary; and Francisco, who is the SSS equities productdevelopment head. Besides looking at their probable guilt, the investigation will also lead to fine-tuning the SSS investment policies. According to Valdez, the SSC looks to Congress for guidance in making the pension fund more beneficial to its more-than 35 million members. He said the newly crafted reform agenda for the SSS is now in the hands of lawmakers. The proposal to amend the SSS Charter is currently being deliberated at the committee level in the Senate and was certified a priority bill by the Legislative-Executive Development Advisory Council Executive Committee. One of the major provisions include rationalizing the powers, duties and accountabilities of the SSC. This would expand the SSC’s power to diversify the investments of SSS to generate and boost earnings, and further improve the benefits extended to its members.

Transportify

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number of months ago, I saw a Bloomberg interview of two young enthusiastic gentlemen who were the co-countr y directors of this relatively new multinational company called Transportify. As I was listening to the interview of Noel Abelardo and Paulo Bengson, of what Transportify was all about, I thought it was a great idea. The easiest way to explain it is if you have Uber and Grab as an app to transport passengers, you have Transportify to transport goods and packages. After a year since launch, more than 5,000 drivers/operators have signed up with Transportify, which is a testament to the growing popularity of delivery service on demand. The advantage of this delivery-service app is that there is no gray area in terms of the government transport franchise required, which is “truck for hire” and there is no moratorium for this category, making this business totally legal. I have had a number of opportunities to meet and discuss with both Noel and Paulo about the business possibilities with Transportify and it seems that everyone is a winner. Customers, driver/ operators and even logistics companies all benefit from this delivery-service app. Maximizing the efficient use of resources enables everyone to profit from this arrangement, which is really nothing more than a customer placing a delivery request on the Transportify app which is then broadcast to the registered drivers who then respond to pick up and deliver the package or packages, which includes furniture, appliances and other goods. As a customer, you are able to send practically anything (as long as it is legal) anywhere within driving distance at a reasonable rate on a timely basis. It does not matter if you are sending

FINEX free enterprise George S. Chua packages for personal purposes or you are a small business that makes infrequent shipments to your customers or a large corporation that needs to make regular deliveries frequently. With the drive of this administration to end contractual labor, this system is a way for businesses not to have to hire their own delivery crew. It also allows businesses, big and small, to have a more efficient delivery system. Instead of having their own fleet of delivery trucks, they can now just call on demand and not have to maintain their own delivery fleet. This allows companies to save on the downtime when the delivery trucks, drivers and helpers are not doing anything and just waiting for the next delivery to be made. For the operators that have signed up with Transportify, this is a legitimate business opportunity for themselves when they are also the driver and a logistics business when the operator has a fleet signed up to make deliveries. Looking at their actual examples, operators who invest in a brand-new aluminum delivery van, could easily have a payback period of less than one year, something that would not be possible with Grab or Uber, and without the legal risk. At the moment, it seems that there is still more demand than supply of delivery vehicles and the plan is to double the fleet in 2018. Hopefully, this encourages and es-

tablishes more Filipino entrepreneurs who can be part of the solution to our problem with unemployment and underemployment. What about those logistics companies with existing fleets of delivery trucks? While you would think that these companies would not welcome delivery apps like Transportify, it is quite the opposite. Many of these companies have now signed up with Transportify and are now making deliveries for Transportify during the idle time of their trucks and drivers, thereby maximizing the utilization of their resources. This leads to better profitability that everyone loves. So what are the challenges facing this new industry? The biggest one is really the availability of Euro 4-compliant vehicles which are now required in the Philippines under the Clean Air Act for first-time registration with the Land Transportation Office starting January 1, 2017. Major brands have already announced the phase out of their most popular models in the light-truck category since they are unable to comply with the Euro 4-emission requirement. Fortunately, Universal Motors Corp. has the BAIC Bayanihan H5 cab & chassis Euro 4 Turbo Diesel that comes in the 18 seat passenger and aluminum-van version that has a higher torque and larger capacity than the leading brand in this category, and if I may add, at a cheaper price with a 100,000-kilometer per three-year warranty. If you are looking to become an entrepreneur or simply need a better way to make your deliveries, get in touch with Transportify or BAIC Philippines or send me an e-mail. This could be the monumental event you need in improving your life. (Comments may be sent to georgechuaph@yahoo.com.)

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Editor: Efleda P. Campos • Wednesday, November 22, 2017 A9

PHL Construction Congress to draw up 2017-2022 construction road map

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ITH the dawn of the Philippines’s golden age of infrastructure, the Department of Trade and IndustryConstruction Industry Authority of the Philippines (DTI-CIAP) is leading the creation of the country’s construction road map in the second Philippine Construction Congress at the Philippine International Convention Center on November 28. The Philippine Construction Congress returns to converge the country’s key industry players and lay out the conceptual framework in drafting the Philippines’s Construction Industry Roadmap for 20172022, anchored on the P8.4-trillion infrastructure projects under the Duterte administration’s “Build, Build, Build” program. “With a conceptual framework as our blueprint, the government seeks to fast-track the formulation of the Philippine Construction Industry Roadmap in line with the biggest, boldest and the most ambitious infrastructure megaproject the country has ever witnessed,” said Ruth B. Castelo, DTI undersecretary for Competitiveness and Ease of Doing Business Group and

CIAP acting supervisor. “As we present a conceptual framework in the event, we will discuss and consolidate the ideas of fellow nation-builders across the construction industry,” Castelo said. “With their inputs, we hope to identify lucrative investment areas and public-private partnerships, address the possible roadblocks, fiscal delivery, and nurture best practices that will bolster the country’s infrastructure mega-plan for the next five years.” Coorganized with the Philippine Constructors Association and DTI’s Center for International Trade Expositions and Missions the event will engage leaders and decisionmakers of various infrastructurerelated private-sector organiza-

tions, government offices, together with financial and academic institutions, foreign embassies and business support organizations. To rally support for the development of a proposed road map, the Philippine Construction Congress will also conduct a signing of a memorandum of commitment between the government, industry leaders and concerned stakeholders. The Philippine construction industry is expected to grow in the next four years, reaching $47 billion in 2020 through funds driven largely by the residential and the infrastructure markets, according to Timetric’s Construction Intelligence Center. The infrastructure market is said to be the fastest-growing sector in the construction industry, with the report seeing the said market to reach $14.7 billion in 2020 at a compound annual growth rate of 14.14 percent, driven by government plans to develop high-speed rail links, highways and seaports through PPPs. “Aside from creating a road map, the Philippine Construction Congress will streamline public and private efforts to come up with lucrative public-private partnerships and augment the grand vision of the Build, Build, Build program to increase the productive capacity of the economy, create jobs, increase incomes and strengthen the investment climate leading to sustained inclusive growth,” Castelo added.

CASTELO

Infrastructure is among the top priorities of the current administration, with public spending on infrastructure projects targeted to reach P8 trillion to P9 trillion in 2017-2022. In his 10-point Socioeconomic Agenda, President Duterte envisioned the reduction of poverty from 21.6 percent in 2015 to between 13 percent and 15 percent by 2022. Among the reforms that will drive this agenda is the acceleration of infrastructure and the development of industries that will yield robust growth across the archipelago, create jobs and uplift the lives of Filipinos. In the first Philippine Construction Congress, the CIAP led nearly 300 stakeholders from the construction industry in setting the agenda and creating a groundwork to create

more jobs and hire more workers to support the construction boom and Duterte's National Employment and Livelihood Program. In 2016 the share of the construction industry to total employment of the country stood at 8.2 percent. The industry expanded its work force by 675,000 last year—equivalent to the combined employment generated from 2011 to 2015—to end at 3.3 million in 2016. The industry is expected to employ 5.8 million workers by 2022. Data from the Philippine Statistics Authority (PSA) showed major drivers of the country’s economic growth in 2016 were the accelerated performances of the industry and service sectors. PSA data indicated the growth in the industry sector was due to the robust performance of the construction industry. Construction investments, as measured by the gross value in construction, expanded 13.6 percent to P781.9 billion last year, the CIAP said. Government infrastructure projects went up 29 percent to P185 billion, while private construction activities rose 9.5 percent to P596.9 billion. “With the success of the first Philippine Construction Congress on job generation, we hope to further augment the nation-building efforts of the Philippine construction industry by complementing the key initiatives under the Build, Build, Build program,” Castelo said.

Trade chief to Apec ministers: Reinvent globalization now

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A NANG, Vietnam—Trade Secretary Ramon M. Lopez called on the 21 Asia-Pacific Economic Cooperation (Apec) member-economies to focus on discussions and initiatives centered on promoting sustainable, innovative and inclusive growth during the 29th Apec Ministerial Meeting on November 8. “It is our duty as ministers to reinvent the globalization model wherein progress and growth are extended to the bottom of the pyramid. This is the only way we will be able to realize the Bogor Goals and usher Apec’s role beyond 2020,” Lopez said. The country’s trade chief also highlighted the role of micro, small and medium enterprises (MSME) and its development and internationalization in pushing inclusive economic growth and development. As the Philippines’s trade minister, Lopez also expressed the country’s support for Apec’s programs in promoting green and sustainable MSMEs through the Green Economic Development. The set of policies pushing for the creation of climate-smart and environment-friendly industries are now integrated in the manufacturing industry sector, particularly for the automotive, auto parts, pulp and paper, plastic, housing and furniture industries. On e-commerce discussion, the Philippines submitted its intent to participate in the Apec Cross-Border Privacy Enforcement Arrangement and work with economies in ensuring compliance with international standards to address MSME issues on security, as well as privacy in the Internet and digital economy. “ The Philippines continues its support for the MSME sector as we colead the development of the Apec MSME Work Program with Malaysia. We have also shared our inputs on tariffs, investments, nontariff measures, transparency and capacitybuilding discussions,” Lopez added. Meanwhile, in another intervention with Apec membereconomies, Lopez urged the Apec ministers to promote capacity-building efforts and technical collaborations that will increase the value-add of industries and MSMEs, as well as maximizing their potential in the global economy, while achieving inclusive growth. “Apec’s role in promoting sustainable, innovative and inclusive growth can be more meaningful if we are able to influence our respective regional economic-integration groupings with the principles of real inclusivity,” the trade chief said. Lopez called on member-economies to address the issues on growing nontariff barriers, which hamper market access and affect developing economies.

PHL WELCOMES JAPANESE CONFECTIONERY MAKERS

The Philippines, through the Department of Trade and Industry’s (DTI) Foreign Trade Service Corps., welcomed 19 confectionary manufacturers from Kansai Kashi Kogyo Cooperative Association, led by Fujisawa Hajime, president of Nobel Confectionery Co. Ltd. (front row, fifth from left), through a briefing held on November 16 at Dusit Thani Manila in Makati City. In her welcome remarks, DTI Industry Development and Trade Policy Group Assistant Secretary Rafaelita M. Aldaba (front row, fourth from left) introduced the DTI’s Inclusive Innovation Industrial Strategy (i3S), which aims to develop globally competitive and innovative industries to sustain the country’s high-growth trajectory with innovation at its core. Agribusiness and processed food are among the 12 priority industries identified under the i3S. Nobuyuki Nakajima (front row, third from left), deputy executive director of Japan External Trade Organization Manila; and Kawamura Tomotaka, project manager of Sojitz Philippines Corp. (front row, sixth from left), also shared their valuable experience in doing business in the Philippines from a Japanese perspective. The event was concluded by a business networking session attended by members of the Philippine Confectionery, Biscuit and Snack Association, led by its president, Kissinger Sy (front row, left). The Philippine confectionary industry grew by 2.6 percent in 2016, with revenues amounting to $670.1 million.

Asean signs FTA, investment deal with HKC

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HE 10 member-state of the Association of Southeast Asian Nations and Hong Kong and China (HKC) strengthened their trade and economic relations with the signing of the Asean-Hong Kong, China Free-Trade Agreement (AHKFTA) and Asean—Hong Kong Investment Agreement (AHKIA) at the sidelines of the 31st Asean Summit and Related Summits on November 12 in Manila. The two agreements are part of the region’s continuous efforts to expand external economic relations to foster greater trade opportunities for the Asean Economic Community (AEC). “This will open more opportunities for Asean as we ensure greater market access for our products and sustained flow of foreign direct investments,” said Trade Secretary Ramon M. Lopez, this year’s Chairman of the Asean Economic Ministers. Lopez said these agreements would provide job opportunities for people and enhance collaboration among businesses, particularly the micro-, small- and mediumenterprises (MSMEs) sector. The AHKFTA is the Asean’s sixth free-trade agreement (FTA) with external partners, after the Asean-China FTA, Asean-Korea FTA, AseanJapan Comprehensive Economic Partnership, Asean-India FTA and AseanAustralia-New Zealand FTA. It covers trade in goods, rules of origin, nontariff measures, customs procedures and trade facilitation, trade remedies, technical barriers to trade, sanitary and phytosanitary measures, trade in services, intellectual property rights and economic and technical cooperation. In the case of the Philippines, an advocate of establishing an inclusive and innovative region, the deals provide more opportunities for MSMEs, as well as to the countr y’s export industries given HKC ’s role as gateway to the China market and their annual tourist arrivals. For the first eight months of 2017, HKC was Philippines’s third-top export destination with $5.55 billion worth of exports equivalent to 13.18 percent of the country’s total exports. Meanwhile, approved investments from HKC for the first semester of 2017 amounted to $10.74 million, making it the 12th source of investments of the country.

DTI spotlights Central Visayas MSMEs at Otop Premium Product Showcase

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HE Department of Trade and Industry (DTI) demonstrated the massive potential of the grassroots level in Region 7’s food and nonfood industries with the mounting of the One Town One Product (Otop) Premium Product Showcase at the Paseo Solana, Ayala Center Cebu from November 17 to 19. DTI Central Visayas Regional Director Asteria Caberte said the event will feature products of local micro, small and medium enterprises (MSMEs) from Central Visayas that have undergone product-development workshops conducted by the department under the Otop Program. Caberte added the MSMEs’ participation in the Otop Premium Products

Showcase also supplied products for the Go Lokal stores, Tindahang Pinoy, trade fairs and other market-access platforms used by the DTI. The DTI official said the current Otop program is a leveling-up process that focuses on new variations, better products that have significant improvement in the areas of quality, design, standards, compliance, marketability and production quality. Around 100 MSMEs in Central Visayas took part in the recent Otop Next Gen Screening, Assessment and Triage sessions in Cebu City, where experts from the Design Center of the Philippines and from the private sector evaluated potential Otop products.

Otop Philippines is a priority stimulus program for MSMEs as government’s customized intervention to drive inclusive local economic growth. The program enables localities and communities to determine, develop, support and promote products or services rooted in its local culture and competitive advantage. As their own “pride-of-place,” these are offerings where they can be the best at or best renowned for. Otop Next Gen is the DTI’s program to enhance MSME products and services. Building from the gains of Otop first generation, this initiative aims to offer a package of public-private assistance in order for MSMEs with minimum viable products to come up with new or better

offerings with significant improvement and innovation in the areas of quality, product development, design, standards compliance, marketability, production capability and brand development, among others. Otop Next Gen also embarks on the technological upgrade of production processes and design to help ensure sustainability of supply, by combining various elements, reengineering design or process; or building more advanced skills and capabilities. This is where close collaboration with the Department of Science and Technology and the Department of Agriculture will play a pivotal role to catapult our MSMEs on the road to innovation-led growth. Marcel L. Woo

A10 Wednesday, November 22, 2017 • Editor: Angel R. Calso

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editorial Reinventing the NFA’s role

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he National Food Authority (NFA), which is currently under the Office of the President, is vested with the functions of ensuring food security and the stability of rice supply and price. The NFA resorts to importing rice from neighboring Southeast Asian countries and procures paddy from farmers to beef up its stockpile. When supply is tight, usually after a strong typhoon, the food agency distributes rice to areas devastated by natural disasters. NFA rice sold in these areas serve as a warning to unscrupulous traders that the government is ready to intervene and help keep prices in check. This function has undoubtedly kept rice prices stable, which is probably why Agriculture Secretary Emmanuel F. Piñol wants President Duterte to expand the role of the NFA. Piñol had proposed to the President that the NFA serve as a “consolidator,” to buy other farm goods in bulk and sell these in areas in need of these products. To do this, the Department of Agriculture chief made a pitch for the set up of regional food terminals (RFTs) where farmers could sell their produce at a “fair price.” Piñol said the President could do this by merely issuing an executive order (EO). Anyway, NFA’s nongrain marketing activities were stopped by a mere EO issued in May 1985. The NFA was created through Presidential Decree (PD) 4 dated September 26, 1972, under the name National Grains Authority, with the mission of promoting the integrated growth and development of the grains industry covering rice, corn, feed grains and others like sorghum, mongo and peanut. PD 4 abolished the Rice and Corn Board (Ricob) and the Rice and Corn Administration (RCA) but absorbed their respective functions. The Ricob regulated the rice and corn-retail trade and was tasked to nationalize it within a target date. The RCA was in charge of marketing or distribution of low-priced rice, especially during the lean months. The NGA was vested additional functions aimed at developing the grains postharvest systems and processes. It also supported the paddy-production program of the government, dubbed as the “Masagana ‘99 Program,” which aimed for self-sufficiency. It engaged in massive paddy procurement at government-support prices. Under this program, the Philippines was able to export rice at a limited volume from 1977 to 1981. The NGA was reconstituted into what is now the NFA, after PD 1770 was issued in January 1981. This decree widened the agency’s social responsibilities and commodity coverage to include, in addition to grains, other food items like raw or fresh fruits and vegetables and fish and marine, manufactured, processed, or packaged food products, and these were collectively referred to as non-grains commodities. PD 1770 served as the basis of the Kadiwa chain of stores or government retail stores, which sold low-priced basic food and household items in the National Capital Region and in all provinces of the country. EO 1028, which was issued in May 1985, provided for the deregulation of the NFA’s non-grains marketing activities. This decree resulted in the termination of the NFA’s non-grains trading activities and allowed the return of feed grains and wheat importation to the private sector, as well as the lifting of price controls/ceilings on rice and corn. It also caused Kadiwa stores to be shuttered or devolved to the private sector. Allowing the NFA again to engage in the trade of other farm products would drastically reduce the influence of middlemen and unscrupulous traders in setting prices. But government must consider where it would source the funds required to procure farm products directly from farmers and fishermen. The palay-procurement program of the NFA alone costs billions of pesos as the food agency buys paddy from farmers at P17 per kilogram. Should the President give his go signal to the setup of RFTs, the national government must see to it that this would not fall under the control of local politicians. Given the gravity of failure of the country’s agricultural supply chain, economist Pablito M. Villegas said there is justification for expanding the powers of the NFA. To ensure transparency and to curb corruption, Villegas said the private sector must be involved in operating schemes that are similar to the Kadiwa. Also, the University of the Philippines economist said the government must ensure that they would deal directly with farmers and fishermen.

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The Philippines is one of the first countries to become a state party to the Universal Declaration on Human Rights, which celebrates its 70th anniversary next year. In this tradition of promoting human rights, the Philippines renews its commitment to ensuring a safe and secure environment where human rights and fundamental freedoms are enjoyed by every Filipino.

By 2040, Filipinos want to enjoy a strongly rooted, comfortable and secure life in a Philippines with a prosperous middle-class society where no one is poor and people are smart, innovative and live long healthy lives in safe and peaceful communities. A high-trust society where families thrive in vibrant, culturally diverse, resilient and crime free communities is what we aspire for. To achieve this end, the Philippine government is guided by the Philippine development plan 2017-2022. It adopts a culture and gender-sensitive perspective and a

obligation to promote, protect and advance the rights of our citizens, especially the poor, the marginalized and the vulnerable. Social justice shall be pursued, and law and order shall prevail at all times. He has said the work of human rights must work to protect people from all threats against it by state parties and criminal elements, to uplift human dignity and contribute to enhancing that dignity. To ensure institutional humanrights mechanisms are moving in harmony, the presidential humanrights committee coordinates all policies and leads in the development of human rights. The Philippine human-rights action plan for the next five years is

Teddy Locsin Jr.

Free fire Continued from A1

adame chairman, Human rights and sustainable development are interdependent, each necessary to achieve the other. We, as a community of nations, declared this when we adopted the 2030 Agenda for Sustainable Development. This is also echoed in Our Ambition 2040, the collective long-term vision and aspirations of the Filipino people for themselves and for the country in the next 25 years. human rights-based approach to development and governance. Our 10-point socioeconomic agenda aims to combat generational poverty, improve living standards, keep the peace and maintain law and order and sustain high economic growth by, among others, investing in human capital development, fighting criminal activities that undermine human capital development and improving social-protection programs. President Rodrigo Duterte committed that his administration shall be sensitive to the state’s

now in the drafting process. For allegations of human-rights violations, the Philippines has institutions and mechanisms in place to guarantee that human rights are upheld and perpetrators are held accountable. The state investigates all credible allegations of human-rights violations. And will continue to do so in the spirit of our national traditions of liberty and democracy. My country continues to uphold the importance of the Universal Periodic Review (UPR) Process. In May this year, the Philippines addressed human-rights issues when it submitted itself to its third Universal Periodic Review in Geneva reflecting our transparency and desire to address concerns. We view this participation as not just mere compliance, but our contribution to the strengthening of the of the UPR mechanism/and the continued relevance of the Human Rights Council. Madame chairman, The Philippines is one of the first countries to become a state party to the Universal Declaration on Human Rights, which celebrates its 70th anniversary next year. In this tradition of promoting human rights, the Philippines renews its commitment to ensuring a safe and secure environment where human rights and fundamental freedoms are enjoyed by every Filipino. Thank you.

Understanding call center artificial intelligence

T. Anthony C. Cabangon

Editor in Chief

Senior Editors

On human rights

John Mangun

OUTSIDE THE BOX

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aybe it’s because the new high-tech sex robots have been in the news lately that we are hearing again about the death of call centers due to “artificial intelligence.” It might be well to point out that it is called “artificial” for a reason. Likewise, a “sexbot” is artificial intelligence that it stops talking when you push the “mute” button. There is a great misconception about the role of new technologies —broadly lumped as artificial intelligence—in the customer-service industry. The hysterical articles you read that sooner or later all Filipino call-center agents are going to be replaced by armies of computers is simply false and with no basis in reality. It is estimated that consumers make 265 billion customer service calls each year. While there currently are alternatives to speaking to a live agent, 73 percent of all interactions are made through a telephone. That is important to remember. Let’s be honest. Having to talk to a call-center agent is the customer service equivalent of a prostate or

Pap test examination. No one really wants to do it but it is a necessity. A survey found that 52 percent of customers have hung up on a customer-service call because they did not want to wait for an agent to have a conversation that may or may not help them. Here is another fact. At least 52 percent of call-center agents have hung up on a customer because they did not want to have a conversation with a rude abusive or completely helpless customer. I had this actual conversation when working as an agent for a United State Internet provider. A customer called in who could not connect to the Internet. “Do you see

Let’s be honest. Having to talk to a call center agent is the customer service equivalent of a prostate or Pap test examination. No one really wants to do it but it is a necessity. A survey found that 52 percent of customers have hung up on a customer service call because they did not want to wait for an agent to have a conversation that may or may not help them.

the start button in the lower-left hand corner of your desktop?” “I’m sorry. The only thing on my desktop is my keyboard and mouse.” Let’s see a robot handle that answer. When call-center companies talk about artificial intelligence, it is not about replacing live agents but making the total system more efficient. One great change in the last 10 years is that customers would prefer to “text” rather than “talk.” A live agent can talk to only one customer at a time. However he or she can “chat” with several customers at once. I do my personal business with a particular web site hosting company because of their efficient and effective “live chat” service. Another survey shows that 70

percent of consumers prefer any type of messaging instead of voice calls. But this still can require a human on the other end. Companies are moving into the new technologies using some sort of bots that can answer simple and often asked questions online, without the need for the customer to pick up the phone. The bots answer the routine questions via an online chat or other channel; the live agents on the phone are the problem solvers. Try explaining to a bot “I lost my glasses and couldn’t read the bill.” Further, the initial customer contact with a bot can gather information that allows a seamless transfer to a live agent who immediately has a better and clearer idea of a complicated problem without having to ask the customer a series of scripted questions. The call-center business is changing as all businesses do. The historical high growth of the business cannot continue as it is becoming a more mature industry. But to say that in five years they will all be gone is a gross and silly exaggeration.

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

www.businessmirror.com.ph

Duterte reforms in coop sector An overheating planet key to poverty alleviation Edgardo J. Angara

Michael Makabenta Alunan

on the contrary

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he fast-track development in infrastructures, industries and agriculture are crucial to reduce poverty, but increasing the pie solves only half the problem; what is lacking is a fair distribution of the pie that can only happen if the poor themselves are organized through better Duterte administration reforms in the cooperative sector, thus enabling them to be the means and ends of development itself. n Poor can’t survive free market? Individually, the poor can hardly fend for themselves in the ruthless free-market system, where they get clobbered by unscrupulous traders, who have no loyalty for production, being margin players, whose interests is to maximize profits, at the least costs and the least effort, and will not hesitate to import than buy from our farmers if they can profit more. It is neither advisable to subsidize the poor and their prices as that would distort markets. However, when markets are imperfect, the government must come in to assist the poor, not through doleouts and subsidies, but by investing where they count most—empowering and organizing them into cooperatives and equipping them with production and postharvest equipment and logistics for distribution, all on credit. This enables them to achieve economies of scale and full value supply chain, making them more competitive. n Let’s lax barriers to coop entry. While it takes a day or two to get registered with the Securities and Exchange Commission (SEC), it takes three to 10 months to get registered with the Cooperative Development Authority (CDA), particularly transport groups, which are vulnerable to tedious red tape. With Duterte’s transport modernization program requiring industrial consolidation translating to coop-organizing for jeepneys, the massive applications soon will worsen existing bottlenecks that already takes two to three months to get a preregistration seminar scheduled. CDA is partly to be blamed as CDA Chairman Orlando Ravanera issued Memorandum Circular 2017-02 on February 1, declaring only CDA can exclusively give seminars. Earlier, local government units (LGUs) conducted these seminars as part of devolution and in compliance with Executive Order (EO) 96, mandating all LGUs to help register coops. CDA may be violating EO 96 by centralizing seminars. Worse, it has specified seminar frequency schedules at “once a month at the CDA extension office and once per quarter at CDA field offices,” which leaves little flexibility. Its Manila extension office was forced to hold weekly seminars, and plans to increase frequency with rising demand, in violation of its own untenable circular. n Assist, not echo the same. In compliance with EO 95, requiring agencies to assist coops, Department of Transportation (DOTr) has its Office of Transport Cooperatives (OTC), which does nothing else, but repeats CDA’s half day seminars, lengthening them to a full day. Sadly, many drivers are neither literate enough nor have the patience to endure daylong lectures. While CDA allows founding cooperators to conduct the same seminars to its members, OTC requires all members to undergo its day-long Cooperative Education and Transport Operations Seminars at its office, which are peak hours and peak days for drivers. Lacking personnel and offices nationwide, OTC requires its seminars at its central office. Expanding its bureaucracy wont help, and

the solution is simply allowing back more LGU participation. Perhaps, OTC must focus, instead, on designing alternative practical hands-on learning programs. After all, there is no substitute to experiential learning or learning by doing. One can read handbooks or watch YouTube tutorials on swimming or driving, but will never learn, unless one plunges in a pool or does actual driving. n Simplify the complex. CDA can learn a lot from the SEC, which readily approves registration, but requires applicants to issue pledges of undertaking to be accomplished within reasonable periods, if there are remaining minor corrections. About 25 years ago, I interviewed an American businessman, whose mining accessories business in the United State only took him $11 and three minutes to get registered, but in the Philippines, it took him nine months going back and forth, and ridiculously asked of unnecessary details like names of ex-wife, kids, which were irrelevant being divorced. We need not simplify too much, but just get rid of unnecessary redundancy. For one, scrap the required signing on every page of registration papers, which is difficult for transport groups. Gathering 20 to 30 founding cooperators is already a problem, getting them to sign on every page is ridiculous, having no danger of alterations being express lane forms anyway. Another hindrance to entry is the “economic survey,” requiring various unrealistic projections. It also demands submission of various committees required by law, which is ironic as there are 21 types of cooperatives, but with “one formula that fits all” type of committees, most of which end up disfunctional. Perhaps, leeway be given to set up functional committees at start-ups, and create new ones as needs arise. Apart from this feasibility study/economic survey, there are over 14 coop lecture-seminars developed totaling over 188 hours or about 24 days. Remember, drivers learn more by doing not listening to lecture, and have different needs than credit cooperatives. These seminars were likely developed to meet ready funding from the required 10-percent coop allocation for education. These seminars are mostly detailed breakdowns of coop management and related concerns, but for transport coops, what they need more are practical seminars on maintenance, running vehicle service centers, supply parts business, etc. How come small market vendors learn business on the job, without these seminars or feasibility studies? Appropriate and blended models must therefore be developed. By simplifying procedures, CDA can now be called “developmental,” otherwise, it gains the monicker Coop Regulatory Authority, which critics says sounds like sira or defective, when it has vast potentials of developmental work it can do like business matching, organizing intra-Koop trade and investments, organizing big brother small-brother coop partnerships, etc.

E-mail: mikealunan@yahoo.com.

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he world’s carbon emissions could increase by 2 percent this year, according to a new three-part report from the Global Carbon Project (GCP) released at the recent United Nations Climate Change Conference (or COP 23) in Bonn, Germany. This means atmospheric carbon dioxide (CO2) levels could go up to as high as 405.5 ppm (parts per million)—or some 5.5 points higher than the 400-ppm threshold scientists say hasn’t been exceeded in 800,000 years. Such increase is alarming because it followed a three-year long plateau (2014 to 2016), which earlier convinced some scientists that the world had already reached peak emissions—the point after which a downward trend would start. It didn’t happen. An uptake in China’s energy demand from its industrial sector was identified as the most significant

factor to the emissions increase. Low rainfall throughout the year dampened China’s use of its installed hydropower capacity and, in turn, boosted its coal, oil and gas consumption in 2017. The United State and the European Union (EU) managed to maintain their respective declines in CO2 emissions, although at a slower pace. According to the GCP report, high

Wednesday, November 22, 2017 A11

natural-gas prices led to its lower use in the US and coincided with a slight uptake in coal consumption. On the other hand, in the EU increasing use of oil and gas assets eroded the gains the EU made from a massive decline in the bloc’s coal consumption in the past decade. Several studies have calculated that for global temperatures to remain below the 1.5 degree Celsius threshold, the world should only burn or emit 160 billion to 800 billion tons of CO2. The world today emits an annual average of 40 billion tons of CO2. It means we have at least four years to reduce carbon emissions to net-zero levels, and prevent a global catastrophe. That’s why the GCP’s recent projection ought to be a huge cause of concern and a wake-up call to the world on the urgency of fighting climate change. Even though the 2015 Paris Accord stands as a shining moment in human diplomacy and unity, much still needs to be done and in so little time—especially by the world’s top emitters. The GCP report, however, is not all

Lloyd’s reinsurance coverholder Dennis B. Funa

INSURANCE FORUM

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ince Lloyd’s is a market for insurance and is not a company, establishing its presence in a particular jurisdiction is done in an unconventional way. Unlike foreign insurance companies that establish a local office in a country, doing business with Lloyd’s is done through brokers, and one particular mode is known as the “coverholder model.” It has also become a scheme to “making the London market more easily available on a global scale.” Coverholders, for Lloyd’s itself, is a distribution channel. As of 2016, there are about 2,500 Lloyd’s coverholders producing 30 percent of Lloyd’s premium income each year. Eighty-five percent of coverholders have been with Lloyd’s for more than five years. Total premium written by Lloyd’s coverholders in the United State in 2010 was approximately $2 billion. This coverholder system allows Lloyd’s to operate in a region or country as if they were a local insurer, even without a physical presence. Risks are assumed directly by Lloyd’s underwriters. In the risk handling process, the coverholder is responsible for placing the risk. The coverholder informs the broker who, in turn, informs the managing agent of the risk. Because Lloyd’s enjoys an excellent reputation with high ratings, the coverholder system for Lloyd’s

has been accepted in a number of jurisdictions. Moreover, Lloyd’s offers specialized covers or special classes of insurance or niche products that are not offered by other insurance firms or are just too risky for insurers to accept. This may include underwriting personal accident cover for famous sports personalities or specialty liability insurance. It may include underwriting risks “that are too large, or too complex, or both, that do not lend themselves to coverage through more ‘normal channels.’” An alternative way of obtaining Lloyd’s coverage is through the Open Market Correspondent’s (OMCs). An OMC is an insurance intermediary in designated territories that introduces business to Lloyd’s. Coverholder is a “company or partnership authorized by a managing

Coverholder is a “company or partnership authorized by a managing agent to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it in accordance with the terms of a binding authority.” agent to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it in accordance with the terms of a binding authority.” It is an insurance intermediary that acts in all respects as the actual insurer. On the other hand, a binding authority or a “binder,” “is an agreement between a managing agent and a coverholder under which the managing agent delegates its authority to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it to the coverholder in accordance with the terms of the agreement.” It is negotiated annually. A delegated underwriting authority may also come through a Lloyd’s service company that is a 100-percent owned subsidiary of a Lloyd’s managing agent. A binding-authority agreement may also delegate the coverholder with the authority to issue insurance documents on behalf of Lloyd’s syndicates. It can also spell out the coverholder’s other responsibilities, such as the handling and collection of insurance premiums or the settlement of claims. Thus,

Insiders do more than trade in India By Mihir Sharma Bloomberg View

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n India you don’t really exist till you’re on the right WhatsApp groups. It’s on those private chat rooms that political campaigns are sharpest; where India’s sprawling extended families quarrel and make decisions; and, according to a recent Reuters investigation, where company quarterly results are predicted with surprising prescience. There’s no proof of insider trading yet, but officials from the Securities and Exchange Board of India, or Sebi—India’s market regulator—told the Economic Times that they were looking into the reports. This is just another reminder of the fact that, while nominally India’s financial markets are set up to protect ordinary investors and market participants, in actual fact they work to protect insiders. This isn’t generally understood, given that India’s laws against insider trading and protecting minority shareholders are strict on paper. In the World Bank’s ease of doing business indicators, for example, one of the few domains in which India has consistently done well is in the protection of minority shareholders.

But here, as elsewhere in India, there’s a vast difference between what the laws say and how they’re implemented. Indeed, India’s Supreme Court recently chastised regulators, saying that their rules on insider trading simply weren’t clear enough. The WhatsApp story seems to confirm something of an open secret in Mumbai stock-market circles: There are closed networks that tend to get information about companies well before the general public. Sebi struggles to get insider-trading prosecutions off the ground. Meanwhile, foreign investors operating in India are being forced to run investigations of their own local employees and contractors. Even if Sebi’s regulations were up-todate and detailed, enforcement would be hampered by staffing problems. The agency has only 780 employees, one for every six companies listed on an Indian stock exchange. (Fifteen times as many people work at the United State Securities and Exchange Commission, one for every company listed on an American exchange.) Nor does the training or background of Sebi’s employees necessarily inspire confidence. Add to that a culture that has long normalized trading on insider information. I remember sitting, a few years

ago, with an acquaintance of mine from one of Mumbai’s old stock-broking families, a man then in his late 50s. We were talking of the prosecution in New York for insider trading of Raj Rajaratnam of Galleon Group Llc., and of Rajat Gupta, once a managing director at McKinsey & Co. Inc. After I carefully explained what Gupta and Rajaratnam had done, my acquaintance shook his head, bemused. How, he asked me, are traders expected to make money except by using their networks to unearth information nobody else has? It’s no surprise, perhaps, that many ordinary Indians don’t entirely trust the stock market, assuming it’s loaded against them in some way. A similar insider-first entitlement has led to an even larger corporategovernance problem. What in India are called “promoters”—those who control companies, frequently the firm’s founding family—have power far beyond what their actual ownership share warrants. They pay themselves exorbitant salaries, strip the publicly held companies they control of assets, and have their decisions rubber-stamped by boards and sometimes even by shareholder meetings that don’t have all the information. After a couple of corporate scandals

about doom and gloom. There were optimistic signs. Between 2007 and 2016, some 22 countries (the United States and 21 EU countries) experienced reductions in their carbon emissions, while their respective economies continued to grow. Rob Jackson, a Stanford professor and one of the report’s coauthors, said in a recent interview with Popular Science: “The last three years were the only years that we had emissions drop as the economy grew. Before that, the only times the emissions dropped were when the global economy dropped…. Historically, our economies were tied directly to our energy use, and that was tied directly to fossil fuel.” In short, the GCP report’s findings demonstrate that low-carbon economic growth can be achieved, and can possibly be replicated across the developing world. Whether as a cause of concern or a source of hope, the GCP report should push our leaders to action.

E-mail: angara.ed@gmail.com, Facebook and Twitter: @edangara

the relationship between the coverholder and the syndicate is one of agency. The relationship with the coverholders is regulated by the Lloyd’s Revised Code of Practice on Delegated Underwriting and by the Financial Conduct Authority (FCA) Handbook and other Lloyd’s minimum standards. It has been said that coverholders “have the pen” (underwriting pen), i.e., “they can bind coverage from a syndicate without going to London and waiting to see an underwriter at the syndicate’s box at Lloyd’s.” Needless to say, coverholders have an enormous responsibility and their role is “based on a sense of trust.” Managing general agents would “have to be very careful in deciding who gets that authority” as a coverholder. Syndicates commit their risk capital, on annual basis, through the binding authority contract. Thus, the syndicates agree to participate on all the risks the coverholder underwrites over the course of one year. The selection of a coverholder is approved by Lloyd’s upon the sponsorship of a managing agent. To be approved as a coverholder requires a tedious application process that takes into consideration the applicant’s experience, financial capacity and other legal requirements. The coverholder operates on a commission basis. Lawyer Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.

recently, Sebi set up a committee led by the well-respected banker Uday Kotak to investigate how governance could be improved. Kotak explicitly said that he saw his job as ensuring “fairness for the entire body of shareholders” and not just a select subset. The committee’s report called for multiple changes to how companies were regulated and how boards were constituted. But it isn’t that easy to make changes in India. At least one government minister said that the report was “completely off the mark.” And preventing insiders from taking control of companies would require Sebi to investigate the privately held, or unlisted, subsidiaries of publicly traded companies. Sebi doesn’t have that power and it isn’t certain that the Delhi ministry that does will give it up easily. Kotak pointed out another open secret about the Indian private sector, too: Most activity at many publicly traded companies was nominally carried out by unlisted subsidiaries—and so wasn’t audited, or transparent enough for the average shareholder to figure out. He could easily have added that some promoters tend to use unlisted subsidiaries to hide their control and to move money around in ways that shareholders or the government can’t see.

2nd Front Page BusinessMirror

A12 Wednesday, November 22, 2017

Senators: Chinese telco that will end duopoly needs to secure congressional OK

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By Butch Fernandez

@butchfBM

enators said the entry of a third telecommunications company from China, as suggested by President Duterte, will still need to undergo scrutiny by Congress when it applies for a franchise to operate in competition with the Smart and Globe duopoly. “Yes. The [new telco] will need a new franchise or they can acquire an existing franchise,” Sen. Sherwin T. Gatchalian, chairman of the Economic Affairs Committee, said in a brief interview on Monday. Asked if the third telco—by

acquiring an existing franchise— could then be exempted from Congress scrutiny and immediately start competing with the duopoly, Gatchalian agreed that this can be done. “It depends on the mode of

Gatchalian: “If they buy out the existing shareholders of an existing telco, then they don’t need to come to Congress. If they buy the existing franchise itself, then they need to come to Congress because of the change of ownership.”

acquisition,” he told the BusinessMirror. “If they buy out the existing shareholders of an existing telco, then they don’t need to come to Congress.” Gatchalian added: “If they buy the existing franchise itself, then they need to come to Congress because of the change of ownership.” But acquiring a new franchise, he noted, usually takes “one year

DUTERTE: MINING FIRMS PAYING REVOLUTIONARY TAXES WILL BE CLOSED By Elijah Felice E. Rosales @alyasjah

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to process,” prompting the option for investors to just “buy an existing franchise”. Still, Gatchalian said Duterte is empowered to grant provisional operating permit that would allow the third telco to start operations sooner. At the same time, Sen. Grace Poe, who chairs the Senate Public Services Committee that reviews franchise applications, welcomed Duterte’s move to open the door to new players in the telco industry. “The entry of qualified foreign players into the telco market would be a welcome development,” Poe said, voicing hopes that “healthy competition could lead to better services for the consumers.” Poe pointed out, however, that existing laws “would not allow this,” prompting her to file a pending remedial legislation to address the issue. See “Senators,” A2

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resident Duterte will shut down mining companies paying revolutionary taxes to the communist-led New People’s Army (NPA), saying they are providing further backbone to a rebel group the government now considers as a terrorist organization. In a speech on Tuesday, the President said he will crack down on mining companies financing the NPA by giving into the rebel group’s taxation program. He added the government will make sure no one escapes its watch in its renewed campaign against the communists. “We have to decide once and for all. If I go against the NPAs, everybody has to reconfigure their relationship with the NPAs,” Duterte said. “Because if you continue to support [the NPA] financially, I will close you down,” the President added. To protect the security of the country, Duterte said the government has to trace everyone financing the NPA, including those paying the rebel group revolutionary taxes. Aside from mining companies giving into the NPA’s taxation program, the President said the government will also go after legal fronts of the rebel group. He accused the

Left—a broad coalition of activist groups—of conniving with the NPA, alleging it of extorting money from big companies to bankroll the activities of the rebel group. As a resolve, Duterte said he instructed the government panel on Monday to tell the National Democratic Front (NDF) he is no longer interested in pursuing peace with the communists. “As of [Monday], I have decided to cut talks with the NPAs,” the Chief Executive said. “You tell the guys there [in the] Netherlands, I am no longer available for any official talk,” the President reportedly told Presidential Adviser on the Peace Process Jesus G. Dureza and Government Chief Negotiator and Labor Secretary Silvestre H. Bello III. The government panel in May withdrew from the peace talks with the NDF, following the Communist Party of the Philippines’s order to its armed wing, the NPA, to heighten offensives in the face of the martial-law declaration in Mindanao. The government panel and the NDF in July held backchannel talks to revive the peace talks, but all efforts went to waste, following numerous clashes between the military and the NPA. Since then, negotiations with the communists were stalled, with no clear direction from Malacañang if it was terminated or not.

Heads will roll if DOTr will continue to fail in ending MRT mess–Roque

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resident Duterte will not hesitate to dismiss transportation officials should he find them incompetent in fixing the Metro Rail Transit (MRT) Line 3, which has inconvenienced the riding public for its string of breakdowns in the past weeks. In a news briefing on Tuesday, however, Presidential Spokesman Harry L. Roque Jr. assured that the Department of Transportation (DOTr) is doing everything in its capacity to resolve the MRT fiasco. “We’re crying for a solution and I’m sure that Secretary [Arthur P.] Tugade and Undersecretary [Cesar B.] Chavez are really taking all the necessary steps.” Still, should transportation officials fail to put the MRT fiasco to rest, Roque said he

is certain the President will sack people in due time. “I will not speculate, but I think the track record of the President speaks for itself,” Roque said. “It does not matter if you’re closest to him. If he thinks you should go, you will go.” Some lawmakers have called on Duterte to fire Tugade for the transportation chief’s failure to return the MRT to normalcy after more than one year in office. Rep. Gary C. Alejano of Magdalo, for one, has said the President should now replace Tugade for the growing list of MRT breakdowns, which, in one occasion, caused a freak accident that had an arm of a female passenger severed. “The responsibility of finding solutions to the problem falls square-

ly on the DOTr and its leadership,” Alejano said in a statement, adding “it has been over a year since the Duterte administration took over” managing the railway transit. Roque said the government does not have a timeframe as to when it intends to end the MRT fiasco. Nonetheless, Roque said Tugade is doing everything in his capacity to make sure the railway transit is fixed the soonest possible time. “He assured me…that they are going to procure a reliable maintenance contractor [and] they’re building new rails…buying new train cars and new signaling system,” Roque added. “They are, in other words, revamping almost completely the MRT.”

Elijah Felice E. Rosales

Duterte to issue EO adding teeth to fight vs biopirates Continued from A1

Benefit Sharing of Philippine Genetic Resources” will be ready for submission to Malacañang by the end of the year. According to Teh, members of a technical working group (TWG) created to refine the draft order that was presented during a climate-change adaptation, mitigation and disasterrisk Reduction (CCAM-DRR) Cabinet Cluster meeting last month are now conducting a thorough review of the proposed guideline. “We have met on November 17, and we are hoping to finalize the draft EO. Our target is to finalize the draft EO and submit it to Malacañang by the end of the year,” she said, noting that members of the TWG have given substantial comments during their meeting. “We will try to integrate all these comments to the draft EO,” said Teh, who acts as head of the Secretariat of the CCAM-DRR. “One of the proposals is the creation of an interagency body that will coordinate the whole process of ensuring access and benefit sharing.” The plan, she added, is to harmonize processes of key agencies with mandates over genetic resources. Teh said the TWG is keen on giving the role of overall coordinator to the Department of Environment and Natural Resources. Moreover, the members of TWG proposed the conduct of national inventory of Philippine genetic resources with potential commercial value. “It was proposed to complete the

process flow from inventory to patenting, research and development until commercialization. The final draft EO will harmonize rules and regulations or protocols. They want that to give the EO more teeth so that the concerned government agencies will be compelled to follow the proposed guidelines. They want it more refined, more focused and more clear,” she said. The EO hopes to include in the interagency body key agencies, such as the National Museum, National Commission for Culture and the Arts, National Plant Genetic Resources Laboratory, Philippine Institute of Traditional and Alternative Health, Intellectual Property Office and the Department of Foreign Affairs. Teh was tasked by Environment Secretary Roy A. Cimatu, who vowed to put in place a guideline on Access and Benefit Sharing of Philippine Genetic Resources to ensure access and, more important, fair and equitable sharing of the benefits, to the Philippines and the communities that own the genetic resources from which active ingredients with potential medicinal or pharmaceutical values can be extracted, whether they are animal- or plant-based. Earlier, Rep. Josephine Ramirez Y. Sato of the Lone District of Occidental Mindoro underscored the need for urgent Executive action to protect the country’s genetic resources against biopiracy, by putting in place a stronger national policy. In a statement, the vice chairman

of the Economic Affairs Committee of the House of Representatives said the country has the potential of becoming a global leader in the supply of plant-based raw materials for health and wellness products, given its rich biodiversity. “We need to put in place a stronger national policy to ensure that the country, especially the communities where our resources are found, will benefit from the conduct of research and development to extract active ingredients from plants with high medicinal and other commercial value,” Sato said. Sato has filed House Bill 2163 for this purpose, which is consistent with the country’s commitment as party to several international treaties, including the Convention on Biological Diversity and the Nagoya Protocol on Access and Benefit Sharing, which states that if access is given to do research and ultimately use of genetic resources, fair and equitable benefit sharing must be observed. The bill also seeks to ensure that the indigenous people and the communities that protect animal- or plant-genetic resources will benefit from these resources in case they are developed and commercialized. Teh said market trends and potentials from genetic resources is enormous. For the pharmaceutical industry alone, the market value as of 2008 is pegged at $643 million, while the estimated market value of healthy foods, including functional foods, natural and organic, is pegged at $120 billion.