Issuu

Dangal Awards photo NOBLE ENDEAVOR The Dakilang Adhikain ng Ating Lahi Awards was held on Wednesday at the Unilab’s Bayanihan Center in Mandaluyong City. Photo shows (from left) Teresita Peña, finalist, Barangay Pilar, Las Piñas City; Anita Naval, finalist, Barangay Dalandan, Valenzuela City; Violeta Reyes, winner, Barangay Tanza, Navotas City; Elenita Cayetano, finalist, Barangay Napindan,Taguig City; Dr. Edgar Caballero, winner, Barangay Merville, Parañaque City; Reverencia Ramos, winner, Barangay Concepcion Dos, Marikina City; actress Susan Roces, Rite Med ambassador; former Sen. Aquilino Pimentel Jr.; ALC Goup of Companies President Benjamin V.Ramos; Vincent Guerrero, general manager of Rite Med; Arthur Loyola, executive director of United Bayanihan Foundation; Rita Carpio, winner, Barangay177 Camarin, Caloocan City, Editha Santiago, winner, Barangay Ugong, Pasig City; Encarnacion Tan finalist, Barangay Little Baguio, San Juan City; Florentino Lorenzana-Barangay 60 Zone 5, Tondo, Manila; and Ofelia Lantin, finalist, Barangay Barangka Drive, Mandaluyong City. The Dakilang Adhikain ng Ating Lahi Awards was sponsored by the BusinessMirror, Rite Med and the United Bayanihan Foundation. ROY DOMINGO

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

BusinessMirror

www.businessmirror.com.ph

A broader look at today’s business n

Thursday, October 6, 2016 Vol. 11 No. 362

REGULATOR SAYS BUYOUT OF SMC TELCO ASSETS CANNOT BE DEEMED APPROVED

PCC to CA: Nullify PLDT-Globe deal T

INSIDE

@davecaga

he Philippine Competition Commission (PCC) has asked the Court of Appeals (CA) to declare the P70-billion buyout by PLDT and Globe of San Miguel Corp.’s (SMC) telecommunications subsidiaries as void and for the whole transaction to be undone. Continued on A2

Duterte admin drops Aquino’s grassroots budgeting strategy

the broader look

By David Cagahastian

₧70B

The cost of San Miguel Corp.’s telco assets

P25.00 nationwide | 4 sections 28 pages | 7 days a week

Nene Pimentel says shift to Federalism done in 3years By Butch Fernandez

@butchfBM

ormer Senate President Aquilino Q. Pimentel Jr. said the proposed transition to a federal form of government endorsed by Malacañang and the leaders of the Senate and the House of Representatives is likely to be completed in the midterm of President Duterte. Interviewed after speaking at a BusinessMirrorUnilab awards rites for senior citizens on Wednesday, Pimentel said the federalism transition process would take about three years.

This capacity is crucial, as they [LGUs] stand to see their resources boosted under a federal setup…from current 60-40, in favor of the national government, to 80-20, in favor of LGUs. —Pimentel III

a6-a7

reality parenting

He said the working timetable estimated by his son and namesake, current Senate President Aquilino L. Pimentel III during a separate interview earlier, was achievable. According to the elder Pimentel, the projected timeline for completing the task “is feasible as, far as the work in Congress goes.” But, all in all, the former Senate President said he Continued on A2

parentlife

D41

PHILIPPINE OFFICE Miguel Warren, Payoneer country manager, explains how the leading online-payments company is transforming the way businesses send and receive cross-border payments during Payoneer’s launch at Bonifacio Global City in Taguig, where he also announced the expansion of the online-payments company’s operations in the Asia Pacific region. ROY DOMINGO

Nickel falls most in 3 weeks as PHL supply woes ease

Inflation to remain low until December–Neda N By Cai U. Ordinario @cuo_bm

& Bianca Cuaresma

@BcuaresmaBM

hile the weak peso and the proposed power-rate hike could make local products more expensive, full-year inflation would still not breach the government’s target range for 2016, according to the National Economic and Development Authority (Neda).

Neda Deputy Director General for Planning Rosemarie G. Edillon said in a statement that the average inflation rate for the whole of 2016 may even fall below the target range of 2 percent to 4 percent. “Inflation will remain low and stable for the rest of the year with the continuous expansion of the domestic economy, solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic

PESO exchange rates n US 48.2490

1.6%

The average inflation rate from January to September

liquidity,” Edillon said. She said international and domestic risks, as well as a possible rally of oil prices, could also increase commod-

ity prices this year. She added that a developing La Niña is another risk in the fourth quarter. However, she said rice prices will remain stable this year, since the 250,000 metric tons of rice imported from Thailand and Vietnam will arrive by the end of October. “We must keep on strengthening the agricultural sector through a comprehensive agricultural-development program that aims to increase the Continued on A2

ickel posted the biggest loss in three weeks, as supply concerns eased amid speculation that Philippine mines could avoid shutdowns after a government audit of producers. Nickel Asia Corp. said on Tuesday it’s confident that the Hinatuan Mining Corp. unit, among those slated for closure unless it fixes shortcomings, will not be suspended. The country’s top miners’ group said on Tuesday that while there remains a real threat to many companies’ existence, the one-page letters from the environment department to

members detailing grounds for suspension often listed administrative matters. Prices rallied 20 percent this year through the first three quarters on concern that mine disruptions in the Philippines will curb supply, just as inventories tracked by the London Metal Exchange fell to the lowest in almost two years. In the week ended September 30, money managers boosted their net-long positions in nickel by 3.2 percent to 65,317 contracts, the highest in data going back to mid-2014.

n japan 0.4690 n UK 61.4210 n HK 6.2209 n CHINA 7.2343 n singapore 35.2003 n australia 36.7609 n EU 54.0727 n SAUDI arabia 12.8643

See “Nickel,” A2

Source: BSP (5 October 2016 )

News

BusinessMirror

A2 Thursday, October 6, 2016

news@businessmirror.com.ph

PCC to CA: Nullify PLDT-Globe deal Continued from A1

In its comment to the petition filed by Globe before the CA’s Sixth Division, the PCC said the P70-billion purchase of PLDT and Globe of San Miguel’s telecommunications assets, particularly the rights over the 700mhz frequencies, did not comply with the new requirements under the new Philippine Competition Act (PCA) enacted in 2015. The PCC said the notification of the transaction, which the parties filed with the agency, lacked material information, making such notification ineffective and, thus, rendering the transaction as not among those that can be considered as “deemed approved.” The said P70-billion buyout was executed

before the implementing rules and regulations of the new PCA had been promulgated, but during the effectivity of the PCC’s Memorandum Circular (MC) 16-002, which prescribes guidelines on how parties in mergers and acquisitions should notify the PCC regarding their transactions, which are worth P1 billion and above. The PCC said the “sparse” notification filed by the parties to the transaction did not disclose the key terms of the transaction as required under MC 16-002. In its comment, the PCC noted that, based on the notification filed by the parties before the PCC, the key terms of the transaction were as follows: “The seller, purchasers and VTI [Vega Telecom Inc.] shall execute a

sale and purchase agreement [SPA]. The SPA contains the terms and conditions of the transaction, including the payment terms, representations and warranties and covenants of the parties, and other provisions governing the transaction.” “Clearly, in the notice, petitioner [Globe] did not even disclose any actual information on the key terms of the transaction required under paragraph 1[f] of MC 16-002. Said notice merely stated that the parties shall execute a SPA, which contains the terms and conditions of the transaction,” the PCC’s comment read. Aside from praying for the declaration of the P70-billion deal as void, the PCC also asked that the parties to the transaction be

fined the mandated administrative penalties ranging from 1 to 5 percent of the total transaction cost. “Therefore, aside from denying the instant petition for lack of merit, the Honorable Court should issue an order consistent with the legal consequences of the transaction being declared void, that is, an order directing petitioner to, among others: [i] cease and desist from further implementing the subject acquisition; [ii] undo all acts consummated pursuant to the subject acquisition; and [iii] pay the appropriate administrative penalties that may be imposed by respondent under the PCA for the illegal consummation of the subject acquisition,” the PCC’s comment read.

Inflation to remain low until December–Neda Continued from A1

resiliency of the sector and create a balance in agricultural policy,” Edillon said. The increase in higher prices has become evident in the September inflation data, wherein the rate of increase in commodity prices grew 2.3 percent, the highest in 18 months. Inflation in September was the highest since March 2015, when it hit 2.4 percent. Inflation in August was at 1.8 percent, while inflation in September 2015 was at 0.4 percent. The Philippine Statistics Authority (PSA) data showed that inflation in January to September averaged 1.6 percent. Food inflation accelerated to 3.1 percent in September, from 2.5 percent in the previous month. This is due to the adverse effects brought about by the series of tropical

cyclones that devastated the country.

Key policy rates

The Bangko Sentral ng Pilipinas (BSP) said the inflation rate in September is consistent with its expectations that the rise in consumer prices will inch up, albeit slowly, toward the national government target range. “This also confirms that, at the moment, there is no compelling reason to change settings on our policy rates,” BSP Governor Amando M. Tetangco Jr. told reporters on Wednesday. Central bank Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said the BSP has downgraded anew its inf lation forecast for 2016 further below the target range. Guinigundo said the BSP now expects inflation to hit 1.7 percent,

from 1.8 percent earlier. The reasons behind the lower-than-earlier-expected inflation average for the year include the lower actual August inflation rate, the slower economic activity in the third quarter of the year as election spending wanes and as rainy season sets in and some delays in the expected power rate adjustments. For 2017 and 2018, their expectations remain unchanged at 2.9 percent and 2.6 percent, respectively. Earlier, the BSP said overall balance of risks surrounding the inflation outlook is tilted to the upside—with pending petitions for adjustments along with the proposed adjustments in excise-tax rates of petroleum products and the potential second-round effects on transport fares. “This actually increases the probability of

Nene Pimentel says shift to federalism done in 3 years Continued from A1

does not see everything completed in less than three years. The entire process, from enacting an enabling law to conducting a referendum to ratify the shift to federalism, would take three years. At the same time, Pimentel Jr. voiced

hopes that local government units (LGUs) can have enough time to build up capacity so they can be the spearhead for inclusive growth and participative in empowering development in countryside and marginalized areas under a federal system. “This capacity is crucial as they [LGUs] stand to see their resources boosted under a

federal setup,” Pimentel Jr. told BusinessMirror. He added that in a federal system, the vision is to enlarge the pool for sharing —from just the internal-revenue collections right now to include all other government fees; and to hike the LGU share “from current 60-40 in favor of the national government; to 80-20 in favor of LGUs.”

the risks materializing coming from the increase in excise tax on fuels. And we expect some second-round effects on fuel prices but also on transport fare,” Guinigundo said in a news briefing at the latest monetary-policy meeting. Tetangco vowed to closely monitor recent developments, including financial market volatility. The governor also noted the impact of possible adjustments to the tax structure on consumption patterns and relative prices of assets. He also said the BSP will see how these may be addressed by adjusting any of their policy tools, including macroprudential measures. But Tetangco also told reporters that he is not keen on making a move on one of its monetary-policy tools—the reserve requirement—to control liquidity in the system.

Nickel. . .

Continued from A1

“A very long market is under pressure as the Philippine audit may not close as many mines as feared,” Tai Wong, the director of commodity products trading at BMO Capital Markets in New York, said in an e-mail. “While the medium outlook is positive with stocks at two-year lows, prices may correct further.” Nickel for delivery in three months slipped 2.6 percent to settle at $10,080 a metric ton at 5:50 p.m. on the LME, the most since September 12. Bloomberg News

Investors. . . Continued from A3

Fund sources not only abound from abroad but also domestically given the robust banking and finance system in place. In fact, according to Energy Development Corp. (EDC) President and COO Richard Tantoco, there has been an “incredible deepening of the local capital markets” over the past few years. “The debt capacity locally has just grown, and we see that [as] some of the banks are actually raising a billion and a billion-and-a-half US [dollars],” he said. “And we see the tenors and the amounts stretching, which enable us, developers, to match the longer cash flow with the local or domestic financing. We also see some trends in terms of discussing off-take agreements with our customers. Some of them are actually asking for a reduction on the exposure of the foreign exchange. So borrowing investment and using that to fund the project is actually quite helpful from a customer point of view.” On the infrastructure side, Puno Law Manila Office Partner Elizabeth Loriega pointed out the special“Single Borrower’s Limit”(SBL) for public-private partnership (PPP) projects, which is about to expire on December 28 this year. “So that gives financing institutions more flexibility in lending [to] PPP projects,” she said. Loriega, likewise, pointed to the rules of the Philippine Stocks Exchange on the relaxation of initial public offerings (IPOs) for similar undertakings. These include, but not limited to, relaxing the three-year required track record and operating history under certain conditions, such as the PPP project must be a national project; the PPP should be operational before listing at least 15 remaining years of project effectivity and the cost should at least be P5 billion or about $110 million; the principal shareholders are subject to a one-year lock up period from initial listing day; the secondary offering is also prohibited during the IPO period and it is subject to automatic delisting upon the expiration of the PPP contract; and the mandatory tender offer to PPP company public shareholder prior to desisting. President Duterte, amid his call for change, believes that the country’s economic growth momentum still needs to be sustained by keeping up some of the vital undertakings of his predecessor. Former PPC Center Executive Director Andre Palacios said the new administration is looking at the existing pipeline of the PPP projects developed during the term of former President Benigno S. Aquino III. Even though not all of those projects moved forward, he said, some actually did at a faster pace, like the developments of regional airports and the Ninoy Aquino International Airport. Another trend he sees is that there’s an enhancement of the program, wherein the current administration is open to answer the proposals, contrary to what the previous government did. “Also, there is now a program by the local government department, where they are encouraging PPPs at the local level. So selective, continuity and enhancement of the program is additional trend,” he added. To the credit of the previous leadership, CFP Transaction Advisors Managing Director Solomon Castro, lauded Aquino’s PPP thrust under his daang matuwid initiative. He said that, between 2010 and 2016, there was not even a PPP pipeline when Aquino took over the government from then-President Gloria Macapagal-Arroyo. “But six years after the past administration, [Aquino] did invest a lot in the project development process. So we have this robust pipeline now. And I think it’s natural for the new team that came in to just look at these projects, look at the list, and make decisions on what will move forward, precisely what will be pushed back, and what will be dropped of the room, plain and simple,” Castro said. Looking forward, Palacios sees the new government will continue to roll out PPP projects, which will not only be bankrolled by domestic banks. “I think as the projects grow bigger in size and scale, there will be other sources of financing, like the PSE, offering the listing rules for PPP projects. We’ll also need foreign financing in the end,” he stressed.

news@businessmirror.com.ph

BMReports BusinessMirror

Thursday, October 6, 2016 A3

‘Investors ready to pour money on PHL’s power, infra projects’

By Roderick L. Abad | Contributor

ATIONAL projects in the Philippines are seen to continue to draw support from both the local and foreign investors, as the new government plans to continue some of the development initiatives undertaken by the previous administration.

“The trends that I see are things [will] continue to get bigger. The need for capital is increasing all the time [not only] for bigger and bigger projects, but also smaller [ones],” Latham & Watkins’s Tokyo office managing partner Joseph Bevash said on Tuesday during their company’s organized forum, dubbed “Sustaining the Philippines’ Momentum: Navigating Transitions and Financing Growth,” at the Shangri-La Hotel at The Fort in Taguig

City. He mentioned that international developers and lenders are still interested to join in various development projects in the country, particularly in energy and infrastructure industries. “I think, increasingly, combinations of Philippine and international participants will be able to sort of optimize the peso-versus-dollar components of the cost side and the revenue side, which will ultimately… benefit…the consumers of power, or

whatever [sector],” he noted. Bevash, however, cautioned that one very significant segment expected to be hanging on the cliff at the end of 2016 is coal, after European commercial banks and developers’ vow not to coal projects in the future. “[So] coal should not necessarily be a continuing part of the Philippine energy [sector’s] future. But the complexion of those projects [will] change completely. And so you’ll see

in the future a no participation by Europeans and Americans,” he bared. While support from some of the Western countries is nearly coming to an end, Bevash said the country may found more allies from among its Asian neighbors. “I think you’ll see the very aggressive Korean, Japanese, Chinese participants coming on the side [of the] Philippines developers and lenders,” he said. See “Investor” A2

BMReports BusinessMirror

A4 Thursday, October 6, 2016

news@businessmirror.com.ph

Manila’s population could expand to 29.3M by 2030 due to urban migration–EIU report

By Cai U. Ordinario

@cuo_bm

ver 6 million more Filipinos are expected to flock to Manila in 10 years, according to a report released by the Economist Intelligence Unit (EIU). In the report “Association of Southeast Asian Nation [Asean] Cities: Stirring the Melting Pot,” the EIU said the population of Manila could balloon to 29.3 million by 2030, from an estimate of 23.2 million in 2015. Manila, as defined by the EIU, corresponds to the Greater Manila Area. It consists of Metro Manila, or the National Capital Region, and urbanized areas and neighboring provinces. “The good news for Asean is that many of its cities can still learn from the mistakes of the once-great metropolises in the developed world, on top of learning from each other’s experiences,” the EIU report read. “Cities are living beings, and those in Asean are no different. How they navigate a rapidly changing world over the next few years will be critical for their long-run prospects,” it added. EIU estimates showed that around 68 percent of the population of Manila by 2030 will be composed of 15- to 64-year-old Filipinos. The share of this age group to the total population has been increasing from 66.5 percent in 2005 to 67.6 percent in 2015. “Driving this growth are persistently high rural- to-urbanmigration flows, despite declining fertility rates. Cities where favorable demographics boost the labor force will have an advantage in terms of sustaining higher levels of economic and consumer-spending growth,” EIU said. With more Filipinos living and working in Manila, the EIU projects that the median household income in the megacity will reach $30,200. This is more than double the

23.2 million The population of Manila in 2015

estimated median household income in 2015 of $11,900 and in 2005 at $6,200. The EIU also estimated that by 2030, the number of households earning over $10,000 annually will increase to 7.6 percent. This is almost double the 4 million households earning $10,000 a year in 2015. In 2005 there were only 500,000 households earning $10,000 in Manila. “[We] project the number of middle-class households in Asean to more than quadruple, rising from more than 38 million in 2015 to 161 million in the next 15 years,” the EIU said. With the growth of the population and rising incomes, cities like Manila are also faced with challenges, such as pollution and heavy flooding. Based on the EIU, Manila is second only to Bandung in Indonesia as the most polluted city in the Asean. In terms of flooding, it is also one of the urban areas in the region that are susceptible to floods due to typhoons and heavy rainfall. The Philippines, in general, the EIU said, is particularly vulnerable to flooding. This makes flooding a serious issue, particularly in raising productivity. “Flood events in recent years have been especially damaging for Manila’s urban infrastructure, and have revealed deep gaps in the government’s capability to handle

Street vendors wait for customers as jeepneys and other traffic stand congested in Manila. Jes Aznar/Bloomberg

such severe weather conditions,” the report read. “Given that Manila contributes a large proportion of national GDP, regular flooding events in the Metropolitan Manila region tend to have a negative impact on the economy as a whole,” it added. In 2013 the EIU said Supertyphoon Yolanda (international code name Haiyan) cost the economy

some $12 billion to 15 billion, which is roughly equivalent to 5 percent of the country’s GDP at the time. While Manila was not directly hit by the typhoons, the EIU said the flooding experienced in Manila increased commodity prices and decreased the spending capacity of residents. Since then, the government has undertaken flood-manage-

ment projects, the most notable of which was the P23.5-billion Metro Manila Flood Management Project, Phase I of the Department of Public Works and Highways and Metropolitan Manila Development Authority. The project includes the rehabilitation of 36 pumping stations in Manila, Pasay, Taguig, Makati and Malabon through the replacement

of pumps and the construction of 20 new pumping stations in Manila, Pasay, Pasig, Mandaluyong, San Juan, Caloocan, Valenzuela and Quezon City. It will also minimize solid waste in waterways to reduce flood risks. The project involves participatory housing and resettlement, project management, support and coordination.

Cost of airline climate deal Oil slips from three-month high may be peanuts for passengers as US stockpiles seen increasing

he proposed United Nations accord to limit pollution from international flights could cost airlines billions. For passengers, the price may be less than an in-flight glass of pinot noir. Airlines estimate the measure being debated this week in Montreal will cost the industry between $2.9 billion and $12.4 billion annually by 2030. Based on a handful of sample routes, that could add between 31 cents and $12.10 to the price of an individual ticket, according to figures from the Air Transport Action Group, a Geneva-based organization representing airlines, engine makers, airports and pilots. The deal, which would be the first global climate accord for a single industry, calls for companies to offset their emissions growth after 2020 by funding environmental initiatives. While the price of that effort is forecast to grow as high as $23.9 billion by 2035, the amount would be a tiny fraction of airlines’ budgets. It will be up to individual companies to determine how to recover the costs. The expense is so low that customers may never notice. “This is a highly competitive industry,” said Haldane Dodd, a spokesman for the Air Transport Action Group. “Some airlines might pass the cost onto consumers, others won’t.’’ Emissions from international flights were excluded from the Paris Climate accord. They account for about 2 percent of global greenhouse gases and are forecast to more than triple over the next few decades. The 15-year agreement being brokered by the UN’s International Civil Aviation Organization would not force airlines to cut pollution. Instead, companies would compensate for new emissions beyond 2020 by buying credits that back renewable energy projects, efforts to capture industrial gases or other environmental initiatives. The credits for a 540-mile (870-kilometer) flight in 2030 from Casablanca to Madrid, for instance, would cost airlines between $51 and $131, using a Boeing

This is a highly competitive industry. Some airlines might pass the cost onto consumers, others won’t.’’—Dodd

737-800 aircraft, according to the Air Transport Action Group. At 162-seats, that breaks out to 31 cents to 80 cents a passenger. For comparison, a glass of pinot noir or chardonnay aboard United Continental Holdings Inc. flights costs $7.99. The cost of offsetting longer flights would be higher. A 7,500-mile route from Dubai to Sydney on an Airbus 380 would cost between $2,542 and $6,585, according to the Air Transport Action Group. At 325 seats, that would be $4.67 to $12.10 per passenger.

Emissions growth

While some environmentalists have criticized the accord, saying the cost of offsets lets airlines off easy, Annie Petsonk, international counsel for the Environmental Defense Fund, said the objective is not to punish airlines. Rather, she said, it’s a way to compensate for their emissions growth until the carriers find ways to become more efficient. While the cost per passenger may seem like a pittance, she said, the billions the accord could generate would go a long way in developing nations. “For travelers, the cost will be lost in the noise of the overall ticket price,’’ Petsonk said. “But for some countries, it could mean a significant source of lowcarbon development financing.’” Bloomberg News

il slipped from a threemonth high in New York before a government report that’s projected to show that US crude stockpiles grew for the first time since August. Futures slipped 0.3 percent, after surging 9.3 percent the previous four sessions. Crude supplies probably increased by 1.5 million barrels last week, rising for the first time in five weeks, a Bloomberg survey showed before the Energy Information Administration report on Wednesday. Prices climbed earlier, as Hurricane Matthew threatened to disrupt fuel shipments along the US East Coast and investors look ahead to next month’s Organization of Petroleum Exporting Countries (Opec) meeting. Futures rose from the settlement following an American Petroleum Institute report on Tuesday evening that was said to show US crude stockpiles fell last week. “The market is positioning ahead of US weekly data that’s expected to show a minimal increase in crude supplies,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. Oil in September capped the biggest monthly gain in five months after the Opec agreed to trim supply for the first time in eight years. Quotas will be decided at the group’s official meeting in Vienna on Novem-

ber 30. Opec crude production rose to a record in September, according to a Bloomberg survey. West Texas Intermediate (WTI) for November delivery fell 12 cents to settle at $48.69 a barrel on the New York Mercantile Exchange. The contract reached $49.13 earlier, the highest intraday level since July 5. Futures rose from the settlement after the industry-funded American Petroleum Institute was said to report US crude supplies declined by 7.6 million barrels last week. November WTI traded at $49.07 at 4:48 p.m. in New York.

Fuel stockpiles

Brent for December settlement declined 2 cents to $50.87 a barrel on the London-based ICE Futures Europe exchange. Prices reached $51.37, the highest since June 10. The global benchmark closed at a $1.57 premium to WTI for December delivery. Gasoline inventories probably expanded by 500,000 barrels in the week ended September 30, according to the Bloomberg survey. Analysts projected that the report will show refineries reduced operating rates and that supplies of distillate fuel, a category that includes diesel and heating oil, declined. Rising prices have drawn explorers back to the US shale patch. Rigs targeting crude in the nation rose

to the highest level since February, Baker Hughes Inc. said on its web site on Friday. “I’m going to be looking at the product ion nu mber,” sa id Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, which oversees $133 billion of assets. “The US rig count is up and it will be very interesting to see when that leads to higher output.”

Hurricane threat

Gasoline futures climbed 2 percent as the hurricane was forecast to head northward along the East Coast, potentially reaching New York Harbor, the delivery point for Nymex contracts. That may disrupt shipments temporarily as tankers change course to avoid the hurricane. Opec boosted output by 170,000 barrels a day in September to 33.75 million barrels a day, the Bloomberg survey of analysts, oil companies and ship-tracking data showed. Nigeria and Libya added a combined 190,000 barrels a day which compensated for a drop in output from Saudi Arabia and Angola. Production from Nigeria and Libya is returning after internal unrest crippled the countries’ oil infrastructure. Together with Iran, they will likely be exempt from the preliminary deal to cut output. Bloomberg News

Asean

BusinessMirror

www.businessmirror.com.ph

The importance of the pharmaceutical industry Asean-EU Perspective

HENRY J. SCHUMACHER

Editor: Max V. de Leon • Thursday, October 6, 2016 A5

Most improved bond risk as Vietnam defies slowdown

Manila. “The combination of structural advantages and a government with a clear and sensible long-term economic strategy largely explains the optimism of many foreign investors that Vietnam will be the next Asian tiger.” Vietnam’s five-year credit default swaps declined 40 basis points in the three months ended September before climbing one basis point to 185 on Monday, according to prices from CMA. The yield on the government’s 10-year bonds fell to 6.46 percent on Monday, the lowest level since March 2015. The VN Index of the nation’s shares has jumped 19 percent this year.

ustainable access to innovative health care and continued advancement in research and development of innovative biopharmaceuticals are critical components for economic growth in the European Union (EU) and Asean (and the Philippines!). Asean leaders identified health care as one of the 12 priority sectors to help drive Asean integration and creation of the Asean Economic Community. Asean health ministers have also emphasized that health development is a shared responsibility and must involve greater participation from all groups. EU business commends this commitment for collaboration among governments and the private sector. The EU biopharmaceutical industry supports Asean and its membercountries’ trade, health and regulatory reforms that promote the free flow, of goods for consumers, and ensures quality, efficacy and safety of pharmaceuticals. However, challenges exist. Patient safety and producing quality medicines are the foundations of the EU pharmaceutical industry, but necessary, burdensome, or inconsistent regulations impede or delay access to medicines in Asean member-states. Market-access restrictions in the form of preferential procurement and procedures affect the ability of bring innovative products to market. Inadequate intellectual-property protection and enforcement have a detrimental impact on the availability of safe medicines, and create potential health hazards to consumers. The EU pharmaceutical industry will continue to support the ongoing reforms, and act as a partner of local and regional health authorities to deliver on their health-care goals. The pharmaceutical industry in most Asean markets is growing and dynamic, albeit at variant rates. The growth is driven by several factors, including the emergence of more efficient health systems that are expanding access for consumers (such as universal health in the Philippines). Both innovative and generic pharmaceutical sectors are benefiting from this growth. In 2016 the Asean Economic Community started its integration, and will be a driver on expanding health-care services and goods throughout Asean with more partnerships forming, and greater collaboration on research and development being encouraged. The EU pharmaceutical sector stands ready to be collaborative partner. The EU bilateral free-trade agreements with certain Asean markets have the potential to be the most significant driver for opening the markets and benefiting Asean and EU companies. Key issues are: n Patient safety n Clarification of laws n Clinical trials n Regulatory delays n Parallel trade n Labeling standards Market access: n Foreign direct investments n Government procurement n Preferential treatment for state-owned enterprises n Intellectual property n Patents n Regulatory data protection n Counterfeit medicines Key recommendations: n The EU pharmaceutical industry recommends greater and more frequent private-sector consultation in advance of the development of domestic regulations, and that private-sector issues be more frequently addressed at the Asean level. n The industry recommends clear and transparent procurement or listing procedures for biopharmaceuticals that recognize the value of innovation, rather than create disincentives for access to innovative medicines. n The EU pharma industry urges Asean governments to prioritize IPR protection and develop initiatives to reduce the delays and backlogs that exist in granting patents. n The industry recommends greater interministerial coordination at the Asean and domestic level so that trade, health, economic matters can be effectively and cohesively addressed. n The EU pharmaceutical industry recognizes that Asean membercountries take the threat of counterfeit and substandard medicine seriously, and recommend greater collaboration among all health-care stakeholders be developed regionally to address this growing cross-border issue and promote awareness among consumers.

Challenges remain

Bloomberg

ietnam’s bond risk is falling at the fastest pace in Asia, as buoyant exports and rising foreign direct investment bolster Southeast Asia’s second-best performing economy.

The cost of insuring the nation’s five-year notes using credit default swaps has dropped one percentage point since the end of December and shrank to 1.5 percentage points last month, the least since before the global financial crisis in 2008. That compares with declines of 81 basis points in Indonesia and 61 basis points in Malaysia. Vietnam’s exports are rising amid a regional slump as the nation’s diverse export base, which ranges from textiles to mobile phones and coffee, enables it to weather global weakness in manufacturing and commodities. While Fitch Ratings says there remains risks to Vietnam’s credit rating, the country’s gross domestic product has grown at least 5 percent each year since the start of the millennium, while foreign direct investment rose to a record in 2015. “The decline in bond risk reflects improving macroeconomic fundamentals,” said Trinh Nguyen, senior

6.4%

The GDP growth of Vietnam in the third quarter

economist for emerging-market Asia at Natixis SA in Hong Kong. “Vietnam’s credit cycle is on the upswing, exports are expanding and GDP improving. All this means that its likelihood of default has been reduced according to the markets’ perception.”

contraction in exports,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. “Vietnam’s economy has improved remarkably over the past three years. Yet, it was only in the past 12 to 18 months that the market has taken notice of the sustainability of the improvements in its macroenvironment.”

Quicker growth

Record investment

Annual economic growth accelerated to 6.4 percent last quarter, from 5.78 percent in the previous three months, the General Statistics Office said on September 29, behind only the Philippines in Southeast Asia. The government has forecast GDP to expand between 6.3 percent and 6.5 percent in 2016, while economists predict 6 percent. Exports have climbed every month since March 2015, advancing 8.6 percent in September from a year earlier, the data show. “Having the most diversified export production base, Vietnam continues to buck the regional

Foreign direct investment climbed to $14.5 billion in 2015 as companies such as South Korea’s Samsung Electronics Co. and LG Electronics Inc. shifted smartphone and television manufacturing to Vietnam to take advantage of competitive labor costs. Total disbursed investments in 2016 are likely to surpass last year’s level based on pledged projects, stateowned Dau Tu newspaper reported September 21. “To maximize the economic benefits from a large and skilled workforce, Vietnam has been highly open to foreign investment,” said Donghyun Park, a principal economist at the Asian Development Bank in

Even though bond risk is falling, Fitch sees threats to Vietnam’s “BB-” credit rating, the third-highest junk grade, after the National Assembly said public debt may breach the government’s ceiling of 65 percent of GDP in the second half of the year. “Challenges to Vietnam’s rating profile remain, and include a rapid reacceleration in credit growth and rising public debt, which is already higher than the median of ‘BB’ Fitchrated sovereigns,” said Andrew Fennell, a director at Fitch Ratings in Hong Kong. Official data show banks in Vietnam have recorded lending growth of 11 percent this year through September, below the government’s goal of as much as 20 percent. The share prices of most Vietnamese lenders have dropped in 2016 amid concern they are undercapitalized and have substantial bad loans on their books. The economy is overly dependent on unsustainable loan growth, Credit Suisse Group AG said in an August 31 research note.

State sector

The current positive picture is very different from the aftermath of the global financial crisis, when Vietnam lagged behind its peers, held back by an inefficient statecontrolled sector. Vietnam embarked on a drive in the 1990s to cut holdings in stateowned firms to bolster economic growth. The government’s privatization plan fell short of its target in 2015, with 289 state-owned companies selling stakes compared with a goal of 514. “While the rest of the region enjoyed cheap capital inflows post the financial crisis, Vietnam went through a severe economic slowdown in which it was forced to deal with the inefficiency of its state-owned sector,” Natixis’s Trinh said. “There is still a lot of work to be done, but it has made progress.” Bloomberg News

India, Singapore strengthen ties on countering terror, skill development

EW DELHI—Singapore on Tuesday backed India’s stance on terrorism, condemning the menace in all its forms, as the two countries looked at measures to strengthen counterterrorism cooperation, including cybersecurity. On the economic front, the two countries signed two pacts on cooperation in skill development, formally cementing their partnership. A third pact on intellectual property was signed to facilitate greater business-to-business collaboration. Indian developers will be allowed to raise capital through the sale of rupeedenominated corporate bonds in Singapore to finance big-ticket infrastructure projects.

The pacts were signed in the presence of Prime Minister Narendra Modi and his Singapore counterpart Lee Hsien Loong in New Delhi on Tuesday. Lee is on a three-day visit to India. In his remarks, Modi said India and Singapore had agreed to “expedite” the second review of their Comprehensive Economic Cooperation Agreement. On his part, Lee announced the appointment of two senior ministers to head Indian and Singaporean delegations to a bilateral financial dialogue to give a boost to economic ties. The Indian side will be headed by Finance Minister Arun Jaitley, while the Singaporean side will be headed by Singapore’s deputy PM Tharman Shanmugaratnam.

Modi termed defence and security cooperation as a “key pillar” of the Singapore-India strategic partnership. “As two maritime nations, keeping the sea lanes of communication open, and respect for international legal order of seas and oceans is a shared priority,” Modi said in an oblique reference to tensions among many Association of Southeast Asian Nations members and China over competing claims over the South China Sea. Modi’s comments can be seen as support for Singapore, which has been engaged in a war of words with China over a recent report in China’s Global Times that Singapore wanted the inclusion of the Philippines’s position on an international arbitration ruling on claims to the South China Sea during the Non-Aligned

Movement summit held in Venezuela in September. On terrorism, Modi said its rising tide, “especially cross-border terrorism, and the rise of radicalization are grave challenges to our security.” “It is my firm belief that those who believe in peace and humanity need to stand and act together against this menace. Today we have agreed to enhance our cooperation to counter these threats, including in the domain of cyber security,” Modi said. In his remarks, Lee said Singapore “strongly condemns” terrorism in all its forms, while expressing condolences for the 18 September attack in Uri, where were a terrorist attack on an Indian Army camp claimed 19 lives. TNS

SingaporEAN Prime Minister Lee Hsien Loong. Bloomberg

TheBroa

Business

A6 Thursday, October 6, 2016

Duterte admin drops Aquino’s

By Rea Cu

@ReaCuBM

HE road to perdition is paved with good intentions, as the saying goes, and could be applied to the bottom-up budgeting (BuB) tack of the government of former President Benigno S. Aquino III. Developed jointly by the Human Development and Poverty Reduction (HDPR) and the Good Governance and Anti-Corruption (GGAC) Cabinet clusters, the BuB was first introduced in the Joint Memorandum Circular 1 on March 8, 2012, according to a World Bank document. The BuB tack aimed to take into account inputs from government units from local government units (LGUs), barangays, municipalities and civil-society organization (CSO) when crafting the oveall budget for the fiscal year. According to Budget Secretary Benjamin E. Diokno, the BuB program is not anymore necessary since the budget for LGUs are already being provided through the internal-revenue allotment (IRA). Diokno said the LGUs should work around the IRA for its projects instead of being given more funds. In recent reports, Diokno stated that the 2017 national government budget, proposed by the current administration, will not include an allocation for BuB projects explaining that the funds, instead, could be spent for more effective projects. He further pointed out that the BuB program was only used as a “political tool” by the previous administration.

Allocations

IN the proposed 2017 national government budget submitted by the Department of Budget and Management (DBM) to Congress, allocations to Local Government Units (ALGUs) totaled P554.9 billion, which covers the budget for IRA and special shares of LGUs to national taxes. This year the ALGUs reached P485.82 billion, lower than that of the proposed budget for next year. The LGU budget gained an increase of 14.2 percent over the 2016 level, mainly due to the 81.5-percent increase of the Local Government Support Fund (LGSF), which covers financial assistance to LGUs and municipalities, among others. Based on DBM data, the 2016 budget of P3 trillion gave a share of P18.4 billion to fund the LGSF, this was noted to be the sectors biggest allocation to date. According to Local Budget Circular 107 issued by the DBM in August last year, a budget of P2.83 billion was allotted for BuB projects to be implemented by the LGUs from the total earmarked funds for LGSF amounting to P3.13 billion. Under the General Appropriations Act (GAA) for 2012, the LGSF was only given a budget of P200 million.

Pids

IN a paper titled “Assessment of the Bottom-up Budgeting Process for FY 2015,” Rosario G. Manasan of the Philippine Institute for Development Studies (PIDS) explained that the BuB program is valued by LGU officials. This was so because of the additional funds it provides to the municipalities and cities for projects to further help the livelihood of the people. “As such, the BuB creates fiscal space on the part of the LGU allowing it to finance and implement more projects than can be accommodated from its own resources,” Manasan said. “But beyond, and perhaps, more important, the BuB process increases participation in local governance.”

Aside from the increase in funds to further develop projects at the grassroots level, the BuB program was also deemed to be successful in soliciting active participation from local government officials. It was also explained that a number of CSOs were already involved in local planning through its membership in Local Development Councils (LDCs). “However, CSOs are usually outnumbered in the LDC because they only account for 25 percent of the LDC and their role in the LDC is limited to approving, and, in many cases, ‘rubber stamping’ the LGUs Comprehensive Development Plan and the Annual Investment Program that have been prepared oftentimes by LGU officials with little involvement from CSOs,” the study said. While the study of the conduct of BuB in 12 municipalities is focused more on the participatory aspect of the process, it was noted to also assess how well the BUB has contributed to the achievement of its poverty reduction and alleviation objective.

Status

ACCORDING to data from the BuB web site openbub.gov.ph and from previous reports, projects under the BuB program that have been completed from the year 2013 to 2015 totaled 16,576. This was noted to be only 27.77 percent from the total number of BuB projects planned under the Aquino administration, which reached a total of 59,684 for three years, with funding reaching as much as P60 billion. For the year 2015 1,730 projects were completed under the BuB program, 9,455 projects in 2014 and 5,391 in 2013. For the threeyear period, the amount spent by the Philippine government for the completed BuB projects totaled P15.5 billion. While 7,928 out of the total planned BuB projects over the three-year period were noted to be abandoned by the government. This was noted to be a 13-percent drop in the total BuB projects, and had cost the government P8.5 billion. From the dropped 7,928 BuB projects, 289 projects were abandoned in 2015; 4,321 in 2014; and 3,318 projects were dropped for 2013. The reason for the dropped BuB projects was noted to be either because it was canceled, unfunded or replaced; nonfeasibility of the proposed project was a major factor of the abandoned projects. Meanwhile, according to a statement from the Department of the Interior and Local Government (DILG) web site in April this year, from 2013 to 2015 a total of P51.70 billion has been provided by the national government to LGUs for the implementation of a total of 41,156 funded projects.

Takes time

DILG Undersecretary for Local Government Austere A. Panadero said the “BuB as a reform program has its own birth pains since its conceptualization in 2011 and early stages in 2013 and 2014.” “Understandably and consequently, the completion rate takes time in improving through the years, as projects differ in nature ranging from infrastructure to livelihood,” Panadero added. He cited that 8,385 BuB

President Duterte watches as outgoing President Benigno S. Aquino III steps down the dais to review the troops during the inauguration ceremony on June 30 at Malacañang in Manila. AP/Bullit Marquez

aderLook

sMirror

www.businessmirror.com.ph | Thursday, October 6, 2016

s grassroots budgeting strategy

According to Budget Secretary Benjamin E. Diokno, the BuB program is not anymore necessary since the budget for local government units (LGUs) are already being provided through the internal-revenue allotment (IRA). Diokno said the LGUs should work around the IRA for its projects instead of being given more funds. AP

projects are still ongoing, 11,473 are on the pipeline and 4,722 have been proposed. The completion rate is 40 percent and the delivery rate is 61 percent. “The national government agencies [NGAs] had the sole discretion in identifying what kind of projects are needed on the ground,” Panadero said. “With BuB, NGAs are now attuned with LGUs.” He further pointed out that BuB projects for this year are covered in the 2016 GAA, with a P24.7-billion budget set aside to fund 14,324 projects. Allocated budget for BuB programs started with P8.9 billion in 2013. Under the DILG, the department managed projects in line with improving potable-water supply, local access roads, and disasterrisk reduction management-related projects, such as evacuation centers, flood controls, equipment and rescue vehicles. As of March 2016, the DILG completed 2,030 projects when the program started in 2013. This was noted to amount to a total of P9.201 billion. In 2015 308 BuB projects were completed and 648 projects were noted to be ongoing with bulk of the projects still in the pipeline. A total of 749 projects were on procurement, 497 with approved initial documents and 261 under preparation of initial documents. The DILG downloaded P5.659 billion funds to LGUs for the implementation of potable-water projects and infrastructure-related projects.

Slow pace

THE PIDS study cited that subprojects under the BuB program for the year 2013 developed at a slow pace. Only one approved BuB subproject in the 12 study sites had been completed, which was in March 2014. “The implementation of BuB subprojects for FY 2013 is also found to have been hampered by the poor national government agency feedback at various stages of the process,” the Pids study said. “At the same time, poor coordination in project implementation between the NGAs and LGUs, on the one hand, and CSOs, on the other, has not only hampered the effective implementation of the subprojects but has also inhibited rather the facilitated NGA-LGUCSO engagement.” The study further recommended that, in order to achieve a harmonious BuB process, the government must encourage LGUs to conduct CSO mapping. This was noted to help properly identify ac-

FORMER Budget Secretary Florencio B. Abad stated in previous reports that, under the 2017 perceived national budget targeted by the Aquino administration, the Department of Budget and Management set aside 42 percent of the P35-billion government funds for BuB projects over the P24.7 billion designated for this year.

credited and nonaccredited CSOs within an LGU. “This is in line with the promotion of federation of CSOs belonging to the same basic sector, meaning to minimize the number of member-CSOs within an LGU to manageable levels,” according to the Pids study. Steps also include the encouragement of CSO leaders to consult with members of their organization and, at the same time, enhancing the capacity of CSOs to improve the quality of their participation in the BuB process. The PIDS study further indicated that increased investment in social preparation by the government will help improve the quality of grassroots participation in the BuB process. Clarifying roles of the appointed local facilitator from the DILG and distinguishing the National Anti-Poverty Commission (NAPC)-affiliated BuB focal person was also seen to improve the BuB program implementation.

Decentralization

FOR European Chamber of Commerce of the Philippines (ECCP) Vice President Henry J. Schumacher, the BuB program should be retained and not scrapped altogether. This is especially true if the Duterte administration is veering toward a government that is “regionalized,” he said. “The Duterte administration wants decentralization and regionalization. Given that vision, bottom-up budgeting makes sense,” Schumacher told the BusinessMirror through electronic mail. “Maybe that’s the aim for the 2018 budget.” In earlier talks, it was pointed out that President Duterte is planning to shift the country’s form of government to a federal one, since he wants to bring growth and development to every part of the country and not just the metropolis. The planned decentralization of power in the country’s government will need constitutional revisions, since the 1987 Philippine Constitution dictates that the Philippines is a democratic and republican state. Revision of the Constitution could either be conducted through a constitutional convention, Constitutional assembly, or through a people’s initiative, with the result being called a Charter change. “Article II Section 1: The Philippines is a democratic and republican state. Sovereignty resides in the people and all government authority emanates from them,” the Constitution read.

Schumacher added that the ECCP has always been in favor of the BuB program since it stimulates participation in the grassroots level.

Abad’s view

FORMER Budget Secretary Florencio B. Abad stated in previous reports that, under the 2017 perceived national budget targeted by the Aquino administration, the DBM set aside 42 percent of the P35-billion government funds for BuB projects over the P24.7 billion designated for this year. The increased allocation stemmed from the DBM’s push to expand BuB projects to cover barangays, which is at an estimated 12,000, that will receive BuB funds in 2017. From the P35-billion BuB project budget set by the DBM under Abad, P19.7 billion was programmed to go to beneficiary-municipalities that have complied with good governance standards. According to earlier reports, the Aquino administration implemented the use of the BuB pro-

gram under its term, in a bid to strengthen its commitment to create a national budget that is transparent, accountable and responsive to the needs of the Filipino people. The implementation of BuB was meant to scale up the involvement and responsibility of LGUs in antipoverty and basic public-projects programs in their respective localities.

Stages

THE BuB projects under the DILG and other agencies are identified by representatives of LGUs and CSOs at the Local Poverty Reduction Action Team (LPRAT) level. These projects are then submitted to the Regional Poverty Reduction Action Team and then to the National Poverty Reduction Action Team. The list of projects is then endorsed to the DBM for inclusion in the National Expenditure Plan. Approved BuB projects are then included in the GAA. Concerned LGUs have to prepare initial documents, including feasibility studies, program of works (POWs)

and cost estimates. Once submitted, a memorandum of agreement between the DILG and the LGU has to be signed prior to the release of funds. The said stage was noted to take at least one to three months to complete. Its procurement process takes an average of two to three months. While the actual project implementation for water projects takes 18 months to complete for each project. For infrastructure projects, it takes six months to two years to be completed. Panadero said the DILG houses the BuB Project Management Offic, which is responsible for the overall coordination of the BuB program with the guidance of the BuB Executive Committee. He explained that 14 other government agencies distribute funds to the LGUs, with the said agencies reporting their project status to the Open BuB Portal, and the department consolidates the overall BuB status. All BuB participating agencies should be bounded by GAA and exercise due diligence in the implementation.

Bottom-up Budgeting Program RECOMMENDATIONS BY THE PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES THE following recommendations flow directly from the observations from the foregoing observations on the conduct of the BuB in 12 study sites. n Provide adequate time to prepare for the actual conduct of BuB. n Encourage LGUs to conduct CSO mapping. CSO mapping is an important step toward properly identifying the various (including accredited and nonaccredited) CSOs in the LGU. n Promote federation of CSOs belonging to the same basic sector. n Encourage CSO leaders to consult with the members of their organizations. n Enhance capacity of CSOs to improve the quality of their participation in the BuB process. n Adopt the Enhanced BuB process in more areas, specifically, the barangay-level planning using KC process and the participation of BDC vice chairmen in CSO assembly. n Ensure increased investment in social preparation to help improve quality of CSO and grassroots participation in the BuB process. n Clarify roles of the DILG-appointed local facilitator and NAPC-affiliated BuB focal person. n Issue invitation two weeks prior to the actual conduct of the CSO assembly. n Clarify in guidelines that CSO assembly should be open to LGU-accredited and non-LGU-accredited CSOs. n Provide the CSO representatives with logistical/ financial support to enable them to attend the CSO assembly and the LPRAT, as well. n CSO should come up with a list of the projects they want included in the LPRAT. n Establish and maintain barangay-level database at the LGU level and train LGU officials and CSO representatives how to use sub-LGU level data. n BuB guidelines should clarify that only the elected members of the LPRAT should be involved in the prioritization of BuB projects. n BuB guidelines should clarify that CSO representatives in the LPRAT should present the list of projects that CSO leaders drew up during the CSO assembly. n The LPRAP workshop should be facilitated by the local facilitator. n Establish better feedback mechanism between NGAs and LGUs. n Improve coordination between NGAs, LGUs and CSOs during subproject implementation. n Enhance CSO role in monitoring of status of subproject implementation. n Information on status of subproject implementation should be disseminated to broader CSO audience, not just to the members of the LPRAT. Source: “Assessment of the Bottom-up Budgeting Process for FY 2015,” by Rosario G. Manasan

Thursday, October 6, 2016 • Editor: Lyn Resurreccion

The World BusinessMirror

www.businessmirror.com.ph

Violent student protests threaten to close South African universities

Republican vice-presidential nominee Gov. Mike Pence shakes hands with Democratic vice-presidential nominee Sen. Tim Kaine during the vice-presidential debate at Longwood University in Farmville, Virginia, on October 4. AP/Julio Cortez

Mike Pence is calm and steady, but dodges in defending Trump

ASHINGTON—Republican Mike Pence was calm and steady in the face of Democrat Tim Kaine’s fiery and frequent challenges. But when it came to defending Donald Trump, Pence dodged, sidestepped or was silent about some of his running mate’s most provocative words.

Kaine aggressively pressured Pence to vouch for Trump throughout the 90-minute debate, often citing the brash businessman’s own words. Pence defended Trump’s tax history, but maneuvered around criticism of Trump’s demeaning comments about women, his public doubting of President Barack Obama’s citizenship and broader questions about temperament. “I can’t imagine how Governor Pence can defend the insult-driven, me-first style of Donald Trump,” said Kaine, the Virginia senator and Hillary Clinton’s No. 2. The usually easygoing Kaine went on the attack from the start and seemed determined to make the debate a referendum on whether Trump has the disposition for the Oval Office. He slammed Trump for having called women pigs and slobs, and condemned the GOP nominee’s praise of Russian President Vladimir Putin. Pence frequently avoided taking the bait—a shrewd move for a conservative darling who could have

eyes on the Oval Office himself if Trump loses in November. But for voters seeking assurances from Pence about Trump’s temperament, there was little to cling to. Five weeks from Election Day, the White House race appears to be tipping in Clinton’s favor. She was widely viewed as the winner of last week’s first presidential debate, rattling the real-estate mogul with jabs about his business record, responding to his attacks with calm rejoinders, and sending him into a multiday tailspin over comments he made about a beauty queen’s weight 20 years ago. New public opinion polls have shown her improving her standing in nearly all battleground states. Pence was markedly more prepared and more detailed in his answers than Trump was on the debate stage. He was also more consistent in painting the Democratic ticket as career politicians unwilling to shake up Washington. “Hillary Clinton and Tim Kaine want more of the same,” Pence said.

He repeatedly accused the Democrats of running an insult-filled campaign — an ironic attack line given that Trump has leveled repeated insults against Clinton and his former rivals in the Republican primaries. Republicans hope Pence’s performance will help steady Trump’s campaign. But that boost could be short-lived if Trump has another weak performance when he and Clinton meet on Sunday in their second of three debates. Trump is sure to be peppered with questions in the next debate about his tax records, as Pence was on Tuesday. Asked about reports that the businessman might not have paid any federal taxes for years, Pence said his running mate “used the tax code just the way it’s supposed to be used, and he did it brilliantly.” Records obtained by The New York Times showed Trump suffered more than $900 million in losses in 1995 that could have allowed him to avoid paying federal income taxes for as many as 18 years. Kaine, too, defended his running mate’s weaknesses, chiefly the public’s questions about her honesty and trustworthiness. He said that while Trump was “selfish,” Clinton had devoted her career to helping children and families. Social issues were a bigger part of the conversation than in the first presidential showdown, reflecting both candidates’ religious faith. Kaine, a Catholic who personally opposes abortion but has consistently voted in favor of abortion rights, said of the Republican nominee, “Why doesn’t Donald Trump trust women to make this choice for themselves?” He also pointed to Trump’s assertion that women

should face some kind of “punishment” for abortion, a comment Trump later walked back. Pence stressed his opposition to abortion and said he was “proud to be standing with Donald Trump” on the issue. On national security, Kaine revived Trump’s frequently flattering comments about Putin, the Russian president. “He loves dictators,” Kaine said. “He’s got like a personal Mount Rushmore: Vladimir Putin, Kim Jong Un, Moammar Gadhafi and Saddam Hussein.” Pence tried to flip the tables by accusing Kaine’s running mate of stoking Russia’s belligerence. “The weak and feckless foreign policy of Hillary Clinton and Barack Obama has awaked an aggression in Russia that first appeared in Russia a few years ago,” Pence said. “All the while, all we do is fold our arms and say we’re not having talks anymore.” On criminal justice, Kaine argued that Trump’s embrace of “stop-and-frisk” style policing was a mistake. Pence argued that Clinton has used police shootings to argue that there is “implicit bias” in police departments, and he said the Democrats should “stop seizing on these moments of tragedy.” Kaine quickly shot back, “I can’t believe you are defending the position that there’s no bias.” The vice-presidential debate was held at Virginia’s Longwood University, which Pence called Norwood University. While last week’s first presidential debate was watched by a record-setting television audience of 84 million people, Tuesday’s contest was expected to have smaller viewership given Pence’s and Kaine’s lower profiles. AP

Afghan officials: Clashes with Taliban continue in Kunduz

ABUL, Afghanistan—Afghan forces battled the Taliban in the northern cit y of Kunduz for the third straight day on Wednesday and American helicopters provided air support to troops on the ground in the wake of the multipronged attack on the city launched by insurgents this week. The fighting in Kunduz, which fell briefly to the Taliban a year ago, came as Afghanistan’s leaders and officials from over 70 nations gathered in Brussels, seeking to

drum up billions of dollars for the cash-strapped Kabul government as it battles the powerful Taliban insurgency and rampant corruption. Afghan Gen. Qasim Jungalbagh, the provincial police chief, said Taliban gunmen launched fresh attacks on Afghan forces in Kunduz from the south and east early on Wednesday. He said “clearance operations” have begun inside the city but that heavy clashes continue on the outskirts. “Once again insurgents

attacked our forces from two different directions and heavy battles are taking place to the south and east of the city,” Jungalbagh said. Since pushing into Kunduz on Monday and briefly hoisting their flag at a main intersection, the Taliban were pushed back but their fighters hunkered down in residential homes, slowing the counteroffensive by the Afghans. The US military was providing air support to Afghan forces fighting on Wednesday to secure a number of areas in the city, US

Army Brig. Gen. Charlie Cleveland said. The US military spokesman described the fighting as “sporadic,” saying that since Tuesday night, “US forces have conducted two engagements from the air to defend friendly forces.” He did not provide further details. Jungalbagh said 42 insurgents have been killed and more than 25 others wounded in the battles. Earlier, the Defense Ministr y said five Afghan security personnel were killed and 13 others wounded. AP

iolent clashes between South African police and students demanding free education are threatening to force some universities to close. The Johannesburg-based University of the Witwatersrand, known as Wits, has suspended classes until October 10 after police fired rubber bullets at demonstrators on Tuesday. Following the arrest of at least three students, school authorities agreed to withdraw police to the perimeter of its campuses, which have been largely shut down for more than a week. “We have made this concession because we do not want the scenes that played out on our university campuses today to be repeated,” Wits Spokesman Shirona Patel said in an e-mailed statement late Tuesday. The violence at Wits as well as the University of Cape Town on Tuesday followed clashes last week at universities around the country. Many of the nation’s institutions of higher learning say financial strains on their budgets may threaten their ability to remain open. That would spell disaster for Africa’s biggest economy, which is already contending with a skills shortage and a 27-percent unemployment rate.

Restoring calm

W its Vice C ha ncel lor Ad a m Habib said on Monday that if calm isn’t restored, he would have to close the institution. A mobile-phone poll last week at Wits showed that 77 percent of the

21,730 students who responded want classes to resume. At the same time, violence rocked the University of Cape Town on Tuesday, forcing authorities to block some entrances to the campus. Protesters pelted security personnel with rocks and several buildings were hit with petrol bombs. Police remain on campus and the management is hopeful of reopening on Wednesday. “If we ended up not being able to continue lectures for the next two or three weeks, then we would probably have to close the campus and say that we can’t continue this year,” Vice Chancellor Max Price said in a video posted on the university’s Twitter page. Authorities at Wits plan to hold a meeting on Friday with student leaders, school officials and Chancellor Dikgang Moseneke, a retired deputy chief justice of the Constitutional Court, to reach an agreement on resuming classes. Finance Minister Pravin Gordhan, speaking in an interview with Bloomberg TV in New York on Tuesday, said the government is “doing its best” to resolve the universities’ funding crunch. “What we have done last year and will do for the next year is free tertiary education for those students who come from poor backgrounds,” Gordhan later told Bloomberg Radio with Robert Moon. “We don’t see any point in middle-class and upper-class students being subsidized by the state if in fact their families can afford to pay these fees.” Bloomberg News

Upstart in UN secretary-general race faces Security Council vote

f t e r nine months of cocktailparty campaigning, interviews over the Internet and East-versus-West politicking, a defining vote in the race to replace Ban Ki-moon as UN secretarygeneral takes place on Wednesday in the United Nations Security Council chambers. Supporters of ex-Portuguese Prime M i n i s t e r A n t o n i o G u t e r re s — w h o has led through five rounds of straw polls—will be looking to limit defections to Bulgaria’s Kristalina Georgieva, a European Commission vice president nominated by her government last week after another candidate struggled. At stake is oversight of a 71-year-old institution with 105,000 peacekeepers deployed around the world and an annual budget of more than $13 billion. In a year in which the UN explicitly sought female candidates, Georgieva’s entry could garner crucial support from Russia, which has said publicly it would prefer a candidate from Eastern Europe. Previous UN chiefs have come from Norway, Sweden, Myanmar, Austria, Peru, Egypt, Ghana and South Korea. “We do believe that it is the turn of Eastern Europe to provide the next secretary-general,” said Vitaly Churkin, Russia’s ambassador to the UN and president of the Security Council. “We would very much like to see a woman.”

Color-coded ballots

While still unofficial, Wednesday’s vote will be the first to use color-coded ballots that will show publicly whether a candidate has the support of the five veto-wielding members of the Security Council. A negative vote from one of the five isn’t a death knell—Kofi Annan faced one in his successful 1996 race—but it’s a big hurdle to overcome. The 63-year-old Georgieva, who holds a PhD in economics and was once a vice president at the World Bank, said she has the experience to help solve seemingly intractable issues such as the Syrian refugee crisis and internal UN reforms. “I can get things done,” Georgieva said during a two-hour question-and-answer session at the General Assembly on October 3. “Whether it is on management or integrating different sectors, I have led successively reforms that have made

organizations more vibrant.” Although Guterres, who ran the UN’s refugee agency for a decade, has previously won the support of 80 percent of Security Council members, he faces challenges of geography and gender.

‘Symbolic value’

“I cannot change what I am,” Guterres said in a September 21 interview with Bloomberg News, before Georgieva entered the race. “If the decision is that the symbolic value of having a woman is what matters, then choose another person.” Guterres presented himself during the campaign as “an honest broker” who will come down hard on UN peacekeepers accused of rape. He said that fixing the organization requires the protection of whistle-blowers who expose sexual misconduct, corruption and other illegal activity. The 15 members of the Security Co u n c i l a re ex p e c te d to p a s s t h e i r endorsement this month to the General Assembly, which takes a symbolic vote on the decision. While the process to date has been unprecedented in terms of transparency, it’s now reached the endgame, Russia’s Churkin said.

‘Constructive fatigue’

“I do sense this feeling of constructive fatigue among members of the Security Council,” Churkin said, adding that he would move to schedule a binding vote soon. Georgieva entered the race after the Bulgarian government switched its support from her compatriot Irina Bokova, the director general of the UN’s Educational, Scientific and Cultural Organization. Bokova has fared poorly in five informal straw polls but has refused to withdraw. The late entry could still backfire. Last week, the ambassador for the Ukraine— which has a rotating spot on the Security Council through 2017—told reporters he wasn’t pleased with Georgieva’s entry. “She is too late,” said Ambassador Volodymyr Yelchenko, who has clashed with Russia at the UN over Moscow’s annexation of Crimea and support for rebels in Eastern Ukraine. “The way it is done is not fully correct.” Wednesday’s vote will determine if the rest of the Security Council agrees. Bloomberg News

The World BusinessMirror

www.businessmirror.com.ph

Trade war over trees looms as Canada, US remain at impasse O

Thursday, October 6, 2016

Oil resumes advance as weekly US industry data shows inventory drop

il resumed its advance as weekly industry data signaled US crude stockpiles declined, trimming a supply glut. Futures rose as much as 1.3 percent in New York after slipping 0.3 percent on Tuesday. Inventories dropped by 7.6 million barrels last week, the American Petroleum Institute (API) was said to report. Energy Information Administration data (EIA) on Wednesday is forecast to show stockpiles increased. A deal between Organization of Petroleum Exporting Countries (Opec) and nonmembers could trim output by 1.2 million barrels a day and boost prices by as much as $15 a barrel, according to Venezuela’s oil minister. Oil has advanced about 10 percent since the Opec agreed last week to cut production for the first time in eight years. Opec, which pumped at a record in September, will decide quotas for the group’s members at an official meeting in Vienna on November 30. Hurricane Matthew is heading for the US and may disrupt East Coast fuel shipments. “While the surplus is declining, high inventories will probably keep prices from climbing too far,” David Lennox, a resources analyst at Fat Prophets in Sydney, said

anada and the US are gearing up for another fight over trees. US Trade Representative Michael Froman will meet Canadian Trade Minister Chrystia Freeland and Canadian industry groups in Toronto on Wednesday in an attempt to end gridlock in a softwood lumber dispute that has been simmering for decades.

The US could seek tariffs that top 30 percent against Canadian producers, such as West Fraser Timber Co., as early as next week. The duties could prompt Canadian companies to curtail output or shut down mills. “It’s going to be ugly,” said Kevin Mason, managing director of ERA Forest Products Research, a Vancouverbased financial research company. “There’s going to be mill closures. It’s going to be messy.” The dispute over softwood lumber has been one of the thorniest between the world’s two largest trading partners, with the spat gathering steam in the early 1980s when US companies claimed Canada gave producers access to cheap timber on government land. The battle ended when both signed the Softwood Lumber Agreement in 1996, establishing tariffs and quotas on Canadian imports. A second accord expired in October 2015, allowing Canada to ship lumber tariff-free for a year to give both parties time for talks on a new deal.

Little headway

Both countries have until October 12 to iron out a new accord, after which US companies can file new trade cases against Canadian imports. Canada is the world’s top softwood lumber exporter and the US is its biggest export market, where it’s primarily used for home construction. The US Lumber Coalition backs the position that any new agreement should maintain Canadian exports at or below an agreed US market share. Producers in British Columbia have argued for an ability to choose between an export tax model and a hard cap volume restriction, similar to the structure of the 2006 agreement. Monthly softwood exports to the US are up 24 percent on average since the pact expired a year ago, data compiled by Bloomberg show. The dollar value of softwood lumber exports to the US rose 27 percent in the first seven months of this year to C$4.2 billion ($3.2 billion) compared with C$3.3 billion in 2015, according to Statistics Canada. The two sides last met in September and made little headway in resolving the dispute, according to Bloomberg

BNA. Any agreement must reflect the realities of softwood lumber, including the differences in communities across Canada, Alex Lawrence, a spokesman for Freeland said in an e-mail. “The fact is we are not looking for any deal; we are looking for a good deal for Canada,” Lawrence said. “Right now the US industry is not where we need them to be.”

Market volatility

It would be an “absolute miracle” if an agreement is reached before the October12 deadline, Mason said. While the lack of a deal and uncertainty regarding tariffs will depress share prices for the next couple of quarters, producers with exposure to sawmills in the US south will benefit from higher volumes and low log costs, according to a September 23 ER A note. Lumber production will be profitable for companies such as Weyerhaeuser Co. and Deltic Timber Corp. Higher margins in the US south will offset some of the negative impact for Canadian firms with US assets, including Interfor Corp., Canfor Corp. and West Fraser Timber, Mason said. Lumber shares in Canada have trailed the 12-percent gain for the S&P/TSX Composite Index this year. Canfor has fallen 31 percent in Toronto, while West Fraser has declined 25 percent. Interfor has climbed 1.8 percent to October 4. Interfor, which generated nearly 70 percent of its revenue in the US last year, is poised to see earnings rise more than 20 percent in the 2017 calendar year, while Canfor’s profit will likely drop almost 10 percent, according to ERA. Canfor, West Fraser and Interfor declined to comment.

Price uncertainty

Lumber prices will probably be volatile, and small, independent producers in eastern Canada and the British Columbia coast that rely on the US market will be the biggest losers, he said. Lumber prices have rallied 31 percent this year amid increasing demand from the US housing market. “I think there’s going to be some volatility,” Mason said. “Some of these firms are definitely at risk.” Bloomberg News

by phone. “The market will be looking forward to the November Opec meeting and waiting for any details on quotas.” West Texas Intermediate (WTI) for November delivery rose as much as 61 cents to $49.30 a barrel on the New York Mercantile Exchange and was at $49.17 at 12:20 p.m. in Hong Kong. The contract lost 12 cents to $48.69 Tuesday after climbing 9.3 percent the previous four sessions. Total volume traded was about 7 percent above the 100-day average. Prices advanced 7.9 percent last month.

US stockpiles

Brent for December settlement gained as much as 54 cents, or 1.1 percent, to $51.41 a barrel on the London-based ICE Futures Europe exchange. The global benchmark was at a $1.57 premium to WTI for December. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, increased by 435,000-barrels last week, the API said on Tuesday, according to people familiar with the data. Nationwide inventories probably climbed by 1.5 million barrels, according to the Bloomberg survey before the EIA report. Bloomberg News

A10 Thursday, October 6, 2016 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

A joke song that spiced our world

f you come across Steve Job’s photo online with the caption “I have a pen, I have an apple, ugh! Apple Pen” and you don’t know what that means, thank lady luck for sparing you from a viral earworm that could wheedle its way into your brain. The silly caption is a parody of the latest viral Internet joke song—pen pineapple apple pen (PPAP). Before you ask, the song has nothing to do with Apple, the company. PPAP is a song about sticking a pen into a fruit—that’s how you end up with an apple-pen and then a pineapple-pen. Created by Japanese comedian Kazuhiko Kosaka, the viral video runs about a minute long and features largely nonsensical lyrics about pricking fruits with pens combined with a series of rhythmic dance moves. As of this writing, more than 14 million people around the world have “unfortunately encountered” this latest Internet tune since it was posted on YouTube in August. PPAP showed its global legs when it became a monster hit after reaching 9Gag’s Facebook page, where it got 50 million views and more than a million shares. For most of us, there’s no escaping the viral tune that is, at best, silly and senseless. The annoying part is that, somewhere, the song begins to grow on you. Our advice: stay away from it or else you’ll be lumped among those who have never heard a good song to appreciate. Once you expose yourself to it, there’s no escaping PPAP, which has taken the Internet by storm, probably because millions of viewers are left delighted and confounded by the song’s veiled meaning. While half of PPAP’s audience is enjoying the silly little song, the other half is wondering what the new chant really means. Is there a hidden message behind the lyrics? While it’s doubtful even the most knowledgeable music critic will be able to draw any meaning from the song, people insist that PPAP must have some kind of sexual meaning to it. Unfortunately for you, PPAP will be inescapable. As an online observer puts it, the song has the power to corrupt one mind at a time, like some sort of punishment that becomes pleasurable when shared with someone else. If you don’t hear it here, you will hear it somewhere else: On auto-playing Facebook videos, embedded on Twitter, or on a TV or radio show. Not surprisingly, the infectiously addictive joke song has been dissected by online media companies, such as bbc. com, straitstimes.com, the star.com, mashable.com, abc.net.au, bgr.com, telegraph.co.uk and time.com, to name a few. Call PPAP nonsensical or crazy, it doesn’t matter to its biggest celebrity endorser, Justin Bieber, who declared via Twitter that the joke song is his favorite video. The controversy, however, is just starting to brew. Conspiracy theories regarding the true meaning of the song have emerged. For example, a YouTube user by the name of Vosk21 has posted a video—“Satanic Illuminati exposed”—that allegedly explains the dark meaning behind the joke song. We know that the apple symbolizes the Fruit of Knowledge from the Garden of Eden that caused the downfall of Adam and Eve. In this viral song, however, the invisible apple pricked by an invisible pen in this silly song is just utterly hilarious.

Bad financial journalism John Mangun

OUTSIDE THE BOX

here used to be two institutions that everyone could depend on: the press and the church. The reason was because we expected these people to have higher standards for truth and ethical behavior than the rest of us. In the movies, the crooked politician is confronted with “If you don’t turn yourself in to the police, I am going to the newspapers with all the evidence I have.” While both of these enterprises still claim to occupy the moral high ground, their actions and the public’s perception have changed during the last decades. Journalism is everything from the front page to that My Favorite Recipe column in the back of the Lifestyle section. It includes reporting of news and events; analysis of those events to give a better understanding; and opinion/commentary about

the events to bring a particular perspective. “Investigative journalism” is another category when a reporter digs deep into important subject matter that has been ignored usually for shameful reasons. Local journalist groups are completely justified for being outraged that anyone in the business for any reason should be subjected to or fearful of intimidation of any sort, including physical harm. An early reported murder of a US journalist because of his work was in 1837, when Elijah Parish Lovejoy, an editor of the Alton Observer, was killed

Are you ready for the ‘Big One’?

Since 2005

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

Publisher Editor in Chief Managing Editor Associate Editor News Editor City & Assignments Editor Senior Editors

T. Anthony C. Cabangon Jun B. Vallecera Max V. de Leon Jennifer A. Ng Dionisio L. Pelayo Vittorio V. Vitug Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos

Online Editor Social Media Editor

Ruben M. Cruz Jr. Angel R. Calso

Creative Director Chief Photographer

Eduardo A. Davad Nonilon G. Reyes

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

Judge Pedro T. Santiago (Ret.) Benjamin V. Ramos Adebelo D. Gasmin Marvin Nisperos Estigoy Aldwin Maralit Tolosa Dante S. Castro

BusinessMirror is published daily by the Philippine Business Daily Mirror

HOM

Publishing, Inc., with offices on the 3rd floor of Dominga Building III 2113 Chino Roces Avenue corner De La Rosa Street, Makati City, Philippines. Tel. Nos. (Editorial) 817-9467; 813-0725. Fax line: 813-7025. (Advertising Sales) 893-2019; 817-1351, 817-2807. (Circulation) 893-1662; 814-0134 to 36. E-mail: news@businessmirror.com.ph.

www.businessmirror.com.ph

Printed by brown madonna Press, Inc.–San Valley Drive KM-15, South Superhighway, Parañaque, Metro Manila MEMBER OF

by a mob because he was antislavery. However, journalists have lost the people’s trust. The lowest rating in history shows that only 32 percent of Americans have a great deal or fair amount of confidence for the press and media to report the news fully, accurately and fairly. In 1972 the trust rating was 72 percent. Only 22 percent of the British public say they tend to trust the press. A recent Associated Press article had the title “Uncertainty over Duterte alarms investors”. We could assume that this was both reporting of the facts and an unbiased, unopinionated analysis of the situation. It was not. The third sentence reads: “Some experts say unpredictability is slowing longer-term foreign investment in the Philippines. Photos and reports in the media of killings of suspected drug dealers and users have contributed to sagging confidence.” The article then cites comments supporting that viewpoint from the European Chamber of Commerce in the Philippines and the American Chamber of Commerce of the Philippines. But if “some experts say,” then logically some experts “do not say,”

Ariel F. Nepomuceno

DECISION TIME

‘Y

ou fall to the ground, unable to keep standing. You hear a booming sound. You hear screams from people inside their homes. You hear breaking glasses. Telephone and power poles sway violently. Then the power goes off. In front of you, the village road is heaving, as if you are riding waves. The strong ground shaking goes on for 50 seconds. It is the longest 50 seconds of your life.”

No, it is not a teaser from another doomsday Hollywood film meant to titillate moviegoers’ imagination to cash in big time come screening day. It is how scientists picture the possible scenario should the impending “Big One” hit the country. The Big One is the moniker given by experts to the big earthquake that could leave Metro Manila in tatters, and which sheer magnitude necessitated dedicated scientific studies and investigations.

Projected gloomy scenarios

In 2004 the Philippine Institute of Volcanology and Seismology (Philvolcs), Metropolitan Manila Development Authority and the Japan International Cooperation Agency have come up with the Metro Manila Earthquake Impact Reduction Study that has analyzed different earthquake scenarios in Metro Manila and has revealed grim and disturbing projections. According to the report, “The damage estimation of a potential rupture of the West Valley Fault is that 40 percent

of the total number of residential buildings within Metropolitan Manila will be heavily or partly damaged, and the earthquake will cause approximately 34,000 deaths and 114,000 injuries. Moreover, fire spreading as a secondary effect of the earthquake will cause an additional 18,000 deaths.” In 2010 the Greater Metro Manila Risk Analysis Project has been released. A three-year collaboration of Philippine scientific agencies and the Australian government aid program with Geoscience Australia, the study has allowed agencies to create maps that determine the depth of hazards present in an area; the extent and the frequency of hazards; and the worst-case scenario through modeling. The study has corroborated previous bleak projections on the Big One’s potential cost to life and property in Greater Metro Manila Area. It has determined that a 7.2-magnitude earthquake along the West Valley Fault could cause over 37,000 fatalities, 605,000 injuries and total economic losses of almost P2.5 trillion. This is because a

7.2-magnitude earthquake is equivalent to 63.5 Hiroshima atomic bombs, 796,214 average lightning flashes, or 1.90 billion sticks of dynamite, according to a separate study.

West Valley Fault

The West Valley Fault is a 100-kilometer fault and one of the segments of an active fault, the Valley Fault System. It runs through portions of Quezon City, Marikina, Makati, Pasig, Taguig, Muntinlupa, Bulacan, Rizal, Laguna and Cavite. Over the past 1,400 years, the West Valley Fault is said to have caused four major earthquakes. Upon investigation, scientists have determined that these earthquakes have happened at 400 to 500 years interval. The last recorded major earthquake is said to have occurred in 1658, or 358 years ago. Using the recurrence interval pattern, or the average time span between earthquake occurrences, scientists are wary that the time is ripe for another major movement in the fault. Thus, the Big One predictions. What do we do now? According to Philvolcs Director Renato Solidum, the operative word is “preparedness.”

Collective effort

The issue on preparedness has to be approached on two fronts—public and private preparedness. On the public front, the government has to persistently uphold its policy on national disaster risk reduction and management, as stipulated in Republic Act 10121, or the Philippine Disaster Risk Reduction and Management Act of 2010. Pertinent plans and programs that deal with disaster prevention and mitigation, disaster preparedness,

meaning there probably is an opposite viewpoint to comments from both chambers. The article does have a contradictory view from government officials but they are not unbiased experts. The American Press Institute says that “consumers value broad concepts of trust, like fairness, balance, accuracy and completeness.” Based on that assessment, the article should have been titled “We believe uncertainty over Duterte alarms investors—here’s why,” and there is nothing wrong with well thoughtout opinion. However, pushing a viewpoint under the disguise of informing the public is not only wrong and dishonest—it does not work as seen in the press and media trust ratings. Like a popular saying in the American South—supposedly inhabited by ignorant rednecks—“Don’t pee on my boots and tell me it’s raining.” 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.

disaster response, and disaster rehabilitation and recovery have to be consistently considered and implemented. Earthquake drills that simulate public and private sectors’ collaboration on rescue and retrieval operations, evacuations, communications and relief operations have to be done, not only regularly but also religiously, to make sure that all units work seamlessly and up to par. Moreover, the more fundamental issue of houses, buildings and infrastructures’ structural integrity has to be seriously considered. Local government units have to be conscientious in guaranteeing that establishments are built according to specific building codes. On the private front, as common tao, we have to take it upon ourselves to be responsible for our own safety and survival. We can only rightly prepare, if we are rightly informed. Truth be told, all the information we will ever need to get us prepared for any disaster is on the Internet. Scientific references and simplified summaries on the Big One are readily available and easily accessible online. There are detailed information on basic what to do and expect when an earthquake occurs, as well as technical data on how to identify precise fault-line paths through digitized maps and atlases. Clearly, the only thing that separates us between what we know, or not, is a click of our browser. I used to be the executive officer of the Office of Civil Defense of the National Defense Department. This concern was always on top of our agenda. It is said that life can be over in 50 seconds when the Big One happens. Now is a good time to prepare for it. Let’s hope, though, that it will not occur. But being prepared is always worth it. Hence, our government should also focus on this.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Time to say good-bye–or not

Finding the Savior in the miracle

Grateful and further rewarded

Msgr. Sabino A. Vengco Jr.

Alálaong Bagá

Teddy Locsin Jr.

Free fire IT seems like only yesterday That Joker passed away A year ago.

IS strict instructions against a Senate necrology or any public display of grief spared me from giving the eulogy that I could not have written and given.

It was a loss beyond words. I don’t think I even said good-bye on Twitter or Teditorial. At least I don’t think I did. I might have gotten angry at suggestions to defy his instructions, but I know they meant well. Anyway I don’t want to remember. Even he could not say good-bye though now it seems to be the reason he insisted that we dine and drink before he left for Stanford, never to return. We talked about this and that. Given the limited choices at the bar, he said, the smart option is picking the most expensive wine. We talked about the time we worked together but hardly ever about current events. Even in the previous administration, I read his sentiments in the papers but he never expressed them to me. He was the gatekeeper of the first president, she who restored democracy. He was ever zealous to keep her above reproach. For therein lay her only protection against enemies. He was always alert to frustrate attempts to meet so-called national emergencies when the solution suspiciously cost plenty of money. It was a contentious Cabinet. But the fight was between men and women of high intelligence and unimpeachable integrity no matter which side you were on. It would be the last time there would be serious discussions—quarrels even—over opposing principles held by strong personalities. After that, I don’t know. I never served in government again. But that’s not all the Joker I knew: the man who defended the famous and the not-so-famous detainees. In the second case, he was in Crame instantly—clothes thrown over pajamas— before permanent damage was done to those he made clients on the spot. He was never openly angry, never publicly outraged, and yet he defended with every ounce of his being every good cause coming his way. But he was always careful never to show his true feeling because, among those who have none, a show of emotion, an outburst of passionate conviction is a sign of weakness to be exploited by inflicting worse treatment on their victims. That was the Joker style, to handle your case with a smile or a smirk and a flippant remark before pouring heart and soul into the fight. He left the Palace just a year after he set the presidency on its feet. But every day after that, to the end of her term, it seemed as if he was still there, pulling all the strings. That is a kind of permanent tenure in the office he redefined in the best way. For the Executive Secretary stood in place of the President to take the bullets flying her way. People can and will make mistakes, but never could she. Now, when hearts are healing Is the time to remember A man in his late November Fighting with all the energy of Spring, Now is the time to say good-bye— Or maybe never.

ll have seen the loving kindness of God, let all sing joyfully to the Lord (Psalm 98:1, 2-3, 3-4). Though many experience the munificence of divine goodness, not all come around to express gratitude and discover the Savior behind the miracle (Luke 17:11-19).

The Lord makes known His saving power Psalm 98 begins with an invitation to sing praise to the Lord in celebration of the marvelous things He has done for Israel. Like a mighty warrior, His right hand and outstretched arm have brought victory. He has been challenged; His covenant relationship with His people violated. The Lord therefore manifested His saving power in a demonstration of righteousness, a vindication carried out rectifying an injustice. It was out of His faithfulness to the house of Israel and in remembrance of His steadfast love (hesed) that He has made known His saving work, as He has promised: “I hereby make a covenant. Before all

your people I will perform marvels, such as have not been performed in all the Earth or in any nation, and all the people among whom you live shall see the work of the Lord” (Exodus 14:10). Not just Israel but all the Earth is called to join in singing a new song to the Lord, because He has revealed His saving power in the sight of the nations. In coming to the aid of Israel and achieving victory, something of cosmic significance is shown: the Lord is the conqueror of the forces of chaos. God’s sweeping triumph is for all. “All the ends of the Earth have seen the salvation by our God.” That is why the scope of the praise given to God is universal: “Sing joyfully to the Lord, all you lands.”

Val A. Villanueva

Businesswise here was a time in the 1970s when the Organization of Petroleum Exporting Countries (Opec) held the world in the palm of its hands.

There was nothing that the other nations—especially those which do not produce oil—could do but to bear and hope for the best. Personally, I believe that there is little science in gauging the importance of oil to the world’s economy. By and large, it only accounts for less than 10 percent of the world’s GDP. But the crux of the problem lies in the dependence of the world’s capital stock on this precious commodity. When oil prices spike, the

capital becomes less productive. Also, transportation is significant to the role of the global economy, and it is enormously reliant on oil. Weaning the world off the “black gold” is just too difficult to accomplish. The stark reality is that the oil industry signifies an essential change for the world’s economy. It necessitates massive outlay to preserve oil supply, and higher prices to sustain investment. Energy accounts for more than 40 percent of growths in

Tzara’at or leprosy as a gradual erosion of the skin was thought by the Jews to culminate, unless healed, in the disintegration of the flesh and the ultimate escape of life. This leakage of life makes the afflicted person potentially dead and creates impurity. Such impurity must not spread to the sanctuary, hence the priests were commanded to screen the pure from the impure. If a skin lesion was tzara’at, the leprous person must stay away, and expiation prescribed. When the affliction is healed, the priests declare the person pure and purification rituals completed. The 10 lepers outside a town proper who begged for Jesus’ help in their misery somehow knew of His extraordinary power. He merely instructed them to show themselves to the priests for formal certification of what they were hoping for. As they followed His command, they were cleansed of their disease. One of the 10, a Samaritan, realizing that he was healed and overflowing with gratitude, headed back to Jesus. This manifestation of the universality of God’s blessings of wholeness and healing, which included the despised Samaritan, underlines as well the paradox of an outsider (twice over) connecting with Jesus much

Final decision appealable to CTA Atty. Ronald S. Cubero

Tax Law for Business

xamination of taxpayers is again expected to come into full swing after the suspension of the field audit and other field operations of the Bureau of Internal Revenue (BIR) for the examination of taxpayer’s books of accounts and other transactions was lifted. In every examination, the BIR and its examiners are required to follow the due process requirements in the selection of taxpayers for examination and in the conduct of audit and issuance of audit results. Failure on the part of the BIR to observe the procedures required of it may result in the nullity of the assessment. Just as the BIR is required to observe these procedures, the taxpayer should also observe certain prescribed requirements in contesting an assessment. Failure of the taxpayer to observe the rules in contesting the assessment may result in the assessment becoming final and executory. One of the remedies of last resort available to taxpayers in contesting an assessment is to appeal a final decision of the commissioner or his authorized representative to the Court of Tax Appeals (CTA). This final decision is usually referred to as Final Decision on Disputed Assessment (FDDA), which is issued after the filing of a protest by the taxpayer. The rule is quite clear in

this regard—if the taxpayer wishes to question an unfavorable decision to the CTA, the taxpayer has to appeal to the CTA within 30 days from the receipt of the FDDA. Following this rule, all that the taxpayer needs to do before elevating its case to the CTA is to wait for the FDDA. There are many instances, however, where no FDDA is issued. Instead, the documents received by the taxpayer after the filing of its protest is any or all of the following: Preliminary Collection Notice (PCN), Final Notice Before Seizure (FNBS), Warrant of Distraint and/or Levy (WDL), subpoena for collection case filed in court, demand letter, among others. In these instances, which is considered as the final decision that is appealable to the CTA? Apparently, previous decisions of the Courts are not consistent. In a recent decision (CTA Case 8700, August 8, 2016) by the CTA, the said Court cited previous Supreme Court cases involving simi-

In search of sustainable, diversified energy sources

Thursday, October 6, 2016 A11

the world’s nonfinancial corporate capex (capital expenditures)—compared to only 7 percent for telecommunications. In the Philippines experts have expressed alarm over the country’s dwindling energy sources. Much of the country’s power plants are mostly powered by diesel; and their prices, though manageable for now, could shoot up in the near future. Old and dilapidated power plants would have to make way for new ones, but it takes a lot of time to build one. Experts chimed that we’re running out of time. Department of Energy (DOE) Secretary Alfonso G. Cusi in a speech delivered during the European Union (EU)-Philippines Business Summit recently held at the Shangri-La Hotel in Makati talked about the country’s priorities on energy security with focus on increasing supply, improving reliability and resiliency of the country’s energy infrastructure

He is inviting the EU business to invest: “The Philippine energy sector is one area rife with investment opportunities, it being capital-intensive and primarily private sector-led. Our priorities in the sector remain centered on energy security, with stark focus on increasing supply, improving reliability and resiliency of our energy infrastructure.” Cusi reveals the country’s target to energize every household throughout the country’s three major islands by 2020: “We are also targeting a “One-grid Philippines,” with the Mindanao grid finally interlocking with the Visayas and Luzon grids, not later than 2022 “To ignite interest and pave the way for investments, Cusi says his department will identify the portfolio of installed and dependable power capacities, specifically for base-load, midmerit and peaking requirements: “We have held and lined up various energy investment fora

lar issue. In a 1984 case (GR L-59758, December 26, 1984), the SC considered the date when the final demand letter was issued and not the date of the WDL in determining whether the appeal was timely filed. In this case, the demand letter expressly stated that it is the BIR’s final decision. In a 1988 case (GR L-28896, February 17, 1988), the SC declared that, as a rule, the WDL is the proof of finality of the assessment and is tantamount to an outright denial of the request for reconsideration. Apparently, the pertinent doctrine laid down in this case abandoned the ruling in 1984. Subsequently, in a 1990 case (GR 66160, May 21, 1990), the SC treated the judicial action for collection instituted by the BIR as the FDDA. The SC emphasized that the BIR should always indicate to the taxpayer in clear and unequivocal language what constitutes a final action on disputed assessment. Seemingly, this case abandoned the 1988 ruling and adopted the doctrine laid down in 1984. The SC, likewise, in 2001 (through GR 135210, July 11, 2001), held that the FNBS is tantamount to a denial of request for reconsideration because the tenor of it indicates that the taxpayer was being given the last opportunity to pay. Clearly, the SC reiterated the earlier doctrine laid down in 1990 and 1984. Guided by these jurisprudence, the CTA, in its recent ruling, adopted the 2001 SC decision. The Court stated that a WDL standing alone and without declaring that it is the BIR’s final decision, cannot be considered as an FDDA. In this case, after the taxpayer

and regional energy-investment briefings to inform, update and stoke interest in the business and investment community.” He says the country’s nascent natural-gas industry urgently requires substantial investment in infrastructure development. The plan is to build a common liquefied natural gas receiving and distribution infrastructure as part of the future “clean energy city”. There is also the plan for the total privatization of the remaining power-generation assets within the next three years of the Power Sector Assets and Liabilities Management Corp. The DOE also commits to strengthen and forge further international ties, with other state and international organizations, conscious that comity and reciprocity are what really set the stage and the tone for a healthy inflow of investments to the country. Our country’s oil supply is

better than the others from God’s own chosen people. And the evangelist pointedly contrasts the difference between being miraculously cured and being saved in finding the Savior. A responsible faith in Jesus is the context for salvation. “Go, your faith has saved you,” Jesus told the Samaritan. Alálaong bagá, the Samaritan spurred by gratitude found his way back to Jesus; that is why his cure led to his being saved, to his being integrally healed body and soul. The miraculous cure was only the initial instance of a wonder; another and deeper wonder is the coming to faith in discovering the Savior, in experiencing salvation beyond a physical cure. In this world of ailments and creeping disintegration, not all are favored with relief and wondrous healing nor do all find their way to a communion with God in living faith and joyous gratitude. The ultimate grace is when as all cures fade away, as they must and eventually do, one finds the sought completeness only in God. Then we “break into song, singing praise” to our Lord forever and ever. Join me in meditating on the Word of God every Sunday, 5 to 6 a.m. on dwIZ 882, or by audio-streaming on www.dwiz882.com.

filed its protest, the taxpayer received a FNBS and subsequently a WDL. It is upon the receipt of the WDL that the taxpayer appealed to the CTA. In deciding the case, the CTA noted that, unlike the PCN, and the Second Notice where the BIR also threatened to initiate collection proceedings against the taxpayer, the title of the document as FNBS is, in itself, an indication that it is not a mere reiteration of the BIR’s demand for taxpayer to pay. It is BIR’s final decision to hold taxpayer liable to pay. This recent CTA decision can be used as a guide as to when an appeal should be made to the CTA, if instead of FDDA, other document is issued to a taxpayer, such as PCN, FNBS and WDL. What seems to be considered a final decision appealable to the CTA depends on the tenor of the notice or letter issued by the BIR. This is, however, still subjective and confusing especially to ordinary taxpayers who are not well versed in the developments in jurisprudence. Perhaps, as part of the series of tax-reform programs of the current administration, the rules on appeal to the CTA should be made clearer.

The author is a junior associate of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm of World Tax Services (WTS) Alliance. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at ronald.cubero@ bdblaw.com.ph or call 403-2001 local 350.

currently stable. However, oversupply is still a concern, although demand is not a factor at this time. Gasoline and diesel prices may increase due to Opec’s tentative agreement to limit oil production. There is a high probability that oil prices will be driven up as a consequence of Opec’s decision. But implementing the same is another thing. There are Opec member-countries that want to regain their market share after being penalized by the international community. It is therefore of utmost urgency for us to diversify our sources so that we will not be affected by the price movements from only one source. Demand-side management is also important. Energy-efficient appliances and vehicles should be used. Rooftop solar panels with netmetering technologies show a lot of promise. For comments and suggestions, e-mail me at mvala.v@gmail.com.

2nd Front Page BusinessMirror

A12

Thursday, October 6, 2016

www.businessmirror.com.ph

House approves 2017 natl budget bill on 2nd reading

By Jovee Marie N. dela Cruz

@joveemarie

fter more than a month of deliberations, the House of Representatives is expected to approve on Wednesday on second reading President Duterte’s first proposed P3.35-trillion national budget for 2017. National Unity Party Rep. Karlo Alexi Nograles of Davao City said the third and final reading approval of the 2017 General Appropriations Bill will be after the Congress’s Halloween break on November 7. Nograles said the proposed national budget will reach all Filipinos, “most especially those in the countryside, who have felt forgotten and neglected.” Nograles added there is no major change in the National Expenditure Program or the proposed 2017 national budget submitted by Malacañang to Congress. The Duterte administration’s P3.35-trillion “budget for real

₧3.35T

The total amount of national budget for 2017 proposed by the Duterte administration, which is 11.6 percent higher than the current year’s P3.002-trillion allocation change” for 2017 focuses on social and economic services. Of the P3.35 trillion, 40.14 percent, or P1.34 trillion, will be for empowering human resources t hrough educat ion, health care, social welfare and

other social services. The 27.6 percent of the budget, amounting to P923 billion, has been earmarked for economic services to fix broken infrastructure network, boost agriculture and rural sector, and generate more jobs and livelihood. For general public services and defense, the government will allocate 22 percent, or P729 billion, of its total budget. The 2017 budget is higher by 11.6 percent than the current year’s budget of P3.002 trillion. As a percentage of GDP, the 2017 budget represents 20.4 percent compared with this year’s 20.1 percent of GDP. The total revenue next year is expected to reach P2.48 trillion, or around 10 percent more than the government target to collect this year. It is equivalent to 15.6 percent of the GDP. The national government budget deficit next year is expected at 3 percent of GDP, or P478.1 billion. This funding shortfall is funded through borrowings. The total borrowings in 2017 will reach P631.3 billion. The GDP is expected to grow

by 6.5 percent to 7.5 percent in 2017 through sustained expansion of the services and industry sectors, and the expected rebound of the agriculture sector. By department and special purpose allocations, the Top 10 are Department of Education, with P567.7 billion; Department of Public Works and Highways, with P458.6 billion; Department of the Interior and Local Government, with P150 billion; Department of National Defense, with P134 billion; Department of Social Welfare and Development, with P129.9 billion; Department of Health, with P94 billion; State Universities and Colleges, with P58.8 billion; Department of Transportation, with P55.4 billion; Department of Agriculture, P45.2 billion; and Autonomous Region in Muslim Mindanao, with P41.7 billion. Budget Secretary Benjamin E. Diokno has said the allocation for each department, agency, and sector was based on their needs. He also said the “budget for real change” focuses on programs and projects that achieve the country’s 10-point socioeconomic-development agenda.

OUTSTANDING The BusinessMirror’s Leonila Garcia bags the Outstanding Published Feature on De La Salle University category of the 2016 Lasallian Scholarum Awards recently held in Makati City. “Journey of a Lasallian Scholar” was her winning piece. ALYSA SALEN