Businessmirror october 17, 2017

Compliance Management—is it really needed? By Henry J. Schumacher

Read this press clipping from October 12: ‘TOKYO—The chief executive of Kobe Steel warned on Thursday that more quality data about the company’s products may have been falsified than has previously been disclosed, suggesting that fallout could widen further from a scandal that has already affected hundreds of companies worldwide. We are reviewing data, including from overseas. It is possible that there could be more cases of wrongdoing,” the executive, Hiroya Kawasaki, told reporters. He added, “Trust in our company has fallen to zero.” Kawasaki said it could take Kobe Steel two weeks to complete a review of its records to determine the full extent of the data falsification and decide whether any of the improperly certified products it shipped to customers presented a safety hazard. Makers of cars, airplanes and trains use metal from Kobe Steel, making such a safety assessment imperative.”

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Kirill Makarov | Dreamstime

he answer can only be yes. Quality control is only one area; data protection, cybersecurity, anticorruption, etc., are other areas that need compliance management. Of course, the compliance managers must not report to the management, they must report to the board of directors, which must have independent board members.

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Tuesday, October 17, 2017 Vol. 13 No. 6

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@jearcalas

he rice sector may get at least P27 billion in government assistance, or nearly half of the Department of Agriculture’s (DA) P60.6-billion budget for 2018, once Congress approves the tariffication of the staple.

ESPENILLA: NO PRESSURE TO TWEAK RATES EVEN IF FED TIGHTENS FURTHER C

entral Bank Governor Nestor A. Espenilla Jr. said contained inflation means there isn’t a need to increase interest rates in the near term. “Right now, there is no need to move policy rates looking at the inflation outlook,” Espenilla said in Washington, where he was attending the annual International Monetary Fund meetings. “It might be too much of an anticipation to say we will raise interest rates at the next review.” An economic boom accompanied by surging credit growth has fueled speculation that the Bangko Sentral ng Pilipinas (BSP) may need to tighten monetary policy. That would be a divergence from other central banks in Southeast Asia— like Indonesia’s and Vietnam’s—that have eased this year. The Philippines kept its benchmark interest rate unchanged at a record low of 3 percent last month. The BSP is next scheduled to decide policy on November 9. The Philippine economy is headed for a sixth year of growth exceeding 6 percent, among the world’s fastest. That hasn’t yet translated into an inflation problem with the Central Bank maintaining forecasts for this year and next year at 3.2 percent. The bank’s goal is to keep inflation within a range of 2 percent to 4 percent until 2020. “If you look at it purely from that perspective, that is not really a big driver for us to move policy rates,” Espenilla said last Sunday in Washing-

ESPENILLA: “Our monetary policy is not hostage to what happens in another jurisdiction. We are in a different cycle.”

ton. “Nonetheless, we review this on a six-week cycle.” The Central Bank governor said he won’t be pressured to lift rates if the Federal Reserve (the Fed) pushes ahead with further gradual tightening. In past economic cycles, central banks in Asia moved in tandem with the Fed. “Our monetary policy is not hostage to what happens in another jurisdiction. We are in a different cycle.”

Weak peso Describing the economy as increasingly strong, Espenilla played down concerns about the impact of the weak peso, which has declined more than 3 percent against the dollar this year, according to Bloomberg data. “Currency traders will do what they do.” On the nation’s credit boom, the central bank governor said demand for credit is based on underlying fundamentals and that its scrutiny of banks shows that loans quality remains high. Growth in net loans accelerated to 20.4 percent in August, the fastest pace since 2014. See “Espenilla,” A2

PESO exchange rates n US 51.3850

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Tariffication to give rice sector ₧27-B safety net By Jasper Emmanuel Y. Arcalas

2016 ejap journalism awards

Upper middle-income status within grasp Manny B. Villar

₧60.6B

THE ENTREPRENEUR

The budget of the Department of Agriculture for 2018

Removing the quantitative restriction (QR) on rice by amending Republic Act (R A) 8178 would allow the government to generate P27 billion annually, according to a paper published by the Philippine Institute for Development Studies (Pids).

Part One

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lot of foreigners who have seen Metro Manila and have observed the signs of prosperity almost everywhere in the metropolis often wonder why the Philippines is classified as a lower middle-income country. The World Bank classifies countries based on their gross national income (GNI) or each country’s final income (also defined as GDP plus overseas income) divided by their population, or GNI per capita.

See “Tariffication,” A2

Continued on A10

BMReports

Can PHL wean itself off coal? By Rea Cu

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@ReaCuBM

Part Two

NVIRONMENTAL activists group Greenpeace Philippines claims the burning of fossil fuels, specifically coal, is detrimental to the environment and human health. “Specifically, [the] traditional means of generating energy that involves the burning of polluting fossil fuels, such as coal, natural gas and oil, have been scientifically proven to be extremely hazardous to the environment and to human health,” the group’s statement issued in a forum in mid-September said. “Of the three types of fossil fuels, coal has inflicted, and continues to inflict, the biggest blows to public health.” According to documents provided by Greenpeace Philippines, the use of coal as energy source releases the most carbon dioxide (CO 2) per unit of energy. Coal accounts for 43 percent of global emissions released annually from fossil-fuel combustion, with 28 percent being emitted from coalfired power plants. Coal-fired power plants, which are the largest producers of manmade CO 2 emissions, contribute to the increase of greenhouse gas (GHG). This gas traps heat in the

This October 5 photo shows activists at the Bank of the Philippine Islands headquarters in Ayala Avenue, Makati City, protesting the bank’s planned financing of a new coal-fired power plant in Atimonan, Quezon. Environmentalists are urging financial institutions to rechannel investments to renewable-energy sources rather than in “dirty fuel”, like coal. ALYSA SALEN

Earth’s atmosphere, resulting to increase in global temperatures. “Experts predict that the rising global temperatures will continue to increase overall health burdens, which disproportionately affects the poorest and most vulnerable communities, resulting in the widening of current unacceptable gaps in health outcomes,” it said.

Deaths

ACCORDING to Raphael Lopez of the Health Care Without Harm Inc. Asia (HCWHA), coal-related deaths in the Visayas region every year may reach up to 650 from the current 240 should the country continue to rely on coal-fired power plants. However, he said the estimated increase in premature deaths can be reduced.

“A track pursuing renewable energ y [RE] would help reduce, if not avoid, the number of mortality,” Lopez said during the same forum. He was referring to the HCWHA case study that sought to provide a more detailed analysis of the health impact of coal-power plants within a 1,500-kilometer radius. Continued on A2

n japan 0.4577 n UK 68.1571 n HK 6.5814 n CHINA 7.7978 n singapore 38.0038 n australia 40.1779 n EU 60.7987 n SAUDI arabia 13.7023

Source: BSP (13 October 2017 )

A2 Tuesday, October 17, 2017

BMReports BusinessMirror

MTD Capital proposes ₧121.8-B NGAC in Clark

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he Bases Conversion and Development Authority (BCDA) received an unsolicited proposal from MTD Capital Berhad to establish the 207-hectare New Clark City National Government Administrative Center (NGAC) through a joint-venture agreement with an estimated project cost of P121.8 billion.

All of its components, salient features and terms will undergo thorough review, negotiations and approval by the BCDA, the stateowned asset-disposition firm said in a statement. According

to MTD Capital, the NGAC will house satellite offices, as well as the major administrative offices of various executive departments and agencies. MTD Capital’s proposal also includes the construction of an extension facility of the Office of the President and executive buildings, site development for embassies and international schools, buildings to serve as housing for government employees, sports facilities, a central communications and security-command center, public schools, a government hospital, a public library and buildings for community centers. BCDA’s proposed site plan for the first phase of the project, which will cost P17 billion, will cover 50 hectares of the 207-hectare total area of the NGAC. MTD Capital’s proposal follows the practice of other progressive

countries, such us Putrajaya in Malaysia and Sejong City in South Korea, by establishing NGACs outside the country’s capital, helping ease traffic congestion and overpopulation in the metropolitan area. New Clark City is BCDA’s flagship project, envisioned to be a metropolis that will rise in the Clark Special Economic Zone in Capas and Bamban, Tarlac. The New Clark City will feature mixed-use real-estate developments, an agro-industrial park and a food-processing terminal. MTD Capital is a Malaysianbased investment holding company with interest in civil engineering and construction, infrastructure development, real estate and property development, energy, ports and manufacturing of construction related materials. It is the parent company of AlloyMtd Philippines. Catherine N. Pillas

scholarships and vocational education and research and development. “Up to 20 percent of the Rice Fund collected from the effectivity of this act from the applicable rates of duty for all rice importations shall be utilized for the establishment of a permanent rice-endowment fund, which shall be preserved as a capital fund and not expended, and which will be prudently invested, and its profits and earnings reinvested and any savings at the end of the year shall also accrue to the rice endowment fund,” it read. The substitute bill also noted that 20 percent of the Rice Fund shall be made available as grants to farmers and cooperatives in the form of farming machinery. Tractors, harvesters, millers, reapers and other related farming equipment would be given to farmers to increase their productivity. “Up to 20 percent of the Rice Fund shall be used for a special program of the crop loans, farm inputs, crop insurance, loan guarantees and other financial assistance to farmers and farm workers included in the registry system for basic sector in agriculture, including related technical assistance and support, which shall be established and administered by the DA,” the substitute bill read. Another 20 percent of the Rice Fund

will be allocated for postharvest facilities, logistics, storage, transportation facilities and infrastructure projects. As for the remaining 20 percent, 10 percent will be used to fund rice farmers’s education, scholarships, technical and vocational training of farmers and their dependents. The remaining 10 percent will be channeled to the government’s research and development program on rice. “The congressional oversight committee on agricultural and fisheries modernization shall conduct a periodic review of the use of the Rice Fund,” the substitute bill read. It indicated that the fund will be disbursed by the DBM to the DA and that the Agriculture secretary would administer the fund. “The DA, in consultation with the Philippine Council for Agriculture and Fisheries, shall promulgate the policies and guidelines necessary for the planning, administration, coordination and monitoring of the utilization of the Rice Fund,” it read. The programs that will be supported by the Rice Fund will only complement the existing initiatives rolled out by the DA for the rice farmers, according to the substitute bill. “Any remaining balance at the date of expiration of the collection of duties for the

Rice Fund shall not revert to the general fund but shall continue to be used for the purpose for which it was collected and set aside,” it read. The DA, together with other relevant agencies, will be tasked to craft a Rice Industry Roadmap that will serve as a “backbone” of the sector’s development. “Upon the enactment of this Act, the DA, together with relevant agencies, shall be given a maximum of 180 days to finalize the rice road map to restructure the government’s delivery of support services for the sector,” it read. “As part of this road map, a five-year rice program shall be implemented to provide alternative livelihood for those who will be affected by the shift in the import policy. The road map shall be based on the following principles: rice industry; farmers’ profitability, support covering the whole value chain and technology-oriented, location, situation and farmer-specific support services,” it added. House Committee on Agriculture and Food Chairman Party-list Rep. Jose T. Panganiban Jr. of Anac-IP earlier told the BusinessMirror that they plan to approve the bill on third and final reading before the end of the year.

tasked to undertake reforms in regulation through the Omnibus Franchising Guidelines. The program also mandates the regulator to implement new jeepney-vehicle standards, rationalize routes and assist in a proposed scrapping program, among others. Other government agencies will be involved in the program’s implementation. The Department of Trade and Industry will extend the Comprehensive Automotive Resurgence Strategy Program, which provides vehicle manufacturers with incentives. The Department of Finance will assist the LTFRB in implementing a financing program for the proposed refleeting of public-utility jeepneys. But Rep. Sarah Elgalo of Kabataan, Reps.

Emmi de Jesus and Arlene Brosas of Gabriela, Rep. Ariel Casilao of AnakPawis and Rep. Carlos Isagani Zarate of Bayan Muna said the government’s PUV-modernization program would burden, not help, drivers. “The project, now fully funded by the government in its national budget in the amount of P843.45 million, fails to consider the plight of jeepney drivers and the commuters,” Elago said. According to the lawmaker, the cost of modernization will be shouldered by commuters themselves. “The government will have to subsidize the purchase of the e-jeepneys, manufactured abroad and by local business tycoons, through our taxes.” With Lorenz Marasigan

In its proposal, MTD Capital Berhad will provide financing for the project, as well as technical and engineering expertise, for the construction and operations and maintenance of the NGAC.

Tariffication. . . Continued from A1

The Pids paper noted that the projected revenues would come from the importation of some 2.2 million metric tons (MMT) of rice at 35-percent tariff. Purchases of imported rice are expected to increase once the government removes the QR. Under a substitute bill approved recently by the technical working group created by the House Committee on Agriculture and Food, duties collected from importing the staple would form the rice competitiveness enhancement fund, or Rice Fund. “The Rice Fund shall consist of all duties collected from the importation of rice under this act and shall be automatically credited to a special account in the general fund of the national treasury: provided that fund release shall not be subject to any ceiling by the Department of Budget and Management [DBM],”the substitute bill read, a copy of which was obtained by the BusinessMirror. The Rice Fund shall be channeled to six components: rice endowment fund, farm equipment/mechanization grants, rice-crop finance, postharvest development, rice

Strikes. . .

Continued from A14

Piston President George F. San Mateo said his group is opposing the program, as the phaseout of 15-year-old vehicles would displace thousands of jeepney drivers. Under the program, modern jeepneys must be equipped with Euro 4 emission-standard engines. These vehicles will also be required to have speed limiters, GPS, dash cam and closed-circuit television, to ensure the safety and security of the commuters.

‘Burden on drivers’

Under the proposed program, the LTFRB is

Espenilla. . . Continued from A1

Domestic credit to the private sector in the Philippines stood at 45 percent of GDP in 2016, according to data from the World Bank. The ratio exceeded 100 percent in Malaysia, Thailand and China. The BSP has adopted measures in the past to cool the property sector, including capping the value of real estate that can be used as loan collateral. It is not a situation where banks are lending to anyone who has a name and can sign a piece of paper,” Espenilla said. “We know for a fact that the banks are lending very carefully into the market.” Bloomberg News

Report. . .

Continued from A14

Adelina Sevilla-Alvarez of the Center for Community Journalism and Development (CCJD). Undersecretar y R icardo B. Ja l ad , ad m i n i st r ator of t he Office of Civil Defense (OCD) and executive director of the National Disaster Risk Reduction and Management Council (NDR R MC), said disaster response shou ld focus on prevention and mitigation, with a special attention given to local government units and communities. The Philippines is seen as a key country in disaster-risk reduction due to its exposure to hazards, as well as the learnings it offers for other countries. Earlier this year, some local governments in Eastern Visayas signed

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Can PHL wean itself off coal? Continued from A1

By 1,500-km domain covering the areas of Southern Luzon, the Visayas and Mindanao, which is home to around 97 million people. “Considering the Philippines’s rising population, poor health outcomes and the scarcity of resources needed to adapt to t he worst ef fects of c l imate change, the country should end its heavy dependence on coal as an energy source and accelerate initiatives involving renewable energy resources to meet its energy demands,” the HCWHA report said.

The WHO

ACCORDING to the World Health Organization (WHO), the burning of coal in power plants is a leading cause of smog, acid rain and toxic air pollution. The air pollutants caused by the combustion has been linked to serious damage to the human respiratory, cardiovascular and nervous systems. Based on estimates done by the WHO, more than 7 million people die each year from diseases related to air pollution, making it the world’s largest single environmental risk to health. From mining, transportation, washing, combustion and to disposal of postcombustion wastes, coal was found to have negativelyaffected people’s health. In the Philippines around onethird of the energy used to generate electricity comes from the burning of coal. Coal-fired power plants continue to be the country’s top producer of electricity since 2012, accounting for approximately 39 percent of the country’s powergeneration mix. According to the Department of Energy (DOE), the Philippines has 17 operating coal plants as of May 2015. About 29 more are to begin commercial operations by 2020. The DOE has announced early in the year that the Philippines is looking at a dramatically increased 70-percent dependence on coal for electricity from 2030 to 2050.

Impact

THE HCWHA study also revealed that at least 12 percent of workers employed in coal-fired power plants have contracted lung diseases suspected to be due to inhalation of dust during mining operations. Fatal impact to their health includes pneumoconiosis (Black Lung disease) and silicosis, among others. Based on an HCWHA 2016 fact sheet, energy derived from coal poses the most harmful in terms of public health-risk impact. Coal combustion results in significant air pollution and its waste contains toxic metals and radioactive materials. “The majority of greenhouse-gas emissions include CO2, methane and short-lived climate pollutants, such as black carbon, come from the burning of fossil fuels,” HCWHA Executive Director Ramon San Pascual said. up to the campaign “Making Cities Resilient” launched by the United Nations Office for Disaster Risk Reduction (UNISDR). “Each family is vital in resilience building of a community. UNISDR emphasizes that capacitating families and ensuring their safety, especially in the most vulnerable areas in the Philippines, must be our main priorities as duty bearers,” Jalad said. The IDDR-ADDM Celebration was spearheaded by the OCD and the NDRRMC, in partnership with the Disaster Risk Reduction Network Philippines (DRRNet-Phils) and its members World Vision, Center for Disaster Preparedness, CCJD, Assistance and Cooperation for Resilience and Development, Build Change, Ateneo School of Government and Oxfam. The event is also the second leg of “Barangay 911: Tugon sa Tawag

Occupational health risks in coal mining and production include exposure to carcinogens, silica and coal dust, among others. Climate risks, likewise, comprise 44 percent of global CO2-emissions from fuel and methane combustion. According to Pascual, continued investments in coal and fossil fuels for energy generation inject a massive strain in a country’s health-care system. In 2015 an estimated $5.3 trillion, or 6.5 percent of the global GDP, went to post-tax consumer subsidies for fossil-fuel companies, including that of health costs due to air pollution. Fossil-fuel combustion, being a major contributor to air pollution, has caused around 7 million premature deaths around the world for 2012, Pascual added. “Air pollution is the biggest threat to health that comes from the energy sector,” he said in the same forum. “Air pollution is the leading cause of heart attack, stroke [and other major illnesses].”

Alternatives

HYDROELECTRIC, geothermal, solar and wind-energy sources comprise that of RE sources. The HCWHA claims that small hydroelectric energy sources are less harmful to health. Although public health risks stemming from the source are not well documented, it is assumed that the impact is minimal, Pascual said. As for its occupational health risks, workers in this area are exposed to toxic chemicals and diesel fumes. They may encounter drowning or electrocution, especially in large dams. The climate risks associated with hydroelectric energy sources involve variable climate impact from construction and operation in the area, including significant emissions from the reservoirs. Geothermal energy is deemed to pose relatively low public health risks from air and water pollution. Occupational risks include toxic chemical exposure, injuries and silicosis. Climate risks in this RE model involve minor climate impact, with its open-loop system emitting relatively small amounts of CO2 and methane. Solar energy, meanwhile, pose public health risks that are relatively smaller compared to the burning of fossil fuels. Health concerns here only center on the management of toxic waste during manufacturing of solar panels and end-of-life disposal. Occupational health risks in solar-energy sources only involve injuries and toxic chemical exposure during manufacturing. Climate risks, on the other hand, are minor and stem from the manufacturing of equipment. As for wind energy, the public health risk seen from this source only comes from the noise emitted by the turbines that can possibly contribute to stress-related illnesses. Occupational health and climate risks are also minimal. To be concluded

ng Panahon”, an awareness raising campaign of DRRNet-Phils featuring nine calls to action toward addressing key issues on the DRRM system in the Philippines. It envisions model communities that represent the aspiration and collective action of Filipinos toward building a resilient nation. The launching also commemorates the International Day of Disaster Reduction and Asean Day for Disaster Management. The DRRNet-Phils is a national tertiary formation of CSOs, people’s organizations, practitioners and advocates adhering to the Hyogo Framework for Action and its successor, the Sendai Framework for Disaster Risk Reduction and implementing communitybased disaster-risk reduction and management. DRRNet-Phils is one of the four CSO representatives to the NDRRMC.

Economy

A4 Tuesday, October 17, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

House leader vows to oppose medical marijuana-use bill By Jovee Marie N. dela Cruz @joveemarie

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senior deputy minority leader strongly opposed on Monday the passage of a measure decriminalizing the use of marijuana. Party-list Rep. Lito Atienza of Buhay said the Philippine Medical Association has rejected the House Bill (HB) 6517 outright, declaring marijuana “contrary to the policy of the State to safeguard the well-being of its citizenry”. “If other countries wish to destroy themselves by enabling medical marijuana, then let them create their own problems. We Filipinos certainly do not want to degenerate into a nation of zombies,” Atienza said. HB 6517 Philippine Compassionate Medical Cannabis Act, which is pending for the second-reading approval, seeks to amend Republic Act 9165, or the Comprehensive Dangerous Drugs Act of 2002, which classifies marijuana or cannabis as a dangerous drug. Currently, marijuana is classified as a prohibited substance, just like methamphetamine hydrochloride or shabu, cocaine and heroin, under the Dangerous Drugs Act of 2002. Under the law, possession of at least 500 grams of marijuana, or at least 10 grams of marijuana concentrate (resin or resin oil), is punishable by life imprisonment, plus a fine of up to P10 million. Carrying lesser quantities of the drug is punishable by 12 to 20 years in prison, plus a fine of up to P500,000. “We expect the bill to be put to the floor when Congress resumes session next month, and we intend to fight it off forcefully,” Atienza said. “Advocates of the bill argue that Filipino families should be allowed to use marijuana to provide artificial, mind-altering ‘highs’ to depressed teenagers, as well as children, with attention deficit hyperactivity disorder, when what these vulnerable kids truly need and deserve is extra loving care and emotional support,” Atienza said. The lawmaker also warned that criminal drug traffickers are bound to exploit “medical marijuana” as a mere cover to boost the recreational use of the drug and enlarge their nefarious trade.

“What makes marijuana even more menacing is that many young Filipinos are known to first experiment on the substance, before they eventually use harder drugs,” Atienza said. “Marijuana is a gateway drug. Pushers in schools purposely use marijuana to entice students to use drugs for the first time, before they are introduced to shabu,” the lawmaker added. Moreover, Atienza said the World Health Organization considers marijuana an extremely harmful substance that produces in users a dangerous dependency. For his part, Rep. Rodolfo T. Albano III of the First District of Isabela, principal author of the bill, said his proposal seeks to provide compassionate and right of access to medical cannabis and expand research into its medicinal properties. However, Albano said the bill should not be deemed in any manner to advocate, authorize, promote or legally or socially accept the use of cannabis or marijuana for any nonmedical use. Albano called on his colleagues “to decide based on evidence”, citing the numerous clinical trials around the world that have shown the safety and efficacy of cannabis and its therapeutic and palliative effects. He added his bill does not decriminalize the use of marijuana, except for medicinal purposes for qualified patients certified by licensed S2 doctors, who have assessed their medical history and current medical conditions. Neither does it allow smoking of cannabis and its recreational use continues to be prohibited by law. And it can be dispensed only by hospitalbased Medical Cannabis Compassionate Centers through licensed S3 pharmacists, Albano added. According to Albano, research and safety of medical cannabis will be ensured through licensed Medical Cannabis Research and Safety Compliance Centers licensed by the Philippine Drug Enforcement Agency. He also underscored that his proposed measure does not amend or in any way contravene the Dangerous Drugs Act of 2002, which recognize the medical use of drugs, including cannabis.

BusinessMirror

FPI renews push for tighter cement, steel import control

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By Catherine N. Pillas

@c_pillas29

he Federation of Philippine Industries (FPI), representing local manufacturers, is pushing for an equal treatment between importers and manufacturers of steel and cement, as the Duterte administration gears up for a stepped up infrastructure development under the “Build, Build, Build” program. Manufacturers continue to find loopholes in the Department of Trade and Industry’s (DTI) draft department administrative orders (DAO) on cement and steel importation, insisting both products must still undergo in-country testing. The DTI’s DAO 17-02 proposes a minimum requirement of preshipment inspection (PSI) as a substitute for testing imported cement upon arrival. “They have prepared an order, saying all shipments of cement, and eventually steel bars, will be subjected to preshipment inspection. That’s fine, but there has to be inspection at the port of entry, and results from [the DTI’s testing] should be awaited before being released into the market,” FPI President Jesus L. Arranza said at news briefing on Monday. Trade Secretary Ramon M. Lopez, commenting on the DAO on cement some weeks ago, said he may be inclined to allow cement imports to just undergo PSI at their port of destination. Upon arrival and upon passing the test, the imports will only be subjected to a minimal “verification” process at the port of entry. Pure cement traders/importers,

for their part, have groused that aside from ballooning costs from cement storage, spoilage may also occur due to the lengthy testing process by the Bureau of Product Standards (BPS). Arranza, however, said that the DTI should move to accredit more testing centers to facilitate entry. “I’m not against importation, but only if importers do not pay the right duties and if the products are substandard. Let’s not have trade facilitation but sacrifice quality,” he added. For steel, Philippine Iron and Steel Institute President Roberto M. Cola similarly insisted on in-country testing and called for the wider accreditation of testing labs so as to hasten the entry of steel products. “Just like the cement, testing should be done here. Steel is a commodity, and in the case of commodities, the origin of the shipment is difficult to trace. A shipment can come from anywhere or wherever it’s most convenient. [The] DTI just have one accredited lab for testing,” Cola stressed, referring to the Metals Industry Research and Development Center under the Department of Science and Technology.

PSA seeks addl support to ensure accuracy, reliability of PHL statistical system By Cai U. Ordinario

@cuo_bm

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hile the Philippine Statistical System (PSS) has been touted as one of the world’s best, the Philippine Statistics Authority (PSA) is cognizant of the data gaps that need to be addressed, especially where the Sustainable Development Goals (SDGs) are concerned. No less than Socioeconomic Planning Secretary Ernesto M. Pernia said that, out of the 232 global SDG indicators, only 94 are readily available for the country to measure its progress. Around 11 of the 232 indicators are not applicable for the country, but 127 indicators need to be updated and/or developed. Pernia said 59 indicators are not collected regularly, and 68 indicators still do not have methodologies. But meeting the country’s SDG commitments will not only require greater disaggregation in terms of the available data but a macro approach in terms of improving the entire PSS. And this will not come cheap.

’No free lunch’

Improving the PSS will require an average increase in the PSA of an average budgetary increase of 30 percent to 35 percent over a five-year period. In a presentation at the International Conference on the Sustainable Development Goals (ICSDGS), Philippine Institute for Development Studies (PIDS) Senior Research Fellow Rosario G. Manasan said the estimate includes the major initiatives of the PSA, including quadrupling the sample size of the family income and expenditure survey (FIES) to 180,000 respondents, from only 45,000 respondents. Manasan said in her medium-term expenditure framework (MTEF) for the PSA between 2018 and 2023, the increase in the sample size of the FIES will be accompanied by efforts, such as enhancing the agency’s information system and geotagging build-

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ings and structures to create digital maps for census/survey operations. “I think…[the PSA’s effort is] good. We should really invest. In my opinion, [agencies] say we want this [data], we want this [statistic], but you should allocate funds. There’s no free lunch,” Manasan told BusinessMirror. The need to invest in statistics is imperative, Manasan added, saying the performance of the country’s statistical system has been “deteriorating” compared to other East Asia and the Pacific countries. Manasan said the overall statisticalcapacity indicator between 2014 and 2016 showed the PSS experienced “persistent gaps in data quality, lack of data on old and new concerns alike”. She added this was largely due to the lack of monetary and human resources. This was apparent in the 2015, 2016 and 2017 periods, which showed that the PSA’s budget declined compared to previous years. “After adjusting for variation in conduct of periodic censuses and surveys, total budget allocation for the PSA for the years 2015, 2016 and 2017 is lower than in previous years when expressed as a percentage of GDP,” Manasan said. In the MTEF, Manasan added the baseline assumptions include an information communications technology (ICT)-investment program, as well as provision for refresh every five years; geotagging of buildings and structures; increasing sample size of FIES from 45,000 to 180,000; and conducting the FIES once every three years, with APIS being conducted during non-FIES years. Manasan’s baseline computation showed the estimated cost of these policies will reach P4.41 billion in 2018; P5.79 billion in 2019; P6.45 billion in 2020; P3.9 billion in 2021; P4.58 billion in 2022; and P7.08 billion in 2023. Using 2018 prices, these policies will cost P4.41 billion in 2018; P5.62 billion in 2019; P6.08 billion in 2020; P3.57 bil-

lion in 2021; P4.07 billion in 2022; and P6.1 billion in 2023. This means the average cost of these policies will amount to P4.97 billion between 2018 and 2023. Scenario 1 assumed ICT-investment program includes provision to refresh it every three years; geotagging of buildings and structures; increasing the sample size of the FIES to 180,000 respondents from only 45,000; and conducting the FIES once every two years, per semester, and conducting the Apis on non-FIES years. Manasan said the PSA will require P4.41 billion in 2018; P5.79 billion in 2019; P6.66 billion in 2020; P3.95 billion in 2021; P4.54 billion in 2022; and P7.45 billion in 2023. But these estimates will be higher using expected 2018 prices. The average estimate reaches P4.97 billion between 2018 and 2023. In 2018 this will amount to P4.41 billion; 2019, P5.62 billion; 2020, P6.27 billion; 2021, P3.61 billion; 2022, P4.03 billion; and 2023, P6.34 billion. Meanwhile, Scenario 2 assumed ICTinvestment program includes provision to refresh it every three years; geotagging of buildings and structures; increasing the sample size of the FIES to 180,000 respondents from only 45,000; conducting the FIES once every two years, per quarter; and conducting the Apis on non-FIES years. Manasan said this will cost P4.75 billion in 2018; P5.79 billion in 2019; P7.03 billion in 2020; P3.95 billion in 2021; P4.94 billion in 2022; and P7.35 billion in 2023. Using 2018 prices, these policies will cost P5.26 billion between 2018 and 2023. Annually, this will cost P4.75 billion in 2018; P5.62 billion in 2019; P6.72 billion in 2020; P3.72 billion in 2021; P4.39 billion in 2022; and P6.34 billion in 2023. “The thing with PSA is that their budget increases if there’s a major survey to be conducted or a census,” Manasan said. “You cannot say every year but on the average it will increase by 35 percent average (every) five years.”

Wartime entrepreneurship

A Maranao lad peddles his rice-cake merchandise to soldiers and evacuees alike inside an evacuation site in Marawi City, amid a bloody siege that has claimed about 1,000 lives. Defense and military officials announced on Monday the slaying of Isnilon Hapilon and Omar Maute, a development which may finally bring an end to the four-month siege. Nonie Reyes

At the moment, the Philippines only have a few products under mandatory testing compared to Asean counterparts, Cola said. If the government is concerned with trade facilitation, the logic doesn’t add up as the Philippines is already heavily reliant on imports.

“If we’re talking about facilitation, we have to look at the trade balance with a country and, second, what is the reciprocity arrangement? We don’t export any steel. In terms of trade balance, 90 percent of our steel is imported, so what else are we facilitating?” Cola said.

ADB highlights downside of rural to urban migration

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igration from rural to urban areas has led to the shortage in agriculture workers, and has become a threat to attaining food security, according to the Asian Development Bank (ADB). In an Asian Development Blog on Monday, ADB Sustainable Development and Climate Change Department Director General Amy Leung said this requires the private sector and the government to forge partnerships to finance agriculture investments. “Rural-urban migration is intensifying an already-acute shortage of agricultural workers, which has emerged as one of the main obstacles to food production in many countries. This, in turn, results in more outmigration from rural areas and the agricultural sector,” Leung said. Leung added hunger, poverty, conflict and instability has led around 763 million migrants to become internally displaced within their home countries. She added that this has happened amid the rise in hunger globally. Around 815 million people went to bed unfed or half-fed in 2016, compared to 777 million the year before. Leung said on top of this is the threat of climate change on food production. The later suffers from and contributes to the former. “This trend, if left unchecked, will result in a mass exodus of rural populations to urban areas, potentially triggering an even larger human catastrophe,” Leung said. In a recent international workshop, Leung said experts agreed that agriculture cannot innovate without the help of other branches of science. She added technology, such as the use of drones or remote sensors offers opportunities for the sector. These technologies can pave the way for the sector to boost knowledge-intensive agriculture. However, this requires investments in “customized knowledge and a knowledgeable farming community.”

Leung said this means supporting educational institutions and providing farmers with the know-how to use and maximize innovations. “ADB plans to invest about $400 million to development curriculums, support laboratories, forge partnerships with world-class universities and strengthen links between academia and industry across the entire agricultural supply chain in several countries in Asia and the Pacific,” Leung said. Other priority investment areas include collecting data; processing data to become knowledge that farmers can use; and mid-end (processing and storage) and front-end (distribution and retail) stages of the food chain. Leung added that, while financing is a necessary factor in boosting agriculture production and increasing innovation, extending credit to farmers remains “cumbersome”. This requires governments and private-sector companies to invest in partnerships through digital-platform providers and financial institutions to address finance gaps. This means using information and communications technology to do background checks on clients and performance monitoring, or managing loans electronically. “Our repeated failures to abate global hunger demonstrate that we need to do something different to promote food security in ways that reduce migration. The transformation from the current resourceintensive agriculture to future knowledgeintensive agriculture is the way forward,” Leung said. In the second quarter of 2017, the Philippines’s agriculture, fishery and forestry sector grew 6.3 percent. However, it only contributed 0.5 percentage points to the country’s GDP growth in the second quarter. Cai U. Ordinario

Agriculture/Commodities BusinessMirror

www.businessmirror.com.ph

Editor: Jennifer A. Ng • Tuesday, October 17, 2017

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Pork output seen growing by 3.15% in 2018

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By Jasper Emmanuel Y. Arcalas @jearcalas

hilippine pork production next year could reach 1.635 million metric tons (MMT), 3.15 percent higher than the projected output of 1.585 MMT for this year, according to the United States Department of Agriculture (USDA).

In its report, titled “Livestock and Poultr y: World Markets and Trade”, the USDA Foreign Agricultural Service (FAS) attributed the increase in output to the improvement in the purchasing power of Filipinos. “Robust consumer demand for pork will also boost output in Russia, the Philippines and Mexico,” the USDA-FAS said in its report published recently. Local pork demand next year is forecasted to grow by 4.63 percent to 1.919 MMT, from the estimated 1.834 MMT this year, according to the USDA. The USDA-FAS said imports would fill the gap in local pork supply next year. In 2018

pork imports may expand by 14 percent to 285,000 metric tons (MT), from the projected 250,000 MT this year, according to USDA data. “Global exports are forecast nearly 3 percent higher in 2018 driven by strong demand from Mexico, the Philippines and South America [Argentina, Chile and Colombia] where competitive prices support gains in per-capita consumption,” the report read. Data from the USDA showed that global pork exports next year could reach 8.484 MMT, 2.58 percent higher than the 8.271 MMT that would be traded this year. The value of the local hog sector’s production at current

Buy exotic meat only from licensed traders–DENR

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he Department of Environment and Natural Resources (DENR) called on consumers to buy meat only from licensed dealers, who are allowed under the law to distribute locally sourced or imported meat. Director Theresa Mundita S. Lim of the Biodiversity Management Bureau (BMB) of the DENR noted that, aside from special permits from the Department of Agriculture (DA), dealers of exotic meat must secure all the necessary permits from the DENR-BMB’s Wildlife Bureau. Lim noted that underground trading of exotic meat is still rampant because of the increase in demand. Buyers make the orders in advance. Although Lim said there is already a farm in Bicol that breeds and raise deer as livestock. There is also a farm in Davao that breeds and raise wild boar. There are nine crocodile farms in the Philippines that export crocodile skin and sell fresh and processed crocodile meat that is offered in a select restaurant and grocery stores. These, Lim said, undergo a very tedious permitting process. Wildlife poachers, meanwhile, simply hunt them in the wild, in violation of various environmental laws meant to prevent the extinction of these endangered animals. “Whether you are a seller or a buyer, you may be slapped with a penalty or fine under Philippine laws,” Lim said. According to her, the Philippines strictly abides by the Conventional on International Trade in Endangered Species of Wild Fauna and Flora (Cites) and implements Republic Act (RA) 9147, or the Wildlife Resources Conservation and Protection Act. Cites lists roughly 5,800 species of animals and 30,000 speciesofplantsthatareprotectedby the international treaty against overexploitation. The list includes meat and meat by-products that are endangered, like wild boar, deer,

crocodiles or other products that are not classified as animal livestock or food for human consumption. Section 3, or the Scope of Application of the Wildlife Act, states that trading of wildlife species found in all areas of the country, including protected areas under RA 7586, otherwise known as the National Integrated Protected Areas System (Nipas) Act, and critical habitats are prohibited. The law also applies to exotic species which are subject to trade, are cultured, maintained and/or bred in captivity or propagated in the country. Lim said as a policy, the DA’s National Meat Inspection Service (NMIS) needs to certify that the meat, whether fresh or processed, are safe for human consumption. “On our part, we must first establish that the meat or its by-products are genuine or is what the sellers say they are. If it is not, it is not within our jurisdiction. But, still, the seller is liable for violating the Consumer Act,” Lim said. The DENR-BMB discourages consumption of endangered wild animals, even among indigenous peoples, because of their conservation status. Animals like the Philippine tamaraw, or Mindoro dwarf buffalo, is traditionally part of the diet and culture of Mindoro’s Mangyan tribes. Some indigenous groups also traditionally hunt wild boar and deer for food, with the forest being their main source of sustenance. However, Lim said because these wild animals are threatened with extinction, the DENR-BMB is regulating hunting to prevent their extinction. The DENR-BMB allows farms to sell fresh meat and other by-products of the saltwater crocodile, or Crocodylus porosus, wild boar or pig, or deer if they are bred and raised in captivity or in farms, which have permits to operate, provided that the animals are not identified in Cites. Jonathan L. Mayuga

Bloomberg

prices rose by 12.09 percent to P113.7 billion in the first half of the year due to the increase in farm-gate price, according to the Philippine Statistics Authority (PSA). In its report, titled “Swine Situation Report JanuaryJune 2017”, the PSA said the average farm-gate price of live hogs went up by nearly 11 percent to P104.55 per kilogram, from P94.22 per kg last year. In terms of volume, the sector produced some 1.087 MMT of pork, slightly higher than the 1.076 MMT recorded in the first half of 2016. “Growth in production

was noted in the first quarter of 2017 at 3.5 percent, while a decrease was recorded in the second quarter of 2017 at 1.32 percent,” the report read. Despite the increase in output, the Department of Agriculture (DA) was forced to allow the special importation of 7 million kilograms of pork slapped with a 30-percent tariff instead of the usual 40 percent. This covers only prime cuts of pork and not other parts, such as offal. The DA approved the special importation to stabilize the price of pork in the domestic market.

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Banking&Finance

Tuesday, October 17, 2017 • Editor: Jun B. Vallecera

BusinessMirror

OFW remittances up 7.8% to $2.5 billion in August–BSP

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By Bianca Cuaresma @BcuaresmaBM

HE Bangko Sentral ng Pilipinas (BSP) reported on Monday a 7.8-percent rise in remittances by overseas Filipino workers (OFWs) in August this year, compared to the same month last year.

Cash remittances—or money sent by Filipino workers through banks—hit $2.5 billion in August alone, up significantly from the $2.3 billion recorded in August last year, the BSP said. The 7.8-percent acceleration is the largest year-on-year growth since March this year, which posted a 10.7-percent expansion. Remittances to the coun-

try have been growing in the 7-percent ter r itor y for t wo consec ut ive mont hs, w it h l a st mont h ’s g row t h reaching 7.1 percent. By country source, the BSP identified the United Arab Emirates (UAE), the United States, Singapore and Qatar as the primary contributors to the rise in cash remittances during the month.

A pizza-like investment

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T has been a realism that monetary necessities are likely to grow over your lifetime. While your income derived from employment may grow at a steady rate, inflation will take its chunk, and will reduce your purchasing power. T he traditional vehicles of investments, such as bank deposits, money-market instruments and the like may not help you realize your goals. As such, the potential profit from your investments to buy your dream car, to afford you a holiday trip or to fulfill your other dream of buy i ng a new hou se m ay not be realized. But there’s hope because good investment options, such as mutual funds, may help you achieve your goals. How does a mutual fund work? I have been in the financial industry for many years advocating financial literacy, and when I talk about mutual fund, some people say it is not exciting. Well, that’s because they don’t have any knowledge about how mutual fund works. Allow me to explain how a mutual fund works, by comparing it with a food for all occasions that we love—pizza. Assume that you are craving for a pizza. However, you don’t know how to make one. Your alternative is to just buy from a pizza chain. But what pizza chain will you choose? You go to the best pizza parlor in town that makes and serves pizza delicacies. The pizza parlor is like your chosen fund company. Since it is a bit costly as it does not sell pizza per slice, buying the whole piece won’t do because the big pizza is too much for you to eat. So, you call your friends to join you. You can pool your money to-

Don-Don Adolfo Crisostomo

PERSONAL FINANCE gether, buy it and have a pizza treat for your group. The chef of the pizza parlor is like the fund manager. You and your friends who are pooling money together for the pizza treat represent the investors who participate in a fund. With the chef ’s expertise in making pizza, he makes you a good product by mixing the appropriate quantity of ingredients like flour, veggies, meat, salt, herbs, cheese, etc. These ingredients denote the various stocks and/or bonds, etc. in a mutual-fund portfolio that a fund manager takes care for the investors. The expert chef produces the right blend of ingredients to make a delicious pizza and will make you delighted. This is the same as the expert fund manager creating the right mixture of stocks, bonds and other securities to get the best return of investment in your portfolio. Depending on your contribution, you will be allotted pieces of the pizza. In the same way, depending also on your investment, you will get your corresponding returns. An individual has many options for the kind of pizza they want to eat. T his holds tr ue in a mutual fund, where there are options you can choose from. These include money-market fund, equity fund, debt fund or even combinations among possible choices.

The positive development in the volume of remittances in August brought the total cash sent by OFWs back home to $18.6 billion—5.4 percent larger than the $17.6 billion seen in the same eightmonth period last year. By remitter source, both land-based and sea-based workers contributed to the growth of the total remittances for the first eight months of the year, with land-based workers growing by 6 percent from last year and contributing $14.7 billion to the total, while sea-based workers remittances grew 3.2 percent in January to August this year to contribute $3.9 billion compared to the same period last year. The bulk of the total cash remittances for the January-to-August period—82.5 percent in particular, came from the US, Saudi Arabia, the UAE, Singapore, Japan, the United Kingdom, Qatar, Kuwait, Germany and Hong Kong. Remittances to the Philippines have been known to fuel domestic consumption—one of the pillars of the economy’s resilient growth in recent years. Cash sent by Filipino workers abroad also provide support to the country’s external position. The BSP earlier said they are banki ng on st rong rem it t a nce i n f low s, as well as tourist receipts and business - process out sou rc i ng re venues to d r ive t he recover y of t he countr y’s Ba lance of Pay ments position for the year. ING Bank Manila economist Joey Cuyegkeng said the margin between rem it t a nces a nd t he t rade def ic its has practically disappeared, despite t he upside sur pr ise of remittances for August. “August saw only less than $100-million excess in remittances. This follows an excess of $670 million in July. Since 2016 the margin has been erratic and would likely remain so in the coming months,” Cuyegkeng said. “This would keep the peso on the defensive bias. A hawkish BSP would moderate the weakening bias,” he added.

Asean moving closer to common market goal, DOF chief tells IMF By Rea Cu

@ReaCuBM

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HE Department of Finance (DOF) said on Monday the Asean is moving closer toward the creation of a common market, which is expected to further promote financial inclusion in the region. In a Washington, D.C., briefing, Finance Secretary Carlos G. Dominguez III reported to the International Monetary Fund (IMF) the accomplishments that the Philippines and other member-states of the Asean bloc have done so far in step with their financial-inclusion agenda. This includes the creation of a common market for the region, which is considered as one of the world’s major growth drivers. During the meeting, the finance chief also reported the concerns of the Asean finance ministers over the prospect of more developed countries adopting inward-looking policies and the possibility of sharperthan-expected financial tightening in this export-oriented region, amid the normalization of United States policy rates. Amid such concerns, the Asean continues to meet its timetable on economic integration as spelled out in the Asean Economic Blueprint 2025, Dominguez said. “The Asean has moved dramatically in its effort to build a region-wide policy framework to enhance trade, economic cooperation and financial flows among the association’s member-countries. We are now moving closer toward achieving the strategic goal of a common regional market,” Dominguez said. With the Philippines chairing this year’s Asean, Dominguez reported that average growth this year among the Asean countries is expected at 5 percent, driven by strong domestic consumption in their respective economies. According to Dominguez, in some Asean economies, faster growth is inhibited by higher inflation and weaker-than-expected trade flows, which are short-term limitations and could turn for the better once

Don-Don Adolfo Crisostomo is a registered financial planner of RFP Philippines. To learn more financial planning, join the 66th RFP program this November 2017. To inquire, e-mail info@rfp. ph or text <name><e-mail> <RFP> at 0917-9689774.

global growth picks up. “The Asean region is currently one of the fastest and main drivers of global growth. As a group of export-oriented economies, however, we look with concern at the prospect of more developed countries adopting more inward-looking trade and investment policies,” he added. He also reported the progress in the Asean +3, which includes Korea, Japan and China, Finance Cooperation Framework jointly chaired by the Philippines and Japan. While improvement on the Chiang Mai Initiative Multilateralization (CMIM) include: n Completed the revision of the CMIM operational guidelines and the preparation of the CMIM Conditionality Framework that will clarify the activation process of the IMF delinked portion of the CMIM; n Been developing the qualification indicators for the CMIM Precautionary Line based on the Economic Review and Policy Dialogue Matrix; and n Completed the 7th test run, which examined the activation of the CMIM arrangement with the IMF program, underscoring the needs for strong coordination between the two agencies. The CMIM is a currency swap agreement among the finance ministries and central banks of the Asean +3 economies that aims to provide financial support for short-term liquidity problems. “We have achieved progress, as well, on the Asean +3 Macroeconomic Research Office [Amro]. We have finalized the Amro’s strategic direction and medium-term implementation plan. This plan seeks to build up Amro toward delivering high quality and original surveillance to member-economies supportive of the CMIM,” he said. According to Dominguez, a memorandum of understanding between the Amro and the Asian Development Bank has already been signed, with the Asean looking forward to the conclusion of a similar agreement with the IMF.

Govt online trade-facilitation platform rolls out in December

T Furthermore, just like the need for you to choose the right pizza chain, you need to choose the right mutualfund scheme that can deliver your expected returns. Hopefully, the above analogy gives you an understanding of how a mutual fund works. But there are other aspects you will need to understand. Here are some things you need to know: n Risk profile assessment; n Entr y, management and exit fees; n Diversification and liquidit y concepts; n The role of the Securities and Exchange Commission; and n Basic knowledge of the computation of net asset value per share. Now, you can do your own research and consult your financial advisor to know more the ins and outs of a mutual fund. I have been conducting financial and business private consultations, and people are very eager to learn about the options where they can invest their money. However, during follow-up consultations, they tend to procrast i n ate. T he y don’t ac t by open i n g a n a c cou nt w it h a l ice n s e d representative. This is a reality among prospective investors, which I wish to change through proper financia l-literac y education.

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HE Department of Finance (DOF) on Monday reported that the TradeNet platform that will be rolled out in December will start with the facilitation of seven commonly traded goods that represent half of the country’s total trade volume. Finance Undersecretary Gil S. Beltran said the government’s online trade facilitation platform called TradeNet, which aims to minimize the cost of doing business and cut the processing time for import and export permits, will initially cover rice and six other commonly traded goods that represent half of the Philippines’ total trade volume. Beltran, who is also the DOF’s chief economist, pointed out that TradeNet.gov. ph will also perform the functions of the country’s National Single Window (NSW), which will allow traders to use the system to apply for import and export permits for rice, sugar, used motor vehicles, chemicals like toluene, frozen meat, medicines and cured tobacco. The NSW, which is targetted to be interconnected by December to the Asean Single Window, is a regional initiative that aims to speed up cargo clearances and promote economic integration by enabling the electronic exchange of border documents among the organization’s 10 member-states.

“The initial deployment will allow traders to use the system for the first seven commodities that represent 50 percent of the total trade volume of the Philippines,” Beltran said in his report to Finance Secretary Carlos G. Dominguez III in a recent DOF Executive Committee meeting. According to Beltran, the 16 agencies involved in the processing of permits for the import and export of the first seven commodities will have to be connected online to TradeNet by December, including: the Bureau of Animal Industry; the National Tobacco Administration; the Fair Trade and Enforcement Bureau; the National Food Authority; the Bureau of Plant Industry; the Food and Drugs Administration; the National Meat Inspection Service; the Bureau of Internal Revenue; and Bureau of Customs. He added that other goods will be progressively placed onboard the TradeNet platform as other regulatory agencies involved in trade facilitation get engaged in the system. In August this year the NSW Steering Committee met at the Bureau of the Treasury to discuss the implementation of the Philippines’s single window, along with related measures to facilitate trade and improve the ease of doing business. Rea Cu

Case clippings

By Justice S J Ranada Jr.

LABOR–review of NLRC decision Decisions of the NLRC are reviewable by the CA thru certiorari under Rule 65. Thus, the CA must look at an NLRC decision and ascertain if it merits reversal exclusively on the basis of presence of grave abuse of discretion amounting to lack or excess of jurisdiction. Thus, when such CA decision is brought to the SC the question presented is whether the CA correctly found that the NLRC acted with grave abuse of discretion. PNB v. Gregorio 18 Sep 2017

GR 194944 Jardeleza, J

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The World BusinessMirror

Oil gains on concern Iraq-Kurd tensions will disrupt crude flows

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rude extended gains from the highest close in two weeks as speculation mounted over potential output disruptions in a region that’s home to Iraq’s oldest producing oil fields. Futures in London rose as much as 1.3 percent after gaining 2.8 percent last week. Iraqi soldiers moved late last Sunday to take over fields in the northern city of Kirkuk from Kurdish forces. That’s amid an intensifying conflict after the semiautonomous Kurdistan Regional Government (KRG) held a referendum on independence from Iraq on September 25. The Organization of Petroleum Exporting Countries (Opec) sees crude demand growing at a “healthy pace” over the next five years. Brent oil has risen in six of the past seven weeks on signs output curbs by Opec and its allies are draining a glut. While exports of about 600,000 barrels a day from Kirkuk’s oil fields and deposits inside the adjacent Kurdish region were said to continue last Sunday, Eurasia Group estimates Iraq taking control could cut shipments by 450,000 barrels daily until the government repairs a pipeline to Turkey or reaches a revenue-sharing deal with the Kurds. “Tensions are definitely escalating in Iraq at the moment, and it will be a supporting factor for oil prices for the time being,” said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures Inc. “It’s a complex issue as it involves Kirkuk oil fields that produce about 550,000 barrels a day, as well as the neighboring countries, such as Turkey, which is threatening to cut off the pipeline.” Brent for December settlement climbed as much as 73 cents to $57.90 a barrel on the Londonbased ICE Futures Europe ex-

change, and traded at $57.78 at 12:52 p.m. in Singapore. Prices added 1.6 percent to $57.17 last Friday. The global benchmark crude traded at a premium of $5.66 to December West Texas Intermediate (WTI). WTI for November delivery rose as much as 54 cents, or 1.1 percent, to $51.99 a barrel on the New York Mercantile Exchange. The grade advanced 1.7 percent to $51.45 last Friday. Total volume traded was about 14 percent above the 100day average. Iraq is the second-largest producer in the Opec, pumping most of its 4.47 million barrels a day from fields in the south and shipping it from the Persian Gulf port of Basrah. The Kurdish region, meanwhile, relies on a pipeline to the port of Ceyhan in neighboring Turkey to get most of its crude to market. The conduit also transports some 100,000 barrels a day of oil from federal-run fields in Kirkuk. The shipments from Kirkuk combine crude pumped by Iraq’s stateowned North Oil Co. and by the KRG, and both flows are normal, Kirkuk Governor Najmaddin Kareem said last Sunday. The Kurdistan Security Council confirmed in a Twitter message late last Sunday that Iraqi forces and Shiite militias have advanced from southern Kirkuk, intending to take over a military base near the oil fields. Crude demand will climb an average 1.2 million barrels a day through 2022 and slow to 300,000 barrels a day in 2035 to 2040, Opec Secretary-General Mohammad Barkindo said last Sunday in Kuwait. Cautious money managers cut bets on rising WTI crude in the week ended last Tuesday, US Commodity Futures Trading Commission data showed. Bloomberg News

Editor: Lyn Resurreccion • Tuesday, October 17, 2017 A7

Yellen: US economy remains in good health

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ASHINGTON—Janet L. Yellen, chairman of the Federal Reserve (the Fed), said last Sunday that the United States economy was in good health in an upbeat assessment that reinforced expectations the Fed is planning to raise its benchmark interest rate later this year.

Job growth is strong, companies are increasing investment, and the US is benefiting from the improved health of the global economy, Yellen said in remarks to the Group of 30, which hosts gatherings of international policy-makers and privatesector bankers. Referring to the Fed’s benchmark rate, Yellen said, “We continue to expect that the ongoing strength of the economy will warrant gradual increases in that rate to sustain a healthy labor market and stabilize inflation around our 2-percent longer-run objective.” The Fed has raised its benchmark interest rate twice this year, in March and in June, to a range between 1 percent and 1.25 percent. Investors expect a third 0.25-percentage point increase at the Fed’s final policy-making meeting of the year, in mid-December. The Fed also announced in September that it would begin to reduce its holdings of Treasuries and mortgage bonds. The Fed kept rates at a low level and bought the bonds to reduce borrowing costs, stimulating economic activity. It is pulling back from that stimulus campaign because officials think the economy can stand on its own. Yellen said the prospect of tax cuts

or other changes in domestic fiscal policy has not influenced the Fed’s monetary policy plans at this point. “We’re uncertain about the size, timing and composition of changes that will actually be put into effect,” she said. She added anticipation of changes like tax cuts has buoyed measures of consumer and business confidence, but there is little evidence so far of increased investment. She said the Fed similarly is taking “a kind of wait-and-see attitude.” Yellen’s term as Fed chairman ends in early-February. President Donald J. Trump has said he is considering whether to appoint her to a second four-year term. The US economy added an average of 171,000 jobs per month during the first eight months of the year, a little lower than the monthly average of 187,000 in 2016, but well above the growth of the workingage population. Reported employment shrank in September for the first time in seven years, but that is most likely the result of Hurricane Irma, which hit Florida while the government was conducting its monthly survey. Yellen said the damage from recent storms, while “terrible,” was unlikely to leave a lasting imprint on the economy.

Janet L. Yellen, chairman of the Federal Reserve in Washington, on March 15 Al Drago/The New York Times

History suggests that the longerterm effects will be modest and that aggregate economic activity will recover quickly.”—Yellen “History suggests that the longerterm effects will be modest and that aggregate economic activity will recover quickly,” she said. Other vital signs also are looking strong. The unemployment rate stands at 4.2 percent, and labor-force participation has stabilized. While wage growth remains weak by historical standards, Yellen said that was mostly the result of slow growth in productivity. “The pace seems broadly consistent with a tightening labor market once we account for the disappointing productivity growth in recent years,” she said. Yellen also noted that domestic business investment has improved and stronger growth in other countries has increased demand for US exports. “I perceive that risks to global growth have receded somewhat and expect growth to continue to im-

prove over the near term,” she said. The most obvious cause for concern is the weakness of inflation, which has remained below the Fed’s 2-percent annual target since the financial crisis. Other developed nations are grappling with the same phenomenon. “The apparent disconnect between strong economic activity, on the one hand, and low inflation and wages on the other, is one of the standout characteristics of the ongoing recovery, almost everywhere,” said Vitor Constancio, vice president of the European Central Bank, who spoke on the same panel as Yellen. Some Fed officials regard weak inflation as evidence the Fed should retreat more slowly from its stimulus campaign. Yellen reiterated Sunday that she did not agree, because she regarded inflation as likely to increase as growth continued. New York Times News Service

Xi Jinping and China’s new era of glory: Pushing for their place in the sun

Chinese women use their mobile phone near the slogan “Welcome the 19th Party Congress, Create New Glories” in Beijing, China, last Sunday. China’s Communist Party is expected to convene its 19th Party Congress on Wednesday, during which Chinese President Xi Jinping will likely receive a second five-year term in office. AP/Ng Han Guan

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EIJING—Two weeks after taking China’s top office in November 2012, Xi Jinping took part in what seemed like a throwaway photo op. He gathered his top lieutenants at the newly renovated National Museum of China, a vast hall stuffed with relics of China’s glorious past: terra-cotta soldiers from Xi’an, glazed statues from the Tang dynasty and rare bronzes from the distant Shang dynasty. But Xi chose as his backdrop a darker exhibition: The Road of Rejuvenation. It tells the story of how China was laid low by foreign countries in the 19th and 20th centuries but is now on the path back to glory. There, in front of images of China’s subjugation, Xi announced that his dream was to complete this sacred task. This soon became the “China Dream” and has shaped his rule ever since. With Xi about to be reappointed

to another five-year term in a Communist Party conference that begins on Wednesday, it’s worth remembering this visit. Many of Xi’s accomplishments and his likely plans for the future are underpinned by an idealistic view that China’s 200-year eclipse is ending now, and it is his mission to lead a rigidly controlled China back to the center of the world stage. For foreigners, this means getting used to a China that is stronger and more assertive—but possibly more brittle—than in the past. If Xi is successful, his China could become a model for digitally driven authoritarianism around the world, while failure could force a reconsideration of the wisdom of trying to forcemarch a country to modernity. China’s new role is hard to miss in foreign affairs. Beijing has moved ag-

gressively to enforce historically dubious claims to international waters and islands far from its shores, building reefs into islands and making the bizarre assertion that the economic zones around them are Chinese waters—arguments contrary to any independent interpretation of international law. China has also begun pulling small countries on its periphery into its orbit through a lavish infrastructure plan called the “One Belt, One Road” initiative, in the process propping up regimes that are sliding away from democracy in Thailand, Myanmar and Cambodia. These ambitious policies to dominate the region are paralleled by tough measures at home. For five years, Xi has led a fierce campaign against corruption, which arguably was the biggest threat to the party’s long-term ability to rule. But he’s also leveraged this crackdown to sideline political rivals,

admitting as much last year when he said that high-ranking officials arrested for corruption had been engaging in “political conspiracies.” A sophisticated program of domestic surveillance is part of this strategy. The government has encouraged provinces to experiment with a system of “social credit” that rates people on how they behave—from financial delinquency to being too critical online—and then limiting the freedom of offenders, for example, by restricting their ability to get promoted or travel on trains or planes, something German political scientist Sebastian Heilmann calls “digital Leninism.” Nationally, this new policy of refined coercion has eradicated public dissent. Previous leaders disliked alternative viewpoints, but small bookstores, regional newspapers, think tanks and, for a while, social media allowed some space for differing views. Now these channels are all but closed. For the past five years, for example, I’ve been conducting a series of question-and-answer sessions with dozens of Chinese intellectuals. It’s hardly an exaggeration to say that almost all of these people have been silenced, their access to any sort of media outlet blocked. Not all of this started with Xi. China’s military expansion—its two new aircraft carriers, for example—is backed by decades of patient modernization. The shutting down of social-media accounts also began before Xi took office. And then there’s the broader issue of China’s being a wealthier and more powerful country; under any leader, Beijing was going to shake off its reticence. But Xi has upped the ante. He’s been far more successful than his predecessors in realizing the Communist Party’s vision of ideological uniformity, rendering his administration as more than a straight-line continuation of past leaders. Having a modernized military is one thing, but using it is another; like-

wise, the severity of the crackdown on dissent—think of the decision to let Nobel Peace Prize laureate Liu Xiaobo die in prison in July—reflects a far harsher approach. One key reason for Xi’s brusque self-confidence is his family history. Xi’s father was one of the founders of the People’s Republic, and Xi grew up in the privileged world of China’s red nobility. That gives him unimaginably more social capital than his two predecessors, Hu Jintao and Jiang Zemin, both of whom came from relatively pedestrian backgrounds. These informal networks come on top of Xi’s formal positions, the most important of which is general secretary of the Communist Party, a title he will get for another five years at the party congress. This combination of formal and informal power has led Xi to make decisions unimaginable under his predecessors. Like Xi, for example, other leaders recognized that China’s naked capitalism left many people living unhappily in a spiritual vacuum. And they, too, recognized that traditional beliefs and culture had a role to play in providing people with a system of values. But Xi has embraced traditionalism like no leader since China’s last emperor abdicated in 1912. Even Chiang Kai-shek, the conservative who led the country before the communist takeover in 1949, backed laws to limit China’s traditional religions. Xi’s administration, by contrast, has endorsed almost all manner of tradition—so long as it serves the party. Xi’s positioning himself as a savior of Chinese culture has been accompanied by increasingly odd statements. According to Xi’s propagandists, he has rewritten the rules of diplomacy; is personally popular among all leaders around the world; and, of course, is humble and modest. This might be normal for a Vladimir Putin or Kim Jong Un but is atypical of recent Chinese leaders. Since the debacle of Mao’s rule ended in 1976, they have positioned themselves as

modest, behind-the-scenes brokers. And, perhaps, it was no coincidence that this period of dull managers coincided with China’s first successes in a century. With competent, low-key technocrats in charge of a stable country in a relatively peaceful world, China took off. Xi’s new tack is riskier. Unlike any leader since Mao, he has made almost every area of governing his personal area of responsibility. Xi is not a Mao— the comparison has been made but is forced. There is no real personality cult, for example, and he has not embarked on insane economic plans like the Great Leap Forward. But like Mao he is popular, charismatic and supremely self-confident, dangerous traits in a system with no checks and balances. At home, at least, this centralization of power has showed few successes. Economic reforms have languished, and the stagnation feels even more pronounced in politics. Perhaps, most striking has been the arrest of human-rights lawyers. Once a vibrant movement that simply aimed to hold the government accountable to its own laws, human-rights advocates have been effectively silenced. Seen more broadly, Chinese institutions are in danger of decay. In the past, the understanding was that power would transfer smoothly from one leader to the next, if not through elections then through some sort of tacit agreement. For a couple of decades, party congresses like the coming one were showcases for this, with one dull leader following the other, sometimes with daggers in their backs, but still in some sort of predictable pattern.This congress, for example, was supposed to anoint Xi’s successor, who would take control in five years. Now this is unlikely, casting doubt on who will succeed Xi. All of this makes one wonder how Xi’s rule will end: with his taking an unprecedented third five-year term or perhaps staying on in some ceremonial capacity and pulling the strings from behind a curtain? Xi’s predecessor, Hu, is said to be practicing Chinese medicine, and to have withdrawn from politics. Ian Johnson/New York Times News Service

A8

The World BusinessMirror

Tuesday, October 17, 2017

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Tillerson: N. Korea diplomacy continues until 1st ‘bomb drops’

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ASHINGTON—Secretary of State Rex Tillerson said last Sunday that diplomatic efforts aimed at resolving the North Korean crisis “will continue until the first bomb drops.” That statement comes despite President Dona ld J. Tr ump’s tweets a couple of weeks ago that his chief envoy was “wasting his time” trying to negotiate with “Little Rocket Man,” a mocking nickname Trump has given the nuclear-armed nation’s leader Kim Jong Un. “I think he does want to be clear with Kim Jong Un and that regime in North Korea that he has military preparations ready to go and he has those military options on the table. And we have spent substantial time actually perfecting those,” Tillerson told CNN’s State of the Union. “But be clear: The president has also made clear to me that he wants this solved diplomatically. He’s not seeking to go to war,” Tillerson said. Recent mixed messaging from the top of the US government has raised concerns about the potential for miscalculation amid the increasingly bellicose exchange of words by Trump and the North Korean leader.

Trump told the UN General Assembly last month that if the US is “forced to defend itself or its allies, we will have no choice but to totally destroy North Korea.” Trump also tweeted that Korea’s leadership “won’t be around much longer” if it continued its provocations, a declaration that led the North’s foreign minister to assert that Trump had “declared war on our country.” Tillerson acknowledged during a recent trip to Beijing that the Trump administration was keep-

ing open direct channels of communications with North Korea and probing the North’s willingness to talk. He provided no elaboration about those channels or the substance of any discussions. Soon after, Trump took to Twitter, saying he had told “our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man.... Save your energy Rex, we’ll do what has to be done!” Trump offered no further explanation, but he said all military options are on the table for dealing with North Korea’s nuclear and missile programs. Analysts have speculated about whether the president and his top diplomat were playing “good cop, bad cop” with North Korea, and how China might interpret the confusing signals from Washington. Beijing is the North’s main trading partner, and the US is counting on China to enforce UN sanctions.

I think he does want to be clear with Kim Jong Un and that regime in North Korea that he has military preparations ready to go and he has those military options on the table. And we have spent substantial time actually perfecting those.”–Tillerson

Secretary of State Rex Tillerson answers a reporters’ question while greeting Organization of American States Secretary-General Luis Almagro at the State Department, in Washington on October 13. AP/Andrew Harnik

“Rest assured that the Chinese are not confused in any way what the American policy toward North Korea [is] or what our actions and efforts are directed at,” Tillerson said. Asked if Trump’s tweets undermined Tillerson, the secretary said: “I think what the president is doing is he’s trying to motivate action on a number of people’s part,

in particular the regime in North Korea. I think he does want to be clear with Kim Jong Un and that regime in North Korea that he has military preparations ready to go and he has those military options on the table and we have spent substantial time perfecting those.” He added that Trump “ has made it clear to me to continue my diplomatic efforts, which we

are, and I’ve told others those diplomatic efforts will continue until the first bomb drops.” North Korea has launched missiles that potentially can strike the US mainland and recently conducted its largest ever underground nuclear explosion. It has threatened to explode another nuclear bomb above the Pacific. AP

276 killed in deadliest single Austrian vote nudges Europe’s balance to right as populists gain attack in Somalia’s history M A ustrian voters paved the way for the nationalist Freedom Party to enter government, heralding a shift to the political right that’s likely to make the country a more prickly ally for its European partners. Projections after Sunday’s election put the populists within reach of second place behind the People’s Party of Foreign Minister Sebastian Kurz, 31, who claimed victory after a campaign built on outflanking the Freedom Party with a hard-line stance on migration. He now has a mandate to form a coalition, replace Social Democrat Christian Kern as chancellor and become the world’s youngest government leader. With the Freedom Party poised to return to government for the first time since 2005, congratulations poured in from European nationalists, including France’s Marine Le Pen and Geert Wilders in the Netherlands, while the World Jewish Congress expressed concern. For Ger man Chancel lor A ngela Merkel, the result may chip away at a key ally’s pro-European stance in the years ahead. “There won’t be a debate to leave the EU, but the Freedom Party is strong enough to demand significant concessions” and may lead Austria to align more often with eastern European countries that have challenged Merkel on issues including migration, said Thomas Hofer, a political consultant in Vienna. “Austria has mostly been an ally of Germany for decades, but that picture could change more often now,” Hofer said. While European populists were kept out of power in elections this year in the Netherlands, France and Germany, the Freedom Party has been part of Austria’s government before. Last year Freedom Party candidate Norbert Hofer almost won a run-off for the Austrian presidency, a mostly ceremonial post. Any coalition with the People’s Party would have to be “a partnership of equals,” he said last Sunday. Austria’s two big parties, the People’s Party and the Social Democrats, have governed together for 44 of the 72 years since World War II. While Kurz and Freedom leader Heinz-Christian

Kurz

Bloomberg

Strache might shake up Austria’s cozy political order, they broadly agree in pledging business-friendly policies, notably to scrap corporate taxes on retained profits. They’ll also stay in the German-led camp favoring fiscal austerity in the euro area.

EU fallout

Strache, whose party’s last stint in government under Joerg Haider led to EU diplomatic sanctions against Austria, sought to ease the way to power by backing off strident rhetoric against the EU. Where Merkel and French President Emmanuel Macron may face increased resistance is on proposals to deepen European integration, maintaining economic sanctions on Russia and chastising eastern EU member-countries seen as crimping democratic freedoms. Austria’s next government may also try to toughen EU policy toward Turkey. While last Sunday’s projected result doesn’t guarantee a coalition with the Freedom Party, Kurz has a mandate to form a government after an early election he triggered by breaking up a coalition with the Social Democrats this year. The final tally may still be influenced by postal ballots, which will only be

counted on Monday. “This is a strong mandate for us to bring about change in this country,” Kurz told cheering supporters in Vienna as the results came in. “It’s about establishing a new political style, a new culture.” The swell of anxiety over immigration to Austria began building 2015, when almost 70,000 mostly Muslim refugees sought asylum from war-torn countries such as Syria, Afghanistan and Iraq. Schools and hospitals in the nation of 8.7 million struggled to accommodate the newcomers, and disagreements over whether it was fair to give immigrants generous welfare support dominate the media. Frauke Petry, a former head of the anti-immigration Alternative for Germany party, which drew inspiration from its Austrian counterpart, posted congratulations on Twitter. Ronald Lauder, who heads the World Jewish Congress, said the Freedom Party is “full of xenophobes and racists.” “It is sad and distressing that such a platform should receive more than a quarter of the vote and become the country’s second party,” he said in an e-mailed statement. “My only hope is that they won’t end up in government.” Bloomberg News

OGADISHU, Somalia—The most powerful bomb blast ever witnessed in Somalia’s capital killed 276 people with around 300 others injured, the country’s information minister said early Monday, making it the deadliest single attack in this Horn of Africa nation. The toll was expected to rise. In a tweet, Abdirahman Osman called the attack “barbaric” and said countries, including Turkey and Kenya, had already offered to send medical aid. Hospitals were overwhelmed a day after a truck bomb targeted a crowded street near key government ministries, including foreign affairs. As angry protesters gathered near the scene of the attack, Somalia’s government blamed the al-Qaeda-linked al-Shabab extremist group for what it called a “national disaster.” However, Africa’s deadliest Islamic extremist group, which often targets high-profile areas of the capital, had yet to comment. Al-Shabab earlier this year vowed to step up attacks after both the Trump administration and Somalia’s recently elected president announced new military efforts against the group. The Mogadishu bombing is one of the deadliest attacks in sub-Saharan Africa, larger than the Garissa University attack in Kenya in 2015 and the US Embassy bombings in Kenya and Tanzania in 1998. Doctors at Mogadishu hospitals struggled to assist badly wounded victims, many burned beyond recognition. “This is really horrendous, unlike any other time in the past,” said Dr. Mohamed Yusuf, the director of Medina hospital. Inside, bleary-eyed nurses transported a man whose legs had been blown off. He waited as surgeons attended to another badly injured patient. Exhausted doctors struggled to keep their eyes open, while screams from victims and newly bereaved families echoed through the halls. “Nearly all of the wounded victims have serious wounds,” nurse Samir Abdi said. “Unspeakable horrors.” The smell of blood was strong. A teary-eyed Hawo Yusuf looked at her husband’s badly burned body. “He may die waiting,” she said. “We need help.” Ambulance sirens echoed across the city as bewildered families wandered in the rubble of buildings, looking for missing relatives. “In our 10 year experience as the first responder in #Mogadishu, we haven’t seen anything like this,” the Aamin Ambulance service tweeted. Grief overwhelmed many. “There’s nothing I can say. We have lost everything,” wept Zainab Sharif, a mother of four who lost her husband. She sat outside a hospital where he was pronounced dead after hours of

efforts by doctors to save him. The country’s Somali-American leader, President Mohamed Abdullahi Mohamed, declared three days of mourning and joined thousands of people who responded to a desperate plea by hospitals to donate blood. “I am appealing all Somali people to come forward and donate,” he said. Mogadishu, a city long accustomed to deadly bombings by al-Shabab, was stunned by the force of last Saturday’s blast. The explosion shattered hopes of recovery in an impoverished country left fragile by decades of conflict, and it again raised doubts over the government’s ability to secure the seaside city of more than 2 million people. “They don’t care about the lives of Somali people, mothers, fathers and children,” Prime Minister Hassan Ali Khaire said of the attackers. “They have targeted the most populated area in Mogadishu, killing only civilians.” Rescue workers searched for survivors trapped under the rubble of the largely destroyed Safari Hotel, which is close to Somalia’s foreign ministry. The explosion blew off metal gates and blast walls erected outside the hotel. The United States condemned the bombing, saying “such cowardly attacks reinvigorate the commitment of the United States to assist our Somali and African Union partners to combat the scourge of terrorism.” It tweeted a photo of its charge d’affaires in Somalia donating blood. But the US Africa Command said US forces had not been asked to provide aid. A spokesman told The Associated Press that first responders and local enforcement would handle the response and “the US would offer assistance if and when a request was made.” The US military has stepped up drone strikes and other efforts this year against al-Shabab, which is also fighting the Somali military and over 20,000 African Union forces in the country. The United Nations special envoy to Somalia called the attack “revolting,” saying an unprecedented number of civilians had been killed. Michael Keating said the UN and African Union were supporting the Somali government’s response with “logistical support, medical supplies and expertise.” In a tweet, UN Secretary-General Antonio Guterres said he was “sickened” by the attack, and his spokesman urged all Somalis to unite against extremism and work together to build a “functional” federal state. Last Saturday’s blast occurred two days after the head of the US Africa Command was in Mogadishu to meet with Somalia’s president, and two days after the country’s defense minister and army chief resigned for undisclosed reasons. AP

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Tuesday, October 17, 2017 A9

A10 Tuesday, October 17, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

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editorial

A collective fight

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ast Tuesday President Duterte signed a memorandum ordering the Philippine Drug Enforcement Agency (PDEA) to take the lead in the antidrug campaign. The Philippine National Police, the National Bureau of Investigation, the military, the Bureau of Customs and other “ad hoc drug task force” agencies now have to defer to the PDEA in the conduct of anti-illegal drug operations, as per the order.

Critics say merely changing the lead implementer of the government’s antidrug campaign is not enough. They are right. Certainly, the onus is not on the government alone. Efforts on public awareness, mass education and grassroots advocacy against the use of illegal drugs may have curbed the demand for them. The President’s campaign may have resulted in the arrests, prosecution and the death of some local drug dealers. However, these have not really deterred international drug traffickers from using the Philippines as a major transit point for their drug shipments. We have many large ports, many islands and unguarded waters where drugs can be imported and exported quite easily. In some cases, the drug shipments slip through Customs and other so-called official channels, like the recent P6.4 billion worth of smuggled shabu from China. With billions in profits involved, drug trafficking and dealing will always be perceived as well worth the risks by criminal elements. As far as law enforcement is concerned, even with PDEA as lead implementer, it still needs the police and other agencies. As of March 2017, the PDEA has only 1,274 agents, certainly not enough to mount an effective campaign. The President also needs to support the incorruptible in our police force and justice system so they will not shirk from asserting their authority to arrest, prosecute and sentence drug dealers. It bears repeating: Arrest, prosecute and sentence. Not just kill. Those policemen untouched by the temptations of the drug trade, in particular, deserve to know that their hard work in arresting drug dealers would lead to obtaining convictions; that they will result in the incarceration of the offenders. This is an incentive against merely disposing of these scalawags through extrajudicial means on the premise that, in the end, they will get off scot-free anyway. There are bad eggs in the antidrug agencies and in the courts. This makes it all the more important for honest policemen and prosecutors to be supported. A lot of times, policemen are blamed for not doing enough and even conniving with drug dealers. When the honest cops in the force do something, they deserve support, especially from the justice system. There must be a collaborative effort among the PDEA and other law-enforcement agencies and the courts to be successful against illegal drugs. However, these are the realities in the antidrug war. We know that our institutions are not as strong. Our justice system is not as incorruptible. That, perhaps because of poverty or the wrong value system, more people, especially young people, are lured by the immediate and huge profits promised by the illegal-drugs trade. We know that most drug dealers are getting some sort of backing and support from accomplices in the government, be it at the lawenforcement level, the justice system or even from certain local or national officials. This explains their rather resilient spirit to continue their illicit trade. These factors have all weakened the antidrug campaign. This is why we also need the non-governmental organizations and civil-society groups, the media, the private sector and our citizens to help devise a more effective tool in the antidrug war. Civil society and the media must help in value reorientation and public awareness, which entails instilling moral discipline and a culture of living a healthy and drug-free life. We can only win the antidrug war if our young people are committed to being free of drugs. We need to change attitudes and help reorient young people who may be attracted by the drug business because of the huge money involved. The role of barangays and citizens themselves to fight the social malaise and build a drug-free nation cannot be overemphasized. We need to create more awareness at all levels in order to discourage illegal-drugs use and its trade. While law enforcement and prosecution will go a long way, it is fundamental to have an antidrugs culture in our society, to make drug use taboo or an object of abomination.

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Manny B. Villar

THE Entrepreneur Continued from A1

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ow-income countries have a gross national income (GNI) per capita of $1,026 or less; lower middle-income countries have a GNI per capita of between $1,026 and $4,035; upper middle-income countries have a GNI per capita of between $4,035 and $12,475; and high-income countries have a GNI per capita of $12,476 or more. Based on GNI per capita, 80 countries and territories make up the high-income group, 55 countries are classified as upper middle-income, 52 are lower middle-income and 29, mostly in Africa, are low-income countries. Among the major economies of the Asean, only Singapore, with a GNI per capita of $51,880 in 2015, is ranked as a high-income economy. Malaysia and Thailand, with GNI per capita of $9,850 and $5,640, respectively, belong to the middle-

income category. The lower middle-income group includes the Philippines (GNI per capita of $3,580), Indonesia (GNI per capita of $3,400) and Vietnam (GNI per capita of $2,050). The Philippine Development Plan (PDP) expects the country to move up to upper middle-income status by 2022, or the end of President Duterte’s term. In a presentation before the Philippines-Singapore Business Council, Conference in August,

We need the doomsayers John Mangun

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

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

Upper middle-income status within grasp

OUTSIDE THE BOX

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ake a mental note about the following thoughts regarding the Philippine stock market. The Philippine stock market is very expensive and highly overvalued compared with other regional markets. Government policies and politics are damaging the Philippine economy and will eventually cause the stock market to fall significantly. Philippine stock prices are being fueled by unstable speculation and “hot money”. If you strongly agree with those statements, please do not read any further and turn to another section of the newspaper. I’ll wait. Thank you. Good. Now you and I can talk. If you are an investor in local stocks, it is in your best financial interest that anyone who holds those opinions must not be challenged to change their view. We need as many people as possible to believe that stock prices are not going to go up. When

it comes to stock prices, the majority is always wrong. This is not about what is known as being a “contrarian” investor. Contrarian investing is a strategy of buying and selling against the general investor sentiment. This “general investment sentiment” has nothing to do with you making money buying any particular issue. Once again, it is not a “stock market”; it is a “market of stocks”. You can have a crashing bear market and still have

Socioeconomic Planning Secretary Ernesto M. Pernia said the target could be achieved even earlier than under the PDP. Assuming that the country’s GNI grew by 5 percent a year, Pernia said income per capita would be within the $4,000 to $5,000 range by end of 2018, well within the upper middleincome category. The Asian Development Bank is more optimistic than the PDP. In April 2016 it said in a report that the Philippines, together with Indonesia and Sri Lanka, would reach upper middle-income status by 2020, or two years earlier than the government’s target. The regional multilender’s 2016 Annual Evaluation Review of its operations and challenges cited the improvements in the countries’ infrastructure, public sector and social welfare-programs development. On my part, I say becoming an upper middle-income economy is within our grasp. I notice, based on statistics, that we’re ahead of Indonesia, and Vietnam is way behind us in terms of GNI per capita. Also, we are growing faster than most of the major Asian economies. If we can sustain a GDP growth of

6.5 percent, then we really should move faster to the upper middleincome category. Considering that population is a vital component in computing for GNI per capita, the slowdown in our population growth will also increase our chances of improving our income status. The final results of the 2010 National Statistics Office population census showed that Philippine population growth slowed down from the annual rate of 2.34 percent in 1990-2000 to 1.9 percent in 2000-2010. In 2015 population growth slowed further to 1.72 percent, according to the Commission on Population. The 2015 population of 100.98 million was half a million lower than what was forecast in 2010. The commission attributed the slower growth rate to wider use of contraceptives—45 percent of couples used modern contraceptives in 2015, up from 38 percent in 2013.

big profit winners. However, the general investor sentiment does influence the general direction of the market. If you keep a close eye on the sentiment, it is fairly easy to predict what the broad market will do next. When the Philippine Stock Exchange Index (PSEi) first blasted through 7,000 in early-2013, this was the beginning of a new and glorious dawn. Except, the PSEi turned around five weeks later and retraced 22 percent. That was not profit taking. That was the majority of opinion being wrong and then running away. The PSEi tried 7,000 again in late2014. It was a hesitant break, as investors were scared. But, in April 2015, PSEi 8,000 was broken, and this is what everyone had been waiting for. PSEi 8,000 lasted a whole two weeks. Fast forward to July 2016 and, this time, everyone knew 8,000 would be only a stepping stone to 8,500 and beyond. This time, less than two weeks passed before 8,000 was lost. Sentiment turned negative to the point that the PSEi fell to the 6,500 area. In May 2017 the index only briefly touched 8,000, and again in July,

because everyone knew that this was a false move, and no one wanted to get caught holding the bag. Expectations for a major pullback were strong. But prices did not pull back. For three months the PSEi failed to break and hold 8,000, which, in most investors’ minds, was clear proof that the market could not, would not break 8,000. And then, five weeks ago, the market virtually skyrocketed through 8,000 as if it were not even a bump in the road. Through all of the drama that 2017 offered, two-thirds of the issues on the PSEi are up more than 20 percent this year already. One-third increased by 30 percent or more. If you looked at majority sentiment during the past 10 months, it has been that the local market is “too expensive” with the background of a “bad government”, and that only hot money is interested in the local stock market. Please help keep the doomsayers whining and moaning.

To be concluded. 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.

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The US sees an opportunity Red-hot House in the Palestinian reconciliation

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By Eli Lake | Bloomberg View

sually the United States and Israel are on the same page when it comes to reconciling the two rival Palestinian factions, Hamas and Fatah. Until Hamas renounces terror and disarms, both Washington and Jerusalem have opposed its integration into the Palestinian Authority. That’s why it’s important that the reaction from the US and Israel was so different last Thursday to news of the latest Hamas-Fatah unity deal. Prime Minister Benjamin Netanyahu, in a statement on his Facebook page, did not mince words: “Reconciling with mass-murderers is part of the problem, not part of the solution. Say yes to peace and no to joining hands with Hamas.” Compare that with State Department Spokesman Heather Nauert: “We would welcome the effort for the conditions for the Palestinian Authority to fully assume responsibilities in Gaza. We see that as potentially an important step for getting humanitarian aid in there. We are going to watch these developments closely.” A unity Palestinian government would potentially mean a designated terror organization, Hamas, could receive international aid, a much-needed lifeline for a group under intense pressure from Egypt and Israel. At the same time, the agreement would allow the Palestinian Authority to reenter Gaza, a territory that has been under Hamas control since it seized power with its militia in 2007. At first glance, the different reactions from Israel and the US look like a return to the fraught relationship under former President Barack Obama between the two allies. But there is more going on. Both US and Arab diplomats told me that Israel has been briefed on the status of Hamas-Fatah negotiations since they began over the summer and, privately, has not objected in the same harsh tones as Netanyahu’s statement last Thursday. This time the reconciliation agreement was brokered by one of Israel’s allies, Egypt. Under President Abdel Fattah el-Sisi, Egypt and Israel have quietly cooperated against Hamas and more extreme terrorist groups in the Sinai. El-Sisi has also applied considerable pressure on Hamas, instructing his military to destroy the underground tunnels between Gaza and the Sinai and closing the border between the two countries until August. Egypt brokered the last attempt at reconciliation in 2011, but back then the relationship with Israel was far less robust. The new deal also comes as the United Arab Emirates (UAE), another moderate Sunni Arab Gulf state, is making a bid to replace Qatar as a major donor in Gaza for humanitarian aid and infrastructure improvement. The representative of Fatah in the Cairo reconciliation talks was Mohammed Dahlan, a former Palestinian Authority security chief who

has been living in the Emirates in recent years. Jonathan Schanzer, the senior vice president of the Foundation for Defense of Democracies, told me the recent reconciliation agreement “is part of an overall attempt to shape the regional architecture”. He said this was a gambit to try to take power out of the hands of Turkey, Iran and Qatar and to reassert the role of the more moderate Sunni Arab powers like Egypt, Saudi Arabia and the UAE. “There is a certain amount of quiet coordination going on,” Schanzer said. “It’s hinting at the potential for deeper coordination between Israel and the Sunni Arab states.” Put another way, an element of this deal is to make Hamas, which is facing its own political and economic crisis, more reliant on moderate Sunni Arab states, who in turn will try to moderate the radicals. At least that is the theory. Schanzer points out that Hamas this month elevated Saleh al-Arouri to its second in command. He was the planner of the 2014 kidnapping and murder of Jewish teenagers that sparked the last war between Hamas and Israel. He is also the founder of Hamas’ Qassam Brigade. What’s more, the initial terms of the reconciliation agreement do not address Israel’s red lines: disarmament and renouncing terrorism. Also, Congress prohibits US funding for the Palestinian Authority if Hamas enters into a power-sharing agreement, unless Hamas makes a number of reforms. Even though Hamas was coerced into the negotiations, it represents a major shift for the group, which is a branch of the Muslim Brotherhood, to accept negotiations hosted by the Sisi government. Sisi initially seized power from his country’s elected Muslim Brotherhood president in a 2013 military coup. In an interview Dahlan gave to the Associated Press in July, he said he was able to find common ground with the new head of Hamas in Gaza, Yehiyeh Sinwar. Both grew up in Gaza’s Khan Younis refugee camp. That common ground is significant. Hamas seized power in Gaza in 2007 by killing many of Dahlan’s subordinates in the Palestinian Authority’s security service in the strip. Some of his men were thrown off of rooftops. In the 1990s and 2000s, Dahlan’s job was to target Hamas for the sake of the peace process. When Hamas seized his preventive security services, they made sure to leak official documents and video that implicated Dahlan’s deputies in torture and other crimes.

Trump, chieftain of spite By Charles M. Blow New York Times News Service

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t must be cold and miserable standing in the shadow of someone greater and smarter, more loved and more admired. It must be infuriating to have risen on the wings of your derision of that person’s every decision, and even his very existence, and yet not be able to measure up—in either stratagem or efficacy—when you sit where that person once sat. This is the existence of Donald J. Trump in the wake of former President Barack Obama. Trump can’t hold a candle to Obama, so he’s taking a tiki torch to Obama’s legacy. Trump can’t get his bad ideas through Congress, but he can use the power of the presidency to sabotage or even sink Obama’s signature deeds. In fact, if there is a defining feature of Trump as “president”, it is that he is, in all ways, the anti-Obama— not

only on policy but also on matters of propriety and polish. While Obama was erudite, Trump is ignorant. Obama was civil, Trump is churlish. Obama was tactful, Trump is tacky. There is a thing present in Obama and absent from Trump that no amount of money or power can alter: a sense of elegant intellectualism and taste. The example Obama set makes the big man with the big mouth look smaller by the day. But I believe that this nonadjustable imbalance is part of what has always fueled Trump’s rage against Obama. Trump, who sees character as just another malleable thing that can be marketed and made salable, chafes at the black man who operated above the coarseness of commercial interests and whose character appeared unassailable. America—even many of the people who were staunch opponents of Obama’s policies—admired and even

Ernesto M. Hilario

ABOUT TOWN

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F there are clear winners in the latest surveys by the Social Weather Stations (SWS) and Pulse Asia, says the ruling political party, Partido Demokratiko Pilipino (PDP), they’re none other than their two top leaders: President Duterte, the party chairman; and Senate President Aquilino L. Pimentel III, party president, who both enjoy high trust and satisfaction ratings from the public. Duterte’s satisfaction rating in the SWS survey stood at 67 percent, while Pimentel managed to obtain 60 percent, or net satisfaction ratings of +48 and +46, respectively. On the other hand, the Pulse Asia survey showed the approval rating of Duterte at 80 percent and Pimentel at 55 percent. The PDP secretary-general, House Speaker Pantaleon Alvarez, lagged behind Duterte and Pimentel, with 34-percent satisfaction rating in the SWS survey and 33-percent approval rating in the Pulse Asia poll. In the September 24 to 30 Pulse Asia poll, Alvarez obtained an awareness rating of 89 percent. But what is not readily apparent in the survey result—he garnered a 33-percent approval rating and 17-percent disapproval rating—is that the undecided numbered 47 percent, or almost half of those surveyed. If almost half of all 1,200 respondents in the survey had no opinion as to whether they approved of Alvarez’s

performance as House Speaker, that can only mean one thing: they know nothing or very little about what’s happening in Congress. That raises questions: Isn’t the media giving him the importance that he deserves as head of one of two chambers of the legislature? That’s possible. If media has been giving him a bad reputation for speaking his mind on controversial issues, then his disapproval ratings would have gone through the roof. But it’s only 17 percent, per Pulse Asia. Which leads us to conclude: Not too many know what he’s doing at the helm of Congress. That’s what his colleagues in Congress want to rectify. House leaders have expressed confidence that Alvarez’s ratings would rise once Filipinos, particularly those living on the edge of poverty, realize that a number of bills passed under his leadership would directly benefit them and boost national development.

Tuesday, October 17, 2017 A11

For Deputy Speaker Gwendolyn F. Garcia, Alvarez’s competent leadership in the House is reflected in the passage of such important bills as the Magna Carta of the Poor, universal health coverage for Filipinos, the protection and welfare of caregivers and medical scholarship and return service program. Apart from these, she said, Alvarez facilitated the passage in record time of the 2018 General Appropriations Act. Rep. Robert Ace Barbers, chairman of the committee on dangerous drugs, said Alvarez has showed firm resolve and strong political will: “Strong leaders make unpopular decisions and policies not to be popular, but to deliver what is good and just.” Rep. Rodito Albano, a member of the House contingent to the Commission on Appointments, said the Speaker is a decisive and hardworking leader: “The surveys do not reflect everything the House has done under [his] able leadership. Whenever there are issues about governance, he is always supportive in ferreting out the truth through inquiries so that the appropriate remedial legislative measures are subsequently crafted. He also ensures that legislative priority is given to the approval of propeople, pro-poor bills.” Rep. Reynaldo Umali, chairman of the committee on justice, said the Speaker is not a popularity-conscious leader as shown by his decisions and performance: “While we are confident his ratings will rise again, we’ve seen that Speaker Alvarez is a leader who bases his decision on what is right and necessary, and not on what is popular. That is the mark of a true and strong leader.”

Their endorsement of Alvarez’s leadership is not without basis. The Congress web site revealed that a total of 30 House bills have been enacted into law since the 17th Congress started in July last year. These include House Bill (HB) 5633 or Republic Act (RA) 10931 that will promote universal access to quality tertiary education by providing for free tuition in state universities and colleges and state-run technicalvocational institutions; HB 5159 or RA 10932 that will strengthen the provision of emergency health-care services by prohibiting the demand of deposits or advanced payments for the confinement or treatment of patients in hospitals and medical clinics; and HB 5225 or RA 1029 that will establish the free Internet-access program in public places in the country. Earlier, Congress reported that, in its first year alone, it made short work of more than 200 bills, many of them now awaiting Senate approval. If that’s the case, then it’s been redhot with frenzied activity that seems to be under the radar of media or the public at large. Finally, there’s PDP Vice Chairman and Energy Secretary Alfonso G. Cusi, who remarked: “The survey results show continued strong support for PDP’s platform of change. The surveys show a third to a half of the respondents were undecided about Speaker Alvarez. I think this is due to the political noise centered in the House in the past couple of months. I am confident that he will bounce back as people start feeling change happen in their lives.”

E-mail: ernhil@yahoo.com.

House to overhaul the obsolete penal code

“The present code was based on the Spanish Codigo Penal, which was enforced in the Philippines beginning in 1896. Today, so many years have elapsed, but no amendments or revisions were made,” Umali lamented. He explained that, eight decades after, special penal laws proliferated in the Philippines, resulting in legal complications that make the task even more burdensome to restructure, or integrate it into one efficient code. “We can hardly keep track of the exact number of penal laws that we have, and there is difficulty in

determining which law or laws are to be used to prosecute a particular criminal conduct,” Umali, himself a lawyer, said. The measure, also coauthored by Speaker Pantaleon D. Alvarez, Majority Leader Rodolfo C. Fariñas Sr. and Reps. Marlyn Primicias-Agabas of the Sixth District of Pangasinan and Ramon Rocamora of the Lone District of Siquijor, is likewise intended to incorporate all other special penal laws into a single criminal code. These include: 1. Updating and revising existing penal laws to make them relevant

in accordance with current international best practices; 2. Integ rating specia l laws in order to have one code for all criminal laws; 3. Strengthening the criminal justice system through relevant laws to address present societal problems; and 4. Ensuring that there will be a single and unified criminal code, taking into consideration future laws to be passed. Umali pointed out the importance of the speedy passage of the proposed Philippine Code of Crimes, which, he said, will consolidate and update the RPC and other special penal laws into a single penal code to make it more responsive to the reforms needed in the country’s criminal justice system. According to Umali, the RPC contains antiquated provisions that punish crimes that are no longer relevant. He added that some of the penalties and punishments have already become ineffective. “Congress is a very good venue for us to undertake reforms in the criminal justice system. Through Congress, we will have a better access to all stakeholders involved,” he said.

adored the sense of honor and decency he brought to the office. Trump, on the other hand, is historically unpopular, and not just in America. As The Pew Research Center pointed out in June: “Trump and many of his key policies are broadly unpopular around the globe, and ratings for the United States have declined steeply in many nations.” Trump is reviled around the globe, and America’s reputation is going down with its captain. All of this feeds Trump’s consuming obsession with undoing everything Obama did. It is his personal crusade, but he also carries the flag for the millions of Americans—mostly all Republicans—who were reflexively repulsed by Obama and the coalition that elected him. Trump has done nearly everything in his power to roll back Obama’s policies, but none are as tempting a target as the one named after him: Obamacare. Republicans—including

Trump—campaigned for years on a lie. They knew it was a lie, but it was an enraging one that excited their base: Obama was destroying America’s health-care system, but Republicans could undo the damage and replace it with their own, better bill. First, Obama wasn’t destroying America’s health-care system. To the contrary, he simply sought to make it cover more people. He moved to take US health care in a more humane, modern and civilized direction, to make it more universally accessible, even by the sick and poor who often took its absence as a given. Second, the Republicans had no replacement plan that would cost less and cover as many or more people. That could not be done. So, their repeal-and-replace efforts failed. But that also meant that Trump’s promise was proved a lie. Trump has no problem lying, but, in the end, he wants his lies to look plausible.

Trump makes assertions for which there is no evidence—either knowingly lying, recklessly boasting or wishfully thinking—then seeks support for those statements, support that is often lacking because the statements are baseless. He violates a basic protocol of human communication: Be sure of it before you say it. His way is to say something wrong, then bend reality to make it appear right. This is why the age of Trump is so maddening and stupefying: He is warping reality. Last week he took more swipes at undermining the ACA: Asking his administration to find ways to increase competition among insurers (a move many worry will move younger, healthier people out of the marketplace) and stopping the “cost-sharing reduction” payments — federal subsidies paid to insurance companies to help finance coverage for low-income Americans (a move

Cecilio T. Arillo

database

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HE House Committee on Justice chaired by Rep. Reynaldo V. Umali of the Second District of Oriental Mindoro has sought the immediate passage of House Bill (HB) 6204 meant to make the obsolete Revised Penal Code (RPC) responsive to the country’s worsening crime situation.

HB 6204 covers Book 1 of the RPC, which is the result of the initiative of the Code of Crimes Committee spearheaded by the Institute of Government and Law Reform (IGLR) of the UP Law Center. The UP Law Center, through the IGLR, constituted the Code of Crimes Committee composed of criminallaw experts, members of the bench and House members Umali, Primicias-Agabas and Rocamora. “When I learned that they have already completed Book 1, and some titles and chapters in Book 2 are either complete, almost complete or just undergoing some refinements, I proposed that Congress should proceed to tackle HB 6204, the Book 1 of the Code of Crimes, which was recently referred to the committee to allow the creation of the special technical working groups that would continue to work on the unfinished business of the UP [University of the Philippines] Law Center,” Umali said. “This is a common undertaking with the Integrated Bar of the Philippines for the rolling out of this new code of crimes,” Umali added.

To reach the writer, e-mail cecilio.arillo@ gmail.com.

many believe will send premiums soaring for those people). Trump is doing this even though it will likely wreak havoc on countless lives. He is doing this even though a Kaiser Health Tracking Poll released last Friday found that most Americans want Trump and Congress to stop trying to repeal the law and, instead, work on legislation to stabilize the marketplaces and guarantee health care to Americans. Furthermore, six in 10 Americans believe Congress should guarantee cost-sharing reduction payments, as opposed to only a third who view these payments as a “bailout of insurance companies”, as Trump has called them. There is no real reason to cut these payments, other than to save face and conceal the farce. Trump isn’t governing with a vision, he’s governing out of spite. Obama’s effectiveness highlights Trump’s ineptitude, and this incenses Trump.

Global Eye

A12 Tuesday, October 17, 2017 • Editor: Angel Calso

BusinessMirror

PM Modi risks wealth erosion as savers chase India stock rally

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By Jeanette Rodrigues & Santanu Chakraborty Bloomberg

ndians pouring record amounts of their savings into a stock-market rally risk getting burned.

Earnings per share at companies in the NSE Nifty 50 Index have stagnated since the run up to the 2014 elections, which triggered a surge in equity prices. The index has risen 50 percent over the same period. Bridging the gap won’t be easy after already-slowing economic growth was slugged by Prime Minister Narendra Modi’s demonetization drive late last year and the disruptive roll out of a goods and services tax this July. The cash ban funneled savings into banks, forcing them to lower deposit rates given the slow pace of corporate lending. Savers looking for higher returns piled into equity markets, strengthening what was already a consistent flow of domestic money into stocks. “There is a lot of frothiness in the market,” Prateek Pant, cofounder of Sanctum Wealth Management, which has $770 million in assets, said last week. Most of the local money is flowing into balanced funds but “unfortunately, these products are sold as an alternative to fixed deposits, which is incorrect. Earlier, people have burnt their hands in the process and now they could be burned again.” A correction in equities would hit closer to home this time because an unprecedented number of Indians would see their wealth erode, unlike previous instances where global funds bore the brunt. While the overall share of stocks and bonds in national income is still relatively low, Modi wouldn’t want sentiment to sour with elections a little more than a year away. Michael Patra, an executive director with India’s central bank, has said monetary policy must consider bubbly market valuations. A spokesman for market regulator Securities and Exchange Board of India didn’t

respond to a call and e-mail seeking comment sent last Thursday.

Valentine’s Day

Equity mutual funds added almost 5 million investor accounts in the six months ended September 30, an all-time high. The 804 billion rupees ($12.4 billion) of net inflows during the period are more than triple the amount seen during the same stretch last year. Mutual funds are seeing flows of about 500 billion rupees, or about 7 percent of annual financial savings, into so-called systematic investment plans, which allow a pre-agreed amount to be invested at regular intervals, said Nilesh Shah, chief executive officer at Kotak Mahindra Asset Management Co. That can reach 20 percent, he said, without specifying a time frame. “We have grown our SIP books 10 times in the last three years with a ‘SIP Day’ kind of celebration,” Shah said. “SIP Day is our Valentine’s Day.” India has “successfully institutionalized equity savings” as illustrated by continued domestic inflows despite disruptions, such as demonetization and the sales tax rollout, Ridham Desai, managing director at Morgan Stanley India Co., said last month. Some analysts are sanguine about the risk of a correction. Earnings for the three months ended September will increase 10 percent from a year ago, according to forecasts from CLSA India Pvt. for the 104 companies it tracks, a turnaround from the 18-percent decline of the previous three months. Citigroup Global Markets India Pvt. expects profits for the 131 companies it covers to increase 13 percent. “One year lost due to demonetization and GST, but the recovery is

coming,” said Ajay Bagga, executive chairman at OPC Asset Solutions Ltd. “The skepticism about the markets makes them stronger. The government has goofed up but the inner dynamics of the Indian economy and psyche will see us rebounding.” The benchmark S&P BSE Sensex Index and the broader Nifty gauge rose 0.2 percent as of 11 a.m. in Mumbai on Monday after advancing 1.9 percent last week.

Too optimistic?

The risk is that projections have been too optimistic. Earnings at NSE Nifty 50 Index constituents have trailed consensus forecasts for most of this decade, data compiled by Bloomberg show. The same trend is witnessed with economists, who have been lowering India’s growth forecasts. For instance, back in October 2016—a month before Modi invalidated 86 percent of currency in circulation—economists expected GDP to grow 7.7 percent in the July-

through-September period. The estimate is now at 6.6 percent after five reductions. Financial savings are also increasing at a time when India’s overall savings rate is falling, which means that any drop in stock or bond prices will leave the government with even less money to allocate. The International Monetary Fund predicts the savings rate will decline to less than 28 percent of GDP by 2022 from 28.5 percent now and 33.5 percent in 2012. If sentiment sours on the economy or market valuations, a correction will drag down real growth, said Radhika Rao, an economist at DBS Bank Ltd. in Singapore. Sanctum’s Pant says a sell-off may come as early as November, after the traditional festive trading this month. “Markets are heating like a tinderbox, complacency is at the highest level you will see,” said Sanjiv Bhasin, executive vice president at Mumbai-based brokerage India Infoline Ltd. “This is the time to start smelling the coffee.”

www.businessmirror.com.ph

Putin treads where Stalin failed with megaproject in the works By Evgenia Pismennaya & Irina Reznik Bloomberg

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S billionaire Arkady Rotenberg’s builders race to finish a bridge to Crimea, Vladimir Putin already has a new megaproject lined up for his childhood friend. Almost seven decades after Josef Stalin embarked on building a tunnel to Sakhalin Island, just north of Japan, the Russian president is reviving a project that he’s estimated may cost about 286 billion rubles ($5 billion). The contract to construct a bridge to energy-rich Sakhalin will go to Rotenberg’s Stroygazmontazh, according to three people familiar with the plans. The largesse will come in handy as the company and its owner are were hit with Western sanctions to punish Russia for meddling in Ukraine. Speaking in September in the Pacific port city of Vladivostok, Putin touted the bridge plan for Sakhalin as one of several new transport links proposed for the region that “would combine to produce a project on a planetary scale.” Such megaprojects have become a signature plank of Putin’s economic policy as he approaches what may be his final term in the Kremlin. While critics call the viability and cost of these efforts into question, the president is gambling they can shake the malaise that hangs over Russia in the aftermath of its longest recession this century. Pleased with the progress made by the recent infrastructure feats, Putin approved the Sakhalin plan because he also sees the political appeal of linking remote parts of Russia, the people said. “It’s more of a geopolitical project— the wish to bring Sakhalin closer,” said Stepan Zemtsov, a senior researcher at the Gaidar Institute in Moscow. “It’s not about recouping the investment.”

Mega spending

Sakhalin would cap an unprecedented stretch of infrastructure spending that’s spanned the length and breadth of the world’s biggest country by territory. Ventures ranging from the Power of Siberia pipeline to the 2018 soccer World Cup have cost about 3 trillion rubles. Rotenberg’s companies have been a major beneficiary of the costly revamp. Not all the construction has paid off economically: A building boom around the 2014 Sochi Winter Olympics has required the Kremlin to bail out the state development bank that funded it. Although the decision to award the deal is already taken, an announce-

ment about the start of construction may only be made next year, said the people close to the Kremlin and Stroygazmontazh. That was confirmed by another person close to state monopoly Russian Railways JSC, which will oversee the work. They spoke on condition of anonymity to discuss matters that aren’t yet public. No final decision about Sakhalin has yet been made, said Putin’s spokesman, Dmitry Peskov. A representative for the Rotenbergs also said it was premature to comment on the participation of Stroygazmontazh in the project.

Crimea ride

Stroygazmontazh will turn to Sakhalin once it completes another prestige engineering project, the 228 billion-ruble bridge to the Crimean peninsula, according to the people. The expectation is that the bridge will be ready enough for Putin to ride through during the election campaign, one of the people said. The vote is set for March 18, the fourth anniversary of the annexation of Crimea from Ukraine. Fitful efforts have been made to build a link across the 7.3-kilometer (4.5-mile) Strait of Tartary, the narrowest point dividing Sakhalin from mainland. All that’s left of Stalin’s attempt, which ended with his death in 1953, is the remains of a Gulag forced-labor camp built for workers. Under the current plan, the link would straddle desolate stretches of the coastline, from the tiny settlement of Pogibi—population 20—to Lazarev, a ramshackle town of slightly over 1,000, which is largely cut off from the rest of the mainland.

Bridge to nowhere?

With only half-a-million people living in Sakhalin, the bridge will never become economically viable, according to Natalya Zubarevich, head of regional studies at Moscow’s Independent Institute for Social Policy, who says a more sensible solution is to improve the existing ferry service. The island is home to Russia’s first liquefied-natural-gas plant and already linked to the mainland with pipelines for oil and gas. There isn’t enough demand to move people and resources, such as timber, to warrant a bridge, according to the Gaidar Institute’s Zemtsov. For now, the assumption is that borrowed money will be used for the Sakhalin project, requiring no budget resources, two of the people said. Loans from Japanese banks may be another possible source of funding, according to the person close to Russian Railways.

Japan’s Internet maverick has new global target: $180 steaks around the world By Aya Takada & Hiromi Horie

ban on Japanese beef in September. Japan reached a trade agreement with the European Union this year to eliminate tariffs on Japanese beef. The government aims to boost Wagyu exports to ¥25 billion by 2020.

Bloomberg

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apan’s corporate enfant terrible Takafumi Horie built one of the country’s most successful Internet businesses, stood for parliament, went to prison and started a space company that aims to put the country’s first privately funded rocket into orbit. Now he has a new frontier: cattle. The founder of Interstellar Technologies has teamed up with his friend Hisato Hamada to form Wagyumafia, which brands, promotes and distributes Wagyu beef. Horie, 44, compares the soft, fatty meat with Domaine Romanée-Conti, a wine estate in Burgundy, France, that has built its brand into one of the most expensive in the world.

Good Burgundy

“While Wagyu is as scarce as good Burgundy, it has been sold cheaply by JA,” said Horie, referring to Japan Agricultural Cooperatives, the nation’s largest farmers’ group. “I’m confident that the beef can be sold at much higher prices in global markets.” Since unveiling their first, members-only restaurant in Tokyo in September 2016, Horie and Hamada have opened three more shops. Membership has risen to 1,000, about 300 of whom are from overseas. Wagyumafia has held tasting events in New York, Paris and Singapore, and plans to open its first overseas restaurant

Channeling sushi

Takafumi Horie and Hisato Hamada raise their glasses for a toast at a Wagyumafia members-only restaurant in Tokyo. Bloomberg

in San Francisco next year. “By mafia we mean a syndicate of ex-IT entrepreneurs,” said Hamada, 40, former publisher of an online movie magazine. “Our project is to deliver Wagyu produced by selected farmers directly to global buyers, bypassing middlemen and without advertising. We find customers via social media and pop-up” events. Wagyu comes from four Japanese breeds of beef cattle—Black, Brown, Shorthorn and Polled—that typically produce intensely marbled meat, with a higher percentage of unsaturated fat than most other beef. That makes the soft, flavorful steaks the world’s most expensive meat. At Hamada’s new shop in Tokyo’s Roppongi district, a favorite area for foodies, Wagyu sells for ¥30,000 ($268) a kilo. (The cheapest bottle of Romanee Conti costs about ¥46,000,

with top vintages in the city fetching more than ¥1 million.) Wagyu prices are rising in Japan due to the increased costs of calves, Hamada said. The average price of a Wagyu-producing calf reached a record ¥852,287 in December, more than double the rate four years ago, according to Zen-Noh, the trading arm of JA. As many of the older farmers retire, companies are being forced to rear their own cattle to keep up supplies. “To cope with rising costs for Wagyu calves, we decided to start breeding them by ourselves,” said Aichiro Yamaguchi, a spokesman for Japanese retailer Daiei, a subsidiary of the nation’s biggest supermarket chain operator Aeon Co. Daiei, which operates Wagyu feedlots on the southern Japanese island of Kyushu, bought 15 Wagyu cows in December for breeding. The

Wagyu’s marbled beef Bloomberg

company plans to expand its herd to 500 by 2020 and aims to slash beefproduction costs by 30 percent, he said. Hamada first met a Wagyu farmer when he was distributing Food, Inc., a documentary film about corporate farming in the US. A farmer who saw the film invited Hamada to visit his farm in the southern Japanese prefecture of Miyazaki. The farmer, Muneharu Ozaki, feeds his cattle organic ryegrass and natural mineral water, with a home-made mix of 12 ingredients, including barley and corn. He shuns additives such as antiseptics and antibiotics. “What I want to produce is tasty beef that my family members can enjoy without any safety concerns,” said Ozaki, who studied cattle farming for two years in the US. Hamada was impressed by the taste of Ozaki’s beef and his way of

raising cattle. Later, while working as a French movie buyer, he met threeMichelin-star chef Alain Ducasse, who told him Wagyu could become a killer ingredient for Japan in the global food market. He and Horie, the former president of Web portal Livedoor, are trying to build a premium brand as demand for Japanese beef soars overseas, especially in China, where food quality and safety has become an increasing concern. Japan’s biggest export market was Hong Kong, which bought 353 tons in the first six months of 2017, followed by the US with 201 tons. Cambodia, a transit point for Wagyu shipments to China, was the thirdlargest buyer with 197 tons. China maintains a ban on Japanese beef after Japan’s first incidence of mad-cow disease in 2001. Exports are set to expand as Taiwan lifted its

“Wagyu is on the same path as sushi,” which has expanded rapidly across the globe in the past decade, said Dan Christiansen, food director of MASH steak house in Copenhagen, the biggest overseas retailer of Japanese Wagyu. Wagyumafia sources five brands of beef from 15 farms, including Ozaki’s. The best known Wagyu abroad is Kobe beef, the top-grade meat from Tajima, an old province that is now in the north of Hyogo prefecture. Tajima is a mountainous region in the west of Japan with few open fields, clear spring water and chilly nights. Tajima cattle are smaller than other Black Wagyu types and their meat has better texture, said Kyukou Tanaka, a 42-year-old farmer from the area. The region produces less than 1 percent of the beef cattle grown in Japan. “Our cows have maintained a pure lineage over the past 2,000 years because they are kept in an isolated area surrounded by mountains,” Tanaka said in an interview in Tokyo. “Their purity is the biggest difference from other types of Wagyu.” His 40-month cow was selected as the champion in the Wagyu contest of Hyogo prerefecture last year, and sold for ¥200,000 a kilogram.

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Tuesday, October 17, 2017 A13

Brexit takes bureaucracy to the atomic level By Jonathan Stearns and Nikos Chrysoloras | Bloomberg

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O understand the implications of Brexit, it helps to go nuclear. Of all the international regulatory challenges created by the United Kingdom’s impending departure from the European Union (EU), the atomic-energy industry may best encapsulate the decision’s bottom-line effect: more bureaucracy and costs for a country that has long fought to curb both within the EU.

Untwining the UK from decades of centralized European supervision of nuclear material for civilian use mirrors the broader Brexit process. Each involves abandoning treatybound organizations, reestablishing links on less integrated terms and, in the meantime, creating uncertainty for everybody from executives to researchers. “Brexit is a complete game changer for the nuclear industry in Britain, altering the regulatory environment, creating major complexity and leading the way to higher costs for businesses, the state and ultimately the British taxpayer,” said Simone Tagliapietra, a research fellow on energy at the Bruegel think tank in Brussels. “It’s a huge, self-inflicted problem.”

Brexit microcosm

The EU’s nuclear framework is a microcosm of the Brexit hurdles because, like Europe’s single market and free-trade deals, it offers the UK benefits that the British government is keen to retain after the country

withdraws from the 28-nation bloc in March 2019. Yet, the act of leaving makes preserving those advantages difficult or even impossible. With negotiations on the divorce terms stalled, numerous industries in Europe are stepping up calls for transitional arrangements that would maintain the status quo between the time of Brexit and the entry into force of any permanent agreements on future UK-EU ties. While the EU’s national governments retain many of the policy powers associated with nuclear energy, the Euratom treaty creates a federal structure for some key elements. The centralized features include nonproliferation inspections, supply agreements with non-EU nations and research funding, all of which will fall on Britain to arrange for the first time in four decades. When notifying its plan to withdraw from the EU, the government of British Prime Minister Theresa May also announced its intention to quit Euratom, which is governed by the bloc’s institutions. The move disap-

The Sellafield atomic fuel-reprocessing site, operated by Sellafield Ltd., stands in Seascale, United Kingdom, on December 22, 2016. Sellafield, the 70-year-old home to Europe’s largest nuclear site, with 10,000 employees and its own rail service and police and fire departments, looks its age and will eventually cost at least 90 billion to properly clean up, says Paul Dorfman, honorary senior researcher at the Energy Institute at University College London. Bloomberg

pointed the UK nuclear industry, which had argued that post-Brexit Britain should stay in Euratom.

Risk of disruption

Britain is a leading European nuclear nation, with 15 reactors accounting for about a fifth of domestic electricity production. The British atomic-energy industry employs more than 65,000 people and features companies ranging from plant operator EDF Energy and developer Horizon Nuclear Power—a unit of Hitachi Ltd.— to fuel producer Westinghouse Electric Co. and uranium enricher Urenco Ltd. “Our primary concern remains the risk of significant disruption if we cease to be members of

Euratom without new arrangements being in place,” said Tom Greatrex, chief executive of the London-based Nuclear Industry Association, which represents civil operators in the UK. “The government’s priority should be seeking agreement with the EU to ensure there are transitional agreements in place, including continuing association to Euratom.” The UK, Euratom and the International Atomic Energy Agency (IAEA) are united under a single nonproliferation agreement. Under the three-party accord, Euratom helps carry out IAEA-mandated inspections on civil nuclear facilities in Britain to ensure that no material is diverted for atomic weapons. In leaving Euratom, the UK will

have to negotiate an inspection agreement of its own with the Vienna-based IAEA and beef up the national nuclear authority. Britain held an initial discussion with the IAEA on a new accord in September, according to the agency. The country also published draft legislation on October 11 to create a domestic nuclear-safeguards system to replace provisions under Euratom.

Nuclear accords

Post-Brexit Britain will also no longer be covered by cooperation accords that Euratom has with a range of non-EU countries, including Australia, Canada, Japan, Kazakhstan, South Africa and the US. As a result, the UK will have to negotiate its own such deals, known as nuclear

cooperation agreements (NCAs), including with the EU itself. This exercise is similar to the general commercial challenge facing the UK as it looks to forge freetrade accords with the rest of the world that would mimic deals the EU already has or is seeking (with the likes of South Korea, Canada, Japan and Australia) and to fashion an open-market pact with the bloc itself. “NCAs between Euratom and non-EU countries allow for closer cooperation in many fields, such as trading of nuclear goods, materials, services and technology, as well as research and safety,” said Berta Picamal, an executive adviser at Foratom, a Brussels-based association that represents the European atomic-energy industry. “Establishing an NCA between the EU and the UK will be essential to avoid any disruption to our industry.” The outlook for nuclear research in the UK is also hazy. As a member of the EU and host of a nuclear-fusion project known as Joint European Torus (JET), the country sees €56 million ($66 million) a year directed from the Euratom research budget to the JET site in Oxfordshire where around 500 people are employed and about 350 scientists from Europe visit annually. The funds for JET, which is a prototype for the world’s largest nuclear-fusion project called ITER in France, are part of a €1.6-billion Euratom research budget for 20142018. Britain will have to negotiate access as of 2019 to this scientific network with the EU, which requires nonmember-countries participating in its research programs to make a financial contribution. “It is crucial that there is a continued UK cooperation within the Euratom research program,” Foratom’s Picamal said. “JET is key for ITER.”

China’s 2017 growth prospects in the balance as closures spur profit surge

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N pockets of China’s industrial heartland, a government push to clean up the environment and cut excess output is starting to bite: Furnaces have gone cold, the lights have been switched off, migrant workers are drifting back home. Liu Xiaoping, a resident of the sprawling, smoggy, steel-making hub of Jinan in the northeast is among the campaign’s collateral damage. Standing in a cul-de-sac where most factories were closed on a recent weekday visit, he says officials ignored his pleas for more time to comply with regulations at his 20-year-old plastic mold business. As officials threatened to cut off electricity, Liu shut down his factory before they could do so. “It was like a knife falling,” Liu said, claiming that the chop in mid-September left him with 1 million yuan ($152,000) of idle equipment and 10 unemployed staff in a city where more than 7,000 businesses labeled “messy and polluting” have been targeted for cleanup or closure. “None of us know what to do.” While it may be little consolation to Liu, the impact from efforts to cut capacity is proving double edged—factory profits have surged and reflation has taken root across industry, giving a much needed boost to indebted companies. Third-quarter GDP numbers due on Thursday are likely to show the world’s second-biggest economy remains in a sweet spot, with a 6.8 percent pace of growth expected, according to a Bloomberg survey of economists. And if comments made by Zhou Xiaochuan, governor of the People’s Bank of China are any guide, a shift in the economy to consumption and away from investment and exports may yet produce an even stronger performance. Speaking in Washington late last Sunday, Zhou said he hoped that a 7percent expansion for the second half was possible, according to a statement. China’s reflation also continues, with producer prices rising 6.9 percent in September from a year earlier, data released on Monday showed. Still, the drag from industrial restructuring may intensify. Economists estimate the expansion will slow to 6.4 percent next year and 6.1 percent in 2019. For China’s leadership—gathering this week at the 19th Communist Party Congress

Hongqiao Group’s aluminum-smelter plant Bloomberg

—cleaning the noxious skies and filthy rivers has become a priority. In contrast to previous leaders’ growth-at-all-costs approach, President Xi Jinping and his premier have declared war on pollution, spurred by the anger of citizens enshrouded in smog that’s sometimes more than 50 times more toxic than levels deemed safe by the World Health Organization. That political will overlaps with an economic need to rein in surplus production of steel, aluminum and other basic materials after years of overinvestment. How and when that capacity gets replaced will be a key factor in the economy’s performance beyond 2017. “The last time we saw this kind of effort to cut capacity was at the end of the last century, when Premier Zhu Rongji was determined to shut down money-losing state enterprises,” said Tao Dong, vice chairman for Greater China at Credit Suisse Private Banking in Hong Kong. “There’ll be short-term consequences for growth and jobs but it’s hard to quantify at this moment, all depending on whether the capacity will remain shut after the Party Congress.” Capacity shutdowns are rippling across the nation with officials estimating hundreds of thousands of small enterprises may be closed.

State enterprises aren’t being spared the knife either, though policy-makers are cushioning the impact of those cuts. Jinan Steel, a unit of Shandong Iron and Steel Co. with about 20,000 employees, was among those shuttered in July, the furnaces falling cold. Many workers, though, were relocated to a group plant at the coastal town of Rizhao, about four hours’ drive away. Premier Li Keqiang visited the company in April and told workers that, while the closure would take a toll, the nation would work to ensure employees are shifted to new positions rather than laid off. Stock filings show the company planned lower production of crude iron and steel this year than last. Calls to the company for comment went unanswered and it didn’t immediately respond to e-mailed questions.

Biggest smelter

IN Zouping county, about a two-hour drive from Jinan, privately owned China Hongqiao Group Ltd., the nation’s biggest aluminum smelter, said in August that it would cut annual production capacity by 2.68 million metric tons, or about 29 percent of the total. In response to questions from Bloomberg, a Hongqiao spokesman said there have been

no redundancies, early retirements or forced holidays at the company. In its latest report based on anecdotes on the economy gathered from more than 3,000 firms, China Beige Book found that progress on reducing debt and industrial capacity is proving elusive. Steel plants are still increasing output while they can ahead of a separate set of temporary, wintertime production curbs designed to lower pollution. That may be because remaining furnaces are working overtime. Morgan Stanley estimates net capacity reductions of steel—accounting for new plants, as well as those shuttered—will reach nearly 200 million tons in total for 2016 and 2017 combined. That exceeds Japan’s capacity of 130.5 million tons, and isn’t far off the European Union’s 222 million tons. The country’s last wave of mergers and closures of moribund state enterprises, in the late-1990s under then-Premier Zhu, cleaned up corporate balance sheets, improved efficiency and paved the way for the following decade’s economic boom, says Cui Li, head of macro research at CCB International Holdings Ltd. in Hong Kong.

Growth impact

The seasonal campaign may shave up to 0.25 percentage point off growth during the next six months, estimates Societe Generale SA. In July the Ministry of Environmental Protection said up to 176,000 businesses would be forced to shut down in Beijing, Tianjin and Hebei by the end of September. As the Party Congress approaches, there’s still a question mark hanging about the country’s longer-term industrial and environmental policies. “In the short term, stricter environmental regulations are bound to slow growth,” says Frederic Neumann, cohead of Asian economics research at HSBC Holdings Plc. in Hong Kong. “The coming leadership reshuffle offers an opportunity to revisit the medium-term policy agenda. This may entail an even sharper focus on environmental issues and the managing of potential risks in the financial sector.” Even before the crackdown on polluting companies gained momentum in recent months, efforts to reduce industrial capacity

had exceeded many analysts’ expectations. It fueled a rally in global metal prices, a surge in China’s factory profits, and a frenzy over commodity stocks. Consolidating industries account for half of total fixed-asset investment, according to CCB’s Cui. The materials industry, including iron and steel, has been hardest hit, she says. Shandong is among places feeling the most collateral damage, with locals affected by job losses or reduced wages, and left with uncertainty over their futures. Zouping’s Hushan village is a rubberrecycling hub that officials shuttered in one sweep last month. Piles of used tires were stacked as high as two stories in many idled workshops, and some factories were locked up, on a Thursday afternoon last month.

Idled workshops

AT Liu Shuhua’s convenience store, located on a quiet road just outside the village, stocks of cigarettes, liquor and snacks are piled high, where once migrant workers snapped them up. Liu says sales have slumped 50 percent, and she fears that’s permanent. “It’s impossible to say I’m not worried,” Liu says. “At least half the township population is affected by these closures.” Some hope workshops will reopen after passing environmental reviews. Liu Qingyong’s family of six made 6,000 yuan a month recycling old tires but now has no income, he says. “The closures are all temporary,” he says. “Sooner or later it will all start again.” The township is trying to find a way out for the rubber workshops, and has invited a Beijing company to discuss a plan, according to a statement on its website. “Closures are not the ultimate solution, but innovation and a clean environment are necessary,” it said. “If Xi is going to maintain support for the Party among China’s middle class he’ll need to focus on quality of life issues,” says David Loevinger, a former China specialist at the US Treasury Department and now an analyst at TCW Group Inc. in Los Angeles. “Stronger enforcement on environmental rules is here to stay, particularly in the northeast. I expect it will be a material drag on growth next year.” Bloomberg News

2nd Front Page BusinessMirror

A14 Tuesday, October 17, 2017

LIBERATION FROM TERROR Marawi City’s Grand Mosque and

www.businessmirror.com.ph

‘STRIKES WON’T DETER GOVT FROM PHASING OUT OLD JEEPNEYS’

bullet-riddled houses bore witness to months of heavy fighting between government security forces and members of an Islamic State-inspired terrorist group. Hopes for an end to violence in war-torn Marawi were renewed after Defense Secretary Delfin N. Lorenzana announced that terrorist leaders Isnilon Hapilon and Omar Maute were among the slain in a military assault early Monday in Marawi City. NONIE REYES

By Elijah Felice E. Rosales @alyasjah

& Jovee Marie N. dela Cruz @joveemarie

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DOT wants to reciprocate visa-free privilege granted by Taiwan to Filipinos By Ma. Stella F. Arnaldo

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@akosistellaBM Special to the BusinessMirror

HE Department of Tourism (DOT) is requesting the Department of Justice (DOJ) to grant visa-free status to Taiwan.

Tourism Spokesman Frederick M. Alegre made this confirmation, as the Taipei Economic and Cultural Office (Teco) in the Philippines announced a nine-month “trial period” of a visa-free program for visitors from the Philippines. “Yes. I know that’s the plan,” said Alegre, who is also the assistant secretary for Public Affairs, Communications and Special Projects, when asked if the DOT will be asking the DOJ to give visa-free status to Taiwan. Data from the DOT show visitor arrivals from Taiwan grew by 8.42 percent to 147,456 in the first seven months of 2017. The market accounted for some 3.8 percent of total visitor arrivals for the period in review. On a monthly basis, however, visitor arrivals from Taiwan have been weakening. In July 2017, for instance, arrivals from Taiwan fell 14.4 percent to 20,451 from July 2016. Teco announced on Monday that Filipinos traveling to Taiwan for tourism, business, visiting relatives of attending functions and events will enjoy visa-free entry for 14 days, starting on November

1. “This visa-free initiative shall undergo a nine-month trial period until July 31, 2018, as part of Taiwan’s goodwill and efforts of the ‘New Southbound Policy’ to build closer people-to-people exchange of visits and an economic community between Taiwan and the Philippines,” according to a news statement from Teco. Dr. Gary Song-Huann Lin, Taiwan representative to the Philippines, likewise urged the Philippine government and the Manila Economic and Cultural Office (Meco) to grant visa-free travel to Taiwanese travelers, in the same manner that the Philippines has granted the same to other countries. “Through these significant efforts, we will surely enhance our bilateral tourism, economic, cultural, educational and other areas of cooperation and exchanges that will eventually bring mutual benefits to the peoples of Taiwan and the Philippines” Lin stressed in the same statement. Meco officials have yet to confirm if it had already recommended the same visa-free privilege for Taiwan. Meco is the de facto embassy

147,456 The number of Taiwanese who visited the Philippines in the first seven months of the year

of the Philippines in Taipei. Owing to the Philippines’s “One-China” Policy, it is restricted from putting a full-scale embassy in Taiwan. This despite the large numbers of Filipinos working in said country. Published reports indicate there are about 124,000 Filipinos working in Taiwan factories. The Teco official said the granting of the visa-free privilege to all Filipinos is one of his longtime visions to build strong bilateral relations and a closer living economic community between the Philippines and Taiwan. It also aims to enhance the mutually beneficial bilateral tourism, trade, investment, technology, agriculture, economic, cultural, educational and people-to-people cooperation and exchanges between Taiwan and the Philippines. Lin expressed hope that this historical visa-free initiative will attract more Filipino visitors to visit Taiwan and lay a solid foundation for a genuine, friendly bond between the two nations. Teco said its government, since 2016, has endeavored to liberalize and simplify visa regulations for Philippine nationals, including the free

“Travel Authorization Certificate” (TAC) for qualified visa-free travellers and the payable e-visa (online visa). These two relaxed visa-application systems will be suspended for Filipinos upon the implementation of the visa-free treatment as from November 1. Passengers who enter Taiwan before November 1 with valid TACs may continue to stay for up to 30 days. But for passengers who do not enter Taiwan before November 1, their TACs will be no longer valid, even within its validity. All approved e-visas before November 1 (including the date) will still be valid to enter Taiwan with duration of stay up to 30 days. Those who have already obtained long-term and multiple Taiwan visas, which have been stamped on their passports, can still use their visas to enter said country. According to Teco, to be eligible for the visa-free privilege, a Filipino must have a passport valid for at least six moths from the date of entry; a return ticket or a ticket for the traveler’s next destination and a visa for that destination if it is required; no criminal record in Taiwan; and proof of accommodation (hotel) booking or host/ sponsor’s contact information /or arrangements of tour, travel, visit, events and meeting, etc. “However, those who intend to stay in Taiwan for more than 14 days or for the purpose of study, work, missionary, employment and other gainful activities are still required to obtain appropriate visas before entering Taiwan,” Teco maintained. With Recto Mercene

he transport strike might have forced Malacañang to suspend classes at all levels and government work on Monday, but the jeepney-modernization program, which a number of jeepney drivers and operators oppose, will still push through. Presidential Spokesman Ernesto C. Abella said the government is “always up in arms” should transport groups decide to hold strikes in protest of the Public Utility Vehicle Modernization Program (PUVMP). “[The] government is ready and prepared as it laid out contingency measures to assist commuters hit by the nationwide transport strike,” Abella said in a statement. According to Abella, the Land Transportation Franchising and Regulatory Board (LTFRB) has tapped 35 city buses in Metro Manila to assist commuters in the face of the transport strike. This is in addition to the four military trucks, four buses, four vans and four service vehicles provided by the Metropolitan Manila Development Authority; 15 military trucks by the Armed Forces of the Philippines; 12 light trucks and four military trucks by the Philippine Coast Guard; and six shuttles and one service vehicle by the Department of Public

Works and Highways. Abella added local government units have also stepped up efforts to aid their constituents who might be affected by the transport strike. In spite of the opposition from the transport group, Pagkakaisa ng mga Samahan ng Tsuper at Operaytor Nationwide (Piston), Abella made clear that the government will carry on with its plan to phase out old jeepneys and replace them with modern models. “ The administration remains committed to the PUVMP, which is long overdue. There were several attempts in the past to modernize the public transport system, but these have been thwarted due to similar transport strikes, which, unfortunately, resulted in an outdated public transport system,” Abella said. He added the jeepney-modernization program has earned the backing of various transport groups, except for “left-leaning” Piston. “These include the Federation of Jeepney Operators and Drivers Association of the Philippines, Alliance of Concerned Transport Organizations, Pangkalahatang Sanggunian Manila and Suburb Drivers Association Nationwide Inc., Land Transportation Organization of the Philippines, Alliance of Transport Operators and Drivers Association of the Philippines, Stop and Go Coalition and [the] majority of provincial transport cooperatives all over the country,” Abella said. See “Strikes,” A2

Report: 1.2M Filipinos displaced due to conflict, disasters in January-June By Elmer Recuerdo

S

Correspondent

ome 1.2 million Filipinos were displaced from their communities in the first six months of the year due to internal conflicts and natural calamities, and the numbers will likely continue to increase, as both causes of displacements get worse each year. According to the Internal Displacement Monitoring Centre’s (IDMC) 2017 Global Report on Internal Displacement, high levels of new displacement by conflict and disaster added to the already-soaring number of internally displaced people (IDPs). The IDMC report said in the January-to-June period, 740,000 Filipinos were displaced due to disasters and 466,000 due to conflict and violence. It added that disasters continue to bring about the highest numbers of new displacements each year. Conf lict-related displacement, on the other hand, has been on an overall upward trend over the last decade. Issues surrounding internal displacements in the country were the center of discussion when 150 disaster risk-reduction and -management (DRRM) advocates from various agencies, academe, communities and civil-society organizations

(CSOs) gathered over the weekend to celebrate the International Day for Disaster Reduction (IDDR) and the Asean Day for Disaster Management (ADDM) in Quezon City. With the theme “Ligtas na Tahanan Tungo sa Matatag na Pamilya at Komunidad”, the celebration became a venue for sharing good practices of families, communities, local government, schools and CSOs on disaster preparedness. It engaged participants in building safer homes and providing a platform for CSOs to raise their calls and influence legislators and decision-makers to respond to these. The groups highlighted two specific issues that need immediate attention from the government: protection and promotion of the rights of internally displaced persons and reduction of vulnerabilities of communities to disasters by investing in disaster preparedness, prevention and mitigation and sustainable livelihood. “We have gained significant milestones in terms of DRRM practice in the Philippines, but there is a lot of work to be done. One area where we need to put extra attention is with the disaster preparedness and disaster prevention and mitigation at the level of family, schools and communities,” said See “Report,” A2

Compliance Management—is it really needed? Continued from A1

You need to manage risk across all parts

of your company so that, at any given time, your business incurs just enough of the right kinds of risk—no more, no less—to effectively pursue strategic goals. Let’s look at a few features of a compliance-management system:

Features:

■ Manage policies, training, due diligence,

communication, approvals, investigations and reporting all in one place; ■ Combine time-consuming compliance tasks into simple, automated workflows; and ■ Get a 360-degree view of your entire compliance program from one, easy-to-use dashboard—in real time.

Bring everything together

Because everything is integrated, the system makes it easy to manage your entire compliance program in one place. Integration

means everything is more effective.

Save time and frustration

Combine time-consuming compliance tasks into simple, automated campaigns. Frustrating processes like getting employees to sign policies or complete training now take minutes, not weeks.

Get real compliance experts

You need compliance experts, covering the fields mentioned above. For instance,

the National Privacy Commission has advised all companies that they have to have data-protection officers in your companies since September 9. This year. Have you complied? If not, you may easily get into trouble—and trouble means criminal liabilities. Once you have a good compliance-management system in place, you can sleep better; you will have no more worries about coordinating the many pieces of your compliance programs.

From employee training to third-party due diligence, the management system brings your compliance and all its data together in one place. The result: Less hassle, lower risk and total visibility into the information you care about in one place. In conclusion, reporting and monitoring are indispensable processes for an effective compliance program. For assistance, you can e-mail Schumacher@integrityinitiative.com