Businessmirror october 10, 2017 by BusinessMirror

Avoid Privacy and Data-Security Mistakes

ost companies lack the experience and resources needed to manage the plethora of security, privacy and compliance issues inherent in a growing technology-based business. Nevertheless, the legal and business implications of poorly managed privacy and data-security practices are too important to ignore. A single error can undermine the trust of investors and customers, attract unwanted regulatory attention or litigation. Here are 10 common privacy and data-security mistakes that you must avoid:

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»continued on A14

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Arduous TRAIN bicam looms as versions clash I T

No losses, but a lot of gain

By Jovee Marie N. dela Cruz

@joveemarie

he House of Representatives and the Senate are headed for a grueling bicameral conference for the first tranche of the Duterte administration’s tax-reform bill, as congressmen have started raising issues on the emerging Tax Reform for Acceleration and Inclusion (TRAIN) version of the upper chamber.

CUA: “I am convinced that our version is sound. I am not saying the Senate version is not good. However, they still need to convince us.”

This could hurt the chances of the tax bill being signed into law by December, as targeted by the Department of Finance (DOF). For one, Rep. Dakila Carlo E. Cua of the Lone District of Quirino, Continued on A2

Manny B. Villar

THE ENTREPRENEUR

n the past few years, the Philippine economy emerged from being a laggard, and is now considered a regional leader when it comes to the pace of economic growth.

Both the Asian Development Bank (ADB) and the World Bank expect the Philippine economy to sustain robust growth with the government’s focus on infrastructure spending and tax reform. Continued on A10

CHANEL PLANS TO OPEN BM Reports STORE IN PHL BY FIRST QUARTER OF 2018–D.O.T. If federalism is the solution, what is the main problem? By Ma. Stella F. Arnaldo

TEO: “The entry of more global premium brands would be an additional incentive to attract more Chinese tourists, particularly from the luxury segment, to the Philippines.”

@akosistellaBM Special to the BusinessMirror

ASHIONISTAS rejoice! French luxury brand Chanel is set to open its first outlet in the Philippines by the first quarter of 2018. In a n inter v iew w it h t he BusinessMirror, Frederick M. Alegre, spokesman for the Department of Tourism (DOT), said Tourism Secretary Wanda Corazon T. Teo met with Herve Ducros, Chanel managing director for travel retail for the Asia Pacific region, during the recent Duty Free & Travel Retail Global Summit held from October 1 to 6 in Cannes, France. “It will be a substantial investment,” said Alegre, who is also the assistant secretary for public af fairs, communications and special projects for the DOT, adding that Ducros gave DOT officials a tour of Chanel’s store across the Palais des Festivals et des Congrès in Cannes. Known for its double “C” logo, many of Chanel’s iconic products include the Chanel No. 5 perfume, the 2.55 quilted bag and the “little black dress”, among

others. The fashion house was founded by fashion designer Gabrielle “Coco” Chanel. Rumors of Chanel opening an outlet in the Philippines have long been circulating over the years, but nothing firm had ever panned out, until the DOT’s confirmation on Monday. Alegre said the Chanel outlet will “open a section” at the Duty Free Philippines Corp. (DFPC) Fiesta Mall in Parañaque City, though he couldn’t say how large the retail area would be. “When we asked when it would open, Ducros said ‘most likely’ it will be in the first quarter of 2018, as they are being careful with how the store will look. If you’ve been to their stores abroad, Chanel has a certain luxury aesthetic that the brand strictly adheres to.” “It’s not about the sa les,” See “Chanel,” A2

PESO exchange rates n US 51.1180

By Alladin S. Diega | Correspondent

Part Two

GNARLY issue in the federal form of government is tax: how to collect, manage and distribute revenue. Hezekiah Concepcion, professor at the Ateneo de Zamboanga University (AdZU), pointed to an imperial power as a model that should be avoided: the United States. “In the US they do not use the term ‘decentralization’, they use the term ‘federal,’” Concepcion said in a forum in Zamboanga mid-September. “They want to emphasize that the freedom and wealth they enjoy came from them [federal states]; [that] they did not derive their power from the national government.” Every federal state in the US have different ways of raising taxes and there are differences in the structures, according to Concepcion. The capital gains rate from one state might vary from another state, he explained. The federal states and the central government—Internal Revenue Service—would both collect taxes, “so this is one of the pitfalls of federalism,” Concepcion said. Different states would have different sources of revenues. The

People undergo a stress-debriefing inside a tent in Balo-I, Lanao del Norte, on October 3, after having escaped armed fighting between government forces and alleged terrorist groups in the nearby Marawi City. Proponents of federalism are saying the current unitary form of government has failed to resolve the armed conflict in these Mindanao towns because resources are centralized in Manila. NONIE REYES

federal states also determine the tax rate, which usually depends on how much the particular state needs and also upon the decision of Congress. “Should the Philippines decide to adopt this political system, the taxation powers of both the state and local governments must be clarified,” Concepcion said.

Greater power

IN t he same for um, Romu lo

Emmanuel Miral Jr., director general of the Congressional Policy and Budget Research Department, said the power of the Philippine president over fiscal resources and appointments within the bureaucracy are greater than the power of the US president. “ T his d ispropor tionately huge powers of the Office of the President, together with the huge power to make economic grants, make the office a highly

coveted prize among the elite,” Miral said. “In the absence of check and balances, this power can easily be abused.” He added that even with the devolution of political power through the Local Government Code, the national government still accounts for 92 percent of the total government revenues. This huge resource is within the control of the central government, therefore the president, Miral explained. “Aside from being linked to corruption, the concentration of political power in the president undermines the government’s capacity to provide public goods, such as in infrastructure, education and health services, that are important for inclusive economic growth.” The current practice, Miral added, is to gather all the revenues collected from different parts of the country, place these in a central coffer and distribute the revenues back to different localities. So much so that the attitude of different political actors is to get as much as possible from the pooled resources, he explained. Continued on A2

n japan 0.4540 n UK 66.9697 n HK 6.5483 n CHINA 7.6837 n singapore 37.4656 n australia 39.7136 n EU 59.9665 n SAUDI arabia 13.6322

Source: BSP (9 October 2017 )

BMReports BusinessMirror

A2 Tuesday, October 10, 2017

If federalism is the solution, what is the main problem? Continued from A1

“This resource can finance programs that are national in scope, such as defense and foreign relation,” Miral said. “But most of the projects funded by the national government have localized benefits.”

Exemptions

MIRAL added that “sectoral groups”, such as senior citizens, the Boy Scouts of the Philippines, cooperatives and the like, all have the tendency to minimize taxes—tax exemptions—coming from them. “They think it should be the national government who must finance projects for them, not realizing that it is the population that shoulders the burden through the tax collected from them,” Miral said. He noted that, among countries in Asia, the Philippines has the highest number of tax exemptions for specific sectors, about 143, while Vietnam has only 25 exemptions. Hence, the tax burden is only shared by few sectors, such as ordinary employees and private companies, according to Miral.

Chanel. . .

Continued from A1

said Ducros, as quoted by Alegre, “ but about a relationship [with our customers],” in reference to the care the brand is putting into its first store in the Philippines. Chanel cosmetics are currently sold at the DFPC outlets. The DOT official said the brand will carry most of its coveted products, such as shoes, bags and apparel at the DFP store. At present, Chanel only sells its cosmetics in the Philippines via Store Specialists Inc. (SSI), a division of Rustans. Quoting Ducros, Alegre said the Chanel brand “will definitely attract the big spending tourists, especially those from China”. Many luxury brands are looking to Asia Pacific, especially to the Chinese market, to boost their flagging sales. The fashion house’s parent unit based in the Netherlands,

World Bank. . . Continued from A14

ensure that returning overseas Filipino workers (OFWs) will have access to economic opportunities. Aldaba said this entails creating a temporary labor-migration policy. To date, he said the Philippines “seems to deny that [the Philippines is] actually

MANASAN said personal income tax may be more directly attributed to the location of residence of the taxpayer. But, she said, in the case of Austria and India, personal income tax has been exclusively under the federal or national government. Sales or consumption taxes, on the other hand, are shared by both federal and state governments, she added. However, Manasan raised the pos-

sibility that some local government units may not be ready for the shift to federalism, especially in terms of development and financial stability. To address the risks of greater disparities under a more decentralized form of government, Manasan said policy-makers must design a feasible intergovernmental transfer, which could be in the form of tax shares, unconditional block grants or specificpurpose conditional grants to assist poorer states or regions. It can also be through equalization arrangements, which are administered by the federal or national government to help poorer states. She cited the current practice in Germany, Canada and Switzerland as example. Still, Manasan noted several fiscal problems being experienced in the current unitary system should be resolved before the Philippines decides to shift to a federal form of government. For one, “there is inadequate equalization”. “There are LGUs that get too much fund transfers relative to what they need while others have very limited,” Manasan said. To be continued

Chanel International BV, reported a 35-percent drop in net income to $874 million in 2016. “The entry of more global premium brands would be an additional incentive to attract more Chinese tourists, particularly from the luxury segment, to the Philippines,” Teo said in a news statement. Clarins General Manager for Travel Retail for the Asia Pacific Region Alexandre Callens told Teo the brand will be expanding their presence in DFPC stores, with the recent approval and implementation of the visa-upon-arrival program for Chinese tourists in the country. The news statement also quoted Callens as saying the French skincare brand, a favorite among the Chinese, will also be deploying Mandarin speaking sales clerks who can explain the beauty products to customers. In the first seven months of 2017, visitor arrivals from China increased by 29 percent to

545,725, ranking it third among the top source markets for tourists of the Philippines, after South Korea and the United States. Chinese tourists are known to enjoy outdoor destinations and shopping for premium brands. The DOT said American snack maker Mondelez International will also increase its presence in DFP outlets. “Historically, it has been a best seller in the Philippine market,” Teo said. Popular Mondelez products sold at the DFP stores include Cadbury chocolates, Chips Ahoy cookies, Ritz crackers andFig Newtons, among others. DFPC is a government-owned and -controlled corporation under the DOT. Last year its profit fell by 17 percent to P164.2 million. In France Teo also met with SSI Group Inc. President Anton Huang; Jose Maria “Chim” Esteban, managing director of Regent Asia Group Ltd. and the first general manager of DFPC; and Robert Colombo of CMK, a liquor supplier.

Teo was joined at the duty free summit by DOT Undersecretary for Tourism Development Planning Benito C. Bengzon Jr., DFPC COO Vicente Pelagio Angala, DOT Assistant Secretary Arlene Mancao and Alegre. The summit is a flagship event of the Tax Free World Association (TFWA), wherein thousands of delegates gather in October for a week of business and networking. The much-attended duty free industry event combines a shop window for premium brands with an experts forum and the chance to network with key influencers. This year, 515 companies registered as exhibitors based across 472 stands, an increase of 4.7 percent from 492 in 2016. This year’s show was expected to outdo last year’s 6,500 delegates and 6,400 visitors with the launch of the new Digital Village, which showcased how new technologies could be utilized in duty-free and travel retail.

exporting labor”. The Ateneo economist also said there is a need to “negotiate opportunities” that will allow the portability of social security of OFWs in host countries. “[The government must also create policies that] capture more precisely through the financial system the savings of OFWs and channel these to the development of our industrial and manufacturing sectors,”Aldaba told the BusinessMirror.

Aldaba and Institute for Migration and Development and Issues Executive irector Jeremiah M. Opiniano said there is a need to craft a migration for development plan to maximize the benefits of migration and make return migration an economically viable alternative for Filipinos abroad. They made this recommendation in a 2008 paper, titled “The Philippine Diasporic Dividend: Maximizing the Development Potentials of

International Migration”. Aldaba and Opiniano said OFWs can invest in a number of areas, such as agriculture, education and health, infrastructure-development projects, social-development projects, financial markets, information and communications technology and tourism. “While we have enumerated eight possible directions for overseas Filipinos’ resources, there is much more work to be done—especially in crafting a migration for development plan for the Philippines, one that values the overseas Filipino and that directs their resources and energies to equitable, rights-based, and, hopefully, far-reaching development,” Opiniano said. The World Bank said overall, migration procedures across Asean remain “restrictive”. These “restrictive policies” are partly influenced by the perception that an influx of migrants would have negative impacts on receiving economies. These barriers include costly and lengthy recruitment processes, restrictive quotas on the number of foreign workers allowed in a country and rigid employment policies. The World Bank said these constrain workers’ employment options and impact their welfare. The World Bank said intraregional migration in Asean increased significantly between 1995 and 2015, turning Malaysia, Singapore and Thailand into regional migration hubs with 6.5 million migrants, or 96 percent of the total number of migrant workers in the Asean. Approximately $62 billion in remittances were sent to Asean countries in 2015. Remittances account for 10 percent of GDP in the Philippines, 7 percent in Vietnam, 5 percent in Myanmar and 3 percent in Cambodia. Cai U. Ordinario

“These exemptions were granted by [their] patrons or legislators who were willing to take their ‘cause’ through lobbying,” he said. “For these groups to continue receiving favorable acts, they would have to maintain a ‘working’ relationship with the powerful centralized national government.”

Constraints

FOR Rosario Manasan, senior research fellow of the Philippine Institute for Development Studies, “the allocation of fiscal resources may enable or constrain governments in the exercise of their constitutionally-assigned legislative and executive responsibilities.” Manasan noted that taxing powers and expenditures “are important instruments for regulating the economy.” She said that each level of government must have enough revenues to finance basic services for the public. In a federal system, taxing and spending powers are decentralized to local governments or federal states, which give them a free hand to decide how and where to use their budgets, according to her.

With this setup, Manasan said, the states will be able to spend their respective funds on projects and policies that are responsive to the needs of their respective localities without seeking approval from the national government. Citing some practices in the distribution of taxing powers in federal states, Manasan pointed out that customs and excise taxes are assigned most of the time to the federal or national government. The same goes with corporate taxes. However, in some federations, these may be under the concurrent jurisdiction of federal and state governments, she said.

Fiscal plans

www.businessmirror.com.ph

Arduous TRAIN bicam looms as versions clash Continued from A1

chairman of the House Committee on Ways and Means, said the lower chamber-approved P250,000 personal tax-exemption ceiling is nonnegotiable. His counterpart in the Senate, Sen. Juan Edgardo Angara, lowered to P150,000 the annual income that will be shielded from personal income tax (PIT). “We will convince them to return the P250,000 annual personal tax exemption to help the public [by increasing their take-home pay],” Cua said on the sidelines of a news conference. “We would like to maintain our version because of the opportunity, so much energy, and political capital that we have invested.” Under House Bill 5636 workers earning P250,000 a year will be exempted from paying the PIT. Senate Bill (SB) 1592, on the other hand, mandates that the first P150,000 annual taxable income will be exempted, plus a maximum of P100,000 additional exemption for those with up to four dependents. “The public already suffered enough; let’s make it right to propel the economy,” Cua stressed.

‘Must emanate from House’

Cua also said they will make sure the Constitution’s mandate that tax bills must originate from the lower chamber is observed. This is in the face of new tax items being added by the Senate in its developing TRAIN version. In the SB 1592, the Senate also proposed higher taxes on cosmetics, coal, foreign-currency deposit unit, capital trains of nontraded stock and dividends. “All new tax measures must emanate from the House and, therefore, if there is a proposed new measure from the Senate, we will have to look into the legality of it,” Cua said. “We will talk about it because we want to come out with a package that will withstand [High Court ruling].” The Senate Ways and Means Committee also endorsed adjustments in the excise-tax rates on petroleum products and sugarsweetened beverages (SSBs)—but with a different formula. Unlike the House version’s “3-2-1 formula”, spread out at P3 on the first year starting 2018, the senators opted to reverse the P6 tax hike schedule, as follows: P1.75 in the first year, P2 for the second year and P2.25 for the third year. The senators also retained the tax exemptions for kerosene. Also, under the House version, beverages containing purely locally produced sugar shall be levied an excise tax of P10, with other sweeteners to be levied P20. On the other hand, the Senate version will tax SSBs via a two-tiered scheme: drinks with caloric sweeteners at P5 per liter and those with noncaloric sweeteners at P3 per liter in the first two years.

‘Our version is sound’

“Senator Angara and I haven’t talked about the details of their report. We have done our research, studies and the impact on the economy, industry and the consumers. I would like to propose to the other chamber to bring their notes so that we can discuss based on those parameters,” he added. “Everything is subject to negotiation. But for me, I am convinced that our version is sound. I am not saying the Senate version is not good. However, they still need to convince us,” Cua added.

Veto

Cua is worried that President Duterte will just veto the tax-reform proposal if the Senate version will prevail. This is because the Senate version will only generate P59.9 billion in revenues, while the House bill will yield P119.4 billion, according to the DOF’s latest projection. “The possibility is there; the President may always veto. If he sees it’s the wrong policy for the country, then he can always do so,” he said.

Increased borrowing

House Committee on Appropriations Chairman Karlo Alexei B. Nograles of Davao City said a big chunk of the 2018 budget is expected to come from the projected revenue under the House version of the tax reform. With this, Nograles warned that the government will have to increase its borrowings if the House version is not adopted. “[If the Senate version will be passed] we’re forced to increase our debt. The ball is in the hands of the House Committee on Ways and Means during the bicameral conference. [The committee will] fight for the desired projections because that was the basis when the budget was drafted and sent to the House,” Nograles said.

Peza perks

Meanwhile, major industry associations and members of the foreign business community are appealing to Congress to retain the zero value-added tax (VAT) provisions for locators of the Philippine Economic Zone Authority (Peza) under discussion in the Senate version of the tax-reform bill. “A longtime challenge for some foreign investors is the requirement to pay VAT and then seek refunds. The government has a poor record of making these refunds. As revealed by Senator Angara in the Senate plenary discussion of the TRAIN bill, some P 30 billion in refunds are currently pending payment,” the group said in a statement. SB 1592 said export sales are subject to zero-percent VAT rate. To be covered are: ■ The sale and actual shipment of goods from the Philippines to a foreign country; ■ The sale and actual shipment of goods to special economic zones and freeport zones; ■ Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident, local export-oriented company to be used in manufacturing, processing or repacking in the Philippines of the said buyer’s goods; ■ Sale of raw materials or packaging materials to an exportoriented enterprise whose export sales exceed 70 percent of production; ■ Those considered export sales under the Omnibus Investments Code of 1987 and special laws; ■ Sales of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations provided that these goods, supplies, etc., are to be used in the operations of international shipping and air transport. With Catherine N. Pillas

news@businessmirror.com.ph

The Nation BusinessMirror

Sereno’s camp welcomes Senate’s word of ‘fair’ impeachment trial By Joel R. San Juan @jrsanjuan1573

HE camp of Chief Justice Maria Lourdes A. Sereno has welcomed the Senate’s assurance that she would get a fair trial in the event that the House of Representatives would find a probable cause to impeach her. At a news briefing, lawyer Aldwin Salumbides, a spokesman for Sereno’s defense, said the disclosure of Senate President Aquilino L. Pimentel III that the Senate is now reviewing its impeachmenttrial rules was actually a sign of “good leadership”. “It only shows the ability of our Senators to be proactive. I think there is nothing wrong with preparing for such possibilities,” Salumbides said. “It’s just a plan that is being set in motion as preparation. So, I think that’s good leadership”, he added. Pimentel earlier told the camp of Sereno that the Senate was reviewing its impeachment-trial rules to ensure it would be more than just a numbers game. He assured that the conclusion of the Senate, sitting as impeachment court, is supported by evidence. Meanwhile, lawyer Josa Deinla also contradicted the position of lawyer Lorenzo Gadon, the complainant in the impeachment case against Sereno, that President Duterte may serve as special private prosecutor during the impeachment trial. Deinla said that the President is not allowed by any law to act as such during the impeachment trial. “It will be an encroachment on the exclusive power of the House of Representatives to act as prosecutors in the impeachment trial,” Deinla said, a statement that Salumbides supported. “The President has no role in such political exercise,” Salumbides said. This developed as the anticorruption watchdog Filipino Alliance for Transparency and Empowerment, headed by Jo Perez, claimed that House Speaker Pantaleon D. Alvarez is rallying his fellow lawmakers to support Sereno’s impeachment because he has an ax to grind against the chief magistrate. “It seems that his investment in

It only shows the ability of our senators to be proactive. I think there is nothing wrong with preparing for such possibilities. It’s just a plan that is being set in motion as preparation. So, I think that’s good leadership.” —Salumbides

her impeachment is driven by something other than a desire to exact accountability: It seems that he is one of the people who stands to benefit from her impeachment,” Perez said. Perez recounted that their history dates back even before she was appointed in the Supreme Court when they were both embroiled in the cases involving Philippine International Air Terminals Co. Inc., (Piatco) from a plunder case that was filed in 2001 by the Miaaa-Naia Association of Service Contractors in connection with the project. Perez recalled that Alvarez, as secretary of the then-Department of Transportation and Communications, awarded the contract to Piatco. Piatco subcontracted the excavation of the Ninoy Aquino International Airport Terminal 3 lot to the Takanaka group, a Japanese firm, but their contract allowed Piatco to control 70 percent of its suppliers, which rendered Takanaka almost like a dummy in its own contract. Sereno’s camp also said there is no need for the Chief Justice to sign a waiver of her bank-secrecy rights. Gadon earlier said the Chief Justice should sign a waiver to allow investigative bodies to examine her bank assets. He added that the Chief Justice should do this, since she refuses to step down to avoid the inconvenience of an impeachment trial. Deinla noted that in the standard form under the Statement of Assets, Liabilities and Networth (SALN) is a waiver allowing the Office of the Ombudsman and other bodies to examine the Chief Justice’s assets. “There is no need for a waiver because there is a standard form in the SALN authorizing the Ombudsman and other investigative bodies to conduct an examination,” Deinla said during the news briefing. Deinla insisted that the impeachment complaint against Sereno has no basis in the Constitution to warrant a trial. “This is a waste of time, this is a waste of energy, this is a distraction,” she said. This developed a group of Filipino Muslims has expressed opposition to the impeachment of Sereno on the ground of Gadon’s “suspicious” background. Abdul Ansari Garsi, spokesman of Moro Defense for Democrac y A l liance, sa id the democratic institutions need to be protected from all kinds attacks, especially from people whose motives are suspicious. The group insisted that Gadon, a lawyer and former senatorial candidate, is not fit to tinker with our democratic processes. “He is a very dangerous person. Remember, he was quoted saying that he wants to wipe out the Moro race from the face of the earth,” Garsi said The group noted Gadon’s interview with a television network in March 2016, as a senatorial candidate, of the Kilusang Bagong Lipunan where he vowed to kill Muslims and burn their houses if they will not cooperate to address terrorism and the insurgency problem in the region. “We can only guess on Gadon’s motive. Nobody in his right mind would even just entertain an idea of genocide,” Garsi said.

Editor: Vittorio V. Vitug • Tuesday, October 10, 2017 A3

Duterte ratings drop, a ‘wake-up call’, opposition lawmaker says

By Butch Fernandez

@butchfBM

ENATORS cautioned President Duterte against complacency, amid his sharpest drop in public satisfaction and trust ratings, which took a double-digit dive according to a survey. In separate interviews, the senators agreed the survey results should serve as “a wake-up call” that Duterte can heed, or ignore at his own risk. Sen. Paolo Benigno A. Aquino IV suggested the survey should be viewed alongside other surveys on public perception of so-called extrajudicial killings (EJKs) linked to the administration's anti-illegal drug war. “So, putting it together, this should not be taken for granted by Malacañang and the President,” Aquino said, hoping it would be seen as “a wake-up call to revise our war on drugs, reform the strategy, as well as street killings”.

Aquino added: “If you look at the month of the survey period, it was the time there were several cases being investigated involving young victims who should not have been killed. So, if you compare that with the survey affirming widespread concern over the wave of killings and their nagging doubts over its legitimacy, I think it is a wake up call...that it is time to revise the strategy in waging the drug war.” Sen. Francis G. Escudero also advised the Duterte administration to take the survey as a wake-up call, voicing hope they will “be less nonchalant, arrogant and cavalier, especially on the part of some Cabinet

AFP and PNP strengthen ties in face of threat groups By Rene Acosta @reneacostaBM

HE police and the military agreed on Monday to further strengthen their collaborative efforts in the investigation and prosecution of leaders of threat groups, as the country grapples with the problem of terrorism. Philippine National Police (PNP) chief Director General Ronald M. dela Rosa and Armed Forces Chief of Staff Gen. Eduardo M. Año signed the resolution creating the Inter-Agency Committee on Legal Action (Iacla) during the 20th Armed Forces of the Philippines (AFP)-PNP National Joint Peace and Security Council (JPSC) Meeting at Camp Crame. The Iacla adds up to the number of agreements on coordination and collaboration between the police and military in the areas of peace and security, including the JPSCC. “As shown, the country is beset with a lot of threat groups, starting with the Abu Sayyaf Group, Maute Group, Ansar al Khalifa Philippines, BIFF [Bangsamoro Islamic Freedom Fighters], including the (NPA [New Peoples’ Army], and now the establishment of a [base] in the Philippines and the linkages of these groups to international terrorists. So this poses seriously to national security,” Año said during a news briefing. “That’s why this interagency committee on legal offensive will be in charge in intelligence gathering and cooperation, investigation, prosecution and monitoring cases against leaders against personalities of these terrorist groups,” he added. Año cited the case of Dr. Russel Salic, the alleged doctor of the Maute

Group and who allegedly helped financed a thwarted plan by the Islamic State to bomb selected targets in the United States, taking advantage of lax Philippine laws. “You know, the country enjoys so much democratic space that is being exploited by terror groups and also criminal groups. Unlike in other countries like Singapore, US, Malaysia, Australia, they have a very strict internal security act,” Año said. He added these countries have special provisions wherein they could arrest and detain a person up to three years “by mere suspicion based on information” until it is determined that the person is a member or part of a terrorist group. Año said while the country has the Human Security Act, they have been asking that it be amended because they believed that “it’s not enough to address the threats against terrorism”. According to the chief of staff, Salic, who is under the custody of the National Bureau of Investigation where he surrendered, is a part of the logistics-support network of the international terrorist group. Salic’s debriefing and investigation is continuing, although Año said he had disclosed information, it would be premature to disclose any details yet to the public. On the other hand, dela Rosa said terrorist groups have chosen to operate in the country because of its “more relaxed laws”, noting that even the “mere national ID system” is having a hard time getting the nod of legislators. “We have been clamoring for that, but it’s a very uphill battle,” he added.

and police officials.” Escudero added the sur vey should be taken as “a reminder to sitting officials that nothing is permanent, everything is fleeting and will come to an end soon enough, whether its survey numbers or their incumbency”. Sen. Sherwin T. Gatchalian, however, sought to soften the impact of the lowest survey rating of Duterte administration over a year in office. “Historical data shows that presidents usually experience a dip in trust and approval ratings after their first year in office,” Gatchalian said, adding, “It’s just a part of the cycle of politics, and it shouldn’t be a cause for concern in Malacañang.” He said that the survey results clearly showed that “the Filipino people continue to trust the President and approve of his performance, despite the ratings dip”. Still, Gatchalian advised the Executive branch not to “become complacent”. The senator suggested that the President and his administration “view these survey results as a constructive challenge to do more for the Filipino people. Corruption, poverty, and police impunity are three

So, putting it together, this [survey] should not be taken for granted by Malacañang and the President, [and should be seen as] a wakeup call to revise our war on drugs, reform the strategy, as well as street killings.” —Aquino important issues in particular that deserve more attention from the Executive branch,” he added.

Ex-VP Binay to DND: Bare plan amid US, North Korea ‘conflict’ By Claudeth Mocon-Ciriaco Correspondent

ORMER Vice President Jejomar C. Binay has asked the Department of National Defense (DND) to apprise the public of its contingency plan amid the brewing conflict between the United States and North Korea. Should the situation escalate into a full-blown conflict, Binay said concerned government agencies, including DND, must be prepared for all possible scenarios to mitigate the impact on the lives of the Filipino people. “While the Department of National Defense has assured the public that the Philippines will not be affected in the event of a missile attack by North Korea on Guam, I am nonetheless emphasizing the importance of preparing for all possible scenarios, including the worstcase scenarios, in case a fullblown conflict ensues between the US and North Korea,” Binay stated in his letter to DND Secretary Delfin N. Lorenzana received on October 6. “This is, of course, standard procedure in crisis situations, and I am interested in knowing the preparations being made by your department and other concerned government agencies. I presume that your department already has one in place,” he said. The former vice president said it is imperative for all concerned government agencies to be ready for each scenario, with clearly defined lines of authority, protocols and provisions for

temporary and safe shelter, food, water, medicines and other basic necessities. “The DND would also benefit from the inputs of experts from such fields as international security, nuclear safety and the related sciences,” Binay added. “I would appreciate, as would the general public, a response from your office on this most urgent matter,” he concluded. Noting the apparently “heightened animosity” between the US and North Korea, the former vice president said that the planned visit of US President Donald J. Trump to the Philippines and other countries in Southeast Asia in November is expected to “bring greater focus on the growing instability in the region”. The Associated Press recently released an official statement from the White House announcing that Trump will take a five-nation trip to the Asia Pacific Region in November, which will include a visit to the Philippines to attend the Asean Summit. The report noted that it will be Trump’s first visit to the region as president, and that it comes as North Korea moves closer to its goal of having a nuclear-tipped missile that could strike US territory. According to the report, the White House said Trump’s visit would “strengthen the international resolve to confront the North Korean threat and ensure the complete, verifiable and irreversible denuclearization of the Korean Peninsula”.

Economy

A4 Tuesday, October 10, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

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Power rates slightly rise in Oct as oil firms cut fuel pump price T

Industry group calls on trade dept to tighten steel, cement testing

By Lenie Lectura

@llectura

LECTRICITY prices are on the rise this month, while fuel pump prices will be reduced after two straight weeks of upward adjustments.

The Manila Electric Co. (Meralco) said on Monday it will implement a P0.0345-per-kilowatt-hour (kWh) power price increase, bringing the overall rate from last month’s P9.2491 per kWh to P9.2836 per kWh. The slight rate increase this month amounts to a P6.91 increase in the total bill of a typical residential household consuming 200 kWh. The October rate increase is mainly due to the P0.1777 per kWh increase in generation charge, which was offset by the reduction in other charges. Generation charge is the largest component of an electric bill. Overall generation charge increased this October by P0.1777 per kWh, from P4.5378 per kWh in September to P4.7155 per kWh this month, primarily due to the completion of the 2014 to 2016 Meralco-petitioned refund in the previous month, which lowered the September generation-charge

₧0.0345/kWh The increase in electricity price increase this month, bringing the overall rate from last month‘s P9.2491 per kWh to P9.2836 per kWh rate compared to the October generation charge. On September 7 Meralco filed a manifestation with the Energy Regulatory Commission (ERC), informing the commission of the necessary process of reconciliation, which resulted from the implementation of the refund through a fixed rate. The reconciliation was reflected last month as a reduction of P0.1136 per kWh in the overall generation charge. Reconciliation for other components, which in-

cludes transmission and systemloss charges, subsidies and corresponding taxes, reflected a net collection of P0.1257 per kWh. Cost of power from power-supply agreements and independent power producers (IPPs) registered slight increases due to higher fuel prices and lower average plant dispatch, respectively. The shares of PSAs and IPPs to Meralco’s total requirements stood at 43 percent and 45 percent, respectively. Charges from the Wholesale Electricity Spot Market (WESM), meanwhile, decreased by P0.4382 per kWh, as lower power demand during the September supply month mitigated the impact of four yellowalert declarations by the National Grid Corp. of the Philippines (NGCP). The share of WESM purchases to Meralco’s total requirements this month was 12 percent. This month’s generation charge also includes the Power Sector Assets and Liabilities Management Corporation’s (PSALM) net recovery of certain incremental costs incurred by the National Power Corp. It can be recalled that the ERC approved the collection of approximately P21.5 billion from customers of affected distribution utilities over 60 months. For customers in the Meralco service area, this is equivalent to a net add-on of around 1.2

centavos per kWh in the generation charge to be remitted to PSALM. Transmission charge of residential customers decreased by P0.0593 per kWh, while taxes and other charges also went down by P0.0839 per kWh this month. The lower charges were partly due to the effect of last month’s reconciliation of the ERC-approved refundable amount. Meralco’s distribution, supply and metering charges, meanwhile, have remained unchanged for 27 months, after the registered reductions in July 2015. Meralco reiterated that it does not earn from the passthrough charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP. Meanwhile, oil firms are implementing a price reduction in petroleum products on Tuesday. Pilipinas Shell and Seaoil said separately that gasoline prices will be reduced by P0.50 per liter. kerosene by P0.85 per liter and diesel by P0.40 per liter effective 6 a.m. of October 10. “This is to reflect movements in the international petroleum market,” Seaoil said. Other oil firms are expected to follow suit.

Peza investment pledges jumped 94% in first nine months of 2017

@c_pillas29

We’re being aggressive in our promotion and marketing of economic zones. We’re telling everyone that there should be no idle lands.”—Plaza

reported DTI draft orders allowing cement to be released even before the safety testing is completed. It also said that a draft provision that recall orders will be made for unsafe steel and cement is not reasonable because these will already be widely distributed and be part of houses and buildings,” he said. And if this information is true, Arranza added, the federation share with them their concern on the safety of the consuming public. The FPI chairman also expressed apprehension on relying completely on pre-shipment inspection using third-party private-sector groups, which will in effect shows that “we do not rely on our people”. The federation, Arranza said, trusts the DTI more than the third-party preshipment inspectors, particularly considering that there are qualified and competent personnel in the DTI that can conduct the necessary postshipment inspection. “Indeed, with all due respect and deference, it is the DTI’s responsibility to make sure that the products that are coming in are following the quality and safety standards strictly,” he added. “With the expected building boom, we should be making sure that all the materials coming in follow local regulations. Clearly, loosening regulations is tantamount to risking the public’s safety,” Arranza said. He also encouraged steel and cement importers to ask the trade department for the list of complaints filed by consumer and trade groups so that they can verify for itself which companies are the ones involved in the importation of the reported substandard products.

ERC gets copy of Salazar’s Malacañang dismissal order

By Catherine N. Pillas NVESTMENT pledges registered at the Philippine Economic Zone Authority (Peza) jumped by 94 percent in the first nine months of the year largely due to the economic zone’s development. A c c ord i n g t o t he i nv e s t ment promotion agency, pledges amounted to P196.46 billion in the January-to-September period this year, a 94.12 percent improvement over the P101.20 billion registered in the same period of last year. The P196.46-billion haul translates to 438 projects, the bulk of which can be credited to new pledges of economic zone development. “ We ’r e b e i n g a g g r e s s i v e in our promotion and marketing of economic zones. We’re telling everyone that there should be no idle lands,” Peza Director General Charito B. Plaza told reporters on Monday. Three quarters of the pledges, or P151.8 billion, were from economic zone developers, followed by manufacturing activity (P 45.09 billion) and information technology and business-process management (P11.39 billion). Job s accompa ny i ng t hese pledges rose from 606,567 jobs in the nine-month period in 2016, to 655,635 jobs this year. This is an increase of 8.08 percent.

HE Federation of Philippine Industries (FPI) has called on the Department of Trade and Industry (DTI) to test all imported steel and cement shipments entering the country. In a letter sent to the DTI, FPI Chairman Jesus L. Arranza expressed concern regarding numerous reports of substandard steel and cement entering the Philippine market. He called on the agency to tighten controls for specific construction materials that are widely used in infrastructure and home building, and crucial to public safety. Arranza, in a news statement released over the weekend, called on the trade department to strengthen rules on post-shipment inspection of imported steel and cement, amid complaints regarding uncertified and substandard steel bars, mislabeled and “expired” cement sold in retail outlets in Luzon and the Visayas. One documented instance, which was reported by its members, reportedly showed some 300,000 expired bags and yet got distributed to different parts of the Philippines. In another, a total of 56 hardware stores in Pangasinan and La Union were reportedly found to be selling not only substandard steel, but also other uncertified construction and electrical products. Arranza expressed concern that people’s lives will be put at risk if the DTI allows untested steel and cement to be sold in the market. “The majority of the companies of our two association members, the Cement Manufacturers Association of the Philippines and the Philippine Iron Steel Institute, are specifically concerned about two

HALAL PRODUCTS (From left) Department of Agriculture (DA) Undersecretary for Special Concerns lawyer Ranibai D. Dilangalen,

Undersecretary for Operations Ariel Cayanan; Jose Luis Fernandez, Food and Agriculture Organization of the United Nations Representative to the Philippines; and DA Undersecretary for Special Concerns Bernadette Romulo-Puyat cut the ribbon marking the observance of World Food Day with the theme “Change The Future of Migration, Invest in Food Security and Rural Development” held at the DA grounds, Elliptical Road, Diliman, Quezon City, on Monday. Right photo shows some of the halal food products on display at the exhibit. PNA/BEN BRIONES

Legislator: No fund allotted for LTO’s license-plate deal Despite A the LTO’s failure and refusal LAWMAKER on Monday asked the leadership of the House of Representatives to investigate the plan of the Land Transportation Office (LTO) to award the Procurement of Motor Vehicle License Plates contract, following the reported controversy in the bidding process of the almost P1-billion deal. In a privilege speech, Party-list Rep. Aniceto D. Bertiz III of ACTS OFW said the move to award the contract is questionable because the P998.8 billion needed for the license plates was not included in 2017’s P3.35-trillion General Appropriations Act (GAA). “The planned procurement allegedly infringes the constitutional powers of Congress in unlawfully using the General Fund because there is no appropriation for the said project,” he said. According to Bertiz, Section 25 of the implementing rules and regulations of Republic Act, or the Government Procurement Reform Act, were allegedly violated after the opening of the bids. “Despite the LTO’s failure and refusal to address the issues raised regarding the absence of funding and the public bidding was allegedly

rigged and manipulated, the LTO proceeded with the opening of bids on September 13, 2017,” Bertiz said. “Since 2013 [vehicle owners] have been complaining about the unprecedented delays on not just the vehicle plates, but also the driver’s license,” he added. Bertiz also said the mandatory 45 calendar day rule as the maximum period for the completion of the proceedings from the last posting of the invitation to bid up to the opening of the bids provided was allegedly not observed.

Lowest bid

BERTIZ, likewise, questioned the lowest bid of Trojan Computer Forms/J.H. Tonnjes East GmbH in the amount of P978,800, which, he said, is P19,200 lower from the P998,00 amount of the project. The lawmaker said the two other bidders include iPay Commerce Enterprise, EHA Hoffman International GmbH and Madras Security Printers Private Ltd. Joint Venture and the disqualified Utsch AG/Holy Family Printing Corp. Joint Venture. In 2013 lawyer Leo Romero obtained a temporary restraining order from the Supreme Court in connection

to address the issues raised regarding the absence of funding and the public bidding was allegedly rigged and manipulated, the LTO proceeded with the opening of bids on September 13, 2017.”—Bertiz

with the procurement of license plates, saying the bidding was void from the very start. Jovee Marie N. dela Cruz

HE Energy Regulatory Commission (ERC) on Monday said it has received from Malacañang a copy of the dismissal order of the agency’s chairman Jose Vicente B. Salazar. “We confirm receipt of the decision from the Office of the President [OP] on the administrative case against ERC Chairman Salazar,” ERC Spokesman Rexie Digal said. The order dated October 6 stated that Salazar was found guilty of simple and grave misconduct in connection to corruption charges. “This Office finds [Salazar] guilty of two counts of simple misconduct and one count of grave misconduct, and hereby imposes upon him the penalty of dismissal from the service with all accessory penalties,” the two-page order signed by Executive Secretary Salvador C. Medialdea said. The ERC, which is composed of four commissioners and one chairman, said it remains committed to fulfilling its mandate. “As we have always assured the public from the time these investigations started last year, the ERC remains committed to faithfully performing its mandate under the law, despite and inspite of these administrative challenges,” Digal said. Commissioner Alfredo Non has been appointed officer in charge (OIC). The other commissioners are Gloria Victoria Yap-Taruc, Josefina Patricia Magpale-Asirit and Geronimo Sta. Ana. All four have earlier asked the OP to make permanent Salazar’s preventive suspension and move for his removal from office. It can be recalled that Salazar was earlier placed under preventive suspension by Malacañang in May, which was extended in August for four more months. Salazar came under fire when he was linked to the death of ERC Director Francisco S. Villa Jr. who took his own life. Villa accused

Salazar of preselecting a bidder to undertake the audio-visual presentation project. The commissioners initiated an internal inquiry after Salazar went on a personal leave for a month. However, the inquiry did not sit well with Salazar, who confronted the commissioners and demanded to stop the said inquiry. This strained the relationship between the commissioners and Salazar. Salazar faces charges of serious dishonesty, gross neglect of duty, grave misconduct and gross insubordination, among various administrative offenses. His suspension, which took effect on May 2, stemmed from the complaint which accused him of deceiving Malacañang in filing his travel authority and designating somebody without proper authority as OIC while he was abroad. Based on ERC Office Order 72 dated April 7, Salazar designated lawyer, Ronaldo Gomez as OIC of the agency while he is on leave from April 9 to 25. Gomez is currently the agency’s executive director. The commissioners objected to this. Among others, they cited a January 24 order from Malacañang that commissioner Sta. Ana was designated as OIC of the ERC for the period April 9 to 25 and May 11 to 15. Salazar has since denied any wrongdoing. Malacañang, however, said “all elements of corruption, clear intent to violate the law and flagrant disregard of established rule have been sufficiently demonstrated.... Accordingly, this Office finds Salazar guilty of grave misconduct,” the decision read. Meanwhile, Salazar’s acts of issuing orders relative to the renewal of power contracts, as well as appointing ERC officers and personnel without the concurrence and approval of the ERC commissioners, constitute simple misconduct.

Agriculture/Commodities BusinessMirror

news@businessmirror.com.ph

Editor: Jennifer A. Ng • Tuesday, October 10, 2017

‘Hike agri investments to slow migration’ By Jasper Emmanuel Y. Arcalas

@jearcalas

HE Food and Agriculture Organization (FAO) of the United Nations urged the Philippine government to increase its investments in rural areas to discourage Filipino farmers from migrating to other countries.

FAO Representative in the Philippines José Luis Fernández noted that migration is one of the “pressing” issues confronting the Philippine farm sector today, particularly in areas affected by conflict and poverty. “For a very long time now, investing in rural development and food security has been at the core of the partnership between the FAO and the Department of Agriculture,” Fernandez said in his speech during the opening ceremonies of the World Food Week on October 9. He said these include increasing farm production and productivity, restoring livelihoods after disasters, building resilience equipping people with skills to pursue off-farm livelihoods and increasing their business skills,

and establishing linkages with markets. “But much remains to be done to create the right conditions for rural families to stay in their communities and prosper there,” Fernandez said. “In areas where conflict, political instability, lack of opportunity, extreme poverty and food insecurity prevail, people find themselves with no choice other than to move,” he added. The FAO official noted that most available jobs in agriculture are associated with low and unstable incomes, gender inequality in pay and opportunities, and limited social protection. “In recent years, the impacts of more intense and frequent natural disasters and climate change have exacerbated the situation.

FILE PHOTO

This is even more pronounced in parts of Mindanao, which have already been suffering from decades of conflict and is also projected to be one of the most at-risk regions to the impacts of climate change,” he said. Citing a report prepared by the International Organization for Migration, Fernandez noted that Maguindanao, which is one of the poorest provinces in the Philippines, has become one of the top 10 sources of overseas

Filipino workers today. “It is a primary source province of Muslim migrants, mainly women, seeking overseas employment, particularly in Malaysia and the Gulf countries,” he said. Despite the challenges faced by the Philippine government, the FAO noted that it is capable of rolling out the necessary measures to boost food production. In a study published last month, t he FAO noted t hat, despite the presence of conflict for two

decades, the Philippines managed to reduce its undernourished population to 13.9 million in 2016, from 14.1 million in 2014. “Countries that have recently been relatively free of conflict and/or experienced low-intensity, localized conflict made the greatest progress,” the FAO said in the report published in Rome recently. “Only 14 of the 46 countries affected by conflict achieved the MDG 1c target, of which, eight

have been relatively free of civil conflict in recent years [the Philippines, Angola, Cambodia, Georgia, Ethiopia, Indonesia, Nepal and Uzbekistan] or experienced very localized low-intensity conflict [the Philippines],” it added. The FAO study noted that the Arroyo administration’s Pantawid Pamilyang Pilipino Program could have helped in reducing the number of conflict-related incidents that posed threats to the country’s food security. “A recent study in the Philippines offers experimental evidence of conditional-cash transfers leading to a substantial decrease in conflict-related incidents in treatment villages relative to control villages,” the study read. T he FAO def i ned con f l ic t as “str ug gles bet ween inter dependent g roups t h at h ave either actual or perceived incompatibilities with respect to needs, values, goals, resources or intentions.” “This definition includes [but is broader than] armed conflict— that is organized collective violent confrontations between at least two groups, either state or non-state actors,” it said. According to the FAO study, the prevalence of the undernourishment in the Philippines’s total population in 2014 to 2016 declined to 13.8 percent, from 16.3 percent in 2004 to 2006.

Importation of day-old chicks nearly doubled in H1 NFA offers training on good

HE countr y’s purchases of impor ted d ay- old c h ic k s ( DOC s) ne a rly dou ble d to 4 . 3 53 m i l lion in the first half, from 2.19 million a year ago, according to the latest data from the Philippine Statistics Authority (PSA). An official of the Bureau of Animal Industry said the increase in DOC imports during the six-month period indicates that some poultry growers were on expansion mode prior to the government’s confirmation that bird flu struck Central Luzon. The Department of Agriculture (DA) a n nou nced on Aug u st 11 t h at av ian inf luenza hit layer farms in San Luis, Pampanga. PSA d ata showed t hat a lmost a l l DOC s i mpor ted were broi lers. T he Ph i l ippines impor ted 4.098 m i l l ion DOC broilers, more than double the

1.933 mi l lion recorded in the same period last year. Data from the PSA also indicated that parent stock hatching egg (PS-HE) accounted for 57.76 percent of the broiler DOC imports during the six-month per iod. PS -HE imports ex panded by 155.06 percent to 2.367 million, from 928,084 last year. Broiler PS DOC breeder imports rose by 91.48 percent to 1.398 million, from 730,200 purchased a year ago. Grandparent stock (GPS) DOCs, which accounted for 8.13 percent of broiler DOC imports, grew by 21.39 percent year-on-year. GPS imports in the first half reached 333,596, from last year’s 274,821. PSA data showed that total chicken production rose by 5.39 percent to 861,870 metric tons (MT), from 817,822 MT recorded in the first half of 2016.

Central Luzon emerged as the country’s top chicken producer during the period, accounting for 37.08 percent share of total output, followed by Calabarzon with a 17.74-percent share. The PSA also said the country’s egg production in the first half of the year expanded by 4.49 percent to 242,988 MT, from 232,543 MT. Data from the PSA showed chicke n eg g produc t ion du r i ng t he si xmonth period grossed P25.491 billion at current prices. The figure is 12.74 percent higher than the 2016 record of P22.16 billion. The country’s total chicken inventory, as of July 1, expanded by 3.73 percent to 181.05 million, from 174.54 million recorded a year ago. Native/improved chicken accounted for nearly 45 percent of the inventory. Jasper Emmanuel Y. Arcalas

warehousing practices

HE Food Development Center (FDC) of the National Food Authority (NFA) will conduct a training on good warehousing practices on December 4 at the FDC Compound in Taguig City. The NFA said in a statement that the training course was developed to create understanding of the requirements for ensuring the safety and wholesomeness of food during warehousing and distribution, and to learn how to inspect for compliance with requirements for warehousing and distribution. According to the NFA, the lectures will discuss the “hidden enemies” during warehousing and distribution of food, requirements for personnel hygiene practices, warehousing sanitation, requirements for receiving and storage of commodities and practical

exercise during inspection of warehouse facility. Alberto R. Cariso Jr., assistant director of the FDC, will serve as the principal resource speaker. Cariso specializes in Good Manufacturing Practices and Hazard Analysis Critical Control Point. The NFA pegged the course fee at P3,200 per participant, inclusive of training manual, lunch and snacks. The agency encouraged interested participants to make reservations early. Participants may stay at the FDC Dormitory on a first come, first served basis. Rooms are airconditioned and can accommodate two persons per room. Adjoining rooms share a toilet and bath with hot shower. Rates are P790 and P600 per room per day for double and single occupancy, respectively.

FAO urges more countries to join treaty against illegal fishing

LL countries should join the Port State Measures A g reement ( PSM A) to make sure the landmark treaty, aimed at cracking down on illegal fishing, succeeds in its aims of ridding the world of a multibillion-dollar scourge that damages human nutrition and environmental sustainability, Food and Agriculture Organization (FAO) Director General José Graziano da Silva said last Friday. “We need all countries around the world to be part of the PSMA for it to be highly effective,” he said at the OurOcean Conference, hosted this year by the European Union in Malta. So far there are 50 parties to the agreement “but we need many more”. FAO is doubling down on its commitment to implement the PSMA, and has committed hefty budgetary resources of its own to support poorer countries develop the technical, scientific and legal capacity required. That should be seen as “seed money” to be increased by voluntary contributions, Graziano da Silva said. The PSMA, which requires rigorous inspections of vessels by port rather than flag states, is the “main tool” to tackle illegal

fishing and “also helps to tackle other serious problems, such as the traffic of drugs and human beings,” he added.

Sustainably blue

GR AZIANO DA SILVA also announced FAO pledges of $41.9 million in funding initiatives for programs aimed at the fisheries sector, including improving fisheries management and livelihoods around the Mediterranean and the Black Sea. “Healthy oceans are a vital condition for the successful implementation of the 2030 Agenda for Sustainable Development” and are particularly crucial for some of the poorest communities in the world who rely on smallscale fishing activities, Graziano da Silva said. FAO ’s lon g - st a nd i n g con t r ibut ion to t he sust a i nable use of oceans, seas and marine resources—which provide animal protein for more than 3 billion people and are the base on which some 300 million people pursue their livelihoods— has intensified in recent years with its introduction. Alongside the PSMA, FAO has mustered international approval of the Vol-

untary Guidelines for Securing Sustainable Small-Scale Fisheries in the Context of Food Security and Poverty Eradication. Small-scale fisheries play a significant social, cultural and economic role around the Mediterranean and Black Sea regions, constituting more than 80 percent of the official fishing fleet and a quarter of all fish landed. However, that role is at risk as 85 percent of local fish stocks are now being fished at levels assessed as biologically unsustainable. Graziano da Silva announced that FAO’s Genera l Fisher ies Commission for the Mediterranean (GFCM) is committing €20 million to help reverse the trend of overexploitation of fish stocks in the Mediterranean and the Black Sea and strengthen the livelihoods of coastal communities along their coasts. FAO is also allocating extra funds to the Blue Hope initiative, which seeks to transform Southern Mediterranean coastal zone communities—currently heavily affected by cross-border migration trends—into engines of stability and growth, Graziano da Silva said. FAO also reaffirmed its com-

CARRYING fish home in Pantufo, Sao Tome and Principe. FAO PHOTO

mitment to spend more than $1 million to assist Small Island Developing States through its Blue Growth Initiative, which is geared to providing developing countries with a frame-

work allowing them to rebuild and grow their aquatic economies in a sustainable ecologica l manner whi le benef it ing coastal communities. A par ticu lar focus w i l l be

making sure that fish trade contributes toward hunger-eradication goals. Maximizing benefits— both economic and in terms of resilience—from aquaculture opportunities will also be a focus. FAO

Banking&Finance BusinessMirror

Tuesday, October 10, 2017 • Editor: Jun B. Vallecera

news@businessmirror.com.ph

EO authorizes OFW-oriented bank

By Elijah Felice E. Rosales @alyasjah

RESIDENT Duterte has green lighted the acquisition of the century-old Philippine Postal Savings Bank (PPSB) by the Land Bank of the Philippines (LandBank) and its subsequent conversion into an overseas Filipino worker bank (OFB). Under E xec ut ive Order (EO) 4 4, the President approved the transfer of shares of the PPSB to the LandBank. T he acqu isit ion is completed upon clearance from the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission, the Philippine Deposit Insurance Corp. and the Philippine Competition Commission. The Philippine Postal Corp, the mother agency of the PPSB, and the Bureau of Treasury were instructed “to transfer all their respective shares in PPSB to LandBank at zero value”. “Relative thereto, the PPSB shall cause the expeditious transfer of all assets, liabilities, records, systems and other appurtenant items to LandBank,” EO 44 said. On the other hand, the LandBank was directed to fund the necessary capital as the PPSB converts into an OFB. The President explained there is a

need to provide overseas Filipino workers (OFWs) with priority support for their growing financial needs as part of the administration’s effort to achieve a sound macroeconomic policy as stipulated under the Philippine Development Plan 2017-2022. Duterte said the government values the contributions of OFWs to the currency’s foreign-exchange income, currency stability, employment and overall economic growth. “[There] is a need to establish a policy bank dedicated to provide financial products and services tailored to the requirements of overseas Filipinos, and focused on delivering quality and efficient foreign-remittance services,” the President said. The LankBank is mandated to implement a reorganization plan for the OFB, and may cause the detail or secondment of LandBank employees. Upon creation,

the affairs and business of the OFB, along with its assets and properties, will be handled by a board of directors composed of nine members. The board of directors is comprised of the LandBank president as chairman; a LandBank-appointed OFB president as vice chairman; four LandBankappointed directors as members; one member representing the Department of L abor and Employ ment (DOLE); one member representing the Overseas Workers Welfare Administration (OWWA); and one member representing overseas Filipinos. The members representing the DOLE, OWWA and OFWs are to be handpicked by the Chief Executive. On the other hand, the PPSB is instructed to return the remaining fund for the Project Dagdag Regular Income Via Entrepreneurship (DRIVE). “Prior to the actual transfer of shares, the PPSB is hereby directed to return to the National Treasury the balance amounting to P249.23 million from the previously released P500 million to fund the Project DRIVE,” EO 44 said. The PPSB was created in 1906 as a government thrift bank “created with a special mission to encourage savings and provide access to financial credit to the ‘unbanked’ areas of the country”. It was shut down in 1976 due to competition with private banks, but was reopened in 1994 pursuant to the provisions of Republic Act 7354, or the charter of the Philippine Postal Corp. The total assets of the PPSB stood at P12.09 billion in 2016, according to the BSP.

China’s central bank could adjust policy again

HINA’S central bank could adjust monetary policy again in the coming months, in response to changes in the economy or the shifting agendas of top political leaders following the 19th Party Congress, according to Goldman Sachs Group Inc. For hints on how monetary policy will evolve, investors should piece together a range of abstract and irregular signals ranging from interbank rates to quarterly reports, MK Tang, senior China economist at Goldman in Hong Kong, wrote in a note. Unlike global peers, the People’s Bank of China (PBOC) doesn’t make scheduled policy-rate announcements, and speeches are relatively rare. The reaction function, or how PBOC officials led by Zhou Xiaochuan set policy in response to economic data, may “potentially be recalibrated after the upcoming party transition”, Tang said. That’s underscored by the central bank’s September 30 announcement of a targeted reserve requirement ratio cut for banks to ensure credit reaches small businesses, Tang added. President Xi Jinping will gather Communist Party officials for twice-a-decade leadership reshuffle starting next week that could replace about half of the top cadres. In the lead up, authorities have been reining in debt risk and consistently pledging “prudent and neutral” policy, while leaving the benchmark lending rate unchanged for almost two years. “Understanding policy intention is not always an easy task in China though, given an absence of regular rate-setting meet-

ings and limited explicit guidance from senior officials,” Tang wrote. “It does not mean that information is lacking, but it requires a mosaic approach that involves watching and analyzing a broad spectrum of cues.” Tang outlined five broad sets of signals for interpreting policy intent: n The PBOC’s “official taxonomy,” such as calling for a prudent and neutral policy stance, released quarterly and typically set at the year-end Central Economic Work Conference; n The tone of irregular official comments, with rare deviations from the party line indicating a strong signal; n Quantitative liquidity indicators, such open-market operations or changes to the medium-term lending facility targeted lending program; n Interbank rate spreads, which reflect financial leverage and influence the policy bias. The repo rate that covers only banks can reflect the policy stance more accurately than the general seven-day repo rate, and gravitates toward it over time; and n High-level actions like changes in the benchmark rate or required bank reserves. “These various sets of signals each offer a different perspective, and are best pieced together to provide a more comprehensive read of policy intent,” Tang said. “Most recently, the RRR news in isolation is a dovish hint,” but other indicators, such as liquidity operations and signs of financial leverage, “would be useful supplementary signals to watch”.

UCPB offers ATM Protect PHL businesses urged to tap to help secure clients’ money Russian market Improving household cash flow

OR only P15 a month, United Coconut Planters Bank (UCPB) cardholders can now protect their hardearned funds through ATM Protect, an insurance product of the bank ’s bancassurance partner, UCPB General Insurance Co. Inc. (UCPB GEN). ATM Protect insures UCPB cardholders against robbery during or after an over-the-counter or ATM withdrawal, robber y f rom stolen mobi le phonebanking device and skimming among other benefits. “We want to provide our cardholders with an affordable insurance product to help protect their hard-earned money against theft, skimming and other untoward incidents. ATM Protect serves as an additional layer of protection to our EMV-enabled ATM card. Hopefully, this will give our cardholders a greater sense of security whenever they use their UCPB ATM card,” UCPB Vice President and Marketing Group Head Charina D. Balanquit said. ATM Protect covers up to three incidents of robbery per policy year, with the

first incident covered up to P50,000 or whichever is lower, subject to the terms and conditions of the policy. Victims of skimming who are enrolled in ATM Protect are covered up to one skimming incident per policy year. ATM Protect also comes with other benefits, including the reimbursements for the cost of replacing government-issued IDs and obtaining a new ATM card, hospital confinement, accidental death, trauma and emergency medical assistance, identity-theft restoration and 24/7 worldwide protection.

IIPINO entrepreneurs are encouraged to penetrate the Russian market, as the two countries enhance economic cooperation. “There is interest for Philippine products, the Russian market is ready to accept us. So our Philippine business community has to be ready to meet this demand, as well,” Philippine Ambassador to Russia Carlos Sorreta said. The ambassador cited the active efforts of more Philippine entrepreneurs and leaders in the business community to “come to Moscow and experience it first-hand” in order to gain the needed knowledge to do business with their Russian counterparts. “I think that building awareness and competency will help our businessmen in the Philippines to make the right partnerships here in Russia,” he said Nine exhibitors from all over the Philippines last month showcased some of the country’s best and well-known food products at the 2017 World Food Moscow Exhibition. The Department of Agriculture and the Philippine Embassy in Moscow cooperated in facilitating the productive participation of the first batch of Philippine exporters to come to Russia after close to a decade of hiatus.

Balance of risk and return with Sun Life’s new fun

ILIPINOS who are ready to experience higher potential returns but are unsure how they can pursue the path to wealth opportunities will find an ideal match to their needs in the Opportunity Tracker Fund, the latest offering from Sun Life of Canada (Philippines) Inc. T he O p p or t u n it y Tr a c k e r Fu nd may be matched with any of Sun Life’s peso variable life-insurance products, such as Sun MaxiLink Prime and Sun MaxiLink One. The Opportunity Tracker Fund provides a middle ground between equity and fixed-income asset classes by utilizing an indexing strategy, which tracks the performance of the Philippine Stock Exchange Index (PSEi) a nd t he p or t fol io du r at ion of t he Bloomberg Phil Sovereign Bond Index AI (BPHILR). It also applies a systematic asset-allocation approach, ensuring that excessive risk is avoided. Moreover, it’s managed by Sun Life’s team of professional fund managers, who will ensure that the client is able to manage risk and maximize returns.

“The Opportunity Tracker Fund is designed to help one pursue opportunities in the market. Being a balanced fund, it allows you to experience equity returns along with the stability of a fixed-income asset while managing volatility and risk through its indexing strategy,” Sun Life Chief Marketing Officer

Mylene Lopa said. “ W hether you’re a young professional eager to grow your money or a mid-lifer looking for a higher-earning potential for your hard-earned money but would still want stability in your financial portfolio, this fund is perfect for you,” she added.

Case clippings

By Justice S J Ranada Jr. NOTARIES PUBLIC–incomplete jurat Where the jurat in a notarized document is incomplete, in that the competent proof of identify of the executor is blank, aside from the fact that the entries pertaining to said document are blank, and the title/ description of the document, name and addresses of parties, date and time of notarization, type of notarial act are not filled up, the lawyer’s notarial commission should be revoked, with 1 year suspension from practice of law. Chambon v. Ruiz 05 Sept 2017

AC 11478 Tijam, J

CCORDING to the 2015 Census of Population, there are around 100.9 million Filipinos and this number is 8.6 million more than the 92.3 million recorded in 2010. The Philippines has estimated 22.9 million households and this number is 2.8 million more than the 20.1 million recorded in 2010. The most number of households are in Calabarzon, the National Capital Region and Central Luzon. Based on census data, both the number of Filipinos and the number of households steadily grow over time. The average household has 4.4 persons each but this number is declining. Households are basic economic units. Households need to function well. They must effectively manage their financial situation to achieve sustainable living. A household is just like a business. A business operates on the basis of profitability and liquidity. A good financial standing is achieved by finding ways and means to improve household cash flow. For any household, the goal of improving cash flow is reached through optimizing expense and maximizing income. The best way to improve household cash flow is to optimize expense. This does not mean households adopt a miser’s mind. It only means expenses are planned in such way that household live within their means at all times. A household may earn millions a month but if its expenses are high, then that household is in jeopardy. Optimizing expense is about managing one’s lifestyle. It is important that expense is based on a budget. The budget is anchored on the income generated by the breadwinner or breadwinners. A detailed listing of monthly expenses must be developed. Attention to detail is important. Benjamin Franklin was quoted as saying that “a small leak will sink a great ship”. By listing down all current expenses, a household is able to identify essential and nonessential expenses. Through the list, a household is aided in determining what it must start, continue or stop doing in terms of expense. For essential expenses, it may consider reducing such. For nonessential expense, a portion may be diverted to saving and investing to prepare the household for the future. Improving household cash flow may also require maximizing income. For many households, the main source of income is the monthly salary of the breadwinner. Doing good at work and accepting management roles increase the potential for higher income in the future.

Genesis Kelly S. Lontoc

PERSONAL FINANCE To increase the spending budget, households may want to consider exploring additional streams of income. One option is to pursue part-time work. Part-time work can take the form of an office-based job or a field-based job. The breadwinner can make the appropriate choice based on what can be committed to on a sustainable basis. Another option is to invest savings in financial instruments. There are many alternatives that can help households earn more and defeat inflation. Common examples include stocks, mutual funds, unit investment trust funds and variable unit-linked insurance products. Before investing in any of these, households must conduct ample research about these products and their providers. The last thing a household wants is invest its hard-earned money in scams. Usually, investment decisions are based on a given financial goal, risk appetite and the time horizon of households. Another option is to invest in a business. Households can either develop a business from scratch or purchase an existing profitable operation. In both, due diligence must be done to make the proper choice. One should only involved in a business one is familiar with. It should be involved in a business that one passionately believes in. The chosen business must always have a point of differentiation in the market for it to thrive. By optimizing expenses and maximizing income, households are on the correct and fulfilling course toward achieving a financial future. As households become more successful in improving their cash flow, the potential for the economy to expand is, likewise, greater. Genesis Kelly Lontoc is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 66th RFP program this November 2017. To inquire, e-mail info@ rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

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Tuesday, October 10, 2017

White House makes hard-line demands for Dreamers deal

he W h i t e H o u s e l a s t Sunday delivered to Congress a long list of hardline immigration measures that President Donald J. Trump is demanding in exchange for any deal to protect the young undocumented immigrants known as Dreamers, imperiling a f ledgling bipartisan push to reach a legislative solution. Before agreeing to provide legal status for 800,000 young immigrants brought to the US illegally as children, Trump will insist on the construction of a wall across the southern border, the hiring of 10,000 immigration agents, tougher laws for those seeking asylum and denial of federal grants to “sanctuary cities,” officials said. T he W hite House is a lso demanding the use of the E-Verif y program by companies to keep il lega l immigrants from getting jobs, an end to people bringing their extended family into the US, and a hardening of the border against thousands of children f leeing v iolence in Centra l A mer ica. Such a move would shut down loopholes that encourage parents from Guatemala, El Salvador and Honduras to send their children illegally into the United States, where many of them melt into American communities and become undocumented immigrants. “Now is the time for Congress to adopt these immigration priorities,” Marc Short, the president’s legislative director, told reporters during a conference call last Sunday night. Otherwise, he added, illegal immigration “will likely increase.” While it is unclear whether Trump views the demands as absolute requirements or the beginning of a negotiation, the proposals, taken together, amount to a Christmas-in-October wish list for immigration hard-liners inside the White House. Immigration activists have long opposed many of the proposals as draconian or even racist. The demands were developed by a half-dozen agencies and departments, officials said. But among the officials behind the demands are Stephen Miller, the president’s top policy adviser, and Attorney General Jeff Sessions, both of whom have long advocated extremely aggressive efforts to prevent illegal entry into the country and crack down on undocumented immigrants already here. The demands represented a concerted effort to broaden the

expected congressional debate about the Dreamers to one about overhauling the entire American immigration system—on terms that hard-line conservatives have been pursuing for decades. In a letter to lawmakers, Trump said his demands would address “dangerous loopholes, outdated laws and easily exploited vulnerabilities” in the immigration system, asserting that they were “reforms that must be included” in any deal to address the Dreamers. Democratic leaders in Congress reacted with alarm, saying the demands threaten to undermine the president’s own statements in which he had pledged to work across the aisle to protect the Dreamers through legislation. “The administration can’t be serious about compromise or helping the Dreamers if they begin with a list that is anathema to the Dreamers, to the immigrant community and to the vast majority of Americans,” Sen. Chuck Schumer of New York and Rep. Nancy Pelosi of California, the Democratic leaders in the Senate and the House, said in a joint statement. Schumer and Pelosi, who declared after a White House dinner last month that they had reached a deal with Trump to protect Dreamers, denounced the president’s demands as failing to “represent any attempt at compromise.” They called it little more than a thinly veiled effort to scuttle negotiations between the president and the Democrats even before they begin in earnest. “If the president was serious about protecting the Dreamers, his staff has not made a goodfaith effort to do so,” they added. L a st mont h t he president abruptly ended an Obama-era policy called Deferred Action for Childhood Arrivals in which former President Barack Obama had used his executive authority to protect about 800,000 of the young immigrants from the threat of deportation and provide them work permits. Even as Trump kept his campaign promise to halt what he had described as “one of the most unconstitutional actions ever undertaken by a president,” he quickly added that he would work with Democrats in Congress to replace the executive policy with legislation, giving them six months to do so. But a White House official said last Sunday that Trump was not open to a deal that would eventually allow the Dreamers to become US citizens. New York Times News Service

A Golden Week scene in Macau

Bloomberg

China’s holidays were anything but golden as home sales plummet

hina’s Golden Week is leaving investors flat as figures from home sales to Macau casino revenue disappoint.

Chinese property developers slumped in Hong Kong after the Economic Information Daily said new home sales tumbled in Beijing and Shanghai compared with a year earlier. Galaxy Entertainment Group Ltd. sank as much as 3.4 percent, with the Power Macao Gaming Association saying revenue was at best slightly higher versus the previous year. Hna-Caissa Travel Group Co. led losses by tourism-related stocks on the mainland after retail sales and restaurant receipts grew at a slower pace. Investor optimism had been high that the holiday, dubbed “Super Golden Week ” because it lasted eight days instead of

116 The number of units of new homes sold in Beijing during the National Day holiday, the lowest since 2009

the usual seven, would lead to bumper earnings. The MSCI China Index, which closed at a decade-high last Friday, fell 0.4 percent at 1:24 p.m.

in Hong Kong. Investors, instead, shifted into stocks that had lagged behind this year, such as consumer staples. China Everg rande Group s lu mp e d 3. 5 p e rce nt , w h i le Guangzhou R&F Properties Co. slid as much as 5.5 percent. New home sales in Beijing dropped to 116 units during the National Day holiday, the lowest since 2009, the Economic Information Daily reported, citing data from Centaline Property. New home sales in Shanghai plunged 78 percent to 178 units, according to the report, which also cited declining sales in Nanjing.

Just looking

Gala x y was among the biggest losers on Hong Kong’s Hang Seng Index, while Sands China Ltd. dropped 2.2 percent. Although casinos were crowded, visitors didn’t necessarily gamble, said Stephen Lau, president of Power Macao Gaming Association, an organization that represents casino workers.

“Gaming revenue for the holiday was flat compared with last year, or only grew slightly,” Lau said. Hna-Caissa Travel and UTour Group Co. retreated more than 5 percent. Retail sales and restaurant receipts rose 10.3 percent during the holiday period, down from 10.7 percent last year and 11 percent in 2015, according to the Ministry of Commerce. “Slower growth in retail sales hurt sentiment and led to consumer-linked shares’ underperformance today,” said Ken Chen, Shanghai based analyst with KGI Securities Co. “Investors are also selling down names that rallied before the holiday to lock in profits.” A gauge of consumer staples rallied the most since March. The index had risen 21 percent this year through last Friday, less than half the pace of the MSCI China measure. Noodlemaker Tingyi (Cayman Islands) Holding Corp. jumped 11 percent on Monday, while hypermarket operator Sun Art Retail Group Ltd. headed for its best gain in two months. Bloomberg News

Mystery over weak Indonesia spending stumps policy-makers

lmost 4 mi l l ion new jobs, r ising wages and eight interest-rate cuts in Indonesia should have been enough to spur consumers into action in the world’s fourth most populous nation. Instead, an increasing number of people are keeping a tight gr ip on their purse str ings and put t i n g t he i r mone y i n t he ba n k , leav i ng pol ic y-m a kers and economists per plexed. “All the necessary factors for suppor t ing consu mpt ion a re there,” Indonesia’s Finance Minister Sri Mulyani Indrawati said last week in Jakarta. “This is something, which is puzzling.” It’s presenting a particular dilemma for the central bank, which has already taken aggressive easing action since last year without being able to lift private consumption growth much above 5 percent. The door for further rate cuts is closing, as Bank Indonesia guards against currency weakness in the face of tighter US monetary policy. Spend i ng by consu mers a nd

bu s i ne s s e s m a k e up h a l f of I ndonesi a’s GDP, a nd slug g i sh g ro w t h i s a c t i n g a s a h a nd b r a k e o n S o u t h e a s t A s i a ’s b i g ge s t e conomy. Goldman Sachs Group Inc. sees economic growth of 5.2 percent for this year being fueled by higher government spending, while private consumption growth and retail sales will remain relatively f lat. President Joko Widodo had pledged to boost growth to 7 percent when he came to office three years ago. “The problem is not purchasing power but the confidence to buy durable goods, like cars and motorcycles,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “They have money, but they don’t want to spend, especially the middle to high-income earners.” W hile employment rose by 3.9 million in the year through February and average monthly wages gained 24 percent in the period, retail sales remain well below the double-digit growth rates of past years.

Jakarta shopping arcade Bloomberg

Inf lation has also been relatively benign, easing to 3.7 percent in September.

Retail slump

Sales of household equipment, such as electronics and furniture, contracted for a fifth straight month in August, dropping 8 percent from a year ago, data from the central bank show. Despite consumer confidence near its highest level this year in September, retailers are feel-

ing the pain. PT Matahari Putra Prima Tbk, one of Indonesia’s biggest retail chains, posted a loss of 170 billion rupiah ($12.6 million) in the first half of the year. Sales at department store operator Ramayana Lestari Sentosa Tbk fell 0.5 percent this year through July, compared to a 6.9-percent growth during the same period last year. Dody Budi Waluyo, assistant governor at the central bank, said in an interview on October 6 that

the rate cuts would take time to take effect. “The signal is quite clear,” he said. “We want the economy running much faster.” Puzzled by the lack of spending, the finance minister ordered a team to examine consumption among various income groups, which found the problem lies among the middle class and highincome earners. One reason for this, which some economists have alluded to, is the government’s efforts to boost tax revenue. Indonesia collected more than $11 billion in penalty payments in a tax amnesty that ended this year, giving citizens a chance to declare assets previously undisclosed to tax authorities. Since then, the government has stepped up efforts to enforce tax rules, which may be affecting consumers’ spending patterns.

Spending patterns

Some of the actions by the tax office “ looks very aggressive,” even though the agency isn’t

trying to get its hands on everyone’s assets, said Anton Gunawan, chief economist at PT Bank Mandiri Tbk. “But that’s the impression that is really coming into the minds of people,” he said. “ That may have impacted on the way people are spending.” Higher electricity tariffs and a delay in the disbursement of bonuses for civil servants may have also hit consumers’ pockets, Bank Central Asia’s Sumual said. It could also be that Indonesi a n consu mers—who a re, for the most part, young and Internet-sav v y—are changing their consumption patterns as incomes r ise. People may be spending less on durable goods, like furniture, and more on lifestyle experiences, like travel. “The millennials, they don’t really like to change clothes every day,” Indrawati, the finance minister, said. “ They want to have the same T-shirt, like Steve Jobs, black. Maybe they only have two, I don’t know, but they are not buying.” Bloomberg News

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Tuesday, October 10, 2017

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Spanish unionists: Catalonia is Spain

ARCELONA, Spain—Spanish unionists in Catalonia finally found their voice last Sunday, resurrecting Spain’s flag as a symbol of patriotism after decades of it being associated with the Franco dictatorship.

In a defiant challenge to plans by Catalonia’s regional government to unilaterally declare independence, hundreds of thousands of people flooded the streets of Barcelona in a surprising outpouring of Spanish unity. T h e y c h a n t e d “ D o n ’t b e fooled, Catalonia is Spain” and called for regional president Carles Puigdemont to go to prison for holding an illegal referendum last week. Some of the demonstrators to ok to ro of to p s , i nc lud i n g f a m i l ies w it h c h i ld re n , a nd leaned over ledges from their perches overlooking the streets below to wave g iant Spanish f lags in a cit y accustomed to the preva lence of the Cata lan pro-independence estelada. Spain’s red-and-yellow flag has long been taboo here in Catalonia and throughout the country because it has been linked to groups supportive of Gen. Francisco Franco’s dictatorship. But on Sunday, a sea of Spanish flags, interspersed with some Catalan and European Union flags, dominated Barcelona’s boulevards. Barcelona police said 350,000 people participated, while march organizer Societat Civil Catalana said 930,000 people turned out. The march was peaceful and no major incidents were reported. Puigdemont has pledged to push ahead for independence and is set to address the regional parliament on Tuesday “to report on the current political situation.” In the days after the October 1 referendum, the momentum appeared to be on his side. Pro-independence protests were attracting large numbers and he benefited

930,000 The number of people who turned out in the rally last Sunday, according to march organizer Societat Civil Catalana

politically from a violent crackdown by Spanish police during the referendum voting. But now the tide seems to be turning. Catalonia’s top 2 banks announced they were relocating their headquarters to other parts of Spain because of financial uncertainty if there is an independence declaration. Other companies are reportedly considering leaving Catalonia to avoid being cast out of the EU and its common market in the case of secession. And Sunday’s mass demonstration by pro-unity Catalans, under the slogan of “Let’s recover our common sense!” will put further pressure on Puigdemont. The march was the largest prounionist showing since the rise of separatist sentiment in the prosperous northeastern region that has pushed Spain to the brink of a national crisis. The rally comes a week after the Catalan government went ahead and held a referendum on secession that Spain’s top court had suspended and the Spanish government said was illegal. Catalan authorities say the “Yes” side won the referendum w ith 90 percent of the vote,

People on a rooftop wave Spanish flags during a march in downtown Barcelona, Spain, to protest the Catalan government’s push for secession from the rest of Spain, last Sunday. The rally comes a week after separatist leaders of the Catalan government held a referendum on secession that Spain’s top court had suspended and the Spanish government said was illegal. AP/Manu Fernandez

though only 43 percent of the region’s 5.3 million eligible voters turned out in polling that was marred by police raids of polling stations on orders to confiscate ballot boxes. Spanish Prime Minister Mariano Rajoy vows that his government will not allow Catalonia, which represents a fifth of Spain’s economy, to break away from the rest of the country. In an interview with the Spanish newspaper El Pais published last Sunday, Rajoy said he will consider employing any measure “allowed by the law” to stop the region’s separatists. Rajoy said that includes the application of Article 155 of the Spa nish Const it ut ion, whic h would allow the central government to take control of the governance of a region “ if the

regional government does not comply with the obligations of the Constitution.” “The ideal situation would be that I don’t have to find drastic solutions, but for that to happen there will have to be some rectifications [by Catalan leaders],” Rajoy said. Rallies were held last Saturday in Madrid, Barcelona and other cities to demand that Rajoy and Puigdemont negotiate to find a solution to Spain’s worst political crisis in nearly four decades. “I hope that nothing will happen. Because [Catalonia] is going to lose more than [Spain] because businesses are fleeing from here already,” said protester Juliana Prats, a Barcelona resident. “I hope it will remain like it has been up until now, 40 years of peace.” The rally drew Spaniards from

outside the northeastern region to the Catalan capital. One group held a large banner boasting “Marbella,” a town on Spain’s southern coast. An AP reporter spoke with another man who had come from the northern Basque Country region. Nobel Literature Prize laureate Mario Vargas Llosa and former president of the European Parliament Josep Borrell addressed the rally. “Besides Catalans, there are thousands of men and women from all corners of Spain who have come to tell their Catalan companions that they are not alone,” said Llosa, who took on Spa nish c it i zenship in add ition to that of his native Peru in 1993. “We want Barcelona to once again be the capital of Spanish culture.”

Borrell added that: “Catalonia is not a state like Kosovo where rights were systematically violated.” The most recent polls taken before the referendum showed that Catalonia’s 7.5 million residents were roughly split over secession, while a majority would support an official referendum on independence if it were condoned by Spanish authorities Rajoy’s government has repeatedly refused to grant Catalonia permission to hold a referendum on grounds that it is unconstitutional since it would only poll a portion of Spain’s 46 million residents. Catalonia’s separatists camp has grown in recent years, strengthened by Spain’s recent economic crisis and by Madrid’s rejection of attempts to increase self-rule in the region. AP

May seeks progress in Brexit talks Merkel gives ground on German migration limit after election as Tory’s plot dims her survival G

rime Minister Theresa May will try to make progress in Brexit talks, telling European negotiators the next move is theirs, even as Tory plots dim the chances she’ll survive long enough to cut the final deal. May appeared last Sunday to have survived a concerted attempt to remove her, and fought back with a veiled threat to demote her rebellious foreign secretary, Boris Johnson. As negotiators head back to Brussels for more divorce talks, May will update Parliament on the concessions she offered last month in her Florence speech. “The ball is in their court,” May said in her statement, around 3.30 p.m. London time, according to her office. “So while, of course, progress will not always be smooth, by approaching these negotiations in a constructive way—in a spirit of friendship and cooperation and with our sights firmly set on the future—I believe we can prove the doomsayers wrong.” In an effort to get back to work after a week that came close to ending her premiership, May will also meet business leaders on Monday. Even as government infighting risks disconcerting EU negotiators, there are signs May might be able to deliver some progress: EU diplomats say leaders may be forced to give ground to the UK before the end of the year to prevent splits opening up between the other 27 governments. The pound fell last week as investors worried that the campaign to oust May would succeed, ushering in months of uncertainty and the possibility of another general election, which the opposition Labour Party could win. Supporters of a hard Brexit, meanwhile, turned their fire on Chancellor of the Exchequer Philip Hammond, with Tory lawmaker

Bernard Jenkin writing in the Guardian that the Treasury was “legitimizing EU threats of economic disruption.” The Times cited unidentified pro-Brexit Tories saying Hammond had to go, after lawmaker Nadine Dorries told ITV that he should be sacked for obstructing Brexit. Hammond has advocated a long transition period after the split to allow companies to adapt, and is seen by business as their key advocate in government.

EU splits?

With political intrigue overshadowing the fact Britain has just 18 months to get a Brexit deal, the fifth round of negotiations starts in Brussels on Monday. The EU has all but ruled out moving on to trade talks at a summit next week, as not enough progress has been made on issues such as how much the UK owes the bloc when it leaves. Some governments are also blocking proposals to allow discussion of the two-year transition deal that May asked for in Florence, according to diplomats speaking on condition of anonymity. While the 27 governments have been united so far, that consensus may not hold if trade talks are postponed beyond December, according to the diplomats. Countries, including the Netherlands and Denmark, are keen to open trade talks as soon as possible. “In any political negotiations, there is not enough time, not enough money, not enough this, not enough that,” Danish Finance Minister Kristian Jensen told the Guardian. “This is part of the game. In my view it is rather important we get into a more close and more speedy process on concluding some of the issues.” Bloomberg News

erman Chancellor Angela Merkel reached a compromise with her Bavarian allies on limiting migration, clearing an obstacle for talks on forming her next government and responding to an electoral surge by the nationalist Alternative for Germany (AfG) party. Two weeks after an election that sent support for her Christian Democratic Union (CDU)-led bloc to the lowest level since 1949, setting the political goal of capping migration marks a concession by Merkel, who has resisted pressure by her CSU sister party for a limit. She now should be able to turn to talks with the Free Democratic Party and Greens on building a coalition contract for her fourth term. Leaders of the CDU and Christian Social Union (CSU), known together as the Union, agree that net migration to Germany, including asylum-seekers, shouldn’t exceed 200,000 annually, according to a document seen by Bloomberg outlining the deal. An escape clause allows the ceiling to be raised in case of unex pected “ international or national developments.” “This is a good day for the Union,” Transportation Minister Alexander Dobrindt of the CSU told reporters late last Sunday after all-day talks. Merkel and Bavarian premier Horst Seehofer, who heads the CSU, are expected to hold a news conference at 12 p.m. in Berlin.

after the Social Democrats fell to 20.5 percent and said they’re ending their coalition with Merkel. No date has been set for starting coalition talks. Merkel, Europe’s longest-serving leader, took one of the biggest risks of her career in 2015 when she declined to close German borders to a record influx of asylumseekers, including hundreds of thousands fleeing Syria’s war. From images of refugees posing for selfies with the chancellor to blasts of criticism by President Donald J. Trump and a backlash that fueled the AfD party, the crisis came to define Merkel’s third term and hovered over last month’s election.

Trump, Orban

Merkel

Bloomberg

Merkel’s shift on refugees is the first policy fallout from Germany’s election. AfD won 12.6 percent of the vote on September 24, becoming the first far-right party to enter the Bundestag, or lower house, since the immediate aftermath of World War II.

Anti-Merkel campaign

T hat f o l l o w e d m o n t h s o f campaig ning by the part y

against Merkel ’s open-borders stance after more than 1 million refugees arrived in Germany in 2015 and 2016 during Europe’s refugee crisis. Support for Merkel’s bloc declined by almost 9 percentage points in the election to 32.9 percent. That leaves Germany’s biggest political grouping dependent on allying with two smaller parties

Merkel, 63, stood her ground during the campaign as anti-immigration protesters disrupted many of her rallies, saying she couldn’t think of anything she would have done differently during the refugee crisis. At one town-hall event, a Syrian refugee opened a question by saying, “I love you.” Her stance clashed with that of EU leaders, such as Hungarian Prime Minister Viktor Orban, who responded by erecting a razor-wire fence and has become a leading voice against Muslims entering Europe. Trump, during his presidential campaign last year, called Merkel’s refugee policy “insane”—and predicted she wouldn’t be reelected. Bloomberg News

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Tuesday, October 10, 2017

Xi’s village is testament to his power

IANGJIAHE, China—Almost 50 years after President Xi Jinping first trudged into this village as a cold, bewildered teenager, hundreds of political pilgrims retrace his footsteps every day.

They follow a well-trod course designed to show how the seven years that the young Xi spent in this hardscrabble village in China’s barren northwest forged the strongman style that he now uses to rule the world ’s most populous nation. Visitors peer dow n a wel l that Xi helped to dig, admire a storage pit that he built to turn manure into methane gas for stoves and lamps and sit for inspirational lectures outside the cave homes where he sheltered from the chaos of Mao Zedong’s Cultural Revolution. “ W hen he f irst ar r ived in Liang jiahe, he wasn’t prepared for the hardship,” a guide told a tour group of officials, who l istened at tent ive ly u nder a drizzling rain. The message, conveyed by the guides and the village’s carefully tended buildings and artifacts, is that Xi left Liangjiahe steeled for the leadership roles that he would one day assume. Turning a leader’s former home into a tableau for propagating his political-creation myth has a venerable precedent in the People’s Republic. Back in the 1960s Mao’s birthplace, Shaoshan, was turned into a secular shrine for sloganchanting Red Guards who looked on modern China’s founder as a nearly godlike figure. The devotion at Liangjiahe falls far short of the fervent cult of personality that Mao ignited. Even so, Xi stands out for turning his own biography into an object of adoration, and zeal. Neither of Xi’s recent predecessors as leader, Hu Jintao and Jiang Zemin, could tout a similarly dramatic tale of coming of age in a dim, flea-infested cave. But more than that, Xi’s story embodies the authoritarian values he wants to restore in China— a “red-brown” melding of Communist revivalism and earthy nationalism rooted in a glorified rendering of China’s ancient past. Liberal-minded members of China’s middle class bridle at that ideology. But others, including farmers and blue-collar

workers, find a lot to like in Xi’s appeals to patriotic pride and homespun populism. “Xi has the perfect résumé. He’s a son of the revolution, but not a child of privilege,” said Trey McArver, a political analyst and cofounder of Tr iv ium/China, which advises companies working in China. “What Xi’s story says clearly is: He is a Communist born and bred, but he also understands the common people.” This story line resonates with many of the nearly 18 million Chinese who were also sent to the countryside by Mao in a mass effort to reeducate urban youth in the rustic virtues of China’s peasant majority, while defusing the fanaticism of the Red Guards. This so-called sent-down generation now holds the reins of the Communist Party, including four spots on the Politburo Standing Committee, the party’s highest rung of power. Members of that generation said Xi shared not only their experiences, but also their values of frugality and perseverance. T hey said that these had been lost in younger Chinese, especially those in urban centers like Beijing, who grew up after their nation’s economic takeoff. “Beijingers who weren’t sent to the countryside can’t handle nearly as much hardship as those of us who did,” said Xia Baoqing, 66, who was also sent to work nea r Li a ng ji a he. “Of cou rse, President Xi has some similar characteristics. He encourages thrift and avoiding waste, and he’s very self-disciplined.” The emergence of Liangjiahe as a popular tourist site attests to Xi’s speed in propelling himself to the center of Chinese politics. He is poised to entrench his power at a Communist Party congress this month. In the run up, party newspapers and a new book have promoted the official line that Xi is a strong leader with close ties to the common people because of his time in Liangjiahe. “Finding high purpose in suffering always makes a good story.

Parents photograph their children in front of the hostel where President Xi Jinping is said to have lived during his time in Liangjiahe, China, on October 6. The village, where Xi spent a formative period of his youth during the Cultural Revolution, has been converted into a tourist attraction that attempts to show how the village helped forge his strongman style. Bryan Denton/The New York Times

This is one such case,” said Guobin Yang, a professor at the University of Pennsylvania who has studied the Cultural Revolution generation. “Like Mao, he is from the people, so the future legend might go.” But even with the worshipful official biography, it remains unclear how far Xi can go in consolidating power. While Xi is expected to use the congress to fill more of the party’s top tier with his backers, he could face stiff opposition, especially if he tries to keep his top ally and anticorruption overseer, Wang Qishan, in office despite reaching the usual retirement age.

Still, no other recent Chinese leader has amassed as much power as Xi, 64. And no leader since Mao has used his personal biography to this extent in asserting his right to lead. “ T here h a s been t h at sea change, and his style of leadership is much more personalist,” said Patricia Thornton, a professor of Chinese politics at Oxford. Ju st a s S h aosh a n d id for M ao, L i a n g ji a he h a s come to f i g u r e p r o m i n e n t l y i n X i ’s of f ic i a l bio g r aphy. W hen he arrived at the age of 15 in early-1969, as one of millions of Chinese youth sent to the countryside by Mao, the village’s 360

[China’s President] Xi [Jinping] has the perfect résumé. He’s a son of the revolution, but not a child of privilege.”—McArver

Rohingya boat P capsizes; 12 dead

residents lived in caves dug into the dry, ocher-colored hillsides, and eked a meager existence out of the dusty soil. According to the current narrative, Xi showed his first signs of greatness in the then-penniless village, rising to a position of local party leadership. “ T he e x p er ie nce of b e i ng steeled by being sent to rural Liangjiahe was the wellspring of Xi Jinping’s thinking, mind-set and feelings,” Lei Pingsheng, another student from Beijing who was sent to work in the village, says in a new Chinese-language book, Xi Jinping’s Seven Years as a SentDown Youth. The book has been heavily promoted by the partyrun media before the congress. These days, Liangjiahe, which is about 380 miles southwest of Beijing, is thronged by officials, many of whom have been ordered to study Xi’s life. About 2,500 people visit Liangjiahe each day, People’s Daily reported, and many of them are

ferried in on minibuses after paying a $3 ticket. (I was allowed to look around only after registering at the village police station, and was accompanied by a guard who whispered to villagers not to say anything.) Visitors are given a carefully airbrushed version of China’s recent histor y. The propaganda about Xi’s time here offers only hints of the ferocity of the Cultural Revolution that drove him and the other sent-down youth to villages like Liangjiahe in the first place. Xi has demanded reverence for Mao and banned historians from exploring dark episodes of starvation and persecution that could tarnish the party’s image. “It’s a selective memory that is about the glories of collective sacrifice for the revolutionary cause,” said Suisheng Zhao, a professor at the University of Denver, who was also sent to work in the countryside under Mao. New York Times News Service

Unesco chooses new chief amid tensions over Palestinian role

OX ’ S B A Z A R , B a ng l a desh—A n overcrowded boat carrying Rohingya Muslims fleeing Myanmar capsized in the confluence of a river and the Bay of Bengal and at least 12 people died, the police said on Monday. Five of the dead were children. Up to 35 people were on the boat and eight survived the capsizing, local police official Mainuddin Khan said. He added rescuers have retrieved 12 dead bodies but it was not exactly clear how many were missing. The search was continuing, but the sea remained rough. The capsizing occurred near the Shah Porir Dwip in Bangladesh’s southern coastal district of Cox’s Bazar as the boat was moving toward Bangladesh late last Sunday. Hundreds of thousands of Rohingya have fled Myanmar since

August 25, when the military launched a crackdown that had been decried by the United Nations as “ethnic cleansing.” Including last Sunday’s capsizing, boat accidents have killed at least 155 Rohingya trying to reach Bangladesh. Myanmar’s military launched what it described as “clearance operations” after an insurgent group attacked security posts and killed several police and border g u a rd s. T he U N sa id Myanmar’s response was “disproportionate” compared to the insurgents’ action. The refugees arriving in Bangladesh have described indiscriminate violence and widespread arson in their home villages in Myanmar’s Rakhine state along the Bangladesh border. AP

ARIS—The United Nations Educational, Scientific and Cu lt u ra l Orga n i z at ion’s ( Unesco) e xec ut ive boa rd i s choosing a new leader to replace departing director Irina Bokova, whose tenure was marred by funding troubles and tension over its inclusion of Palestine as a member. I nte n s e d iplom at ic w r a n gling has marked the race among seven candidates to become the next director general of Unesco. A rab countries have long wanted to lead the organization, though div isions over Palestinian membership have complicated their push. Voting by Unesco’s 58-member executive board starts on Monday and continues through the week until a candidate wins a majority. The choice then goes to the full Unesco general assembly next month for final approval. Leading candidates include Qi a n Ta ng of C h ina, for mer Egyptian government minister

Moushira Khattab and Qatar’s former Culture Minister Hamad bin Abdulaziz al-Kawari. A top priority for the next director will be shoring up finances at Unesco, best known for its World Heritage program to protect cultural sites and traditions around the world. The agency also works to improve education for girls in desperately poor countries and in scientific fields, promote better understanding of the horrors of the Holocaust and defend media freedom, among other activities. T h e U n it e d S t a t e s — o n c e Unesco’s biggest financial contributor—and Israel suspended Unesco funding when its members voted to make Palestine a member-state in 2011. Many saw the vote as evidence of ingrained anti-Israel bias within the United Nations, where Israel and its allies are far outnumbered by Arab countries and their supporters. No. 2 Unesco funder Japan

then withheld its dues last year, saying it wanted to make sure Unesco properly fosters trust among member-nations—a decision widely viewed as a response to Unesco’s listing of Chinese Rape of Nanking documents as a memory of the world. Japan disputes China’s historical views on the 1937 massacre, and a win for China in the director race could further jeopardize Japan’s financial contribution. In interviews with The Associated Press, candidates insisted they would set aside national interests and lead Unesco with neutra lit y. But votes for the agency’s top job are routinely overshadowed by national and regional divisions. Some ca nd id ates a re even meet ing resist a nce at home. Six Egyptian rights groups protested Khattab’s candidacy over the weekend, sug gesting she was complicit in the Egyptian government’s repressive policies. She insists in her Unesco

candidacy statement that she will uphold freedoms enshrined in the agency’s values. Meanwhile, the dispute between Qatar and its neighbors over allegedly sponsoring Islamic extremism threatens to weigh on Qat a r’s c a nd id ate —a long with media reports suggesting Qatar is trying to buy support among Unesco members. With the US role in Unesco under question, some are speculating that China is trying to take advantage of the vacuum to dominate Unesco and the UN agencies more broadly. Chinese candidate Qian insists, however, that “China does not want to replace the role of the United States.” “I went to the State Department and I had a long discussion w ith officials there. I said ‘I really don’t think you A mericans should give up your global responsibility especially in Unesco,” he said. “We need America.” AP

A10 Tuesday, October 10, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

editorial

What about jueteng?

RECENT report by our correspondent Ashley Manabat said the Philippine Charity Sweepstakes Office (PCSO) is losing up to 30 percent of its potential income from the small-town lottery (STL) because of the continued operation of jueteng and other forms of illegal gambling in some provinces.

The STL operation of the PCSO was supposed to take over jueteng, masiao, two-ball and other illegal numbers games in the country. The PCSO has expanded the list of STL operators during the Duterte administration to bring in more competition nationwide and in order for STL to live up to its original purpose as a jueteng and masiao killer. But in a recent Senate hearing on the proposed creation of the Philippine Charity Office to replace the PCSO, STL operators complained that illegal gambling continues to flourish in their areas of operation, which prevents them from fully meeting their obligations to the government. About 30 percent of potential collections is lost to illegal gambling, according PCSO Chairman Jose Jorge Corpuz, a former police director. The STL operator in Laguna, for instance, reported that it collects P4 million daily from STL but loses about P1.2 million to illegal gambling. Another STL operator in Albay is supposed to remit to the PCSO P2.5 million daily, and it was able to meet only 70 percent because it also lost to illegal gambling. The case was almost the same in the provinces of Batangas, Bulacan, Negros Occidental and Pangasinan. President Duterte said he wanted to provide free medicines to indigent Filipinos by generating billions of pesos from STL operations and stamping out illegal numbers games, whose operators have been thriving despite efforts to stop them in the last few administrations. He even created a Task Force on Illegal Gambling for this purpose, headed by Justice Secretary Vitaliano N. Aguirre II, along with Executive Secretary Salvador C. Medialdea and Finance Secretary Carlos G. Dominguez III. If the government has not been getting its target revenues from STL operations despite Duterte’s directive, it can only mean jueteng and other illegal numbers games still have police and local government protectors. Just in August, Philippine National Police (PNP) chief Ronald M. de la Rosa ordered the police to do everything to stop jueteng and other illegal numbers games within 15 days. What happened to this crackdown? It does not help that a lot of people today still don’t seem to see anything inherently wrong with jueteng, masiao, two-ball or whatever else is their welcome diversion against the millstone of poverty and their hard daily existence. This, even after a president of the Republic was ousted mainly for taking bribes from jueteng. Administrations have come and gone, but jueteng is still around. It is hard to stop it because the people want it. They participate in it. It is already part of their culture. But jueteng is not unstoppable. The President can always enforce his will. If he chooses to make it of paramount importance to stop jueteng, it can happen. If he wants jueteng operations to stop, it will stop. If he orders an all-out war against jueteng and the PNP complies with the same fervor they are exerting in the war against illegal drugs, it can be successful. The government can reap enormous profits from operating STLs if all the other illegal numbers games are eliminated. STL retail revenues for the first semester this year are already at P6.17 billion, and the PCSO could have easily earned another P2 billion to P4 billion more without the competition from illegal numbers games. The government can do a lot of good with that money. Let us also not forget that the issue here is the failure of the law and its implementation. Jueteng is illegal because it is a racket. The draws are rigged and operators make money because they pick the “winning” number combinations. Crooks and criminal clans run it because they are the only ones who know how to make a profit from it even after paying billions of pesos in bribes to their government protectors.

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Manny B. Villar

THE ENTREPRENEUR Continued from A1

N its Asian Development Outlook 2017 Update, the Asian Development Bank retained its Philippine GDP growth outlook for this year and 2018 at 6.5 percent and 6.7 percent, respectively, from its Asian Development Outlook 2017 Supplement report in July. In its East Asia Pacific Economic Update, which was released last week, the World Bank said it expected the Philippine economy to grow by 6.6 percent this year and by 6.7 percent in 2018. The government’s official GDP growth targets are 6.5 percent to 7.5 percent for 2017 and 7 percent to 8 percent for 2018. The boosts for economic growth are coming not only from President Duterte’s focus on infrastructure spending and tax reform, but also from his independent foreign policy. In particular, the revival of friendly ties with China after years of strained relations under the previous administration, as well as closer relationship with Russia, is creating new opportunities for the Philippine economy. Tourism is among the first industries that benefited from the President’s new foreign policy. Following the President’s visit to China in October 2016, Beijing lifted its

travel advisories against Chinese visits to the Philippines. According to the Department of Tourism, improved relations between the two countries resulted in 73,649 Chinese visiting the country in May 2017, a whopping 57.29-percent jump compared to 46,825 Chinese visitors in May last year. For the first five months of 2017, China was the third-largest source of international visitors (after Korea and the United States) with 388,896, comprising 13.49 percent of the total 2.52 million arrivals. Among the top 10 markets, China and Taiwan posted the highest growths of 36.29 percent and 20.99 percent, respectively. This year the Philippines expects the number of Chinese tourists to reach the 1-million mark, a 49-percent increase on the roughly 670,000 visitors in 2016. This will bring the country closer to the tourism department’s full-year target of 7 million arrivals, following a 2016

Why Bitcoin is not money John Mangun

Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos Dennis D. Estopace

Online Editor Social Media Editor

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

No losses, but a lot of gain

OUTSIDE THE BOX

F you were a chicken farmer in a rural agrarian community many centuries ago, every Saturday you would probably load up your cart with chickens and do your shopping.

Your first stop might have been at the piggery, where you traded your chickens for meat. Then it was off to the mill for flour or the baker for bread. Finally, on the way home, a stop at the carpenter or blacksmith for supplies or tools to make repairs at your farm would complete your marketing. The owner of the piggery might have taken the chickens you traded him also to the mill for grain. Since the blacksmith did not produce any food, he might keep the chickens he traded for as a continuing food source of chicken eggs. The blacksmith’s excess eggs might have been traded for bread. This would be called a “barter economy”, but live chickens would have been a

good medium of exchange for everyone. The commonly defined characteristics of money are durability, portability, divisibility, uniformity, stability of value, relative limited supply and acceptability. Live chickens meet that criteria fairly well, except perhaps for divisibility, but then again, you can always kill the bird and rip off a leg or two as necessary. Live chickens also could be used as a “storage of wealth”, since they produce eggs until needed for meat, giving a “return on investment”. The most important quality of something that is used as money is acceptability, and that comes from all the other characteristics being there. Sea-

showing of just 5.9 million. The size of the Chinese market also presents a huge destination for our agricultural exports. In March this year China signed agreements to buy $1.7 billion worth of bananas and other fruits and agricultural products from the Philippines. The Department of Trade and Industry says the 34-percent increase in exports to China, Hong Kong and Russia contributed to the $4.3-billion increase in Philippine exports during the first five months of 2017. China is the country’s fourth largest export market and the No. 1 source of imports. For its part, Russia committed to buy an estimated $2.5-billion worth of Philippine fruits, grains and vegetables. The commitment was made during the first meeting between President Duterte and Russian President Vladimir Putin at the 2016 Asia Pacific Economic Cooperation meeting in Peru. Chinese commitment in financing local infrastructure projects is also expected to accelerate growth of foreign direct investments (FDI). Foreign chambers of commerce and industry say the Philippines has a potential to attract at least $10 billion worth of FDI per year, but only received $7.9 billion in 2016. For the first half of 2017, net FDI inflow totaled $3.6 billion, down 14 percent from $4.2 billion a year ago. Among its infrastructure commitments, China has agreed to finance the construction of two bridges that would provide additional crossings on the Pasig River. Last June Public Works Secretary Mark A. Villar and Embassy of

China in the Philippines Economic and Commercial Counselor Jin Yuan signed the agreement for a full grant from China for the construction of the Binondo-Intramuros Bridge in Manila and Estrella-Pantaleon Bridge in Mandaluyong City. The two bridges, which are the first infrastructure projects with China under the Duterte administration, are estimated to cost more than P700 million. China has also committed to provide grants for the construction of the Panay-Guimaras-Negros Link Bridges and Davao City Expressway. The Chinese government is also reviewing loan applications for other priority infrastructure projects, including the $3.01-billion south line of the North-South Railway, the $53.6-million Chico River Pump Irrigation Project in Cagayan and Kalinga provinces and the $374-million New Centennial Water Source-Kaliwa Dam Project in Quezon province. We’re getting all these benefits not because we have established special relationships with China or Russia. Some people panicked or were at least worried when President Duterte launched his independent foreign policy. But he only established normal ties between the Philippines and other equal sovereign states— China and Russia. And it’s proving to be beneficial to us. And the United States, whose president is coming in November, continues to be a friend of the Philippines. We did not give up or lose anything, but we gained a lot.

shells did not meet the durability test. Elephant tusks were not easily divisible. Bat guano probably never caught on globally for other reasons. “Gold bugs” are always complaining that paper money is not backed by anything useful. But what the gold bugs fail to realize is that gold is mostly useless if you are looking for something to eat, wear or keep the rain off your head. What made gold great as money was its durability. While we are told that cryptocurrencies are going to save the world economic system, Bitcoin and the others fail on two of the most important money qualities. Until these two are applicable, cryptos are a nice speculative investment and nothing more. Acceptability is a great problem but maybe—a big maybe—that will change. However, it will not change until value stability is constant. If nobody knew from day to day how many chickens were necessary to buy a kilo of pork, chickens would never be a practical and acceptable medium of exchange. That is the problem with Bitcoin. On a daily basis since September 30, the daily closing price in US dollars of BTC has been: +4.73 percent, +0.85 percent, -0.10 percent ,-2.02 percent,

-2.23 percent, +2.38 percent, +1.29 percent +1.49 percent and +3.99 percent. The average daily price change going back to the beginning of March has been +0.73 percent. Imagine the Philippine peso moving an average of 37 centavos a day and as much as 13 pesos from the previous day. Bitcoin gained 26.77 percent on July 20th and lost 15.89 percent on September 14. That is not money. That is a lotto ticket. Should you buy Bitcoin? Certainly, as a speculative short-term investment after taking into consideration potential loss from hacking, theft and government closing the exchanges and confiscation. For the longer term, you can buy also if you believe that money will continue to flow into Bitcoin. However, for now and the foreseeable future, do not consider that Bitcoin is money. That will only happen when you are able to buy your one-piece Chicken Joy meal with Bitcoin.

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

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stockmarket information and technical analysis tools provided by the COL Financial Group Inc.

Opinion BusinessMirror

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Crux in the dating system FDA head’s baptism of fire Ernesto M. Hilario

Cecilio T. Arillo

DATABASE

ABOUT TOWN

N this high-tech age, if one were to bring up the topic of “dating system” it would conjure up thoughts of how it changed from the traditional pamamanhikan into the modern use of social-media apps, such as Facebook or Tinder. Quite literally, though, the dating system this writer is referring to is the way we write our calendars.

HE new head of the Food and Drugs Administration (FDA), Director General Nela Charade G. Puno, should be warned that she and her agency may be caught in the crossfire as warring business and political interests bring the fight to her territory.

Dr. Robert R. Cargill, an American archaeologist and biblical scholar from the Center of Digital Humanities in University of California (UCLA), is a staunch proponent of changing the use of the Christian BC/AD calendric system into the contemporary internationally accepted scientific standard of Before Common Era/Common Era (BCE/CE). He argued that the continued use of the labels Anno Domini (date of birth of Jesus) and Before Christ (BC) to designate calendric years portray human history as directly relative to the birth of Jesus of Nazareth. However, in this age of science and religious plurality, the battle over the standard dating system has intensified and many contemporary historians suggested that Christians should leave behind the BC/AD labels and adopt instead the BCE/CE dating system for all calendric references. According to a 2010 religious demographic study by the Pew Research Center, a nonprofit, nonpartisan and no-advocacy think tank, the world is composed of 2.2 billion Christians, 1.6 billion Muslims, 1 billion Hindus, nearly 500 million Buddhists and 14 million Jews. More than 400 million other people practice various folk or traditional religion, while an estimated 58 million people belong to other nontraditional sects. In addition, 1.1 billion people indicated no religious affiliation. If you look at the picture, nonChristians outnumber Christians, which means adopting the BCE/CE system is just fair for everybody. Cargill said many Christians perceive the BCE/CE system to be an affront to Christianity. He added they see the system as an attempt to eliminate “Christ” from the calendar, just like the expression “X-mas” for removing “Christ” from Christmas. Some simply appeal to arguments of tradition and familiarity with the system. “There are, however, several excellent reasons for Christians to leave behind the BC/AD dating system. In fact, the use of BC and AD causes more problems for Christians than it solves. For one, it perpetuates the stereotype that Christians are arrogant tyrants who insist on couching all of human history [including Jewish, Islamic, Indian, Chinese, etc.] as relative to the birth of Christ. Rather than living the lives of humble servants that their Bible calls them to do, many Christians maintain that all history should be subject to their own religious claims. Even the period of history that took place before Jesus supposedly came to earth is relegated to mere anticipatory events prior to the birth of Jesus,” Cargill said. “However,” he said, “this insistence upon subjecting all of human history to one’s own religious interpretation opens Christians up to accusations of sectarian fundamentalism.”

“Every time Christians insist upon the BC/AD dating system, they open the door to claims by adherents to other faiths that wish to impose their own relative dating system upon society. Jews will claim that the year 2009 is actually year 5770 [based on the supposed date of the creation of the earth in the Jewish tradition], while Muslims will insist that we are in year 1430 [AH = Anno Hajiri, or the year of the pilgrimage (hajj) of the Prophet Muhammad]. By adopting a BCE/CE system, we avoid any haggling over religious origins of calendric dates,” he added. Cargill also wrote in his UCLA piece that the present calendar is based upon the Gregorian calendar of 1582 CE, a reform of the earlier Julian calendar of 45 BCE. The labels BC and AD were added in 525 by Dionysius Exiguus who used them to compute the date of Easter. However, Dionysius miscalculated, and this error has been retained in the BC/AD system. “While the Gregorian calendar accurately represents years of 365.25 days, Dionysius’s calculations skipped the year zero, jumping immediately from the year 1 BC to the year 1 AD. The result is a calendar that claims to be based upon the birth of Jesus, but which skips the first year of his life,” he explained. “But besides the absence of the first year CE from our present calendar, an even greater problem exists with the BC/AD system: Jesus was not born in year zero,” Cargill said. In the Gospel of Matthew, Jesus was born during the reign of Herod the Great. According to multiple ancient sources, Herod died in 4 BCE. If the Gospel of Matthew is historically accurate, this would mean that Jesus of Nazareth was born on or before 4 BCE—meaning Jesus was born 4 BC. “If we add to these four years the fact that Herod the Great did not die immediately after the birth of Jesus, but, according to Matthew, ordered the death of all children two years of age and younger in an attempt to kill Jesus, we can add an additional two years to the birth of Jesus, making His birth approximately 6 BCE. If we also add the missing year zero, it is most likely that, according to the Gospel of Matthew, Jesus was born around 7 BCE,” he said. “Thus, the BC/AD system is fundamentally flawed in that it misrepresents the birth of Jesus by approximately seven years. This means that Jesus’ ministry did not begin around the year 30, but instead around the year 23. Likewise, Pentecost and the origin of the Christian Church should not be dated to ‘33 AD’, but to about 26 CE,” Cargill concluded. In case of doubt, though, the United Nations and the Universal Postal Union are using the BCE/CE system as official calendar guide. To reach the writer, e-mail cecilio.arillo@ gmail.com.

The issue is the reevaluation and recertification process for two contraceptive devices. So-called pro-life and Church-backed groups raised a howl against these contraceptives and succeeded in convincing the Supreme Court (SC) to slap a temporary restraining order (TRO) on their sale and distribution. President Duterte publicly lambasted the SC for issuing the TRO and putting the government’s reproductive-health program in jeopardy. The SC has said the fate of that TRO is in FDA’s hands. All the FDA has to do is to reevaluate the two contraceptives and recertify them as safe and do not induce abortion. Once the recertification is issued by the FDA, the SC said it will lift the TRO. Because of this, the agency and its head have become the object of negative propaganda campaign on various fronts. Puno should now exercise greater prudence. If not, the reforms in the FDA she managed to put in place within a short period of time could all go down the drain. The thrust of the propaganda campaign seems to be to portray Puno as “lacking in transparency”. This is the best way to demolish the

Instead of freezing bank accounts, EU governments should enable regulators to keep a bank going while they restructure it and search for a new owner. This will require EU governments to commit additional resources for the task. The European Central Bank and the euro zone’s Single Resolution Board have been calling for the power to freeze bank accounts—a socalled moratorium—since the swift resolution of Banco Popular in June.

She should be told that the name of the game is power and not competence. Her ability to conduct an expert evaluation of the contraceptives involved cannot be questioned. After all, she is a pharmacist—one trained to look into the tiniest components of a medicine and consider their effects. Her baptism of fire is on an arena outside of her technical expertise — politics.

Anti-poor bias in tax proposal

ON September 20 the Senate Committee on Ways and Means officially endorsed Senate Bill 1592, or Tax Reform for Acceleration and Inclusion (TRAIN), the first phase of the Comprehensive Tax Reform Program. The TRAIN, however, could take away a whopping third of the hardearned income of those already living dangerously near the poverty line. “It’s not going to be that bad,” says Sen. Juan Edgardo M. Angara, chairman of the Committee on Ways and Means and principal sponsor of TRAIN. But it appears he has callously dismissed the plight of sari-sari store owners and their families who stand to suffer from the burden of additional taxes on sugar-sweetened beverages (SSBs). The proposed taxes for SSBs will effectively increase the prices of common sari-sari store stock like powdered juice, soft drinks, energy drinks and other sweetened beverages. For instance, a packet of powdered juice costs P9 in your neighborhood store; if this tax bill becomes law, that small packet that makes a liter of juice will cost P20. The taxes on SSBs and the inevitable price increases would radically transform the spending habits of Filipinos in the lower-income bracket, who make up 80 percent of SSB consumers.

Is investment really booming? PAUL DONOVAN

HE changes to today’s world economy are truly revolutionary. While many people get excited about the latest model of smartphone or other technological leap forward, economists do not. For an economist, it is the way technology changes society and the structure of the economy that is the exciting story. The growth of e-commerce in business has been dramatic. In the United States manufacturing sales using e-commerce were below 20 percent of total sales in 2000. Today, they are over 60 percent of total sales. However, there is something very odd going on in the data. More and more of what companies do is dependent on Internet-based and other electronic ordering. At the same time, US companies are dedicating less and less of their investment spending to computers, and not increasing their spending on software. The total value of European business-to-business e-commerce transactions has also grown. In most countries, e-commerce is three times as important today as it was in 2000. Investment in technology and software by companies fails to reflect this. A larger and larger share of investment spending is going to

Europe’s new mistake on failing banks HREE years since their banking union began to take shape, European Union (EU) regulators are seeking fresh powers to deal with lenders in trouble. Their plan would let them stop withdrawals from a failing bank for a few days while they address the problem, with the aim of preventing a run. But this approach could easily have the opposite effect, spreading panic to the whole financial system. There’s a better way.

public’s confidence in the reevaluation process involving the two contraceptives. By questioning the process, opposition to the recertification of the said contraceptives gets a new lease on life. Of course, many cannot understand the howl against alleged lack of transparency in the reevaluation process now being done by the FDA. After all, the FDA appears to have given the interested parties enough time to submit their evidence and arguments against the contraceptives. They were also given information regarding the reevaluation process. Puno should be advised that the forthcoming debates on this issue will center on how the FDA supposedly did the reevaluation and not on the technical results of the process. This is what makes the whole strategy against the FDA smack of politics. This is expected and Puno should know that there are powerful interests who will do everything to stop the government’s program on reproductive health. Pharmaceutical industry sources say Puno is in the same “hit list” of a powerful multinational firm doing business in the country.

Tuesday, October 10, 2017 A11

They succeeded in winding down the troubled Spanish lender by selling it to rival Banco Santander, but had to do it on a weekday night with a run on deposits in progress. The regulators say that next time it might be impossible to find a buyer overnight. A moratorium would relieve that pressure and, perhaps, allow them to sell the bank at a better price. This approach would mirror an arrangement that is currently in place in Germany, and it’s super-

If companies rely on employees to provide some of the technology they need to do their jobs, then distinguishing investment from consumer spending becomes less helpful. Investors need to think hard about this topic. IT consumerization is just a foretaste of the structural changes that lie ahead. Blind faith in data that fails to change with the times is a dangerous approach to investing for the future.

nontechnology investment. Increasingly, investment in technology simply fails to appear in the data. The origins of economic data lie buried in the 1930s. Back then, it was pretty clear what was investment and what was personal spending. Today that is not so clear. Bring your own device (BYOD) is now an accepted part of modern business. People access work e-mails over their personal phones. Tablets are used for business, as well as for leisure activities. This practice is now so widespread it has its own label —“IT consumerization”. What this means is that companies can rely on employees to provide the capital that is needed to do their job. Employees are subsidising shareholders. This appears in economic data as reduced investment spending on technology. Consumer spending on technology need not rise. Instead,

consumers increase the amount of time they spend using their personal devices, by adding work tasks. (An economist would say that the capacity utilization rate of the personal device increases. Economists often say things like this. It is best to just accept it and move on). Indeed, some surveys suggest that certain employees will spend over half their time using their personal devices for work tasks. This means that investment is disguised as consumer spending. The total amount of spending will be lower because people use their devices more efficiently. Unfortunately, there are even more problems with the data. In the US a laptop bought by a consumer affects real gross domestic product (GDP) differently from an identical laptop bought by a company for an identical price. Logically, one might

ficially appealing: Closing a bank would certainly stop a run. But it could also have unintended consequences. Depositors may run from a bank in trouble sooner—fearing that if they wait too long they may not be able to withdraw their money. It could also lead depositors to empty their accounts as soon as the bank reopens. Most dangerous of all, freezing accounts in one bank could spread panic to the rest of the system, as other depositors fear the

same will happen to them. The idea also puts international cooperation on bank resolution at risk. The EU regulators’ plan threatens to disrupt measures put in place after the bankruptcy of Lehman Brothers in 2008. Bank of England economists recently warned in a working paper that adopting the new moratorium might prompt banks to back out of the existing arrangements for handling financial emergencies. Strengthening Europe’s Single

If you take away the already limited spending power of the D and E section of the population, you are basically stealing the livelihood of the stores that cater to them. The average sari-sari store earns about P800 on a good day. Based on research conducted by the Nielsen Corp., 31 percent of a sari-sari store’s daily sales consist of soft drinks alone. What happens when their customers can’t afford these drinks? That’s roughly P250 a day taken away from hardworking families who already don’t have much in life in the first place. Angara conveniently forgets that the majority of Filipinos don’t have the luxury of letting go of P250 per day from an already alarmingly small income with which they sustain themselves. That’s P250 that could go to food for their families, or for tuition. We ask: Can Angara and his family live on P550 a day? Angara asserts that 84 percent of the Duterte administration’s “Build, Build, Build” infrastructure program can be generated from other sources apart from funds generated by the TRAIN. The question then is: Why is it being rushed? Angara likes to be known as an ardent advocate of tax reforms who wants to help workers and families save and to promote social justice. That is really hard to believe now that he appears very eager to further burden the very people he promised to protect from higher taxes. If the Lower House of Congress is already perceived as a rubber stamp, the Filipino people deserve better from the Senate whose members should be more discerning when it comes to protecting the people’s welfare.

E-mail: ernhil@yahoo.com.

suppose there was no difference, but there is. Moreover, the way a mobile device is treated is different from the way a computer is treated. If we see investment spending shifting from businesses to consumers, or from laptops to mobile devices, GDP will be affected even if nothing else changes. The recent UBS Nobel Perspectives Live! event stressed that technology changes the way that we work. Technology is already blurring the distinction between work life and personal life. The antiquated philosophy that underpins our economic data means that investors may be missing key parts of the story. If companies rely on employees to provide some of the technology they need to do their jobs, then distinguishing investment from consumer spending becomes less helpful. Investors need to think hard about this topic. IT consumerization is just a foretaste of the structural changes that lie ahead. Blind faith in data that fails to change with the times is a dangerous approach to investing for the future. Paul Donovan is the managing director and deputy head of global economics of Zurich-headquartered UBS. He is responsible for formulating and presenting the UBS Investment Research global economic view, drawing on the bank’s worldwide resources. Donovan took up philosophy, politics and economics at Oxford University. He holds an MSc in financial economics from the University of London. In the Philippines his column will appear exclusively once a month in the BusinessMirror.

Resolution Fund (SRF) is the better approach. The fund’s planned capacity of €55 billion is too small, and even that amount won’t be fully available for years. The EU should agree to make it bigger, and quickly. An adequately financed SRF would give regulators the chance to resolve failing banks without putting the financial system at greater risk. If it helps to head off the next banking crisis, the additional upfront cost will be money well spent. Bloomberg View

Global Eye

A12 Tuesday, October 10, 2017 • Editor: Angel Calso

BusinessMirror

Why Japan wants your electronic waste

By Adam Minter | Bloomberg View

OR 30 years China has recycled more cardboard boxes, plastic bottles and old computers than any other nation. By doing so, it has saved millions of tons of resources and indirectly funded thousands of recycling programs and companies globally. But now it wants to stop.

In July, China notified the World Trade Organization that it will soon prohibit the import of many types of recyclables. As a result, recycling programs and companies around the world are scrambling to find new destinations for the junk they once sent to China. In an increasing number of cases, that destination is a landfill. It’s a true recycling crisis, but it doesn’t have to remain one. China’s decision—publicly, the government claims the ban is driven by environmental issues associated with imported recycling—effectively deprives its companies of a cheap source of raw materials. That’s incentive for other countries, companies and programs to invest in new, cleaner technology to take China’s place and gain access to those materials for themselves. Archrival Japan, long a major global recycling exporter, may be the first to seize the opportunity. Like so many other countries, Japan has for decades relied on China as a major destination for its recycling. This solved an immediate problem, but was also a boon to Chinese manufacturers. After all, while environmental concerns have driven the expansion of recycling programs throughout the developed

world, what goes into the blue bin is also manufacturing feedstock. In the US, for example, almost 40 percent of the aluminum supply comes from recycled resources. Close to half of China’s copper supply is recycling-based. This is especially true for difficultto-recycle items such as electronic waste. “Mining” an old mobile phone for gold or other rare metals is far cheaper than digging a mine, particularly if labor is inexpensive and environmental controls are limited. China’s output was extraordinary: At its peak, the country’s leading ewaste processing zone produced 20 tons of gold from old electronics annually. That’s roughly equal to 10 percent of US mined gold production in 2016. The Chinese government has good reasons to get out of the trade. Pollution associated with electronic waste has become an embarrassing global cause; growing volumes of gadgets discarded by Chinese themselves have reduced the need to import more from abroad. Authorities had been steadily raising barriers to such goods before finally deciding to ban them altogether. This leaves the market open. With long-term government support for research, some of Japan’s biggest

Bloomberg View

THERE’S treasure to be found in the world’s trash. KAZUHIRO NOGI/AFP/GETTY IMAGES

companies are moving to deploy technologies at home and abroad that will replace some of the low-cost and polluting recycling systems long used in China. For example, Mitsubishi Materials is investing over $100 million in precious metals refining plants devoted to electronics and—looking to the future—lithium-ion car batteries. Initially, Mitsubishi will focus on Japan, but it’s also planning to open a plant in the Netherlands, where it will be in a position to manage at least some of the European Union’s electronic waste once bound for China. Crucially, those plants won’t only make money as service providers; Mitsubishi also sees them as a hedge against expected future scarcity. Of course, research and investment on that scale isn’t cheap or

short-term. Mitsubishi, for one, doesn’t expect to have its recently announced plants fully operational until 2021. But once it does, the raw materials derived from those plants will be freely traded worldwide. Chinese manufacturers, now forced to import those materials, will face higher costs and lower competitiveness, while Mitsubishi and Japan enjoy broad economic and environmental benefits. Indeed, the outlook is so bright that organizers of the 2020 Olympics are arranging for gold, silver and bronze medals for the Games to be made from electronic waste generated by Japanese consumers. It’s an investment lesson that recyclers and governments around the world should heed. In the US, the Trump Administration could

By Samson Ellis, Gao Yuan & Cindy Wang Bloomberg News

CHANG

have caused a lot of innovations in the industry.” Chang set up TSMC with help from the Taiwanese government and has spent the three decades since building it into the world’s largest bespoke chipmaker. That’s created a generation of industry leaders and lifted Taiwan’s economy in the process. But he may be stepping away just when he’s needed most. The industry is again anticipating one of those fundamental shifts that shake things up every few years: this time, it’s preparing for the advent of smarter and connected devices from cars and washing machines to augmented reality devices. China’s global ascendancy also promises to disrupt a landscape dominated by ageing corporations. The main chipmaker for Apple Inc.’s iPhones hopes to ride that next wave of growth by preparing to spend more than $20 billion on a state-ofart plant. That’s the price for staying ahead of Intel and Samsung Electronics Co. in cutting-edge production. Liu and Wei inherit a company that is about 30 times larger than local rival United Microelectronics Corp. and commands 59 percent of the $50 billion global foundry market. But it’s a constant struggle to stay

India’s govt needs to loosen purse strings By Dhiraj Nayyar

start by reversing its decision to defund Department of Energy programs focused on recycling technologies. Recycling already supports over 750,000 American jobs; investment focused on creating new sources of sustainable raw materials will create more. At the same time, the private sector should work more closely with recyclers to develop clean technologies and methods that will keep recycling closer to home. Private programs like the US-based Closed Loop Fund facilitate investment in such technologies for private companies and local governments, and they deserve broader corporate support. While no one program will suffice to make up for the loss of China’s recycling capacity, not investing at all would be a true waste.

A legend in microchips retires just as his industry heats up NE of the most influential technological revolutions began with an unsuccessful offer. In 1984, an acquaintance of Morris Chang’s sought help raising $50 million to set up a chipmaker, a request he rebuffed until the friend could come up with a written proposal. The man never returned. Chang later found out his friend had located a factory willing to do the work on his behalf, so only needed a fraction of the money. That “led me to this idea of a pure-play foundry,” said Chang, who three years later would start Taiwan Semiconductor Manufacturing Co. (TSMC) to make chips designed by others. “I was actually disappointed, but it also got me thinking.” That encounter planted the seed for TSMC, which went on to pioneer the made-to-order foundry model and transform the industry by ushering in a wave of newcomers. While giants from Intel Corp. to Fairchild Semiconductor shouldered the burden of chip making from top to bottom, TSMC made it possible for companies such as Qualcomm Inc., Broadcom Ltd. and Nvidia Corp. to focus on design and leave production to Chang. The 86-year-old announced last week he would step down as chairman next year, handing the reins of his $190 billion-plus company to lieutenants Mark Liu and C.C. Wei. In an interview Friday, he discussed his legacy. “Since we established ourselves, fabless companies began to mushroom worldwide,” he said. “Most of the innovations in the semiconductor industry in the last 30 years came from those fabless companies. That’s probably my biggest pride, to

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at the top of the food chain, especially with deep-pocketed rivals Intel and Samsung vying for business and Beijing urging local champions to invest aggressively in capacity. TSMC spends some $10 billion annually to safeguard its perch but that may have to rise to $11 billion, Chang said Friday. The founder of Taiwan’s largest corporation is considered a national hero for placing the island of 23 million on the technology industry’s map. Nvidia’s Taiwanese-born Chief Executive Officer, Jen-Hsun Huang, openly credits TSMC with empowering a generation of upstart

chip designers. Chang was born in 1931 in the coastal Chinese city of Ningbo. His earliest memories were of moving through a succession of cities as his family fled before the Japanese occupation and civil war between the Communists and Nationalists. He passed through Hong Kong before heading to Harvard and later the Massachusetts Institute of Technology to study mechanical engineering. In 1955, he found his first job right out of MIT at Sylvania Semiconductor, before jumping ship to Texas Instruments Inc. for what would become a 25-year stint, rising through

the ranks and acquiring a Stanford Ph.D. in electrical engineering before eventually becoming the head of its global semiconductor business. TI paid his tuition, a practice that instilled in a grateful Chang a respect for in-house talent that he would carry over to the company he founded in 1987. “Morris cherishes talent, he wouldn’t be happy if some of his people joined other companies,” said Richard Chang (not related), who followed Morris Chang from TI to TSMC but eventually helped to create Chinese rival Semiconductor Manufacturing International Corp. Investors have so far expressed confidence in the new leadership’s ability to sustain TSMC’s upward trajectory. Its shares have surged 24 percent this year, thanks to projected demand for new iPhones and other products. That helped make Chang a billionaire, according to the Bloomberg Billionaires Index. TSMC is now racing to meet the future demand it anticipates, from computers and connected devices in the so-called Internet of Things, from cars to home appliances and voice-activated speakers. Growing chipset demand from China spells another opportunity for TSMC: the country spent $227 billion importing integrated circuits in 2016, according to data from Chinese Customs authorities, the fourth consecutive year that chip imports have exceeded $200 billion. A new 12-inch wafer fabrication plant in Nanjing—a five-hour drive from the town of his birth— is almost ready for mass production. It’s the first plant in China capable of using 16-nanometer process technology, according to TSMC. Most domestic companies are only capable of producing 40-nanometer processors, a thicker width that essentially means a slower chip.

CONOMISTS would almost universally agree that fiscal discipline is a good thing. No government should aspire to live beyond its means. If it does, the consequences can be severe: higher inflation, higher interest rates, low private investment and lower growth. India’s current government has justly been praised for its fiscal restraint. It has reduced the overall fiscal deficit and reoriented spending away from wasteful programs such as fuel subsidies and toward more productive investments in infrastructure. What it hasn’t done, however, is deliver the sustained high growth of over 8 percent that India needs. To do so may require loosening the purse strings. It’s important to remember why the Indian economy is struggling. Some analysts argue that the slowdown is a recent phenomenon, sparked by the government’s decision last fall to withdraw 86 percent of banknotes from circulation and the introduction this past summer of a nationwide goods-and-services tax. Yet, while both measures may have disrupted growth in recent quarters, the economy is likely to return to 6.5 percent growth once it has adjusted. Getting to 8 percent will be harder, because of factors that are deeper and more protracted. One statistic explains much of the downward trend from the peak growth rate of 9 percent averaged between 2003 and 2012. The ratio of private investment to gross domestic product was around 38 percent in 2006-2007, in the middle of that run. Ten years later, the ratio has plummeted to 28 percent. Almost the entire fall took place before the current government assumed power. It hasn’t recovered since, despite a stable macroeconomic environment of low deficits and low inflation. Karl Marx is sometimes said to have understood capitalism better than he understood communism. Marx knew that capitalism moves in cycles of boom and bust, or upturn and downturn. India is suffering a down cycle characterized by the fall in private investment and a slowdown in exports (two crucial growth engines) over several years now. The bust began toward the end of the last government’s tenure, when growth collapsed amid a spate of scandals and policy paralysis. Companies that had risen on the high tide of rapid growth suddenly found themselves over-leveraged, struggling for profits (or in deep losses) and short of opportunities. A greatly weakened global economy, buffeted by the 2008 crisis and troubles in Europe’s so-called PIIGS economies (Portugal, Italy, Ireland, Greece and Spain), hammered exports. The fact is that the Indian economy needs to go through a cycle of firms and even individuals deleveraging and scaling down, adjusting to the new reality. The question for the current government is how best to mitigate the pain of that process. Marx’s solutions were a disaster. But a later economist, John Maynard Keynes, came up with a better way to manage and moderate cycles in the short run, by using monetary and fiscal policies in a counter-cyclical fashion. The Reserve Bank of India, believing that inflation (at its most benign in many years) is a greater threat than sluggish growth, hasn’t been of much help on the monetary front. The bank has resisted cutting rates, despite signs of an extended slowdown. Rather than lamenting that fact, the government should use the only other tool available: fiscal policy. If fiscal restraint hasn’t revived private investment, then perhaps spending more will help to “crowd in” such investment. Jumpstarting growth would help relieve the problems of stressed assets and struggling firms, which is the only way to encourage them to invest more. One of the reasons this is easier said than done is because governments don’t always abide by the counter-cyclical principle when there’s an upswing or boom. When growth is healthy, the government has to be diligent about keeping its fiscal policies in balance or surplus, rather than deficit. That leaves cushion for the inevitable downturn.

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Congo halts Sicomines copper exports, orders local processing

Big firms get a boost as China speeds up new drug approvals

A CATERPILLAR Inc. mining truck leaves after collecting newly-excavated oxide ore from the open pit at Katanga Mining Ltd.'s KOV copper-cobalt mine, part-operated by the Kamoto Copper Co., in Kolwezi, Katanga province, Democratic Republic of Congo. BLOOMBERG

By William Clowes Bloomberg News

HE Democratic Republic of Congo ordered Sinohydro Corp. and China Railway Construction Corp.’s local mining venture to stop exporting unprocessed copper and cobalt and refine all its metals within the country. Sicomines must ship “only highvalue products” as the government looks to “ensure the prompt repayment” of the country’s continuing $6 billion minerals-for-infrastructure deal with China, Mines Minister Martin Kabwelulu said on Oct. 2 in response to questions sent by text message. Sicomines’ profit is paying off the loans China provides to Congo, which will be reimbursed quicker if the mine exports higher value, refined metals. The $3.2 billion mining project operated by Sicomines accounted for about a quarter of copper-concentrate and 5 percent of copper-cathode exports last year from Congo, Africa’s biggest producer of the metal and the world’s largest source of cobalt. Sicomines exported 115,000 metric tons of copper concentrate and 20,000 tons of copper cathodes in the first half of 2017, according to the Provincial Division of Mines in South Katanga, where the mine is situated. Sinohydro Corp. and China Railway Construction, both based in Beijing, own 68 percent of Sicomines. The project is a key part of a minerals-for-infrastructure deal struck between the two countries in 2007, under which the Chinese companies build infrastructure, including roads and hospitals that are financed by Chinese banks in return for metals like copper and cobalt.

Authorization withdrawn

KABWELULU wrote to Sicomines Director-General Sun Ruiwen saying he disapproved of the type of mining products the company is exporting, according to a Sept. 11 letter seen by Bloomberg and confirmed by the minister. The minister said the bulk of the products exported by Sicomines are unrefined copper concentrate and cobalt hydroxide,

not processed copper cathodes and cobalt metal. Local mining authorities had been instructed to “no longer authorize the export of mining products other than” processed copper and cobalt, Kabwelulu said in his letter. Of 112 trucks ferrying exports of the metals, only 44 were allowed to proceed because they were already at the border, he said in a text message. Sicomines, whose Congolese shareholders include state-owned miner Gecamines SA and power utility Societe Nationale d’Electricite, transports its products by road to neighboring Zambia. Sicomines Deputy Director-General Jean Nzeng said the company responded to the minister’s letter. “We’re in contact with the ministry to unblock the situation,” he said by phone on Oct. 4 from Kinshasa, the capital. “There are no major problems.”

Copper output

An April 2008 convention that led to the creation of Sicomines states that the venture must produce 200,000 tons of copper cathodes annually by the end of its first year of commercial production and “a corresponding tonnage” of processed cobalt, which is obtained as a by-product of copper mining. Output should rise to 400,000 tons of refined copper in the third year of production, according to the agreement. Sicomines began production in November 2015 and last year produced 44,000 tons of copper cathodes. “Sicomines must respect the convention,” Kabwelulu said by text message. The company didn’t respond to questions about why it officially exported no cobalt in 2016 or the first half of 2017. Moise Ekanga, the head of the Congolese department monitoring the project, said in an interview in October 2015 that a lack of available power was preventing Sicomines from working at full capacity and that the company needed an extra 170 megawatts. Sinohydro and China Railway are currently financing a 240-megawatt, $660 million hydropower plant to meet Sicomines’ needs.

Tuesday, October 10, 2017 A13

CHINA has new rules that will speed up approvals of medicines and medical devices. BLOOMBERG

OR decades, Chinese patients have struggled to gain access to cutting-edge medicines thanks to bureaucratic delays that have hamstrung drug development. Now a sweeping government overhaul of drug approvals is poised to change that. Beijing on Sunday announced new rules that will speed up approvals of medicines and medical devices, easing bottlenecks in introducing new treatments. The move is also a growth opportunity for international and local drugmakers in the world’s second biggest pharmaceutical market. The changes were announced by the State Council, China’s cabinet, just days before a key leadership gathering in Beijing next week. On Oct. 18, delegates will gather for the 19th National Congress of the Communist Party, a twice-in-a-decade shuffling of China’s political decks. Under the new rules, data from overseas clinical trials can be used for drug registrations in China. That removes the need for manufacturers to conduct added tests in China after receiving overseas approvals and will likely cut delays in the launch of new drugs by several years. China is revamping its drug regulatory system as demand for new therapies surges due to an aging

population and rising incidence of diseases such as cancer and diabetes. Faster approvals could deliver a revenue boost in coming years to multinationals like Pfizer Inc., AstraZeneca Plc and GlaxoSmithKline Plc that are expanding there. China spent $116.7 billion on medicine in 2016 and the market is second only to the US in size, according to researcher QuintilesIMS. Shares of Chinese drugmakers researching new medicines jumped on Monday on hopes that they will also benefit. Jiangsu Hengrui Medicine Co. surged as much as 6.5 percent and Shanghai Fosun Pharmaceutical Group Co. advanced as much as 6.1 percent. “For multinational and leading local innovative drugmakers, the anticipated acceleration of approval will improve patients’ access to new medicine and increase revenues for pharmaceutical companies,” said Jialin Zhang, senior health-care analyst at ICBC International Research Ltd. Foreign manufacturers control about

a quarter of the Chinese pharma market, with the rest controlled by local players, he estimates. In the short term, foreign drugmakers might be the prime beneficiaries because they’re already starting to see quicker approvals for their drugs and have deep pipelines of medicines in development, Zhang said. Most local drug companies are still climbing the innovation ladder. That said, Chinese rivals might be the bigger beneficiaries over the long-term thanks to expertise in the local market and cheaper costs, he said. Local and multinational drugmakers have for years struggled with delayed approvals in China as a surging number of applications and a relatively small team of government reviewers resulted in a regulatory backlog. The delays in access to lifesaving therapies led Chinese patients to buy drugs from grey markets over the Internet or from bootleggers, putting them at risk of receiving counterfeit drugs.

The changes announced Sunday had already been widely telegraphed by the Chinese government, which earlier this year said it was considering overhauling the approval process. The China Food and Drug Administration has been introducing bold reforms in recent years, and the latest policy appears to have received the blessing of top-levels of the central government, said Zhang. More recently, the China FDA has already been working to reduce the backlog. That has already led to speedier approvals for some treatments like AstraZeneca’s lung cancer therapy called Tagrisso, estimated to become a global blockbuster next year. As more innovative drugs make an entrance, foreign manufacturers will still have to manage rising price pressures in China. The government has sought to cut prices to manage costs in its public health insurance system, putting foreign drugmakers through more negotiations with hospitals and local governments and squeezing margins. The reforms announced Sunday include other measures to speed up approvals for clinically needed drugs and equipment, establish a compulsory-licensing system and make it easier for research institutions to conduct clinical trials, according to the document. The government said it will also explore a new system linking drug approvals to patent status. This could potentially delay the introduction of generics when there are legal challenges posed by the patent holder. China’s protection of intellectual properties is still lacking, “and this is also an important reason that restricts the development of our medical innovation industry,” said Wu Zhen, vice minister of China FDA, at a press briefing webcast on Monday. Measures on patents were previously adopted by developed markets such as the US, Europe and Japan, and their implementation helped boost both innovative companies and generic drugmakers, Wu said. Bloomberg News

Africa’s contemporary art finds a home in renovated Cape Town museum By Pauline Bax Bloomberg News

ON T E MPOR A RY A fr ican art is so hot that it now has its first major museum— in Africa. Overlooking the harbor in Cape Town, the Zeitz Museum of Contemporary Art Africa, known as Zeitz Mocaa, opened last month in a former corn silo complex that was renovated for 500 million rand ($37 million). It displays strictly 21st century works by a range of young and established artists from across the continent, including South Africa’s Simphiwe Ndzube and William Kentridge and Kenyan-born Wangechi Mutu, as well as African-American and Afro-Caribbean pieces. Conceived by British designer Thomas Heatherwick, the structure’s most awe-inspiring feature is a hollow oval carved out of the silo complex’s inner cylinders bathed in sunlight from above. The centerpiece is a work by internationally acclaimed South African artist Nicholas Hlobo that resembles a giant rubber dragon, which former

Puma SE chairman Jochen Zeitz acquired after it went on show at the Venice Biennale in 2011. Located in a redeveloped industrial area near the busiest shopping mall in Cape Town, Africa’s top tourist destination, the museum’s opening came at a time when African American and African artists have taken center stage in art fairs around the world, from the 2016 Armory Show in New York to the Art/Afrique exhibit at the Fondation Louis Vuitton in Paris this year.

Tourism market

“THE museum has brought a massive amount of international clients to Cape Town who wouldn’t have come otherwise,” said Igsaan Martin, director of Momo gallery in the city. “A lot of our clients collected our art but never had that reason to come through to South Africa. Hopefully it will benefit our artists and we can get them into other museums.” While it’s not the only institute for contemporary art in Africa -- the Fondation Zinsou in the small West African nation of Benin pioneered the

THE museum has attracted international visitors to Cape Town. BLOOMBERG

model—it’s certainly the biggest. It’s stoked huge excitement among artists and curators in South Africa, the country with the most private art collectors on the continent. Yet along with the praise has come criticism -- that the works on display are mostly deemed valuable in western eyes, that art from Francophone African nations gets scant attention and that the museum seems more focused

on the tourism market than the nurturing of artists from across the continent.

Western influence

“AFRICAN art and value is always determined by what happens in western art markets and those power dynamics appear to remain in place,” said art commentator Mary Corrigall. “Of course, the gallery owners who’ve sold work to Zeitz are happy, and galleries and

artists have basically been throwing their works at them. But a lot of people ask: ‘Is this museum for Africans at all? Or is it for tourists?’” For some artists the museum will provide a platform to accelerate their meteoric rise. Prices for the colorful tapestries of Athi-Patra Ruga have shot up from about 175,000 rand to 1.2 million rand in the space of a few years. And when Ruby Swinney graduated from art school two years ago, she sold her paintings at barely 1,000 rand apiece. Next year, the Zeitz Museum will dedicate an entire room to her, and collectors already pay an average 30,000 rand per painting. “It’s great for young artists to be acknowledged by bigger, international museums and institutions,” said Mia Borman, a curator at Whatiftheworld gallery, which represents Swinney. “The opening of Zeitz has had a major impact on our local galleries.”

Tight budgets

SOUTH Africa’s few public art galleries have limited acquisition budgets

and the government is facing a fragile economy that has just emerged from a recession. The museum was the brainchild of a property developer who sought to restore and use the abandoned silo complex in a way that would keep the area commercially attractive. While Cape Town ranks among the top five cities in global TripAdvisor searches, it didn’t have a major cultural institution, said David Green, chief executive officer of the V&A Waterfront, Cape Town’s biggest tourist attraction. Visitors from the rest of Africa can also benefit from the museum, said Azu Nwagbogu, the Nigerian director of the Lagos photo festival, LagosPhoto, who serves as a curator-at-large for the Zeitz. “I’m really more interested in tourists from other African countries coming here to engage with the museum,” he said. “The Americans, the Germans, they are welcome too. But it really should be focused on making sure that we curate something for us Africans, so that we see ourselves in a positive light, and in a way that we feel like we can take ownership of our own destinies.”

2nd Front Page BusinessMirror

A14 Tuesday, October 10, 2017

Workers in retail, BPO may lose jobs due to automation–Unctad

By Cai U. Ordinario

@cuo_bm

ver 80 percent of workers in the retail and businessprocess outsourcing (BPO) sectors are at “high risk” of losing their jobs due to automation, according to the United Nations Conference on Trade and Development (Unctad).

In its “Information Economy Report 2017”, the Unctad said some 85 percent of retail and 89 percent of BPO workers are at risk of being displaced by the automation of operations. The Unctad said that, while increased digitalization will create new jobs, occupations will also disappear as a result of automation. “Advances in computerization, software, automation, robots and AI [artificial Intelligence] enhance the scope for disruptions to traditional industries, with smart machines taking over functions currently performed by people,” the report read. “On-site security guards may similarly be replaced by sensors monitored remotely in centers that provide surveillance for multiple sites,” it added. T he Unctad said increased digitalization will introduce four changes—job creation, job destruction, job changes and job shifts. New jobs will stem from the production of new goods and services such as 3D printing, software, app development, and AI. The report noted that conditions of work will be affected, such as benefits extended to workers, which includes allowing more flexibility for people in remote locations and people with disabilities. The Unctad also said new skills and education adjustments will be required, particularly those linked to digital skills. Workers will also be required, to have strong cognitive, adaptive

and creative skills. “A particular concern is that those losing their job may find it hard to fill the new vacancies created by digitalization, at least not without reskilling or retraining. The rapid pace of technological change and disruption accentuates the risk of mismatching of skills and highlights the urgent

$5.17B

The value of the Philippines’s computer-service exports in 2016 need for adjustment measures,” the report read. The same report noted that the Philippines is considered as one of the world ’s 10 largest computer - ser v ices e x por ters and the only Southeast Asian country on the list. Data from the Unctad, the World Trade Organization and the International Trade Center showed the Philippines’s computer-service exports rose to $5.17 billion in 2016, from $3.12 billion in 2014. The country’s total computerservice exports accounted for about 1 percent of the $353.1-billion global exports of computer

services last year. The top 10 largest computer exporters were the European Union (EU) with $213.31 billion, followed by India with $52.68 billion and the United States with $17.25 billion in 2016. The Unctad said the value of computer-services shipments of the top 10 exporters amounted to $315 billion in 2016. The EU and India accounted for 86 percent of the total computer-services exports. “The expansion of information and communication technology [ICT] services in world trade reflects how much the digital economy has grown,” the report read. According to the Unctad, preparing for the digital economy requires a concerted, holistic, cross-sectoral, and multistakeholder approach to policy-making. Key national policy areas include ICT infrastructure, education and skills development, competition, science, technology and innovation and fiscal issues, as well as trade and industrial policies.

World Bank: Easing of migration rules to cut poverty in Asean

outheast Asian countries like the Philippines will have a better chance of reducing poverty if governments will lift the restrictions to migration, the World Bank said on Monday. In its report, titled “Migrating to Opportunity”, the World Bank said lowering barriers to mobility would allow Asean workers to take advantage of higher wages, new employment opportunities and more options to move to new employment opportunities. “With the right policy choices, sending countries can reap the economic benefits of out-migration while protecting their citizens who choose to migrate for work,” said Sudhir Shetty, World Bank chief economist for the East Asia and Pacific region. “In receiving countries, foreign workers can fill labor shortages and promote sustained economic growth, if migration policies are aligned with their economic needs. Inappropriate policies and ineffective institutions mean that the region is missing opportunities to gain fully from migration,” Shetty added. The World Bank cited international studies that found that a

@alyasjah

masterpieces of the Shell art program were turned over to the Ayala Foundation and are now part of the Ayala Museum’s collection. In photo (from left), Pilipinas Shell President and CEO Cesar Romero, Ayala Corp. President and COO Fernando Zobel de Ayala, Ayala Foundation President Ruel Maranan and Pilipinas Shell Vice President for External and Government Regulations Ramon del Rosario view one of the artworks during the turnover ceremony at Ayala Museum in Makati City. NONOY LACZA

10-percent increase in remittances is associated with a 3.5-percent reduction in the proportion of poor households. In the Philippines, the World Bank noted that studies have found that households that were able to send a member abroad have a two-fold or three-fold greater odds of escaping poverty. This trend was also observed in Indonesia and Vietnam. The World Bank also said the Philippines has a “highly developed” support system for migrant labor, which other Asean countries can emulate. However, the World Bank said better local policies are still needed to improve the reintegration of returning migrants. “The [Philippines] should continue to evaluate and improve its migration-management system, including oversight of recruitment agencies, programs for returned migrants and data sharing and interoperability,” the report read. Local economists like Ateneo de Manila University School of Social Sciences Dean Fernando T. Aldaba agreed with the World Bank and said the government must See “World Bank,” A2

Marawi siege death toll nears 1,000 as clearing ops continue By Elijah Felice E. Rosales

MORE ARTWORKS AT AYALA MUSEUM As part of Pilipinas Shell’s 50th anniversary celebration, more than 200 winning

www.businessmirror.com.ph

s the government remains unsure when the conflict in Marawi City, Lanao del Sur, will end, the death toll in ground zero continues to rise and is nearing 1,000, according to the military. In a news briefing on Monday, Armed Forces Spokesman Restituto F. Padilla Jr. said the number of lives lost in Marawi City is a fingertip close to 1,000 after more than four months of fighting. According to the military’s recent count, the conflict has claimed a total of 982 lives—777 were terrorists, 158 were government troops, and 47 were civilians. Padilla said government troops were able to clear 69 buildings over the weekend. However, he added there are still 200 buildings in about 5 to 7 hectares that are up for clearing by the military. “Our troops are concentrating in this area and where those more or less 200 facilities remain, which includes one

mosque, which we believe is likewise being used as a safe haven and as a storage area for arms, food and whatever cache they have,” he said. As the death toll continues to rise, the military remains unsure when the conflict will end and has opted not to set a deadline, following numerous failures to meet previous target dates. “I was just asking our troops on the ground if any categorical statement was made regarding the deadline, [and] I was informed there was none. We’re really aiming to have this concluded at the soonest possible time,” Padilla said. “So as the case is, even the chief of staff does not want to put pressure on the troops because we know that any kind of pressure might lead to action that may lead to more casualties on our part. So we’re just being very careful about this,” the military’s spokesman added. Aside from clearing buildings, Padilla said government troops are taking extra caution in conducting offensives against the Islamist extremists, in light of reports that there remains about 40 hostages held by the enemy.

Avoid Privacy and Data-Security Mistakes Continued from A1

1. Too frequently, company management and boards fail to pay sufficient attention to the significant problems that will arise from a company’s failure to provide adequate security or to comply with applicable privacy laws. Litigation involving privacy and security is becoming mainstream. 2. Too many pay little attention to the fact that businesses are governed by a wide range of laws and standards, and are expected to operate within commonly accepted practices. Among other things, they may ignore the fact that the collection, use and processing of most personal information is regulated here and abroad. Ignoring these laws may lead to significant errors and may, in fact, subject the company and its managers to legal and other action. 3. Some companies may elect

to ignore their legal obligations because they are small and believe that they can easily fly under the radar. They might be able to escape notice as far as their procedures are concerned for a short time, but not for long. 4. Some companies may think that their ability to succeed requires that they be nimble. They may believe that policies and processes slow them down and are not a business imperative. In the absence of rules defining who is allowed to access certain information or what uses are restricted, employees, subcontractors or visitors might inadvertently access highly confidential or sensitive data and misuse it. 5. Some companies hire third parties, outsource some of their functions, or locate their operations in the cloud because they do not have sufficient resources to hire personnel or to purchase equipment. In

doing so, they may think that they have passed on to those third parties the responsibility for their data. The company that initially collects the data remains primarily responsible for anything that happens to the data. The entity that the customers know—not the obscure service provider—will be the one that will be sued or investigated if data is illegally processed or inadequately protected. It will be the one whose reputation and trustworthiness will be at risk. 6. Security breaches are to be avoided by all means. They are significantly disruptive. A company that has implemented a wellthought-through written security program will be less exposed to potential security breaches and to the significant consequences of security breaches. In most cases, a company that has suffered a breach of security might be required to publicly disclose

the occurrence of the breach. It may have to send notices to affected parties and regulators, and offer credit monitoring or identity theft insurance, which is usually a significant expense. If the National Privacy Commission becomes aware of the breach, a lengthy, invasive and grueling investigation of the company’s practices may follow, resulting in significant cost, disruptions and potentially ending with financial consequences if not law suits. 7. Some companies tend to collect much too much data just because “we may need it later”, and “storage is cheap”. The more data a company has in its custody, the more vulnerable it is to legal violations and security breaches. The more data a company has, the more time and data experts it will need to retrieve it. Collecting a massive amount of data also causes significant security risk. The larger the volume of data—the higher the

probability that it will be stolen. 8. To “save” on costs by simply copying the privacy policy of another web site without fully understanding what it means, or ensuring that the document describes accurately the start-ups’ policies and procedures, companies create risks for themselves. The borrowed document is likely to tell someone else’s story other than that of your company. It will describe the neighbor’s practices, which may be significantly different from those of your company, or, worse, may be illegal. 9. It is true that legal documents may be long or difficult to read. That is not an excuse for not reading them with a critical eye. Privacy statements of some companies state “we will never sell your personal data”. This might be their intention at a particular time, but it fails to take into account that the company or a portion of its assets might be sold.

10. When discussing personaldata protection, it is common to hear: “We don’t have any personal data, our data is anonymized and it cannot be tied to an individual.” This is a significant mistake. While it might have been true, a long time ago, that anonymization prevented the association of a particular individual to a particular data set, this is no longer the case. In the world of data analytics, big data, semantics and other tools, there is no such thing as anonymity. Too often, a competent data scientist will be able to crack the anonymization shell in a short time. Why am I writing about privacy and data-security mistakes? The Integrity Initiative is focusing on compliance-risk analysis of organization, and data-security risks are becoming a major risk factor. For comments, please contact Schumacher@integrityinitiative.com