Businessmirror october 23, 2017

BMReports

Why poverty prevails despite robust growth By Michael M. Alunan

Special to the BusinessMirror

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Part One

S chairman of the Association of Southeast Asian Nations (Asean) this year under the leadership of an unorthodox, foul-mouthed controversial president, the Philippines is now the darling of Asia, more so as it is among those leading the pack in growth rates, although the global limelight and attention also magnify the country’s warts of what’s wrong with our economy that is causing persistent poverty despite robust growth.

High growth but worst poverty?

THE Philippines may brag of posting among the highest growth rates in Asia at 6 percent in 2016, besting Indonesia’s 5.2 percent, Malaysia’s 4.6 percent, Thailand’s 3.1 percent, Vietnam’s 5.9 percent, Singapore’s 2.4 percent and Brunei Darussalam’s 0.5

A family sleeps soundly along the streets of Mabini in Manila. While poverty is marked by the homeless in urban centers, many poor Filipinos are farmers and are in rural areas, suggesting that agriculture development is the key to gainful life of Filipinos. NONIE REYES

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percent, according to Organisation for Economic Cooperation and Development statistics. It’s empty braggadocio. For one, other neighbors are growing faster, with Cambodia at 7.1 percent, Lao PDR at 7 percent and Myanmar at 8.2 percent. The Asian Development Bank (ADB) reveals in its study on 51 developing countries that for every 1-percent increase in income or gross domestic product (GDP), poverty drops by 1.5 percent or even by 2 percent in some Asian countries, except the Philippines. From 2004 to 2009, for instance, our GDP grew by 4.9 percent, but poverty even increased to 26.5 percent in 2009. A major reason poverty prevails is dismal performance of agriculture, which needs so much catching up after over three decades of neglect. This explains why 76.1 percent of those living below the poverty reside in the countryside, the Continued on A2

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Monday, October 23, 2017 Vol. 13 No. 12

Petron sues state-owned PNOC for contract breach By Lenie Lectura

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@llectura

ETRON Corp. has brought state firm Philippine National Oil Co. (PNOC) to court for breach of a binding and compulsory sale-leaseback contract, saying such act threatens to hurt Petron’s operations, shareholders and a petroleumdependent economy. Continued on A16

If [the Philippine National Oil Co. [PNOC] will continue to disregard its reciprocal obligations on the conveyance of our land, then they should return the properties to us. Petron has invested billions of dollars on these properties.” —Petron Corp.

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Dissecting PPP contracts #8: ADR Alberto C. Agra

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PPP L Alberto C. Agra

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uring the life of a public-private partnership (PPP) arrangement, which may last for 50 years, disputes and controversies may arise. These cases typically come about after the term of the officials who vetted and awarded the project. Philippine PPP history has seen the effects of such successor risk.

Cases have been lodged in connection with canceled contracts, changes in interpretation of contractual provisions and breach of material obligations. These happen unilaterally or without the knowledge, consent or participation of the other contracting party. Aggrieved parties may either seek redress and relief from courts, quasi-judicial bodies or “neutral third persons.” Continued on A15

Back-to-back wins for 2 BM ‘Hike in excise tax to pave way for green mining’ reporters in EJAP journ tilt By Elijah Felice E. Rosales

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T was Sinatra at the Manila Polo Club on Friday: Excellent journalism is lovelier the second time around. It was the night of the 26th Business Journalism Awards by the Economic Journalists Association of the Philippines (Ejap) and BusinessMirror reporters Lenie E. Lectura and Cai U. Ordinario were again recognized for excellent coverage last year of their respective beats. Lectura was again named as Best Reporter in Energy, while Ordinario was again declared as Best Reporter in Macroeconomy. Lectura and Ordinario won the same categories in the 2015 edition of the Ejap Business Journalism Awards. The BusinessMirror was also recognized as the Best Business News Source for topping 4 out of 9 award categories (Agribusiness, Energy, Macroeconomy and Special Features). The other winners in the 26th Ejap Business Journalism Awards are James Konstantin Galvez of The Manila Times (Agribusiness/Mining), Melissa Luz Lopez of BusinessWorld (Banking), Iris See “Ejap,” A2

PESO exchange rates n US 51.4630

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LECTURA

ORDINARIO

@alyasjah

xperts have thrown their support behind Environment Secretary Roy A. Cimatu’s plan to increase excise taxes on mining, arguing this will not only add revenue to government coffers, but will also pave the way to responsible mining. Rene E. Ofreneo, labor and industrial relations professor at the University of the Philippines, said it is high time that the government milked more money from the mining industry. Like Cimatu, he believes the contribution of the industry to the country’s GDP is just too little, “almost insignificant,” to be noticed. Cimatu last T hursday said he is eyeing to impose a “significant” hike on excise taxes in mining, citing President Duterte’s

2% The current excise tax o wn mining

instruction to him to maximize profit from the industry. “Absolutely, yes, kailangan [it is needed],” Cimatu said when asked if he is in favor of increasing the 2-percent excise tax on mining. “Dapat lang kasi masyado naman talagang maliit ’yong 2 percent [It is just right because the excise tax of 2 percent is just too little],” Ofreneo told the BusinessMirror. Ofreneo added this can be the government’s first step toward

what he calls “green mining,” or the sustainable way of extracting ores and minerals without having to destroy much of the environment. Aside from increasing excise taxes on mining, he said, he would also like to see the government pursue its promised crackdown on irresponsible mining companies. “Increasing excise taxes on mining would not mean anything if the government continues to allow irresponsible mining companies to operate.” In an e-mail to the BusinessMirror, Ronald U. Mendoza, dean of the Ateneo School of Government, said, “The government needs to be much more strategic with mining policy. We should not just consider it as a revenue source.” For Mendoza, the government has yet to comprehend the full potential of mining, which is to

“light the match toward national industrialization,” or the veering away from being an import-dependent, export-oriented economy. “If mining is connected well with the rest of the value chain, we could be less dependent on imports of key products [that] we also need for our industrialization,” he said. “ T he impact of mining on the economy could also be much stronger. This industry can help strengthen other industries, including manufacturing and construction,” the Ateneo dean added. Mendoza said that, aside from increasing excise taxes on mining, the government should also strive to process ores and minerals within the country. “Presently, up to 70 percent of steel is imported from China, yet a large share of our unprocessed raw ore is sent to China for processing.” See “Excise tax,” A2

n japan 0.4574 n UK 67.7305 n HK 6.5976 n CHINA 7.7774 n singapore 37.9409 n australia 40.5477 n EU 61.0042 n SAUDI arabia 13.7227

Source: BSP (20 October 2017 )

A2 Monday, October 23, 2017

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Why poverty prevails despite robust growth Continued from A1

National Statistical Coordination Board said. It also triggers the massive rural-to-urban migration of rural folks escaping the clutches of rural misery only to end up shackled in urban poverty and contributing to social problems like housing backlog, joblessness, drugs, prostitution and criminality. Asean neighbors are overtaking us? Statistics show that rural poverty only dropped by 14.7 percent over 14 years, from 46.9 percent in 2000 to 40 percent by 2014, making us miss our Millennium Development Goals of halving poverty and still having the worst poverty in Asean. In contrast, our neighbors reduced poverty remarkably. Thailand pumped massive resources into agriculture, reducing poverty from 67 percent in 1986 to 7.2 percent by 2014. Indonesia similarly reduced poverty to 13.8 percent by 2014; Malaysia, 8.4 percent in 2009 and nil by now. Vietnam reduced extreme poverty from 50 percent in 1993 to 3 percent in 2013; Cambodia, from 48 percent in 2007 to 13 percent in seven years by 2014. Their common strategy was sustained massive production in agriculture, which is ironic as we were the envy of the same neighbors, particularly Thailand, which sent scholars to University of the Philippines Los Baños decades back to study agriculture.

Farmers, balanced out?

WE partly went wrong when our policymakers interpreted the pursuit for national interests was balancing “equally” all interests, only to balance out farmers. They were trapped in their own “intelli-

PHL ships. . .

Continued from A16

price level recorded as of August 31. A sugar crop year (CY) in the Philippines runs from September 1 to August 31 of the following year. The country’s raw sugar balance at the end of CY 2016-2017 was pegged at 391,918.80 MT, 69.23 percent higher than the 231,589.20 MT recorded in the previous CY ending August 31, 2016. In March the SRA issued Sugar Order (SO) 1-B, which authorized the reallocation of locally produced sugar in CY 2016-2017. The SRA made the reallocation to arrest the decline in the domestic price of sugar.

gent sophistication,” or sophistry, believing their own propaganda that straddling the tightrope balancing act of pleasing all opposing interests was doing the right thing. Caught in the mediocrity of keeping this “theoretical balance,” their good intentions may have done more harm. One perceived conflict is consumers against farmers and the belief free trade alone will solve all problems, as competition will force producers like farmers to shape up. Actually, farmers and consumers have symbiotic interests because when give more bias to farmers to produce volume and variety, consumers get lower prices and more choices, although there is a lag-time in-between, albeit manageable. So why pit both in contradictions. I’m not totally against freer imports per se as a tool to protect consumers, but when you don’t empower farmers to increase their productivity on a sustained and organized manner, then trade will only benefit traders, and even convert our own farmer-producers into consumers. A powerful book by British-bred Korean Ha-Joon Chang, titled 23 Things They Don’t Tell You About Capitalism discusses extensively that neoliberal “free market,” which we swallowed blindly, has brought more havoc to the world.” His book, however, entails a full discourse altogether.

Invest where they count most

AGRICULTURE needs so much catching up in solid investments, where they count most in sustained productive inclusive growth. This is neither allowing extreme free market dominated by unscrupulous traders, nor heavy government intervention in

costly rice trading of spending billions in support prices of procuring at high prices, but only intervening 2 percent to 3 percent of total production, not enough to influence prices; after which it stores long at a loss, then sells low again, all of which result in mounting financial losses to the National Food Authority (NFA) now saddled with debts of over P160 billion. Why can’t the NFA shift its buffer management system to buying “rice options” instead, a monetary instrument paid to producers, obliged under contract to deliver certain volume of rice stocks when the NFA urgently needs them for buffer and price management. This way, the NFA need not hold physical stocks that are kept long so as not to flood and dampen the markets, but often end up, unfortunately, damaged unnecessarily. In short, the billions saved from palaysupport procurement, long storage and lowpriced retailing, must be spent instead in empowering and organizing farmers into viable cooperatives, equipping them with trucks and postharvest facilities, processing facilities and other marketing and logistical support that will enable organized farmers to capture the full value from the supply chain as they can now deal directly with big markets. What we have discussed are systemic/ structural problems causing stagnation and poverty, and we are not tackling corruption yet, whereby budgets hardly trickle down to intended farmer-beneficiaries, but end up in pockets of bureaucrats in collusion with suppliers. Massive import smuggling is another problem, which only worsen the problems owing to “elite capture” of what economists call

Under SO 1-B, the SRA reduced the allocation for“B” (domestic) sugar to 74 percent, from 94 percent, and allocated 20 percent for “D” sugar, or those shipped to countries other than the US. “Monitoring reports showed the continuing downward trend in the withdrawals of raw and refined sugar in the domestic market and for four consecutive weeks, prices of sugar continued to drop,” SO 1-B read. “Hence, there is an imperative need to take urgent measures in order to arrest the detrimental economic effects of the imbalance between sugar production and the requirement of sugar and to stabilize the collapsing price of sugar consistent with public welfare,” it added.

“rent income” by a privileged few.

Poor RD&E, irrigation investments

AMONG the solid investments needed are research and development (R&D) as our expenditures here are already the second lowest in Southeast Asia. On the contrary, instead of increasing investments, our R&D expenditures continuously dipped from its already-meager levels of only 0.15 percent of GDP In 2002 to 0.14 percent of GDP in 2003, and further sliding to 0.12 percent of GDP in 2005. The United Nations Educational, Scientific and Cultural Organization recommends over eight times our levels to a minimum of 1 percent of GDP. And R&D is not even enough as you need to bring research findings to farmers through extension work that was, unfortunately, scrapped and devolved to the local government units (LGUs) where they were marginalized and lost direct ties with national research efforts. Another problem is lack of irrigation. To magnify its importance, water is said to be the No. 1 input, the No. 2 input and water again as the No. 3 most vital input. We may have the best rice technologies in the world, but only 35 percent of the Philippines’s 4.7 million hectares of rice lands are irrigated. Vietnam has 97-percent irrigation for its 7.7 million hectares of rice lands, thanks to its Mekong River and flat lands. Thailand similarly benefits from the Mekong, which irrigates over 60 percent of its 10.9 million hectares of rice lands. The Philippines’s low-average yields are pulled down by the low yields of our rain-fed upland rice. Records show that, for many

UK Labour Party. . .

Continued from A16

The government faces the prospect of defeat from its own MPs on at least 13 amendments, Starmer said, causing action on the bill to be paused. Starmer also called for the bill to “respect the devolution settlement” and to entrench workers and human rights, dismissing it as “not fit for purpose” in its current form. The Scottish and Welsh governments have already said they will not support the legislation, with Scottish First Minister Nicola Sturgeon and Welsh counterpart Carwyn Jones releasing a joint statement in July calling it a “naked power grab.” Speaking on the BBC’s Andrew Marr Show last Sunday, shadow Foreign Secretary Emily Thornberry echoed Starmer’s stance, saying that a no-deal Brexit “is a serious threat to Britain” and that the Labour Party would stop it. She also said that Britain needs to be part of the customs union. Labour’s intervention comes after last week’s European Union summit saw both sides turning slightly more positive on the progress of the Brexit talks and the EU agreeing to begin internal discussions on trade. May is set to update parliament on the progress of the talks on Monday, and is expected to say that, although the negotiations are “deeply technical,” the people at the heart of them remain her “first priority.” Bloomberg News

years, we spend more on rehabilitating old irrigation facilities instead of building new ones, that could show physical proof where the investments went, as to why this investment ratio, one can only surmise. More horsepower, not carabao power. As to mechanization, measured in horsepower, we trail behind as many farmers still depend on their old carabao, which is no longer reliable and cannot catch up with rising work demand. Records some years back show that Japan’s farm mechanization was an average of 7-horsepower per hectare (hp/ha), South Korea was 4.1 hp/ha, China 4.10 hp/ha and Vietnam 1.56 hp/ha. The Philippine trails behind at 1.02 hp/ha. Traditional spoilage rate in rice production in the Philippines range from 11 percent to 37 percent broken down into harvesting wastage of 1 percent to 3 percent; handling spoilage, 2 percent to 7 percent; drying, 1 percent to 5 percent; threshing, 3 percent to 6 percent; storage, 2 percent to 6 percent; and milling, 2 percent to 10 percent. At a palay production of about 19 million metric tons (MMT), wiping out only a minimum 11-percent spoilage means an additional rice ouput of 2.09 MMT, thus, raising total inventory to 21.09 MMT and wiping out the need for dollar-draining rice imports. There are more issues why poverty has prevailed, despite robust growth, which can’t all be tackled here, but the main culprit is neglect for agriculture, where 76.1 percent of people in poverty is based. Problems have accumulated the past decades, and it’s a big challenge how Agriculture Secretary Emmanuel F. Piñol can catch up fast. To be continued

Excise tax. . .

Continued from A1

“We are essentially reimporting the ore we failed to process,” Mendoza added. The Ateneo dean urged the government to “strike a better balance” between simply earning revenue from mining and developing the industry for national benefit. For Ibon Foundation Executive Director Jose Enrique A. Africa, higher excise taxes on mining “would raise revenues for the government’s need, and moderate extraction of the country’s mineral resources.” Like Mendoza, Africa said the end goal of the government should be to develop domestic processing and industrial production to maximize benefits from the industry. “They are also timely because resource-rich countries, from Indonesia to Zambia, have already been increasing taxes and royalties,” Africa said. This was the same sentiment Cimatu aired, that more and more mineral-rich countries, mostly in Latin America, are imposing higher excise taxes on mining. Cimatu said he will allow the Mining Industry Coordinating Council (MICC) to discuss how much increase will be imposed, but made clear excise taxes on mining should be increased no matter what. In a text message to the BusinessMirror, Finance Undersecretary Bayani H. Agabin confirmed the MICC is concurrently studying the matter. “We are currently studying the matter at the DOF [Department of Finance] and will include it in the fifth package of the tax reform,” Agabin said, referring to the last package of the Duterte administration’s comprehensive tax-reform program. The first package has yet to be enacted into law.

Ejap. . .

Continued from A1

Gonzales of Philippine Star (Capital Markets), Prinz Magtulis of Philippine Star (Finance), Miguel Camus of Philippine Daily Inquirer (Transport and Telecommunications), Amy Remo of Philippine Daily Inquirer (Trade and Industry), and Doris Dumlao of Philippine Daily Inquirer (Features). For winning 3 out of 9 awards, Philippine Daily Inquirer was named as the Best Business News Source. Entries for the 2016 edition of the awards were judged by former Finance Undersecretary Milwida M. Guevara, now CEO of nonprofit Synergeia Foundation; Former Agriculture Secretary Arthur C. Yap, now representative of Bohol’s Third District; former Senior Vice President of treasur y group at Rizal Commercial Banking Corp. Marcelo Ayes; Deputy COO of the Securities Clearing Corp. of the Philippines Juanita Cueto; former President and COO of the National Power Corp. Cyril del Callar; University of the Philippines economist Victoria Quimbo; former Trade Secretary Gregory L. Domingo; and AC Infrastructure Holdings Corp. President and CEO Rene Almendras.

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Long waiting time for passports assailed By Recto Mercene

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@rectomercene

espite President Duterte’s order to shorten the long waiting time for passport processing at the Department of Foreign Affairs (DFA), thousands of Filipinos still find themselves unable to secure the document on time. This has resulted in missed job opportunities abroad and rescheduled departures for ordinary travelers. Although the DFA earlier revoked the 1,200 slots allotted to travel agencies, it still takes three months to process a passport, according to a travel consultant. “The long waiting time in acquiring a new passport for overseas Filipino workers [OFWs] continues to persist at the Aseana main passport office and other regional offices of the DFA,” said travel consultant Manny Geslani. He added the delays in the processing of passports for OFWs also happen in some regional offices operated by the DFA Consular Offices and the online system. Geslani said the DFA has a two-month backlog for appointments, while there are unreasonable requirements by some regional offices for additional identification cards. “These have frustrated Filipinos who want to go abroad and seek better jobs,” he added. When Foreign Affairs Secretary Alan Peter S. Cayetano assumed office in May, he removed the appointment system and encouraged the walk-in scheme, hoping this will reduce the waiting time. Eventually, Cayetano’s order was revoked, and the overseas recruitment agencies were allowed to endorse their applicants as walk-in customers without the need for appointment. However, this is limited to 1,500 slots per day in all the 32 regional offices of the

DFA, Geslani said, noting that the government agency accepts some 15,000 passport seekers per day all over the country. The Aseana complex on Macapagal Boulevard processes about 1,000 passports daily. In their latest consultation with the Federation of Manpower Exporters Inc. and the Coalition of Licensed Agencies Deploying Domestic Services, Foreign Undersecretary Jose Luis G. Montales offered 1,500 slots for walk-in applicants from the recruitment agencies. Geslani said the manpower recruiters are inclined to accept the proposal as a temporary solution to their problems. The industry leaders are also looking forward for the DFA to set up more mobile passport units and biometric desktops that the agency will acquire in 2018 to meet the heavy volume of passport applicants. The manpower industry earlier complained to DFA officials that many prospective applicants have encountered unreasonable demands from regional offices in Davao, Zamboanga and Legaspi. “Those DFA offices have demanded additional identification card (IDs) like driver’s licenses, Social Security System (SSS) and voter’s ID despite the applicants’ submission of authenticated National Statistics Office birth or marriage certificates, PhilHealth ID, National Bureau of Investigation, police clearance and digitized Postal ID, which are the minimum requirements to be submitted by the passport applicant,” he added. He said the additional requirements are over and beyond the minimum requirements needed by an ordinary applicant, since most of them are young women from Mindanao who are not expected to drive. “Most of them do not possess SSS ID since it is their first time to apply for an overseas job,” he added.

Editor: Vittorio V. Vitug • Monday, October 23, 2017 A3

Senate eyes ₧50 billion for Marawi rehabilitation By Butch Fernandez

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@butchfBM & Elijah

Felice E. Rosales

@alyasjah

special Senate Committee on Crisis will visit Marawi’s ground zero to assess the war’s damage and facilitate passage of an estimated P50-billion funding to rebuild the war-torn city.

Sen. Juan Miguel F. Zubiri over the weekend appealed to Sen. Gregorio B. Honasan II, Crisis Committee chairman, to convene the panel and ask government agencies concerned, including the Department of Public Works and Highways and the National Housing Authority, to brief senators on the Marawi situation as soon as possible. “Hopefully, we can schedule the visit on the first week of November,” Zubiri said, “so that, after the briefing at the Senate, we will do the [Marawi] ocular inspection to get the feel on the ground.” Zubiri said he intends to bat for the inclusion of P50-billion allocation for Marawi either in the 2018 budget or under a special fund. This is apart from the initial P5-billion Bangon Marawi fund that Sen. Grace Poe is proposing for inclusion in the 2018 national budget. “I was thinking it [Marawi rehab fund] should be tucked under the 2018 budget that we will tackle in November, or a special supplemental budget,” Zubiri told the BusinessMirror. “But, if P50 billion is needed, it might be too large an amount to cut from the other agencies

funding in the annual budget; so, more likely, it will be a supplemental budget so we don’t touch the regular budget.” Zubiri added he intends to request for a Senate briefing on the Marawi situation before session resumes in mid-November. “Then we can fly to Marawi for an actual observation to see what is needed.” Honasan, however, is not rushing to visit Marawi, saying he would rather let the Armed Forces finish the clearing operations. In a separate interview, Honasan suggested that the Senate inspection of the battle zone be deferred until the area is cleared. “We want to be sure that the area is not just cleared, but also the situation is safe for assessing plans for reconstruction-recovery and development of the area.” “Let us wait for them to finish the task,” Honasan said, adding that President Duterte earlier estimated that only one hectare of the battle zone is left to be cleared. “Also important for us is to first get what is called post-conflict needs assessment, so we will know the requirement,” Honasan added.

Meanwhile, Malacañang last Saturday assured the public that the military is keeping its guard active in Marawi City, even after Duterte has declared the besieged municipality free from terrorist influences. In a statement, Presidential Spokesman Ernesto C. Abella said some government troops might have been sent home, but this does not mean the fight in Marawi City is over. “The start of the military pullout in Marawi does not signal the end of fighting between our troops and Maute terrorist-stragglers,” Abella said. “While enemy force has greatly diminished, we will continue to be alert and assure the residents of the city that we will not compromise its security with the presence of some units of the Armed Forces,” Abella added. The President last Tuesday declared Marawi City liberated, one day after the military killed terrorist leaders Isnilon Hapilon and Omar Maute. Hapilon is the self-styled emir of the Islamic State in Southeast Asia, while Omar is the last of the infamous Maute leaders. However, the deaths of Hapilon and Maute and the liberation of Marawi City do not mean the lifting of martial law in Mindanao, according to the military. In spite of the significant developments on the ground, Abella said government troops will not let their guard down against possible retaliation from pockets of Daesh-inspired groups. “We cannot afford to drop our guard for possible threats coming from the remaining network of the Daesh-inspired terrorist group still operating, as we begin the challenging task of rebuilding, reconstruction and rehabilitation of Marawi,” Abella said.

Economy BusinessMirror

A4 Monday, October 23, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

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‘Drug war, conflict fail to dent PHL growth’

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By Cai U. Ordinario

@cuo_bm

he President’s drug war and the armed conflict in the Autonomous Region in Muslim Mindanao (ARMM) had little impact on the Philippine growth story in the past six years, according to an international economist.

In a recent Philippine Institute and Development Studies forum, Hal Hill, professor emeritus of Southeast Asian Economies in the Arndt Corden Department of Economics, Crawford School of the Australian National University, said violence and conflict did not affect the Philippine economy as much compared to other countries. Hill added that despite the magnitude of the problem in the conflict areas in the ARMM, the country’s national budget has not been overtaken by efforts to finance the military, which is “positive for growth and development.” “If you look at the rosy macro [economic] story for the last six years, it sort of has been delinked from the terrible conflict in your part of the world,” he said. Hill added that, in some conflict countries, defense budgets are huge and this actually is a cause for worry in these countries. But in the Philippines, this is not the case. Based on the data from the Department of Budget and Management (DBM), the Department of National Defense’s (DND) proposed 2018 budget is P145 billion, which is higher by only 5.5 percent from the 2017 budget of P137.4 billion. The DND was only the fifthlargest recipient of the budget in 2017 and 2018. But it was the thirdlargest recipient in the 2016 budget, with P117.7 billion. “The worry in some conflict coun-

tries, such as Pakistan, is that a conflict has led to a huge military budget. [In contrast], in your country there’s very low spending on defense, which I think is a positive,” Hill said. In the same forum, former University of the Philippines School of Economics Dean Ramon Clarete said the Philippines may not be out of the woods yet. Clarete said the government must ensure that its military and police operations are transparent, something that both Filipino and foreign investors favor. He added that, while there was indeed a $1-billion dip in the country’s investments between 2016 and 2017, this cannot be attributed to the conflict or, more specifically, the President’s war on drugs. Clarete said it can be noted that in the first year of the Aquino administration, there was also a similar dip in investments, particularly foreign direct investments (FDI). “All investors, foreign and domestic, would like some transparency and stability in the direction of policy. So it’s very important that the leadership will also articulate that particular stability and transparency,” he added. Data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s FDI declined 37.73 percent to $307 million in July, from $493 million in the same period last year. However, a surge in net equity

Bullet-riddled houses in Marawi City bore witness to months of heavy fighting between government security forces and members of an Islamic State-inspired terrorist group. An international expert said conflicts in areas such as Marawi and the Duterte administration’s war on drugs would not slow Philippine growth. FILE PHOTO

capital to $131 million was due mainly to the increase in equity capital placements to $170 million, which more than compensated for the withdrawals of $39 million.

These equity capital infusions came mostly from Singapore, the United States, the Netherlands, Japan and Taiwan. These were invested mainly

in manufacturing; real estate; wholesale and retail trade; financial and insurance; and electricity, gas, steam and air-conditioning supply activities.

As a result of these developments, FDI net inflows reached $3.9 billion in January to July, a 16.5-percent decline from $4.7 billion in net inflows last year.

Banking on BPO sector not House vows to prioritize passage of resolution hiking military pay enough to cut poverty—experts By Jovee Marie N. dela Cruz @joveemarie

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hile the country’s businessprocess outsourcing (BPO) sector has been known to provide good jobs to millions of Filipinos, economists said relying on the sector alone would not significantly reduce poverty. In a recent Philippine Institute and Development Studies forum, former University of the Philippines School of Economics Dean Ramon Clarete said the BPO sector is concentrated on the “low end” of the outsourcing industry. Clarete said this makes the jobs offered by the BPO sector in the Philippines especially vulnerable to automation, since lowend contact center operations can easily be replaced by artificial intelligence (AI). “Certainly, we should not bask in it because most of it is concentrated in the contact center, low-end part of the BPO,” he said. “Contact centers can be partly automated, so you’ll be losing jobs if you don’t do anything now.” Nonetheless, Clarete said the country’s BPO sector has done the Philippine economy a great service given that it easily accounts for 8 percent of GDP. This is nearly as high as the 10 percent contribution of remittances to GDP. The Philippines’s labor export has played a major role in the country’s economic growth story for decades. In the same forum, Hal Hill, professor emeritus of Southeast Asian Economies in the Arndt Corden Department of Economics, Crawford School of the Australian National University, said the country’s services sector has really made the Philippine economy unique relative to its neighbors. Hill said despite the higher wages paid to BPO workers relative to the minimum wage does not temper the interest of foreigners in outsourcing various services to the Philippines. “Philippine commercia l trade-

policy interest, including Australia as well, especially Asean economic community is much more focused on services than goods,” Hill said. He added the services sector has been a great asset to the Philippine economy because the minimum wage hurts the manufacturing sector, thereby limiting its contribution to economic growth. Hill said that apart from the minimum wage, BPO exports don’t go through ports and harbors. This shields the BPOs from experiencing logistics challenges that manufacturing has been saddled with. “The Philippines hasn’t done so well in its global production networks and manufacturing side, but it has done very well in the BPOs,” Hill said. In its “Information Economy Report 2017,” the United Nations Conference on Trade and Development (Unctad) said some 85 percent of retail and 89 percent of BPO workers are at risk of automation. Unctad said that, while increased digitalization will create new jobs, there will be occupations that will disappear as a result of automation. The report noted that increased digitalization will introduce four changes—job creation, job destruction, job changes and job shifts. New jobs will stem from the production of new goods and services, such as 3D printing, software, app development and AI. The report stated that conditions of work will be affected, such as benefits extended to workers, such as allowing more flexibility for people in remote locations and people with disabilities. Unctad also said new skills and education adjustments will be required, particularly those linked to digital skills. Workers will also be required to have strong cognitive, adaptive and creative skills. Cai U. Ordinario

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ays after the Marawi City liberation, the House of Representatives last Sunday vowed to prioritize the passage of a resolution increasing by 100 percent the salary of police and military personnel. House Appropriations Committee Chairman Rep. Karlo Alexei B. Nograles of Davao City said President Duterte has already endorsed to the House of Representatives and Senate a draft resolution that would make official the 100-percent salary increase for police and military personnel. Nograles said the leadership of the lower chamber guaranteed the approval of the resolution once Congress resumes sessions on November 13. Lawmakers are currently on a month-long break from work starting last October 14. “This is proper procedure since Congress, particularly the House of Representatives, possesses the power of the purse, or the power to allocate funds for government expenditure,” he said. “The House of Representatives led by Speaker Pantaleon D. Alvarez has been keeping a close eye on the resolution for the salary hike, and we guarantee to make President Duterte’s promise a reality,” Nograles added. He said the salary hike is slated for implementation beginning January 2018. Nograles added the money will be sourced from the Miscellaneous Personnel Benefits Fund (MPBF). Specifically, P24.9 billion from the P84.4 billion MPBF for 2018 will be tapped for this purpose. He said the amount is separate from the P61.4 billion that has been allocated for the third tranche of pay hikes for government workers under the Salary Standardization Law. Duterte first bared his intention of doubling police and soldiers’ pay in August last year. Last week, the President declared

Marawi’s liberation from Maute terrorists, who launched a siege and subsequent occupation of the city on May 23. The ISIS-inspired fighters reportedly numbered 800 to 1,000. “Our men and women in uniform proved in the battle of Marawi that they deserve this salary hike. They managed to contain the threat posed by Maute terrorists within the city, neutralize its keys leaders and retake the city,” Nograles said. Preceding this declaration were reports that Abu Sayyaf leader Isnilon Hapilon and Maute Group head Omar Maute had been killed. It should be noted that Hapilon is a wanted terrorist by the United States government. “Kudos to our troops for getting the job done. They showed that they are capable of neutralizing the world’s most dreaded terrorists and bandits. They deserve all the additional benefits coming their way under the Duterte administration,” Nograles said.

Retirement benefit

The House committees on government enterprises and privatization and on national defense and security’s technical working group (TWG) has now started consolidating two measures seeking to reform the retirement benefit and pension system of the seven major uniformed services of the government. TWG Head Rep. Mark O. Go of Baguio City said the bills aim to address the many concerns of the major uniformed services of the government. The seven major uniformed services are the Armed Forces of the Philippines, Philippine National Police, Philippine Coast Guard, Bureau of Fire Protection, Bureau of Jail Management and Penology, Bureau of Corrections and National Mapping and Resource Information Authority. The TWG is harmonizing House Bills 1137 and 5673 filed by Reps. Gary Alejano of Magdalo and Francisco Jose Matugas of Surigao del Norte, respectively. The bills are both titled “Unified Uniformed

Personnel Retirement Benefits and Pension Reform Act.” The bills provide that existing retirees and future retirees of the uniformed services shall be entitled to receive a monthly retirement pay equivalent to 2.5 percent for each year of active service rendered, but not exceeding 90 percent of the monthly base and longevity pay of the grade next higher than the permanent grade last held. The measures said all new entrants, who at the time of their actual retirement, are eligible to receive retirement benefits and pension under existing laws applicable to the uniformed services, shall be entitled to receive their lump sum benefit equivalent to three years within one month of their effective date of retirement. A ll uniformed personnel who are disabled in the line of duty shall be eligible to receive a monthly pension, the rates of which shall be determined by the respective department concerned, the bills added. The bills also seek to provide a new fundsourcing scheme for the unified retirees’ pension and benefits that is sustainable in the long term. They mandate the creation of a Uniformed Personnel Retirement Fund (UPRF) to be managed by the Government Service Insurance System (GSIS) for the sustainability of the retirement benefits and pension of uniformed personnel. The GSIS shall create a new department, which shall exclusively administer the UPRF. The measures also provide that it shall be mandatory for new entrants to contribute a percentage of their monthly compensation as personal share and for the national government to contribute a corresponding share sourced from the general appropriations for the maintenance of the UPRF. The additional funding for the maintenance of the UPRF shall be sourced from the sale or disposition of public lands, as may be authorized by the President.

Agriculture/Commodities BusinessMirror

www.businessmirror.com.ph

Editor: Jennifer A. Ng • Monday, October 23, 2017

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Dairy imports seen declining by 10%

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By Jasper Emmanuel Y. Arcalas

@jearcalas

hilippine dairy imports this year may decline by almost 10 percent to 2.5 million metric tons liquid milk equivalent (MMTLME), from a record-high of 2.77 MMT-LME last year, according to the latest Global Agricultural Information Network (Gain) report.

The Gain report, which was prepared by the United States Department of Agriculture’s Foreign Agricultural Service (USDA-FAS) in Manila, said imported milk has become more expensive as global prices has started to recover. “According to the NDA [National Dairy Authority], total imports of dairy products reached a record 2.77 MMT-LME in 2016 on low global dairy prices and strong local demand. Stocks were accumulated during this period of low prices, as well,” the Gain report read. “[FAS Manila] expects imports in 2017 to decline slightly to 2.5 MMT-LME as global dairy prices begin to recover and domestic stocks remain high,” it added. The report noted that the countr y’s sk im-mi l k powder (SMP) imports this year are expected to decline from a record level last year. It added that whole-milk powder (WMP) imports will also decline “modestly” based on rising global milk prices. Data from the USDA-FAS in Manila showed that the country’s SMP imports this year may reach

1.283 MMT-LME, 13.5 percent lower than the 1.483 MMT-LME recorded last year. WMP imports may also decline by 18.18 percent to 1443,360 metric tons (MT), from 176,440 MT last year, according to the data of the USDA-FAS in Manila. SMP and WMP imports comprise almost 60 percent of the Philippines’s dairy imports annually. However, the Gain report said Philippine imports of liquid milk and butter are expected to increase this year on the back of higher demand from the local food service sector. “In 2017 liquid-milk imports should increase slightly due to rising consumption and increased use in food service,” the report read. “Imports of butter and other dairy spreads, as well as cheese, should continue to rise, mainly coming from New Zealand and Australia, due to the duty-free advantage of those suppliers and also as a result of increasing demand for the products from the expanding middle class, growing fast-food industry and hotel and

restaurant sectors,” it added. Australia and New Zealand both benefit from Association of Southeast Asian Nations agreements that grant access for dairy products at zero-percent duty, according to the Gain report. The Gain report data showed that the country’s liquid-milk imports this year would rise by 4.16 percent to 50,000 MT, from 48,000 MT recorded in 2016. The report noted that the country’s purchases of imported cheese this year would reach 132,240 MT-LME, 9.09 percent higher than the 121,220 MT-LME a year ago. The country’s dairy imports in the first half of the year declined by 8.8 percent to 1.265 MMTLME, from 1.387 MMT-LME last year, according to the NDA, an attached agency of the Department of Agriculture. In terms of value, however, figures from the NDA showed that the country’s milk imports during the January-to-June period rose by nearly 20 percent to P22.641 billion, from P18.911 billion a year ago. NDA Administrator Marilyn B. Mabale told the BusinessMirror that payments went up because imported milk became more expensive. “Based on our data, [the price] of imported milk powder rose by almost 30 percent.” The major dairy suppliers to the Philippines by volume are New Zealand with a 39-percent share of total imports by volume; the US, 24 percent; and Australia, 6 percent, according to the Gain report. “Dairy products are currently the country’s third-largest agricultural import after wheat and soybean meal,” it added.

PHL seeks international support for protection of 5 wildlife species T The needed shift in perspective T

he 12th Session of the Conference of Parties (COP) to the Convention on the Conservation of Migratory Species of Wild Animals (CMS) will kick off on Monday at the Philippine International Convention Center (PICC) in Manila. Over 900 delegates from 124 countries are taking part in the event to come up with measures to protect and conserve endangered migratory wild animals. A total of 35 species, all threatened with extinction, have been proposed for listing under the Appendices of the CMS, five of which are proposals coming from the Philippines. With the Department of Environment and Natural Resources (DENR) taking the lead, Environment Secretary Roy A. Cimatu said the Philippines will push for the inclusion of five migratory wildlife species to the CMS appendices, namely, the whale shark, Christmas frigatebird, whitespotted wedgefish, black noddy and the yellow bunting. The event will serve as an opportunity for the country to call for more protection for migratory sites and species, particularly the whale shark (Rhincodon typus), or locally known as butanding. “The Philippines is one of the nations visited by the whale shark. In fact, the so-called gentle giant has boosted tourism in some provinces, including Sorsogon and Cebu, where tourists have the opportunity to see and enjoy a close encounter with the world’s largest fish,” he said in a statement. The Philippine delegation will campaign for the inclusion of the whale shark in the CMS species’ list under Appendix I while retaining its listing in Appendix II. Appendix I covers migratory spe-

cies that have been assessed as being in danger of extinction throughout all or a significant portion of their range, thus, require national conservation actions to ensure their survival. The whale shark has been included in the CMS Appendix II listing since 1999. Migratory species under Appendix II have unfavorable conservation status and require international agreements and commitments for their conservation and management. “Our position is pursuant to efforts of like-minded nations to have a global ban on whale shark hunting,” Cimatu said. Aside from the whale shark, Cimatu added that the Philippines will also push for the inclusion of four other migratory species—Christmas Frigatebird (Fregata andrewsi), also under Appendix I; white-spotted wedgefish (Rhynchbatus australiae), black noddy (Anousminutus) and yellow bunting (Emberiza sulphurata), all under Appendix II. All these species have been sighted in various parts of the country. The Philippine delegation will also push for the Manila Declaration that would call on world leaders to take broad and coordinated action to protect the habitats of migratory species within their respective territories, and the adoption of a resolution urging membercountries of the Association of Southeast Asian Nations (Asean) to implement marine biodiversityconservation initiatives through the promotion of a network of marine-protected areas (MPAs) at the local and regional levels. “While there has been a notable increase in the number of MPAs in the region, the need to build up a regional connectivity of these ar-

eas among Asean member-nations remains a challenge,” Cimatu said. The Philippines is the only country in the Asean that is a party to the CMS, which now has 124 contracting party-states. Once the proposed resolution is adopted, there will soon be a framework for tighter collaboration on marine conservation by CMS party-states and “range countries,” or non-CMS member-nations that host habitats of migratory species. The Philippine delegation has also submitted draft resolutions calling for a concerted action for the whale shark, promoting sustainable tourism involving migratory species and the need to conserve critical intertidal and other coastal habitats for migratory species. To protect migratory species, particularly the butanding and the wedgefish, the Marine-conservation groups last Sunday called for the passage of a comprehensive law to protect all Philippine sharks species. The whale shark was the first shark to be nationally protected, through Fisheries Administrative Order 193 in 1998. In spite of this, whale sharks were reclassed in the International Union for Conservation of Nature Red List in 2016 from “vulnerable” to “endangered,” which is a step closer to “extinction,” they said. “The Philippines has been at the frontline of protecting whale sharks for nearly two decades. At the upcoming COP, the Philippines will again lead their protection by being the proponent for uplisting from Appendix II to Appendix I. By listing them on Appendix I, parties are urged to strictly protect them throughout their migratory range,” Anna Oposa, executive director of Save Philippine Seas, said in a joint statement. Jonathan L. Mayuga

he world will need between 40 percent and 50 pecent more water, energy and food by 2030. I found this statement in Shell’s “New Lens Scenarios.” This is in 13 years from now! The question is: What needs to be done today in order to deliver the additional water, energy and food? We have to bear in mind that we are going through significant demographic transitions, involving aging populations in some places (in many parts of Europe, in Japan, in China due to the one-child policy, and even in Thailand), youth bulges in others (definitely in the Philippines), and relentless urbanization in both fast-emerging and less-developed economies (aga i n, t he Ph i l ippi nes is a good example, given the fact that agriculture is not becoming an attractive industry and that the young people born in rural areas are moving into the urban areas). Due to prosperity and the growing food demand, the food resource footprint (land, water, energy) of agriculture/food must increase significantly as proteins take over from carbohydrates in diets. Look at the initial successes of companies like Pamora and Mauswags!!! The Philippine poultry farm, Pamora, is offering free-range chicken and eggs, and

Henry J. Schumacher

europe Beat states: “All natural chicken with no hormones, chemicals and antibiotics.” Pamora further states: “Pamora chicken are grown 81 days for optimum quality. Eight percent total fat content with real chicken taste.” Mauswag Agribusiness just received perks from the Board of Investments for its P36.4-million integrated facility involving the planting of Moringa oleifera and processing it into powder form, sold to domestic markets, such as pharmaceutical companies, natural health products manufacturers, bakeries and supermarkets, as well as being exported to Japan, South Korea, the United States and Europe. “Food versus fuel” is something that has to be fully understood by the government. In previous columns I have argued that there is technology available to grow food below solar panels. Urban planning requires visionary leadership, including urban farming—we see the first

good results in places like Singapore and Quezon City. Of course, much more needs to be done. Gi ve n t h i s s ce n a r io, c a n somebody tell me why there is not more emphasis in getting agri-business, agri-food supply chains going? Are we morally prepared to leave the next generation to deal with this? If steps are taken sooner rather than later, will we accept the potential for economic damage and frustrations from policy mistakes? Are we ready to explore step-wise policy implementations that unleash the power of the commercial engine to deliver the transition to have the additional food, energy and water in 13 years? The wisdom of our choices, individually and collectively, is key. There are both positive and troubling features in the decisions that have to be made. T he more c l e a r l y w e s e e the complex dynamics of tomor row ’s world , t he b et te r we m ight nav igate a pat h through the turbu lence to calmer environments. We, I understand us as individuals, the private sector, civil society and, of course, local and national government. Comments are welcome; contact me via e-mail Schumacher@ mcasia.org

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Banking&Finance

Monday, October 23, 2017 • Editor: Jun B. Vallecera

BusinessMirror

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NG gross borrowings more than doubled in August

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By Rea Cu

@ReaCuBM

he national government reported gross borrowings more than twice as large in August than it was a year earlier to P61.309 billion, the Bureau of the Treasury (BTr) said. This ramped up the gross borrowings by 114 percent, compared to only P28.652 billion reported in the same month in 2016. According to the Bureau of the Treasury, gross external borrowings for the month totaled P14.244 billion, up 879.642 percent from P1.454

billion recorded in 2016. Gross local borrowings totaled P47.065 billion, or an increase of 73 percent from P27.198 billion in August 2016. Broken down, bulk of external borrowings formed program loans with P12.672 billion, while domestic borrowings accounted

for P30 billion from fixed rate Treasury bonds. From January to August this year, the government already spent P581.278 billion for its financing activities, representing an expansion by 60.2 percent from P362.678 billion recorded in the same period last year. Gross external borrowings for the period totaled P154.634 billion, which rose by 12.5 percent from the P136.915 billion in the same period in 2016. Gross local debt amounted to P426.644 billion, also an expansion by 88.9 percent from the recorded P225.763 billion in 2016. Earlier, the government under President Duterte bared plans to borrow P889.72 billion for 2018 in a proposed borrowing program. The amount took into account a wider deficit ceiling of 3 percent

of local output or the GDP, according to the BTr. National treasurer Rosalia V. de Leon said the government targets a borrowing mix of 80:20, in which the bulk, or 80 percent, will be sourced from local markets and 20 percent from foreign entities. From domestic sources, a total P711.77 billion was programmed, while P177.94 billion will be sourced from foreign markets. National government requires substantially more funds over the next few years to pursue an ambitious infrastructure buildup program designed to boost local output and making sure such output is sustainable. A similarly ambitious tax-reform program had been launched to ensure the various projects and programs have the financial backing to see their goals to fruition.

Pledges of support pour in for Marawi from multilaterals

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he Department of Finance (DOF) said mu ltilatera l agencies like the Asian Development Bank (ADB) and the International Fund for Agricultural Development (Ifad) bared plans to help the Philippines rebuild wartorn Marawi City. According to Finance Secretary Carlos G. Dominguez III, aside from the assistance to be provided by the World Bank in helping rebuild Marawi City, the ADB and Ifad also committed to help the war-torn city get back on its feet. DOF Assistant Secretary Ma. Editha Z. Tan said the ADB has pledged a grant of $5.225 million for the city’s rebuilding requirement, even as the Japan Fund for Poverty Reduction bared a similar package. The Ifad has yet to set an amount, however. Dominguez also said the Philip-

pines needs expert post-conflict assistance whose critical importance was demonstrated in the aftermath of the Zamboanga siege in 2013. “I mentioned to them, okay the only other conflict we really had was the one in Zamboanga. The last government didn’t do anything about it so we didn’t learn how to handle post-conflict situations,” he said. The so-called Zamboanga siege in 2013 was waged by a faction of the Moro National Liberation Front against the Philippine government. T he ex pertise required essentially pertains to post-traumatic counseling and how to help the local industries become operational again. According to Dominguez, something like a special economic zone for local manufacturers could go a

Perspectives The FinTech Imperative

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inTech is the biggest disruptor of our time for financial institutions. Fifty-seven percent of our survey respondents ranked it as No. 1, ahead of growing global regulatory complexity (51 percent) and new business models (46 percent). Whether it’s providing new ways to enhance the customer experience, responding to regulatory change (such as open banking), underpinning new payments or digital delivery models, making service delivery faster and more cost effective or improving the efficiency of back-office functions—the myriad fintech solutions now available, or in development, are helping to rapidly reinvent the entire value chain of financial services. The swift evolution of fintech has forced traditional financial institutions—banks, insurers and asset-management companies — to face a new reality. Products, services and business models that have worked for decades are no longer an option in the digital world. Legacy infrastructure must be replaced or augmented by newer, more efficient technologies. To thrive, organizations recognize that they need to reinvent what they do and how they do it. Competitors are evolving, too, and it’s not just fintechs knocking on the market door — large tech giants, retailers and other global companies are looking for ways to provide the financial-services customers want.

Consumers expect more from their financial-services providers

Over the past five to 10 years, there has been a rapid shift in how consumers view financial-services companies. Many consumers want financial institutions that are able to respond quickly to their needs with products tailor-made to them.

We are seeing this across all industries. In our 2017 Top of Mind Survey, 29 percent of respondents expected increasing demand for personalization to be the most disruptive consumer behavior trend over the next two years. In an era where retail products can be ordered and delivered in the same day, it’s no surprise that people want their financial transactions to also occur in real time— and for decisions related to their mortgages, insurance coverage or other financial needs to be made in moments rather than days or even weeks. Consumers also want transparency, and complex financial matters explained to them in clear, relevant terms that make sense within their day-to-day lives and that align with their overall financial goals. “It’s not just fintech causing a shift in consumer expectations. A lot of the change we’re seeing in customer experience expectations is driven outside of financial services,” explains Ian Pollari, global coleader of fintech, KPMG international and partner and national sector leader, Banking, KPMG Australia. “Large tech players have done very well in the context of applying data analytics, artificial intelligence or AI and cognitive thinking to personalize the customer experience and take friction out of business processes. When companies like Uber and Netflix can do it, consumers expect all companies should be able to.”

The challenge of competing priorities

Financial institutions have long felt the pressure to both modernize their infrastructure and respond to changing customer demands and expectations. The obstacle for

long way for Marawi and its residents to get the city back on their feet again. “As I said, we don’t really have the expertise and we want to look to our partners for expertise,” he added. Earlier, Dominguez said the end of conflict in Marawi City should help boost investor confidence in the economy now that the government can focus on a comprehensive plan to reconstruct the city and provide economic opportunities for its returning residents. He said the record performance of the stock market following President Duterte’s announcement last week of the liberation of Marawi City from Islamist militants rekindled investor sentiment as the conflict ended. The Philippine Stock Exchange Index (PSEi) gained 49.80 points, or 0.59 percent, to end 8,497.74 on

Tuesday. That day’s stock rally saw an 8,586.73 intraday peak. But even with the crisis in Marawi City and the declaration of martial law in Mindanao, the business community remained bullish on the economy and supported the President’s decisive action to deal with the terrorist attack, according to Dominguez. The government still has to conduct clearing operations and assess the extent of the damage so that it could come up with a detailed recovery, reconstruction and rehabilitation program for the city. Efforts are now under way to provide immediate assistance to displaced residents and open up economic opportunities that would enable them to get back on their feet and rebuild their lives. Rea Cu

many is that they already face a complex array of urgent issues that constantly vie for management attention and investment. For example, financial institutions around the world continue to spend a lot of time and resources to ensure they remain in compliance with changing industry regulations, such as the Payment Services Directive 2 (PSD2) in Europe, and participating in the rollout of new infrastructure, such as the New Payments Platform in Australia. Legacy infrastructure is also a major stumbling block for financial institutions, some of which have been using the same mainframe systems for decades. Executives face frequent decisions about whether to allocate capital to keeping the lights on in the existing infrastructure, or allocate it to digital development. Concerns about maintaining day-to-day operations can significantly hamper the ability of organizations to focus on innovation. Institutions with complex systems can also find themselves hindered when asked to incorporate new financial technologies as the ability to integrate their existing systems with new, agile fintech offerings is often costly or unfeasible. A constantly evolving set of “ burning platform” priorities makes it difficult for financial institutions to give fintech the attention and resources needed to drive better business value. This has led many organizations to simply focus on resolving one issue at a time—usually the issue with the most pressing time frame for action, rather than the one that will lead to the most enduring value. “Financial institutions too often deal with fintech in a very inefficient, fragmented and tactical manner,” says Murray Raisbeck,

global coleader of fintech, KPMG International and Partner, Insurance, KPMG in the UK. “The companies that succeed have undertaken careful architecting of their transformation strategy, including the integration of fintech within their organization.” Even among financial institutions that have moved forward with fintech initiatives, it has not been clear sailing. There has been friction within companies that have tried to integrate and scale fintech. The integration of old and new technologies, not to mention traditional and start-up corporate cultures, is not an easy task to undertake, and there is no straightforward solution to ensure success.

Redefining possibilities

The increasing pressure from both customers and organizational stakeholders, combined with a proliferation of technology options and competition from maturing fintechs, has moved fintech to the top of the growth agenda for leading financial institutions. Executives at these organizations realize that sticking to the status quo is likely the greatest risk to the future success of their business. The article “The FinTech Imperative” by Ian Pollari, KPMG Australia and Murray Raisbeck, KPMG in the UK was taken from KPMG’s publication entitled, Forging The Future: How Financial Institutions are Embracing FinTech To Evolve and Grow. © 2017 R.G. Manabat & Co., a Philippine partnership and a member-firm of the KPMG network of independent member-firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.

Multiagency ID production back to normal T he Social Security System (SSS) said the processing of its unified multipurpose identification (UMID) cards is back on track and that pensioners may receive their respective cards within 30 days upon application. According to SSS President and CEO Emmanuel F. Dooc, the production of UMID cards is now back to normal after the process sustained delays beginning mid-Febr uar y 2017 due to the stoppage of operation of the Central Verification System (CVS) of the Philippine Statistics Authority. T he C VS checks biometr ic uniqueness of member applicants, which is required prior to the issuance of UMID cards. The CVS stopped operation from midFebruary to mid-June 2017 due to high temperature of the data center of the Department of Information and Communications Technology. “We would like to inform our members that the UMID card processing time is now back to its normal processing time. Your UMID cards will be delivered right to your doorsteps within 30 days upon successful data capture via Philpost delivery,” Dooc said. According to the state-run

pension fund, UMID cards are re lea sed for m a i l i ng w it h i n eight d ays upon application, and data capture of the member and will be delivered via Philpost within two weeks for those living in the National Capital Region (NCR) and four weeks for those with registered addresses outside NCR. Dooc said the backlog in UMID card production was wiped out just this week. According to the SSS ID Card Production Department, almost a million UMID card applications were affected by the delay since the machine overheat happened in February. As of end-September 2017, the SSS already released some 1 million UMID cards to its members. To date, SSS already released more than 9 million UMID cards to its members. The government, in compliance with Executive Order 420, launched the use of the UMID card to facilitate faster and easier delivery of service among government agencies. The UMID card covers agencies, such as the Philippine Health Insurance Corp., SSS, Government Service Insurance System a nd t he Home De ve lopment Mutual Fund.

Renewal of the ASEAN Swap Agreement On October 12 the

Bangko Sentral ng Pilipinas and other Asean member-central banks signed the sixth supplemental memorandum of understanding (MOU) renewing the Asean Swap Arrangement (ASA) for a period of another two years commencing on November 17. The ASA involves the provision of $2-billion short-term foreign exchange liquidity support for Asean member-countries that experience balance of payments difficulties. The principal MOU on the ASA came into force on November 17, 2005, and has been renewed six times. The Philippines’s contribution commitment of $300 million allows the country to draw up to $600 million as the need arises. The ASA provides the country an additional safety net similar to other regional financial arrangements, including the Chiang Mai Initiative Multilateralization under the Asean+3.

PHL urged to fast-track infrastructure development

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he Philippines needs to fasttrack infrastructure development and enhance trade facilitation, as the European Union (EU) and the country aim to strengthen their economic ties. The EU-Philippines Business Network (EPBN) Advocacy Papers said the EU business community operating in the Philippines consider infrastructure as the backbone of a strong economy and has a direct effect on the country’s competitiveness and productivity. The Duterte administration’s plans to increase infrastructure spending gradually to 7.4 percent of GDP by 2022, which is expected to “improve the country’s connectivity and have a spillover effect on the economy, generating employment, spurring private consumption and enhancing inclusive growth.” EU businesses also deem more ef-

ficient trade procedures important to boosting trade, thus contributing to economic growth and poverty reduction. “The full implementation of the National Single Window and TradeNet with the automation and streamlining of government procedures will be decisive in addressing many technical and administrative barriers, thus enhancing trade facilitation,” the EPBN Advocacy Papers said. To this end, the papers underscored the need for the Philippines to pursue further free-trade agreements (FTA) in order to provide more competitive export goods and services. It said the current negotiations for an FTA between the Philippines and the EU provide an “excellent opportunity” to identify and minimize market-access obstacles.

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The World BusinessMirror

Editor: Lyn Resurreccion • Monday, October 23, 2017 A7

Spain will remove Catalonia leader, escalating secession crisis

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ARCELONA, Spain—The escalating confrontation over Catalonia’s independence drive took its most serious turn last Saturday as Prime Minister Mariano Rajoy of Spain announced he would remove the leadership of the restive region and initiate a process of direct rule by the central government in Madrid.

It was the first time that Spain’s government had moved to strip the autonomy of one of its 17 regions, and the first time that a leader had invoked Article 155 of the Spanish Constitution—a broad tool intended to protect the “general interests” of the nation. The unexpectedly forceful moves by Rajoy, made after an emergency Cabinet meeting, thrust Spain into uncharted waters. The prime minister is trying to put down one of the gravest constitutional crises his country has faced since embracing democracy after the death of its dictator Gen. Francisco Franco in 1975. The steps were immediately condemned by Catalan leaders and risked further inflaming an already volatile atmosphere in the prosperous northeastern region. On October 1 thousands braved national police wielding truncheons to vote in a contentious independence referendum for Catalonia, even after it was declared illegal by the Spanish government and courts. “There’s nothing soft or limited about what he announced today,” Josep Ramoneda, a political columnist, said of Rajoy. “We’re entering a very delicate phase, in which an independence movement that appeared to be running out of options might now draw instead on a collective sense of humiliation at seeing Catalonia being forced under Madrid’s control.” Fueled by economic grievances and a distinct language and culture, aspirations for an independent state

450,000 The number of demonstrators, led by Catalan leader Carles Puigdemont, in Barcelona, the regio’s capital, last Saturday afternoon in Catalonia have ebbed and flowed for generations. But the current confrontation has presented a vexing quandary not only for Spain but also for the entire European Union, pitting demands for self-determination against the desire to preserve the sovereignty and territorial integrity of an important member-state. Rajoy took the bold steps with broad support from Spain’s main political opposition, and will almost certainly receive the required approval next week from the Spanish Senate, where his own conservative party holds a majority. He did so despite repeated appeals for dialogue and mediation by Catalan leader Carles Puigdemont, whose independence drive has been shunned by wary European Union officials. Rajoy said the Catalan government had never offered real dialogue, but had instead tried to impose its secessionist project on Catalan citi-

Thousands of protesters take part at a rally against the national court’s decision to imprison civil-society leaders, in Barcelona, Spain, last Saturday. The Spanish government moved decisively to use a previously untapped constitutional power so it can take control of Catalonia and derail the independence movement led by separatist politicians in the prosperous industrial region. AP/Emilio Morenatti

zens and the rest of the country in violation of Spain’s Constitution. He said his government was putting an end to “a unilateral process, contrary to the law and searching for confrontation” because “no government of any democratic country can accept that the law be violated, ignored and changed.” Rajoy said he planned to remove Puigdemont and the rest of his separatist administration from office. The central government was also poised to take charge of Catalonia’s autonomous police force and the Catalan center for telecommunications. Rajoy did not ask to dissolve the Catalan parliament, but instead said that the president of the assembly would not be allowed to take any initiative judged to be contrary to Spain’s Constitution for a period of 30 days, including trying to propose another leader to replace Puigdemont. Rajoy said that his goal was to arrange new Catalan elections within six months, so as to lift the measures taken under Article 155 as soon as possible. It’s unclear, however, how

such elections would be organized or whether they would significantly change Catalonia’s political landscape, let alone help to resolve the territorial conflict. Puigdemont led a mass demonstration of 450,000 people in Barcelona, the region’s capital, last Saturday afternoon. In a televised address late Saturday, Puigdemont said he would convene parliament next week to discuss the response to Rajoy; he did not rule out using the session to declare independence. He accused the Spanish government of trying to “eliminate our selfgovernment and our democracy.” In a part of his speech delivered in English, Puigdemont also addressed Europe’s politicians and citizens and suggested Europe’s “foundational values are at risk” in the dispute with Madrid. “Democratically deciding the future of a nation is not a crime,” he argued. Other Catalan separatist politicians warned that Rajoy’s announcement would escalate rather

than resolve the conflict. Josep Lluís Cleries, a Catalan senator, told reporters last Saturday that Rajoy was suspending not autonomy in Catalonia but democracy. Carme Forcadell, separatist president of the Catalan parliament, pledged last Saturday evening to defend “the sovereignty” of her assembly. “We will not take a step back,” she told a news conference. “Mr. Rajoy isn’t conscious that by attacking the institutions, he is attacking the society of this country.” Oriol Junqueras, the region’s deputy leader, said in a tweet that Catalonia was “facing totalitarianism” and called on citizens to join the Barcelona protest last Saturday. Significantly, Iñigo Urkullu, leader of the Basque region, which also has a long history of separatism, described the measures as “disproportionate and extreme,” writing on Twitter that they would “dynamite the bridges” to any dialogue. Faced with Madrid’s decision to remove him from office, Puigdemont could try to preempt Rajoy’s

intervention and instead ask Catalan lawmakers to vote on a declaration of independence in coming days. Puigdemont could also then try to convene Catalan elections, on his own terms, to form what he could describe as the first parliament of a new Catalan republic. His government has been flouting Spain’s Constitution since early September, when separatist lawmakers in the Catalan parliament voted to hold a binding referendum on independence, as a key step toward statehood. An alliance of separatist parties has controlled the parliament since 2015, after winning regional elections, but with only 48 percent of the vote. Should Puigdemont resist Rajoy’s plans, Spain’s judiciary could separately step in and order that he and other separatists be arrested on charges of sedition or even rebellion for declaring independence. Rebellion carries a maximum prison sentence of 30 years. Earlier this week, a judge from Spain’s national court ordered prison without bail for two separatist leaders, pending a sedition trial. Using Article 155 “was neither our desire nor our intention,” Rajoy said last Saturday, but had become the only way to return Catalonia to legality, normality and maintain a Spanish economic recovery “which is now under clear danger because of the capricious and unilateral decisions” of the Catalan separatist government. Rajoy highlighted the decision of over 1,000 Catalan companies this month to relocate their legal headquarters outside the region, in response to the uncertainty. Rajoy received strong backing from politicians from the main opposition parties, including the Socialists, and Ciudadanos, a centrist party. The notable exception was Podemos, the far-left party that wants to use a referendum to persuade Catalan voters to remain within Spain. “We’re shocked by the suspension of democracy in Catalonia,” Pablo Echenique, a senior official from Podemos, said in a news conference last Saturday. New York Times News Service

Trump-promoted cheaper health plans have a history of fraud

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ASHINGTON—In signing a recent executive order, President Donald J. Trump promised that millions of Americans could soon obtain “great, great health care” through inexpensive plans that offer consumers options they had been denied under the Affordable Care Act. But these health plans, created for small businesses, have a darker side: They have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills. The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials who regulate the type of plans Trump is encouraging, known as association health plans. In many cases, the Labor Department said, it has targeted “unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.” In several cases, it has found that people managing these health plans diverted premiums to their personal use. The department filed a suit this year against an association health plan for 300 small employers in Washington state, asserting that its officers had mismanaged the plan’s assets and charged employers more than $3 million in excessive “administrative fees.” Operators of the health plan violated their fiduciary duty by using its assets “in their own interest,” rather than for the benefit of workers, the government said. Marc I. Machiz, who investigated insurance fraud as a Labor Department lawyer for more than 20 years, said the executive order was “summoning back

demons from the deep.” “Fraudulent association health plans have left hundreds of thousands of people with unpaid claims,” he said. “They operate in a regulatory never-never land between the Department of Labor and state insurance regulators.” Association health plans, properly operated, can provide a legitimate option to small employers seeking affordable coverage, and Trump and other Republicans see the plans as an important part of any replacement for the Affordable Care Act. In the executive order, issued on October 12, Trump directed the Labor Department to expand access to the plans by making it easier for small businesses to band together and insure themselves or buy insurance as a large group. Large group plans and self-insured plans are subject to fewer federal and state requirements than individual or small-group insurance. They are, for example, not required to provide “essential health benefits” like mentalhealth care and prescription drugs. But Mila Kofman, a former insurance superintendent in Maine who has done extensive research on association health plans, said they also often falsely claimed to be exempt from state insurance laws, as a way to explain how they could offer premiums lower than those charged by licensed insurance companies. When small businesses having no connection with one another buy health insurance through an association today, they are still generally treated as small businesses under the law, and coverage sold to them must comply with state consumer-protec-

tion laws. But that could change under the executive order. Trump’s proposals could overturn long-standing interpretations of federal law. In numerous advisory opinions, the Labor Department has set forth an elaborate test for association health plans, saying they can be established only by a “bona fide group or association” of employers who are tied together by genuine economic interests other than just providing insurance to their employees. The White House has suggested that the Labor Department could loosen these requirements, allowing employers anywhere in the country to join together “for the express purpose of offering group insurance.” Trump would then be taking a first step to achieve an overarching political goal. As a candidate, he often said he wanted to let Americans buy health insurance across state lines, at lower cost with fewer rules. But history shows the risks of an expansion of association health plans. If a plan becomes insolvent, the impact on consumers can be devastating. Robert Loiseau, who represented fraud victims in Texas, recalled their shock when they tried to receive care. “People bought insurance coverage because it was cheap and seemed to provide them with coverage they needed,” he said. “It had a veneer of legitimacy. But, when they went to the doctor, they found out all of a sudden that their insurance company, their perceived insurance company, was in receivership and that they had no coverage.” The Labor Department filed a suit last year against a Florida woman and her company to recover $1.2

million it said had been improperly diverted from a health plan serving dozens of employers. The defendants concealed the plan’s financial problems from plan participants and left more than $3.6 million in unpaid claims, the department said in court papers. In another case, a federal appeals court found that a health plan for small businesses in New Jersey was “aggressively marketed but inadequately funded.” The plan collapsed with more than $7 million in unpaid claims. Labor Department investigations sometimes turn into criminal cases. A Florida man was sentenced to 57 months in prison after he pleaded guilty to embezzling about $700,000 in premiums from a health plan he had marketed to small businesses. The Labor Department and the Justice Department said he had used some of the plan premiums to build a home for himself. A South Carolina man pleaded g ui lt y af ter the government found that he had diverted more than $970,000 in insur-

ance premiums from a health plan for churches and small businesses. “His embezzlement and the plan’s consequent failure left behind approximately $1.7 million in unpaid medical claims,” the Labor Department said. And in Louisiana, two people pleaded guilty to conspiracy charges after the government found that they had taken money from the medical benefit fund of a trade association and used it to pay for spa treatments, diamond cuff

links, evening gowns, foreign travel and other personal expenses. The House passed a bill in March to clear the way for an expansion of association health plans. Trump supported the bill, but only four Democrats voted for it. A similar proposal, championed by Sen. Rand Paul, R-Ky., was included in a Senate bill to dismantle the Affordable Care Act, but Democrats blocked that bill after a long battle with Republicans. New York Times News Service

A8 Monday, October 23, 2017

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Chinese power over N. Korea is more myth than reality

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EIJING—At first glance, it seems the perfect solution to the world’s most dangerous standoff: Find a way to get China to use its enormous influence to force North Korea to abandon its nuclear bombs. The countries, after all, share a long, porous border, several millennia of history and deep ideological roots. Tens, and possibly hundreds, of thousands of Chinese soldiers, including Mao Zedong’s son, died to save North Korea from obliteration during the Korean War, and China is essentially Pyongyang’s economic lifeline, responsible for most of its trade and oil. The notion of Chinese power over the North—that the countries are as “close as lips and teeth,” according to a cliche recorded in the 3rd century—is so tantalizing that US President Donald J. Trump has spent a good part of his young presidency playing it up. The reality, however, is that the complicated, often exasperating, relationship is less about friendship or political bonds than a deep and mutually uneasy dependency. Nominally allies, the neighbors operate in a near constant state of

tension, a mix of ancient distrust and dislike and the grating knowledge that they are inextricably tangled up with each other, however much they might chafe against it. This matters because if China is not the solution to the nuclear crisis, then outsiders long sold on the idea must recalibrate their efforts as North Korea approaches a viable arsenal of nuclear-tipped missiles capable of reaching the US mainland, something the Central Intelligence Agency (CIA) chief this week estimated as only a matter of months away. “The North Koreans have always driven China crazy,” says John Delury, an expert on both countries at Seoul’s Yonsei University, “and, for their part, the North Koreans have always felt betrayed by China. But both sides need each other in elemental ways.”

The view from China: ‘Kim Fatty’

One clue about how Chinese see the North can be seen in two widespread

nicknames for the overweight, thirdgeneration North Korean leader, Kim Jong Un: Kim Fatty The Third and Kim Fat Fat Fat. As China rises as an economic, military and diplomatic heavyweight whose reach extends from the Americas to Asia, many here resent being dragged down by an impoverished, stubborn, Third World dictatorship that allows its people to go hungry while its leader lives in luxury and expands a nuclear arsenal that could lead to war with Washington. North Korean missile tests hurt trade and tourism and strengthen the US presence in a region that China believes it should dominate. North Korean nuclear tests set off earthquakes near the Chinese border and raise fears of radioactive contamination. There’s also scorn for the North’s brutal, nepotistic brand of socialism, and displeasure that North Korean aggression led South Korea to allow on its territory a US anti-missile system that Beijing says can be used to spy on its operations. This growing disdain is reflected in China’s willingness to permit criticism of the North in the press, and to allow tougher sanctions at the UN. Beijing has suspended coal, iron ore, seafood and textiles from the North. Although North Korea takes pride in its ability to absorb pain, be it war, famine, sanctions or condemnation, China’s tougher line

will rob Pyongyang of key sources of foreign currency. Still, nothing China has done offsets its underlying fear that too much external pressure could collapse the government in Pyongyang. The nightmare scenario for Beijing is North Korean refugees flooding into its northeast after Seoul takes power in Pyongyang and US and South Korean troops occupy lands that were once considered a buffer zone. “It is true that China loathes North Korea and vice versa—at the societal level, the leadership level and the governmental level,” Van Jackson, a North Korea specialist and lecturer at Victoria University of Wellington in New Zealand, wrote earlier this year. “But China’s ‘emotions’ toward North Korea don’t drive its policy.” Beijing has also argued that it has less power over North Korea than people think. Some observers question whether China could force a change in the North, short of military intervention, even if it wanted to. North Korea relies on China for most of its oil, and outsiders have long argued that the best way to cripple the North’s economy and force it to submit would be to persuade Beijing to cut that flow. But even this may not work. North Korea gets its oil from China out of convenience, not necessity, according to Pierre Noel, an energy security specialist at the International Institute for Strategic

Studies think tank. “Would it be good news for North Korea if the oil stopped flowing? No. Is it likely to cripple the economy and force the government to change course on their foremost strategic priority? No. There are ample hydrocarbons in North Korea to substitute for those it imports from China.”

The view from North Korea: ‘Profound mistrust’

One way to gauge Pyongyang’s feelings for Beijing is to consider that Kim Jong Un has yet to visit his only major ally, a country that accounts for 90 percent of North Korean trade, since taking power in December 2011. His late father, Kim Jong Il, hated to travel but went to China eight times during his rule, and Chinese leaders reciprocated with trips to Pyongyang. Since communication at the highest levels has now virtually disappeared, Kim Jong Un feels little need to pay attention when Beijing calls on him to stop testing nukes and missiles. In fact, North Korea has seemingly sought to humiliate Beijing by timing some of its missile tests for major global summits in China. Last month North Korean state media accused Chinese state-controlled media of “going under the armpit of the US” by criticizing Pyongyang. In May the North vowed to “never

beg for the maintenance of friendship with China [or risk North Korea’s] nuclear program which is as precious as its own life, no matter how valuable the friendship is.” It can be argued that the North Korea-China relationship never really recovered from Beijing’s decision in 1992 to establish formal diplomatic relations with Seoul. But a big part of North Korea’s “profound sense of mistrust” and “long-term effort to resist China’s influence” stems from the 19501953 Korean War, according to James Person, a Korea expert at the Wilson Center think tank in Washington. The war is often seen as the backbone of the countries’ alliance, he said, but the North blamed the failure to conquer the South on Beijing, which had seized control of field operations after the near-annihilation of North Korean forces. In the 1970s, with North Korea pushing the United States for a peace treaty to replace the Korean War cease-fire that continues today, Washington chose to work through China. By so doing, US officials failed to see the limits of Chinese influence in the North, Person wrote last month on the 38 North web site. “Yet, nearly four decades later, asking China to solve the North Korean problem remains Washington’s default policy for dealing with Pyongyang.” This, he said, is “a recipe for continued failure.” AP

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Monday, October 23, 2017

A9

Abe’s party seen to win in Japan’s election

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OKYO—Voting in a general election started last Sunday that would most likely hand Prime Minister Shinzo Abe’s rightwing ruling coalition a victory and possibly close to a two-thirds majority in parliament.

Abe dissolved the lower house less than a month ago, forcing the snap election. He judged the timing was ripe for his ruling Liberal Democratic Party (LDP), or at least better than waiting until the end of its term next year. Up for grabs are 465 seats in the more powerful Lower House, which chooses the prime minister. Media polls have indicated voters are passively choosing Abe’s government despite its railroading of unfavorable bills and cronyism scandals, seeing it as a safer choice over an opposition with little or unknown track records. Scare over North Korea’s missile and nuclear development is also seen contributing to voters’ conservative choice. Media surveys also predicted Abe’s coalition to win around 300 seats, though they said it could lose some ground from the current 318 due to scandals. Hiroshi Yamada, 82, said his vote was based on “the issues such

300

The estimated number of seats the coalition of Prime Minister Shinzo Abe will win from 465 seats up for grabs, media surveys predicted

as [a possible] war and foreign affairs,” suggesting his support for the LDP coalition amid growing concerns over North Korea. “I am supporting the political party, which presents feasible policies amid the current situation.” Makiko Yamada, who’s unrelated to the other voter, said she was bothered by Abe’s cronyism scandals. “I saw reports showing people who would help [Abe] were given high positions. It made me think twice.”

Voters were casting ballots early, apparently worried by an approaching powerful typhoon. Vote counting at a few locations in southwestern Japan may be delayed due to the weather, NHK public television reported. Abe said he is seeking a mandate on his government’s tougher stance to defend Japan against the North’s threat and his proposed increase in the consumption tax, but experts say it’s an election about securing his rule. An election victory would boost Abe’s chances to head LDP for another three years at the party’s convention next September. It would extend his premiership possibly to 2021 and eventually achieve his longtime goal of revising Japan’s war-renouncing postwar constitution. In a speech in Tokyo wrapping up the 12-day campaigning last Saturday night, Abe said, “We will protect Japan at all costs for the future of this country.” Support for Abe’s Cabinet has recovered, thanks to the absence of parliamentary debates over political scandals during a recess. The main opposition force, the Democratic Party, was in more disarray after a leadership change and a key member was slammed by an extramarital affair. Holding off on an election would only give Abe’s potential rival, Tokyo Gov. Yuriko Koike, more time to organize a challenge.

Koike hastily launched a new party to contest the vote, though she ended up not running. Her Party of Hope attracted a slew of defectors from the Democrats who converted to her populist platform, including phasing out nuclear energy by 2030, and freezing of a consumption tax hike due in 2019. The initial excitement for her party has waned as Koike’s nationalist stance and policies were seen similar to those of Abe’s LDP. The Democratic Party had imploded and its more liberal members, led by former top government spokesman Yukio Edano, launched yet another group, the Constitutional Democratic Party of Japan, whose focus on grassroots democracy, pacifist principles and calls for “decent” politics is now outpolling the Party of Hope. Abe’s victory would likely mean a continuation of the policies he has pursued in the nearly five years since he took office in December 2012—a hard line on North Korea, close ties with Washington, including defense, as well as a super-loose monetary policy and push for nuclear energy. With a possible backing from the conservative opposition, he may get the two-thirds majority he needs in parliament to propose a constitutional amendment, though any change also needs approval in a public referendum. AP

US disappointed by China’s slow reform–Trump official

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he United States has been disappointed this year at China’s lack of progress in pursuing market-oriented reforms, said a senior administration official, ratcheting up the pressure on the world’s second-largest economy ahead of President Donald J. Trump’s visit there next month. While China had made progress in previous decades toward market pricing and reducing the number of state-owned enterprises, the US is concerned now with Chinese government subsidies, excess capacity and its industrial policy, said the official, who asked not to be identified in order to discuss sensitive policy issues. A meeting earlier this year between President Xi Jinping and Trump in Mar-aLago was a very good one, but the US had hoped for more follow-through from the Chinese on reforms, the official said. The Comprehensive Economic Dialogue between the two economies a few months later failed to produce the desired results, the person added. The official’s comments follow days after Secretary of State Rex Tillerson noted in an interview growing US impatience with China on issues from North Korea to trade. Trump is due to visit Beijing on November 8 as part of his first trip to Asia, where he’ll also attend a meeting of leaders from the Asia-Pacific Economic Cooperation (Apec) in Vietnam. Xi’s address to the Communist Party last week demonstrated that the leader is clearly in a strengthened position, so that gives him ample room

for building a stronger, more marketoriented economy, the US official said. The official spoke amid talks in Hoi An, Vietnam, where finance ministers and delegates from the 21-member Apec were meeting ahead of the leaders’ summit in early November. While trade—a hot-button issue between the US and China—wasn’t included in the final joint statement, it was discussed at length among the delegates. Criticism of China’s practices remained a central part of the Trump administration’s policies on trade, which have emphasized “fair” over “free” trade as the president pushes for renegotiation of existing pacts in the name of “America First.” From the US’s perspective, trade isn’t growth-oriented enough, the official said. Trade should be market-oriented, and free and fair, rather than through gaining an advantage by creating subsidies and industrial policy, or by increasing debt through non-transparent loans, the person added. Amid China’s massive long-term push to finance infrastructure projects throughout the region and beyond in the “Belt and Road Initiative”, the US official noted that those, too, should allow more free-market practices. While the China-led Asia Infrastructure Investment Bank has made progress on that front, many of the projects with Chinese involvement have meant stateowned entities play a major role, with less transparency over their activities, the official said. Bloomberg News

A10 Monday, October 23, 2017

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Italy’s 2 richest regions seek more autonomy from Rome

30% The percentage the regions of Veneto and Lombardy contribute to Italy’s GDP

Carlo Andrea Carnevale Ricci, president of a voting section, checks the electronic voting-operation system at the Berchet School polling station in Milan, Italy, last Saturday. It is greater autonomy, not independence, that two of Italy’s wealthiest regions are seeking in a pair of referendums last Sunday, yet Spain’s Catalonia’s secessionist ambitions loom over the debate. AP/Luca Bruno

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ILAN—Voters in the wealthy northern Italian regions of Lombardy and Veneto are heading to the polls to decide if they want to seek greater autonomy from Rome, riding a tide of self-determination that is sweeping global politics. While the twin referendums last Sunday are nonbinding, a resounding “yes” vote would give the presidents of the neighboring regions more leverage in negotiations to seek a greater share of tax revenue and to grab responsibility from Rome.

The leaders want more powers in areas, such as security, migration, education and the environment. Lombard President Roberto Maroni has lowered expectations, saying he would be happy with a 34-percent turnout among the

region’s 7.5 million voters, equal to the national turnout in a 2001 constitutional referendum. The Veneto autonomy drive dies if voter turnout is below 50 percent plus one of the region’s 3.5 million voters. Even t hough t he referendums—which are approved by Italy’s constitutional court—don’t seek independence, the autonomy drive is a powerful threat to Rome’s authority. Together, Veneto and Lombardy account for 30 percent of GDP and nearly one-quarter of the nation’s electorate. Both regions are run by the antimigrant, anti-Europe Northern League, which has long given up its founding goal of secession as it seeks a national profile.

Also supporting the referendum is former Premier Silvio Berlusconi’s Forza Italia and the populist 5-Star Movement. With the Democratic Party urging its voters to abstain, the votes last Sunday will measure the mood ahead of a national election next year, when Berlusconi says he will make autonomy a goal for all of Italy’s regions. Critics of the referendum argue that the nonbinding vote carries no legal weight, is not needed to trigger autonomy negotiations and is a costly waste of resources. Yet such arguments play into the hands of the “yes” campaigners, who see such put-downs as part of an antidemocratic, elite, centrist decision-making in Rome. Those sentiments have been echoed in the Catalan independence drive in Spain, in the United States election of Donald J. Trump as president and in Britain’s vote to leave the 28-nation European Union. The Italian Constitution already grants varying levels of autonomy to five regions in recognition of their special status: the largely German-speaking Trentino-Alto Adige; the French-speaking Aosta; the islands of Sardinia and Sicily; and the region of FriuliVenezia Giulia for its position on the border with then-Yugoslavia as a Cold War hedge. Veneto was twice denied by the constitutional court to chance to hold a referendum for autonomy before a 2001 constitutional change that allowed Italy’s 15 regions to seek autonomy. These votes last Sunday are the first referendums to pose the question to voters, while Emilia Romagna, a center-left region, has recently opened talks with Rome on greater autonomy without a popular vote. AP

WHO ‘rethinking’ Mugabe’s ‘goodwill ambassador’ post

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ENEVA—After widespread shock and condemnation, the head of the World Health Organization (WHO) said last Saturday he is “rethinking” his appointment of Zimbabwe President Robert Mugabe as a “goodwill ambassador.” In a new tweet, WHO Director General Tedros Ghebreyesus said that “I’m listening. I hear your concerns. Rethinking the approach in light of WHO values. I will issue a statement as soon as possible.” The 93-year-old Mugabe, the world’s oldest head of state, has long been criticized at home for going overseas for medical treatment as Zimbabwe’s once-prosperous economy falls apart. Mugabe also faces United States sanctions over his government’s human-rights abuses. The US called the appointment of Mugabe by WHO’s first African leader “disappointing.” “This appointment clearly contradicts the United Nations ideals of respect for human rights and human dignity,” the State Department said. Health and human-rights leaders chimed in. “The decision to

appoint Robert Mugabe as a WHO goodwill ambassador is deeply disappointing and wrong,” said Dr. Jeremy Farrar, director of the Wellcome Trust, a major British charitable foundation. “Robert Mugabe fails in every way to represent the values WHO should stand for.” Ireland’s health minister, Simon Harris, called the appointment “offensive, bizarre.” “Mugabe corruption decimates Zimbabwe health care,” tweeted the head of Human Rights Watch, Kenneth Roth. With Mugabe on hand, Tedros announced the appointment at a conference in Uruguay this week on noncommunicable diseases. Tedros, a former Ethiopian official who became WHO’s first African director general this year, said Mugabe could use the role “to influence his peers in his region” on the issue. He described Zimbabwe as “a country that places universal health coverage and health promotion at the center of its policies.” A WHO spokesman confirmed the comments to The Associated Press. Two-dozen organizations—in-

cluding the World Heart Federation and Cancer Research UK— released a statement slamming the appointment, saying health officials were “shocked and deeply concerned” and citing his “long track record of human-rights violations.” The groups said they had raised their concerns with Tedros on the sidelines of the conference, to no avail. The heads of UN agencies and the UN secretary-general typically choose celebrities and other prominent people as ambassadors to draw attention to global issues of concern, such as refugees (Angelina Jolie) and education (Malala Yousafzai). The choices are not subject to approval. The ambassadors hold little actual power. They also can be fired. The comic-book heroine Wonder Woman was removed from her honorary UN ambassador job in December following protests that a white, skimpily dressed American prone to violence wasn’t the best role model for girls. Zimbabwe’s government has not commented on Mugabe’s appointment, but a state-run Zim-

babwe Herald newspaper headline called it a “new feather in president’s cap.” The southern African nation once was known as the region’s prosperous breadbasket. But in 2008 the charity Physicians for Human Rights released a report documenting failures in Zimbabwe’s health system, saying Mugabe’s policies had led to a man-made crisis. “The government of Robert Mugabe presided over the dramatic reversal of its population’s access to food, clean water, basic sanitation and health care,” the group concluded. Mugabe’s policies led directly to “the shuttering of hospitals and clinics, the closing of its medical school and the beatings of health workers.” The 93-year-old Mugabe, who has led Zimbabwe since independence in 1980, has come under criticism at home for his frequent overseas travels that have cost impover ished Zimbabwe millions of dollars. His repeated visits to Singapore have heightened concerns over his health, even as he pursues reelection next year. AP

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UK’s $86-billion pension problem may solve itself F or UK Plc., the sting of Brexit comes with an unexpected bonus. With no effort on their part, the biggest British businesses may see pension deficits that have burdened them for years be practically wiped out if long-term bond yields rise 50 basis points in the next year and they budget for slowing gains in life expectancy, according to estimates of New York-based consultancy Mercer. The Bank of England (BOE) is expected to raise interest rates by that amount by November 2018 and it remains to be seen if that affects long-term bonds. That will give executives one less worry as they prepare contingency plans in case Britain can’t strike a deal on splitting with the European Union. Companies like BT Group Plc. and Marks and Spencer Group Plc., whose liabilities are almost double their market value, will also remove a stigma that has contributed to years of under-performance in their shares. “If you bought a basket of these stocks, you would probably make money from here,” said Andrew Millington, the acting head of United Kingdom equities at Aberdeen Standard Investments, which owns shares in firms with big pension liabilities like Tui AG, BAE Systems Plc. and AA Plc. that he expects will benefit. The idea that corporate Britain could fill holes in staff retirement budgets without slashing dividends would have been unthinkable even a year ago. The shortfalls of FTSE 350 companies had soared to a record 165 billion pounds ($217 billion) as the BOE cut rates to spur the economy after the Brexit vote, throttling pension income that relies on higher bond yields. But companies have been “climbing out of a pit” since then, according to Glyn Bradley, principal of UK wealth at Mercer. The gap dropped to an 18-month low of 65 billion pounds in September, partly because pensionfund managers made more on their equity investments as the FTSE 100 rallied 8 percent in the past year. Not all investors have noticed the U-turn. The 14 firms with the biggest liabilities relative to market value have trailed the FTSE 350 by 10 percentage points since Brexit, according to data compiled by Bloomberg and RBC Capital Markets. The game changer will be if BOE Governor Mark Carney raises interest rates to contain inflation triggered by the pound’s post-Brexit decline. Traders see him hiking rates by 50 basis points in the next 12 months, possibly starting as early as the

BOE’s November 2 meeting. If the long-term yield on corporate bonds moves by the same amount, that could potentially bring the pension deficit down to about £12 billion, according to Mercer estimates based on current conditions.

Earlier death

What’s left of the shortfall, meanwhile, could be eliminated if listed companies used the latest longevity forecasts from Continuous Mortality Investigation Ltd. (CMI) in their retirement budgets. Last year CMI cut projected lifespans for people aged 65 versus the 2013 figures many companies still plug into their models. “We may well start to see the aggregated deficits across the definedbenefit universe disappearing, perhaps even moving to a small surplus over the next year or so,” Bradley said from Manchester. Adopting the newer longevity statistics helped Tesco Plc. more than halve its deficit between February and August. If BT were to switch, it could knock £1.3 billion from its almost £10-billion deficit, according to Gordon Aitken, a London-based analyst and actuary at RBC. He says BT and Marks and Spencer will benefit most from the revision in longevity. “Money that gets paid to pension schemes is cash, so it’s money that could go to dividends,” Aitken said. A BT spokesman declined to speculate on potential changes to the company’s pension scheme, citing an ongoing triennial review by trustees. A spokesman for Marks and Spencer didn’t respond to messages.

Final salaries

Given how pervasive pension shortfalls have been this decade, some investors may wait for confirmation that deficits can narrow further before jumping in. A lot could go wrong, after all. Stalled Brexit talks might put pressure on an economy facing the slowest growth since 2012, which would hinder the BOE’s ability to raise interest rates. If inflation keeps accelerating from five-year highs, that would eat into the pension income. And many factors beyond interest rates move bond prices. But any evidence that pension deficits are sliding could also ease political pressure on business executives to stop prioritizing shareholders over pensioners—a practice that’s come under greater scrutiny since retailer BHS Group Ltd., and more recently Monarch Airlines Ltd., collapsed and left their pensioners uncertain about the integrity of their policies. Bloomberg News

Bomb kills ex-Afghan warlord, bodyguard

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ABUL, Afghanistan—An A fghan of f icia l said a bomb has killed a former warlord and his bodyguard, and wounded eight other people. Khalil Aseir, spokesman for the chief of police in the northern Takhar province, said the blast early last Sunday targeted Nazuk Mir, a militant commander during the struggle to drive out Soviet troops in the 1980s. The bomb went off at a restaurant where he was having breakfast. No one immediately claimed the attack. A wave of attacks, mainly targeting Afghan security forces, has killed more than 200 people over the past week. Last Saturday a suicide attack killed 15 military academy members west of Afghanistan’s capital Kabul, a Defense Ministry official said. Dawlat Waziri, the ministry’s

spokesman, added the attack took place outside the training academy of the Marshal Fahim National Defense University, killing 15 and wounding four others. Waziri said that attack on foot occurred in the early evening, when the on-duty officers were on their way home. The Taliban claimed responsibility for the attack, according to their spokesman Zabiullah Mujahid, who said 27 academy members were killed. A statement issued by the office of President Ashraf Ghani said the targeting of security forces illustrated the militants’ “isolation.” Meanwhile, the Islamic State group claimed responsibility for a suicide bombing at a Shiite mosque in the capital as Afghan officials last Saturday raised the number of casualties from the attack to at least 39 dead and at least 41 wounded. AP

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Landslide in Malaysia kills 3; 11 more trapped

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UALA LUMPUR, Malaysia— A landslide at a construction site in northern Malaysia last Saturday killed three foreign workers, with rescuers searching for 11 others feared trapped in the mud and rubble, officials said. Fire and rescue official Mohamad Rizuan Ramli said a 33-feet-high slope crashed down at the construction site in northern Penang state, a popular tourist destination, early last Saturday. He said the bodies of two Indonesians and an unidentified foreigner have been recovered. Rescuers are racing against time to excavate the rubble to get to another 11 foreign workers, believed to be from Indonesia, Myanmar and Bangladesh, who are feared buried alive, he added.

Bangladeshi worker Mohammad Jashim Hussein Ahmad told the national Bernama news agency that the landslide happened swiftly without warning and was over in just a minute, burying his friends, who had no time to run. State lawmaker Teh Yee Cheu told local media that he was told by a rescue worker that most of the victims were likely buried at least 10 to 15 feet under mud and rubble. He said natural boulders from the hill had also come hurtling down during the landslide. He added the victims included a Malaysian, who is the supervisor. Penang City Mayor Maimunah Mohamad Sharif said weather on the island was dry and the cause of the landslide wasn’t clear. AP

Editor: Max V. de Leon • Monday, October 23, 2017 A11

King’s legacy felt strongly as Thailand bids good-bye

Buddhists protest vs Myanmar repatriation of Rohingya Muslims In this August 20 photo, bright green rice fields sit in the hills of Huay Hom, a misty valley in the northern province of Mae Sariang, Thailand. Once on the edge of starvation, this remote village has prospered through numerous development projects initiated by deceased King Bhumibol Adulyadej. As Thailand prepares to cremate its king of 70 years, an era comes to an end amid tears, nostalgia and anxiety. AP

IN this image made from video, protesters march in Sittwe, Myanmar, on October 22. Hundreds of hard-line Buddhists protested last Sunday to urge Myanmar’s government not to repatriate the nearly 600,000 minority Rohingya Muslims who have fled to Bangladesh since late-August to escape violence in Myanmar’s Rakhine State. AP

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IT TWE, Myanmar—Hundreds of hard-line Buddhists protested last Sunday to urge Myanmar’s government not to repatriate the nearly 600,000 minority Rohingya Muslims who have fled to Bangladesh since late-August to escape violence in Myanmar’s Rakhine state. The protest took place in Sittwe, the state capital, where many Rohingya lived before an outbreak of intercommunal violence in 2012 forced them to flee their homes. Aung Htay, a protest organizer, said any citizens would be welcome in the state. “But if these people don’t have the right to be citizens... the government’s plan for a conflictfree zone will never be implemented,” he said. Myanmar doesn’t recognize Rohingya as an ethnic group, instead insisting they are Bengali migrants from Bangladesh living illegally in the country. Rohingya are excluded from the official 135 ethnic groups in the country and denied citizenship.

More than 580,000 Rohingya from northern Rakhine have fled to Bangladesh since August 25, when Myanmar security forces began a scorched-earth campaign against Rohingya villages. Myanmar’s government has said it was responding to attacks by Muslim insurgents, but the United Nations and others have said the response was disproportionate. Myanmar de facto leader Aung San Suu Kyi’s government said earlier this month that it was willing to take back Rohingya refugees who fled to southeastern Bangladesh. The government has agreed to form a joint working group to start the repatriation process. Last Sunday protesters, including some Buddhist monks, demanded that the government not take back the refugees. “The organizers of the protest applied to get permission for a thousand people to participate in the protest, but only a few hundred showed up,” said Soe Tint Swe, a local official. AP

Rio Tinto talking with Indonesia on exit of Grasberg operations

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IO Tinto Group has held talks with Indonesian groups, including state-owned PT Indonesia Asahan Aluminium, about a possible exit from its interest in the giant Grasberg copper and gold operation, according to people with knowledge of the matter. Executives at Rio held meetings in recent weeks, including in Indonesia, on a potential sale of its income stream asset that’s part of the joint-venture agreement with Grasberg’s operator FreeportMcMoRan Inc., said the people, asking not to be identified as details are private. Rio is studying a range of options that could enable it to sell on its interest, the people added. There’s no guarantee that the talks will advance, or that any deal will eventuate, the people said. The company declined to comment in an e-mailed statement and Freeport didn’t immediately respond to a request for comment. Hadiyanto, secretary-general at Indonesia’s Finance Ministry, didn’t immediately respond to phone calls and text

messages seeking comments. Talks have taken place while Indonesia is at loggerheads with Freeport over the government’s proposals to increase local ownership in Grasberg to 51 percent. Freeport in August agreed to a framework to divest its majority stake and commit to the building of a smelter, but has said the process is contingent on several issues, including reaching an agreement on “fair value” for the stake. Under Freeport’s pact with Indonesia, Grasberg will see an investment of as much as $20 billion through 2031 to further develop the mine, including the construction of a smelter. For Rio to commit to any spending, an investment would need to prove more valuable than competing opportunities, CEO Jean-Sebastien Jacques said in a September interview. The divestment process and valuation of the asset must be concluded by first quarter of 2019, state-owned enterprises Minister Rini Soemarno told reporters this month in Jakarta. Bloomberg

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UAY HOM, Thailand—Half a century has passed and the king is dead, but the villagers of Huay Hom still haven’t forgotten the day Bhumibol Adulyadej descended by helicopter into their remote, impoverished mountain valley in northern Thailand and changed their lives forever.

The king, they recall, brought electricity and a road that replaced the trail they trudged over for eight hours to reach the nearest roadhead. Coffee growing was greatly expanded and soon supplanted opium harvests, reaching such high quality that Starbucks is now a steady customer. The village even reaped profits from the royal-assisted raising of sheep and wool weaving, a rarity in tropical Thailand. So to thank the king on behalf of Huay Hom’s 72 now well-to-do families, Kamchai Sawankitsomboon traveled more than 750 kilometers (466 miles) to Bangkok’s Grand Palace. There, after standing in line for 13 hours, he prostrated himself before Bhumibol’s coffin— one of nearly 13 million people to do so during a year of mourning that will all but come to a close with the late king’s cremation this coming week. The religious-like fervor surrounding this outpouring of grief stems from many things: nostalgia for the past, a very personal connection that millions of Thais felt they had forged with their monarch, and gratefulness, as in Kamchai’s case, for the decades Bhumibol put in working on behalf of the country’s have-nots. Regarded as a stabilizing figure amid political turbulence and headlong modernization, the king’s passing on October 13, 2016, also evoked

anxiety about what comes next as the country confronts the close of an era. With his son King Maha Vajiralongkorn, a yet untested monarch, on the throne and an entrenched military regime promoting a meandering “road map to guided democracy,” several Thai academics at a recent international conference said “the Bhumibol consensus” has been replaced by “politics of uncertainty.” “Thai people will never be the same again as Thailand will never be the same again,” said Thitinan Pongsudhirak, a political scientist at Bangkok’s Chulalongkorn University. Thais born when Bhumibol’s reign began 70 years ago who are still alive today have known 30 prime ministers and a succession of coups, constitutions and economic upheavals. But until last year, they had had only one king who many credit with steering the country through these crises and presiding over evolution from a poor rural society to a modern $400billion economy. Many were imprinted with his image at an early age. His persona became a part of their lives. Oraboon Imchai Bulut, a young businesswoman, vividly remembers seeing the king’s portrait on the cover of her first school notebook. While she never met Bhumibol, a friend told her how her grandfather’s eyesight was saved by an operation sponsored by the king.

Waiting overnight to view the coffin, Oraboon brought along a photograph of her deceased father in what she said was “a last chance to say good-bye.” “People in their 40s, 50s and 60s still feel very much related, involved and attached to his reign. The millennials, perhaps, less because His Majesty did less of the public engagements [after his illness],” Thitinan said. “By and large the vast majority of Thais today would more or less collectively feel the same: We are grateful for the reign.”

Deification

CRITICISM of the late monarch has surfaced in recent years. Some Thai and foreign analysts and activists say the king impeded the progress of the country’s still fledgling democracy by wielding too much power and often siding with the military and other conservative forces. Bhumibol’s near deification, critics say, has, in part, been driven by royalist propaganda and buttressed by strict laws outlawing insults to the monarchy. Others have noted that a society relying too heavily on one individual rests on fragile foundations. But such commentary has been largely subdued within Thailand as the nation prepares for the final farewell to Bhumibol, who died at the age of 88 after a prolonged illness. He will be cremated on October 26 within a soaring, purpose-built $30million pavilion. Officials expect a quarter million people clad in black to attend an elaborate, centuries-old ceremony that is probably the last of its kind in Asia.

Sway

BHUMIBOL himself may prove to be the last monarch of his kind, someone embedded in the national psyche through his overreaching sway and historical circumstances. “It was an extraordinary time and he was just an exceptional individual suited for it,” Thitinan said. “The country needed a lot of

development so he spearheaded development projects. The country needed to keep away from communism so he was a rallying point, a unifying symbol against communism,” he continued, referring to the Cold War when Thailand’s neighbors fell to communist regimes and the country tackled a domestic, Chinesebacked insurgency. It was during this era that many of the now more than 4,000 royal development projects were seeded. In Huay Hom village, cradled in a 1,000-meter (3.280-foot), miststreaked valley, a third generation of Christian inhabitants of the Karen ethnic minority relate how the Buddhist king built upon earlier help from American missionaries. “Never a day goes by while in the village without one of the old timers reminding me of that day,” writes Richard Mann, who accompanied Bhumibol and his family on that first visit. In an unpublished memoir, the American former head of a project to replace opium with profitable cash crops describes how the local church choir sang hymns to the royals in four-part harmony and how the elders were blunt in their requests for a road, a better school, medical clinic and electricity. “All those needs,” he wrote, “have been met.”

Legacy

JIR APAN Davivongs, deputy secretary-general of the Chaipattana Foundation which oversees a number of the royal development initiatives, said the projects will continue through government funding and other support. But Bhumibol’s most lasting legacy, he believes, was his concept of the self-sufficiency economy, which stressed smaller scaled, sustainable production that could better withstand global shockwaves. That notion gained traction when Thailand was hit by forces largely out of its control during the 1997 Asian economic crisis, although some regarded it more as an idealized throwback to an older epoch rather than a viable economic system for an already highly capitalistic, globalized nation. How many of Bhumibol’s words and deeds endure remains to be seen. An editorial in the English-language Bangkok Post last week said that already in the past 12 months, state and other actors had failed in their pledges to follow in the king’s footsteps. It cited matters Bhumibol had opposed: excessive military spending, scandals in sustainable agricultural projects, eviction of landless people and the disappearance of conservation activists. “Merely paying lip service to his words and wishes is not enough,” it said. Thitinan said that with a greatly transformed Thailand, the time had come to recalibrate the old political order to include more institutions and players, not just the military, bureaucratic and royalist power brokers. “Now we have to find a system not based on one individual,” he said. “It cannot be the same as before.” AP

Singapore’s game start-up Sea raised $884M in NY IPO

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INGAPORE’S Sea Ltd., Southeast Asia’s most valuable start-up, raised about $884 million in its initial public offering (IPO) in New York. The company sold 59 million American depositary shares for $15 apiece, according to a statement last Friday, offering more shares and pricing them above its initial range of $12 to $14 each. The total amount may be more than $1 billion if an option to sell additional shares is exercised, according to a person familiar with the matter, asking not to be

identified because the matter is private. The games company is backed by Tencent Holdings Ltd. and has benefited from the Chinese company’s support. Sea licenses games from Tencent, which also holds a stake of about 40 percent in the smaller company. Investors are scooping up Sea’s shares, despite rising losses at the company as it diversifies into ecommerce and payments. Sea had a net loss of $165.2 million in the first half of the year on revenue of $195.5 million. It was valued at $3.75 billion in its

2016 fund-raising and will surpass $4 billion with the IPO. “Sea is a future-looking investment,” Kai-Fu Lee, founder of Beijing-based Sinovation Ventures, said before the offering. “Investors are betting that it can become the 800-pound gorilla that will make all the money it may have lost.” Sea was founded by Forrest Li as an online gaming company in 2009 and originally named Garena. He rebranded the company to reflect its regional ambition and diversification. Sea branched

out with a digital payments service called AirPay in 2014 and the mobile shopping business Shopee in 2015. Sea’s games business, which retained the Garena name, still accounts for more than 90 percent of total revenue. Like Tencent, the company offers games for free, then collects money when players buy virtual items like armor, weapons or special skills. It makes money in e-commerce from commissions and advertising, while collecting fees from payments.

Bloomberg

Green Monday BusinessMirror

A12 Monday, October 23, 2017

www.businessmirror.com.ph • Editor: Lyn Resurreccion

Tech giants get low marks for environment impact

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EOUL, South Korea—The environmental group Greenpeace issued a report on Tuesday giving technology titans—including Samsung Electronics, Amazon and Huawei—low marks for their environmental impact.

Many of the biggest technology companies failed to deliver on commitments to reduce emissions of greenhouse gases and are still reluctant to commit fully to renewable energy, according to Greenpeace USA’s Guide to Greener Electronics. The report, which assessed 17 top global tech companies in three areas, also faulted

many of them for failing to use more recycled materials in their products and slow progress in phasing out use of toxic materials. “Tech companies claim to be at the forefront of innovation, but their supply chains are stuck in the Industrial Age,” Gary Cook, a campaigner at Greenpeace USA, said in a statement.

Tech companies claim to be at the forefront of innovation, but their supply chains are stuck in the Industrial Age.”—Cook

Insung Lee, program campaigner of Greenpeace, speaks during a news conference at the Greenpeace office in Seoul, South Korea, on October 17. AP/Ahn Young-joon

The report details the hidden cost behind what may be the most sought-after and celebrated consumer products in the 21st century: mobile computing dev ices, like smartphones and tablet computers. Since 2011, Greenpeace has urged globa l tech companies to transition to renewable energ y, prompting some of them to switch to environmentally friendly power sources for their data centers. The group is urging the industry to tackle energy issues

in manufacturing and supply chains, desig n longer-lasting products to reduce electronics waste and urging an overall rethink of its “take-make-waste” business model. The report highlighted that tech companies’ manufacturing processes are not as environmentally friendly as their innovative images might suggest. While the energy consumption in the tech industry rose rapidly to fuel the supply chains and the manufacturing of these products,

as well as the data centers where social media, cloud computing and other applications run, so have the greenhouse-gas emissions. Samsung Electronics received a grade of D in its use of renewable energy, which accounted for just 1 percent of its manufacturing process, compared with Apple, which relied on renewable energy for 96 percent of its operation. Samsung—the world’s largest maker of smartphones and key component suppliers of many of the tech companies featured in the report—saw its greenhousegas emissions rise 24 percent in 2016 from two years ago. It also received low marks on its efforts to reduce and disclose hazardous chemicals at workplaces and to design long-lasting products. Samsung Electronics and other companies mentioned in the report did not immediately respond to e-mails seeking comment. C hinese sma r t phone ma kers—Huawei, Xiaomi, Oppo and Vivo—have gained a significant share of the market in the last few years. They scored below average in all categories and lacked transparency and commitment in renewable energy, the report said.

Amazon was the only US company that received the lowest mark, an F, in its overall environmental performance, along with the Chinese phone makers. Greenpeace said Amazon was among the least transparent companies and did not report the greenhouse-gas footprint of its own operations. Among the 17 companies, A msterdam-based Fairphone and Apple were said to be doing better in various areas. Greenpeace urged the companies to use more renewable energy, switching energy sources that power their supply chains. It also urged the tech companies to remove hazardous chemicals and other materials from their products and workplaces and design longer-lasting devices to help reduce waste. If the tech industry does not change to renewable energy, the world won’t be able to tackle climate change, Greenpeace campaigner Lee Insung said. “In the next three to five years, the use of renewable energ y and how wel l the companies cope with climate change will determine their core competitiveness,” Lee said. AP

Cleanup from California fires poses environmental, health risks

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ANTA ROSA, California— Dr. Karen Relucio has heard reports of people digging into the ashes of their burned homes in recent days without gloves, wearing only shorts and T-shirts, looking for sentimental items that might have survived California’s horrific wildfires. And as the chief public health officer in Napa County, one of the hardest-hit places, she has used her office as a bully pulpit to urge them to stop, immediately. “Just think of all the hazardous materials in your house,” she said in an interview. “Your chemicals, your pesticides, propane, gasoline, plastic and paint—it all burns down into the ash. It concentrates in the ash, and it’s toxic,” said Relucio, who declared a public emergency over the hazardous waste from the fires, as have at least two other counties. California’s fires are far from out. They have killed at least 41 people and burned about 5,700 structures and over 213,000 acres since they exploded in force on October 8 and 9—record totals for a state that is used to wildfires. Thousands of firefighters are still at work fighting blazes and tens of thousands of people re-

main under mandatory evacuation from their homes, though fire officials have expressed cautious optimism about bringing the fires into containment. But even as the smell of smoke still wafts through this area north of San Francisco, public-health officials and environmental cleanup experts are starting to think about the next chapter of the disaster: the huge amount of debris and ash that will be left behind. In whole neighborhoods here, a thick layer of ash paints the landscape a ghastly white. Wind can whip the ash into the air; rain, when it comes, could wash it into watersheds and streams or onto nearby properties that were not ravaged by fire. And the process of cleaning it all up, which has not even begun, is likely to bring its own thorny set of issues, in the costs, timetables and liability questions—all compounded by scale, in the thousands of properties that must be repaired and restored. “In modern times this has got be an unprecedented event, and a major hazard for the public and for property owners,” said Dr. Alan Lockwood, a retired neurologist who has written widely about public health.

LGUs push for renewable energy

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en. Sherwin T. Gatchalian talks on Sustainability and Citizen Empowerment through Localized Renewable Energy Innovations at the Forum on Sustainable Energy Alternatives at the recent Galing Pook awards. Held at a hotel in Cubao, Quezon City, around 300 officials of local government units (LGUs) attended the event and pushed for renewable energy. Gatchalian is the chairman of the Senate Committee on Renewable Energy. Nonoy Lacza

Members of the National Guard help returning residents dig through the charred rubble of their home, searching for salvageable items, following a wildfire in the Larkfield neighborhood of Santa Rosa, California, on October 16. Jim Wilson/The New York Times

He said an apt comparison might be the environmental cleanup after the terrorist attacks of September 11, 2001, in New York, as debris and dust swirled through Lower Manhattan. As could well happen, too, in California, Lockwood said, the health and environmental effects were felt long after the attack, in the chemicals or pollutants workers and responders at the site, and the public at large, may have been exposed to as the cleanup went on. Household building materials are obviously different from the components of a concrete tower. But they pose risks, too. Treated wood in a house’s frame, for instance, put there to prevent bacteria growth, can contain copper, chromium and arsenic. Consumer electronics contain metals like lead, mercury and cadmium. Older homes might have asbestos shingles. Even galvanized nails are a concern because when they melt they release zinc. All are potentially harmful.

“It’s a completely complex mixed bag of different stuff that’s there,” said Geoffrey S. Plumlee, associate director for environmental health with the US Geological Survey. Plumlee led a study after several Southern California wildfires in 2007 that found that ash from burned-out residential areas contained elevated levels of arsenic, antimony and metals, including lead, copper and chromium. In most cases, the levels were above federa l Env ironmenta l Protection Agency guidelines for soil remediation. After a fire in Slave Lake, Alberta, in 2011 that destroyed about 400 homes, the city landfill was found to be leaching toxins after fire debris was deposited there. In Ca lifor nia the road ahead to c leanup and t he safe retur n t o p ro p e r t i e s w i l l p ro b a b l y not be smoot h or fast, publichea lt h of f ic i a ls a nd c lea nup experts said. The sheer number of communities af fected and

proper t ies dest royed creates a g reater cha l lenge t han any t he state has faced in recent histor y. Local and state agencies, focused on active fires, have not yet sorted out who will take the leadership roles. Even determining how severely lands are affected and the estimated costs of remediation lay ahead in the weeks and months to come. At a packed public meeting in the basketball gym at Santa Rosa High School last Saturday, some residents said they worried that the cleanup could go on for years and asked state officials if they could proceed on their own. The answer they got was a qualified yes. An approved contractor can be hired, if one is available. Otherwise, the cleanup should be free in most cases, residents were told, paid for with taxpayer money or private insurance if a homeowner has a debris-removal clause in the insurance policy on the house. But state and federal officials said last Monday that

many of the details of how this cleanup would work remained unsettled. That is partly because the focus has been on response to the fires and the fatalities, a nd t he 4 0,0 0 0 people st i l l evacuated from their homes, but also because of the complex mix of properties affected on both public and private lands. “There are more questions than answers,” said David Passey, a spokesman for the Federal Emergency Management Agency (Fema). He said, for example, that Fema, the federal government’s lead disaster response agency, typically concentrated on public property, not private, unless individual counties declare the private properties a public health and safety risk. Counties and cities can also take the lead on cleanup, he said, and that, too, has not been fully sorted out. “We don’t know yet which of those solutions, or mixture of those solutions, the cities and counties will choose,” Passey said. New York Times News Service

Biodiversity Monday BusinessMirror

Asean Champions of Biodiversity Media Category 2014

Monday, October 23, 2017 A13

Editor: Lyn Resurreccion • www.businessmirror.com.ph

Asean conservation officers undergo taxonomy training

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By Sahlee Bugna-Barrer

f awareness and knowledge are the backbone of informed and efficient action, then taxonomy is the pillar of successful biodiversity conservation. Insufficient knowledge of species, lack of trained human resources and inadequate capacities in taxonomy have been stressed as among the obstacles to the conservation and sustainable use of biodiversity. These are also identified as challenges to the implementation of the goals of the Convention on Biological Diversity, particularly in the Southeast Asian region. Recognizing the importance of taxonomy to biodiversity conservation, the Asean Centre for Biodiversity (ACB) continues to work with long-time partners to strengthen the awareness and knowledge of species found in the Asean member-states. The ACB and the Queen Sirikit Botanic Garden (QSBG), with funding support from the Japan-Asean Integration Fund, East and Southeast Asian Biodiversity Information Initiative and the Ministry of Environment-Japan, held an intensive Internship-Training on the Taxonomy of High Elevation Vascular Plants from October 1 to 10 in Chiang Mai, Thailand. The training program includes lectures and discussions on sample collection, processing and management of specimens and hands-on experience through field and laboratory exercises in collection, identification and development of a field guide book.

Doi Inthanon National Park: Studying plants on the roof of Thailand

Discussions with taxonomy experts from the Asean and Japan were complemented with research activities at Queen Sirikit Botanic Garden and Doi Inthanon National Park. Doi Inthanon is the highest peak in Thailand at 2,565 meters, and is ideal for studying high-elevation vascular plants. Established in 1972, Doi Inthanon National Park is the sixth national park of Thailand. It covers 482.4 square km of the Chom Thong, Mae Cham, Mae Wang and Doi Lor districts of Chiang Mai. The mountain range is a watershed, and is the primary source of many rivers including

the Ping River that fills the power- generating Bhumibol Dam. The main forest types in the park are montane rain forest, pine forest, deciduous dipterocarp forest and mixed deciduous forest. They are home to important flora and fauna, particularly tiger, Southwest China serow, Chinese goral and northern red muntjac. Recorded birds in the park include the green-tailed sunbird , chestnut-tailed minla, dark-throated thrush , chestnut thrush, ashy wood pigeon, Eurasian woodcock, rustynaped pitta and ashy-throated warbler. Since October still falls under the rainy season in Thailand, the filed work was conducted under poor conditions with temperatures falling to 2°Celsius. Still, with the support of protected-area management, the group was able to photograph and document specimens of epiphytes and climbers, trees, small trees and shrubs, orchids, monocot herbs, dicot herbs and ferns from the Summit Trail, Ang Ka Nature Trail and Kew Mae Pan Nature Trail at Doi Inthanon National Park on October 4 and 5. The peak of Doi Inthanon is easily accessible by car, although visitors can trek through the jungle from Mae Klang Waterfall and stay overnight in Karen village. The short Summit Trail passes by the summit marker, an exhibition hall highlighting the features of the park, as well as souvenir and snack shops. Ang Ka Nature Trail features a short, circular boardwalk through a very dense and lush forest The trail is highly recommended and quite popular with bird-watchers. The Kew Mae Pan Nature Trail is one of the most beautiful nature trails in Thailad, as it passes through montane rain forest and subalpine forest with a diversity of flora and fauna, waterfalls, beautiful viewpoints and possible sightings of the rare Chinese goral. The hike is a moderate walk on clear and well-maintained trails. The photographed specimens will be identified and studied at QSBG, and the results will provide inputs into a field guide to highelevation vascular plants of the nature trails of Doi Inthanon National Park. The field guide is the third in a series, following the conduct of trainings and development of guide books on ferns and mosses at QSBG, Thailand and plants along the Deer Cave Trail in Gunung Mulu National Park in Sarawak, Malaysia.

Wildlife summit to propose new task force vs illegal killing of birds

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new intergovernmental task force to curb the illegal killing of birds crossing one of the world’s greatest migration paths will be high on the agenda at this year’s largest wildlife summit, which takes place in Manila this week. The East Asian-Australasian Flyway spans 22 countries, from the Russian Federation to Alaska in the United States in the north, through much of Eastern Asia to the Western Pacific and Australia and New Zealand in the south. Millions of migratory birds, which travel along the flyway twice yearly, will receive greater protection if the proposal is adopted. Delegates from over 120 countries will gather in the Philippines from October 23 to 28 for the 12th triennial meeting of the Convention on Migratory Species (CMS), or COP12, where they will consider the submission. The Task Force on Illegal Hunting, Taking and Trade of Migratory Birds in the East Asian-Australasian Flyway will build on the successes of a similar initiative for migratory birds in the Mediterranean, agreed at COP11 in in Quito, Ecuador, in 2014. The Mediterranean task force has proved to be a key forum to promote the exchange of best practice and information between countries facing the same challenges and also with other members of the task force. At its meetings in Egypt and Malta, the task force developed indicators and a scoreboard to measure progress at national level. The Asian group will also develop guidelines and recommendations, and will assist countries in preparing national action plans to curb illegal hunting and trade. Dr. Bradnee Chambers, executive secretary of CMS, said: “Intensive hunting and illegal killing are driving many endangered bird species to the brink of extinction. Countries that they transit share a joint responsibility to implement measures to protect them. The proposed task

force for the East Asian-Australasian Flyway feeds into a wider, collaborative strategy to combat global wildlife crime and strengthen efforts to ensure that migratory species are managed sustainably and legally.” Migratory birds face many threats over the long distances they travel. Most notable is the destruction of their habitats, which are critical for feeding, resting and breeding. Yet, in many parts of the world, birds are being deliberately and illegally killed, trapped or traded at an unprecedented scale. According to BirdLife International, around 25 million birds are killed annually in the Mediterranean, with some species now at risk, including pallid harriers, Egyptian vultures and several species of songbird. Earlier this year the secretariats of the CMS and the Bern Convention joined forces and developed a common self-assessment scoreboard to measure and benchmark progress on the eradication of illegal killing for governments to use at national and regional level. The joint tool uses standardized methods, which will also help facilitate the implementation of other initiatives, such as the Tunis Action Plan 2013-2020 for the Eradication of Illegal Killing, Trapping and Trade of Wild Birds under the Bern Convention. The indicator framework offers national administrations a simple tool, which makes it possible for countries to assess their progress. “International efforts to tackle the illegal killing, taking and trade in birds just became easier. The scoreboard will contribute to the prioritization and commitment of resources by national administrations, NGOs [non-governmental organizations] and international actors,” Chambers said. “This tool will greatly aid countries in their monitoring and reporting commitments and will provide a political incentive to reduce illegal killing worldwide.”

Market vendor Aling Gloria sells a variety of sea and freshwater shellfish.

Biodiversity means food Story & photo by Jonathan L. Mayuga

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@jonlmayuga

uki [customer], please buy. This is delicious, fresh from Bicol,” a sturdy woman vendor in her 60s said in Filipino. “These clams are delicious, too. You like them?” she offered as she briskly opened one clam to show to curious customers gathered in front of her stall at the Pamilihang Sentral ng Dasmariñas in Dasmariñas City, Cavite, last Tuesday. A native of Iriga, Albay, in Bicol region, Gloria Manaligod, or Aling Gloria, has been selling seafood and other freshwater shellfish at the market’s fish and seafood section for more than two decades already. Her stall is the only place where a wide variety of sea or freshwater shellfish can be bought. Sometimes, even Aling Gloria is confused about the name and origin of the shells, except for the tahong (mussels), which is the most sought-after among the shellfish she sells. “Mussels are expensive. Those from the sea are expensive because they are difficult to harvest underwater compared to those from the river, which is shallower,” she said. Shellfish harvested through risky diving to reach the ocean floor cost around P100 to P150 a kilo, while those from freshwater, including kuhol (snails), which is abundant in rice farms, range from P50 a kilo to P80 a kilo, depending on the supply, she told the BusinessMirror. Unlike her fellow market vendors, who get their products from fish dealers, Aling Gloria said she gets her supply from different sources. Some come from as far as Bicol and Laguna. “There are plenty of food, but the people are not familiar with them. They are delicious. Sometimes there are plenty, sometimes they are insufficient,” she said. Another fish stall beside her occasionally sells frogs caught from a rice farm. It is sold at P200 a kilo. “I sell frogs only when it rains. My supplier rarely brings me stocks,” the vendor said.

Unsustainable production

Basically an agricultural country, the Philippines, with a population of over 100 million, continues to struggle for food security and self-sufficiency. From a net exporter of rice before the 1970s, the Philippines now imports rice. It is also importing other agricultural products, including

fruits and vegetables, undermining the country’s food-production capacity. An archipelagic country with over 7,500 islands, the Philippines is one of the world’s top producers of fish. According to the Philippine Statistics Authority, total fisheries volume of production was estimated at 1.1 million metric tons during the second quarter of 2017, slightly lower than the previous year’s mark. Of the subsectors, only aquaculture managed to pull up its output, while commercial and municipal fisheries displayed downtrends. Marine species like round scad (minus 19.44 percent), yellowfin tuna (minus 17.55 percent), frigate tuna (minus 17.55 percent) and Indian sardines (minus 12.74 percent) all contributed to the decline in production a report, entitled “Fisheries Situation Report, April-June 2017” said. The high contribution of aquaculture to the countr y’s fish output, however, is proof of the dwindling potential for natural resource-based fish production. Agriculture requires, more often than not, the excessive use of chemical fertilizers and pesticides, which make the soil barren and addicted to chemicals to continue to be productive. Similarly, commercial fishing, which makes use of unsustainable fishing methods, damages coastal and marine ecosystems, resulting in diminishing fish catch. It also includes unsustainable activities in municipal fishing grounds. Besides mining and logging, a g r ic u lt u re — wh ic h re qu i res m a s s ive c u lt iv at ion of fo o d crops and establishments of fish cages and fish pens—have been identified as a major driver of biodiversity loss. The massive land conversion of forest, wetlands and other ecosystems for food production equates to the destruction of natural resource-based food or food provided by nature. Likewise, construction of fish cages and fish pens

means clearing of mangrove forests and inland water ecosystems.

Natural food sources

Forest, coastal, marine and freshwater ecosystems are natural food sources. Their destruction undermines the country’s capacity to produce sustainable sources of food that do not require chemical fertilizers, pesticides or feeds if they remain healthy, an official of the Department of Environment and Natural Resources (DENR) said. Director Theresa Mundita S. Lim of the DENR’s Biodiversity Management Bureau (BMB) said there is a poor appreciation of the interconnectivity of these ecosystems, which provide a life-support system that eventually benefits the community. A healthy forest provides food, fiber, medicines and fuel wood, and even construction materials that are essential for the day-today needs of upland communities. She said that, in earlier years, people hunt for food in the wild, which is thriving with wild boar, deer and other potential sources of protein, and harvest naturally growing vegetables and fruits that are safe from poisonous chemical fertilizers or pesticides. “For decades, forests have been providing not only water but food to upland communities,” Lim told the BusinessMirror last Monday. Streams, rivers and lakes thrive with shellfish that are unique to a particular ecosystem, providing communities with a wide variety of food on the table, she said. These organic food from nature are becoming extinct.

‘Organic’

The DENR-BMB chief said that, because the country is experiencing a rapid rate of biodiversity loss, the law prohibits the harvesting of endangered plant and animal species on pain of facing criminal prosecution and penalized. Some of these laws include the National Integrated Protected Areas System (Nipas) Act, Wildlife Resources Protection and Conservation Act, or Wildlife Act, and the National Caves and Cave Resource Management and Protect Act, or the Caves Act. These laws are meant to protect and conserve the country’s rich biodiversity and prevent the extinction of animal and plant species. Natural resource-based food like shells and shellfish harvested in small volumes are not necessarily reflected in the country’s annual farm or fishery output. But they, nevertheless, contribute to food security and sufficiency, Lim said. “That is why we need to protect our coastal, marine and freshwater resources, because they provide food for the sustenance of millions

of Filipinos,” Lim said. “Freshwater ecosystems support a variety of wildlife. They are unique in many ways. We have lakes, because of our geological history, that have unique species because they are separated from other water bodies,” Lim added, citing the Taal Lake where the famous freshwater tawilis can be found. The environment official said that, because of the massive destruction of forest, coastal, marine and freshwater ecosystems, the country’s food sources are diminished as well. “Some fish, like the Philippine goby, is now vanishing. Scientists have expressed fear that they are going extinct,” Lim said.

Vanishing food source

“By not protecting the fish and freshwater fish, we are reducing our choices for protein,” Lim said. She is discouraging the dispersal of potentially invasive fish in lakes and rivers in order to preserve the native fish species. She noted that aquaculture or fish-cage operation to raise tilapia and bangus (milkfish), if unchecked, will cause the freshwater ecosystem to deteriorate, citing the cases of the Laguna de Bay and Taal Lake, which are under siege by invasive alien fish species. According to Lim, freshwater bodies will naturally cure themselves if all destructive activities are stopped. “If there’s still a wide variety of fish, like ayungin, it is a good indicator that our rivers and lakes have a chance to recover,” she said. She added the threat of invasive species continues to hound the Philippines because of the mindset that rivers and lakes are like fishponds, which are meant for aquaculture. “The fact is that these water bodies were used to be thriving with fish and shellfish. Aquaculture, if not done properly, can kill our rivers and lakes,” she said. Some fish-cage operators, she noted, have the habit of overfeeding their fish, which degrades the water as biological oxygen and chemical oxygen demand increase. Lim said that, compared to tilapia or bangus, native fish varieties are better-tasting. “We should put premium to our unique fish and shellfish because they are found only in some areas in the Philippines. We fail to promote the novelty of these unique food fish and shellfish,” she said. Lim added over-harvesting of fish should be avoided. “Local communities know when to harvest and when to stop harvesting [fish]. They should avoid overharvesting, otherwise, we might lose them [fishes] forever,” she said. If the fish or shellfish are lost, Aling Gloria’s stall at the market might also be gone.

A14 Monday, October 23, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

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editorial

Seeking the strongman

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he latest surveys measuring the performance approval of President Rodrigo R. Duterte caused local pundits—particularly those inclined to be in opposition to the President— rushing to somehow discredit the results. The “Third Quarter 2017 Social Weather Survey” found 67 percent of adult Filipinos satisfied, 14 percent undecided and 19 percent dissatisfied with Duterte’s performance. The results from Pulse Asia Research were 80 percent approval, 13 percent undecided and 7 percent disapproving of the President’s performance. Both polling companies found that the administration has lost some ground from previous surveys. However, certain commentators seemed to be in shock that the drop in “approval” and “satisfaction” were not higher considering all the events that have taken place in the past six months. The unresolved situation—at the time the surveys were conducted—in Marawi, the “war on drugs” and the other battles with those who have strongly criticized the President seemed to have not done much damage to public opinion. The pundits spent more effort on questioning the reliability and methodology of the surveys than examining why the public has relatively strong support for the current administration. At about the same time as these surveys were conducted, Pew Research Center was releasing the results of its survey across 38 nations conducted earlier this year. This survey asked about which form of government would be better. The overwhelming response was a “representative democracy” with the people involved in decision-making. Interestingly, the least support for “democracy” came from South America and the highest support from Europe, with East Asia including Asean close behind. However, another question was asked with different results. “Would a system in which a strong leader can make decisions without interference from parliament or the courts be a good way to govern your country?” European Union nations were strongly and almost universally against this idea. But when asked, “How satisfied are you with the way democracy is working in your country?”—50 percent of Europeans were not satisfied. In East Asia, 64 percent were satisfied. For the Philippines, 69 percent are satisfied with democracy even as a slightly higher than median 12 percent are willing to try a nondemocratic government. The Philippines scored a near global high of 80 percent when asked, “How much do you trust the national government to do what is right for your country?” The one question that might explain Duterte’s performance ratings was “Do you think a system in which a strong leader can make decisions without interference from parliament or the courts is a good form of government?” Fifty percent of Filipinos answered “Very or Somewhat Good.” In 20 countries, a quarter or more of those polled think a system in which a strong leader can make decisions without interference from parliament or the courts is a good form of government. Three nations—India (55 percent), Indonesia (52 percent) and the Philippines (50 percent)—stood out favoring a “strongman” rule of government. What is attention grabbing is that Prime Minister Narendra Modi of India has an approval rating in the high 70 percent area; Indonesian President Joko Widodo’s approval rating stands at 68 percent, and President Duterte’s is also above 70 percent based on an average of the two recent local surveys. These approval ratings are among the highest, if not the highest, in the world. The dilemma, though, in looking at the results is this: Are these leaders holding high approval ratings because they are “strongmen”? Or are they considered “strong” because they have high approval ratings? Since 2005

BusinessMirror A broader look at today’s business

Modern PUVs, anyone? Atty. Jose Ferdinand M. Rojas II

RISING SUN

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ome people were complaining about the inconveniences they experienced last Monday and Tuesday due to the nationwide strikes conducted by various transport groups, like the Pinagkaisang Samahan ng mga Tsuper at Operator Nationwide (Piston) and Stop and Go Coalition. There were camps that were happy about the extra days off work and school, and also because of cleaner air and faster travel time on these days due to less traffic on the roads.

The drivers were protesting the government’s Public Utiligy Vehicle (PUV) Modernization Program, saying that it is anti-poor since new vehicles would cost them “at least P1 million per unit,” an amount that jeepney drivers would not be able to raise. They are fighting for their survival, they said, their livelihood and the opportunity to give their

Zero hunger in 10 years Atty. Lorna Patajo-Kapunan

✝ Ambassador Antonio L. Cabangon Chua

legally speaking

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families decent lives. For its part, the government wants to replace old jeepneys, those 15 years and older, with new environment-friendly jeeps “with added safety features.” Around 180,000 jeepneys nationw ide will have to be replaced, according to the Land Transportation Franchising and Regulatory Board

“Adequate food is not a matter of charity, but of legal entitlement” (Explanatory Notes, House Bills on The Right to Adequate Food).

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he 2015 Social Weather Stations (SWS) survey disclosed that approximately 13.4 percent of Filipino households reported themselves as having suffered or are suffering involuntary hunger. This is slightly better than the 2013 SWS figures, which showed average hunger rate was 19.5 percent, with 18.1 percent, or an estimated 3.90 million families, experiencing involuntary hunger at least once in the past three months (http//www. sws.org.ph). In the midst of political bickering, escalating distrust among the various branches of government, fake news, threats of destabilization, impending nationwide martial law, perceived attacks on institutions, violent extremism, unabated killings, growing societal unrest—the core problem of our people, which is hunger and poverty, has been sidelined. The state is mandated to break the cycle of poverty through policies that would “provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all” (Section 9, Article II, 1987 Constitution).

Quality of life includes the right to adequate food. Both the Senate and Lower House recognize the need for a comprehensive legal framework harmonizing scattered laws on the right to adequate food. Indeed, a number of international instruments signed by the Philippines, including the International Covenant on Economic, Social and Cultural Rights and numerous pieces of local legislation like Republic Act (RA) 9700 (Comprehensive Agrarian Reform Program Extension with Reforms, which adopted the policies in RA 6657), RA 8435 (Agriculture and Fisheries Modernization Act), RA 8550 (Philippine Fisheries Code), RA 7607 (Magna Carta for Small Farmers), RA 7884 (National Dairy Act), RA 7990 (High Value Crops Act), RA 8178 (Agricultural Tariffication Act), RA 7308 (Seed

(LTFRB). In the Philippines, especially in Metro Manila, the jeepney is the most popular mode of public transportation. The proposed PUVs will have Euro 4 engines or electrically powered engines with solar panels as roofs. Part of the proposal is to equip each vehicle with speed limiters, a GPS navigation system, dashboard cameras, automatic fare collection system, Wi-fi and closed-circuit TV cameras. It would be pretty comfortable to have these units on the road, offering a welcome change for passengers who commute to and from work and school every day. However, even with a loan program in place, it would still be very difficult for most drivers and operators to cope with the costs and financial requirements of modernization. The drivers and their groups acknowledge that there is definitely a need to improve the quality of the vehicles plying our public roads. However, they are not in favor of the current version of the phaseout program because of

its strong “pro-business scheme.” They claim that only big capitalists would be able to afford the proposed “fleet management system,” which sets a minimum of 10 vehicles per franchise. Aside from the new franchise system, part of the modernization program is training for drivers and updates on new routes. The entire scheme is being planned for a 2020 implementation, and will be applied not only on jeepneys but also on other PUVs like buses and vans. Definitely, there are portions of the current program that are sound and generally helpful for all concerned. However, there might be some areas that need to be discussed further to find common ground between the drivers/ operators and officials from the government’s transportation department. While we cannot pass up opportunities that will modernize aspects of our lives, we have to look at whether the change is realistic and prioritizes the best interests of the common Filipino.

Industry Development Act), RA 9168 (Plant Variety Protection Act), RA 7581 (Price Act), RA 71 (price tag law), Executive Order 51 (Milk Code), and RA 8976 (Philippine Food Fortification Act of 2000), have the overall, arching objective of guaranteeing the right of Filipino citizens to adequate food (Explanatory Notes, Ibid). In the Lower House, the “zerohunger” bills propose the creation of a Commission on the Right to Adequate Food (composed of a chairman and two members) attached to the Office of the President, which shall be the primary policy-making and coordinating body to guarantee the exercise of the right to adequate food. The zero hunger bills provide that every person has the right to live in condition that will enable the person: “(a) Either to: (1) Feed directly from productive land or other natural resources; or (2) Rely on well-functioning food distribution, processing and market systems, or (3) Both; (b) To be financially able, not only to acquire a sufficient quantity and quality of food, but also to satisfy her or his other basic needs; (c) To be safe from the risk of losing access to food, as a consequence of sudden shocks, like an economic or climatic crisis, or brought about by internal displacements of people, or cyclical events, such as seasonal food insecurity; (d) To have the opportunity of

good food utilization, through access to an adequate diet, clear water, sanitation and health care, to reach a state of nutritional well-being, where all physiological needs are met; and (e) To access foods or diets that are most appropriate under given circumstances, in terms of their nutritional value and cultural acceptability. xxx” (House Bills 61, 3938, 256; Senate Bills 111, 903). The proposed bills seek to eliminate hunger progressively, reducing the evidence of hunger by 25 percent within two-anda-half years from its enactment, by another 25 percent in seven years, and ultimately achieving a zero-hunger state in 10 years. The bills also provide that the state shall ensure that in 10 years, land devoted to food production will be increased to 50 percent of all prime agricultural land in every region, with periodic reviews to be undertaken to ensure compliance with set targets. Various policies in the areas of health care, education, employment and social protection, agriculture and rural development need to be coordinated. Synergies among programs that fall under the responsibility of different departments, such as school-feeding programs that source from local small-scale producers, or food-forwork programs that improve rural infrastructure must be identified. Cynics will say that there is no need to legislate more laws on hunger and alleviation of poverty. What See “Kapunan,” A15

Opinion BusinessMirror

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Why I never stopped teaching?

Dissecting PPP contracts #8: ADR By Alberto Agra

PPP Lead

Siegfred Bueno Mison, Esq.

THE PATRIOT

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arly this month, we celebrated World Teacher’s Day, marking the anniversary of the 1996 signing of a United Nations Educational, Scientific and Cultural Organization (Unesco) document that provided a reference framework to address teachers’ rights and responsibilities on a global scale. This 2017 World Teachers’ Day also commemorated the 20th anniversary of another Unesco document to address the rights of teaching personnel at institutions of higher education. The Joint Message from Unesco, International Labor Organization, United Nations Children’s Fund, United Nations Development Programme and Education International, conveyed a powerful statement by saying that being an empowered teacher, among others, means having “the professional autonomy to choose the most appropriate methods and approaches that enable more effective, inclusive and equitable education”, as well as “raising the status of teachers around the world in a way that honors and reflects the impact they have on the strength of society.” Sometime in 1992 then Department of Education, Culture, and Sports required college faculty members to have a master’s degree as a minimum educational qualification for acquiring regular status. In 1994 the Commission on Higher Education upheld the requirement as contained in the revised manual of regulations for private schools. Sometime in 2013 when some University of the East college teachers challenged the validity of such regulation, the Supreme Court sustained the same and pointed out that “government regulation in this field of human activity is desirable for protecting not only the students but the public as well from ill-prepared teachers lacking in the required scientific or technical knowledge.” In law schools, the Legal Education Board has recently required a certain percentage of law professors in a school to have a masters’ degree in law (Ll.M.) inasmuch as teaching theoretical foundation in law requires, among others, a higher form of pedagogical competence. I have been an instructor since 1993 in a military-intelligence school and a professor since 1998 in several law schools. Save for the years when I worked abroad, I never stopped teaching, even when I was with the Bureau of Immigration and now with Philippine Airlines. Though teaching personnel is underpaid in relation to the hours spent vis-à-vis the financial package, I enjoy the quality interaction I get from the intellectual duels I encounter with some of the brightest students in law. In a different field, scuba diving, I was under the tutelage of two instructors—Ross David and Gigi Santos. Both seasoned dive instructors are extremely competent and very passionate in this underwater hobby. Understandably, Ross and Gigi have different teaching styles. Ross is the doting, caring and Mother

Kapunan. . .

continued from A14

is needed is to bridge the chasm between laws and policies and its implementation. There is the unresolved issue of corruption and misappropriation of public funds, which end up in private pockets. What has happened to the P728-million Fertilizer Scam, the P5-billion Swine Scam, the P3.1-billion Irrigation Scam, the P120-million Ginintuang Masaganang Ani Fund? Has any perpetrator of these scams been arrested, convicted and jailed? Then there is the “Kidapawan Incident” on the issue of food security where, for three days from March 30, 2016, thousands of

Goose type, while Gigi is the serious, straightforward, take-no-prisoners kind of mentor. Nonetheless, these two dive instructors leave a lasting imprint to the extent that their students, myself included, vividly remember all the experiences learned underwater. Of all the law-school professors I had in Ateneo Law School, I will never forget Prof. Avelino “Baste” Sebastian Jr. He served as my inspiration to teach wills and succession, and even write a book about it. I find his teaching style, though unpredictable at best, very effective when it comes to making sure his students remember important points. He usually comes out as a “terror” professor for the most part but, in retrospect, I value his method, as it instills discipline among his students. During my masters’ program in law, my best professor was Prof. Charles Whitebread, who was coincidentally teaching a similar subject (gifts, wills and trusts). I try to imitate both of their teaching techniques as much as I venerate their respective extraordinary technical competence. Though I have not seen Prof. Baste for quite some time now, his teaching legacy is still felt in the Ateneo Law School, hopefully through others like me who were once under him. There is a myriad of teaching methods that I have witnessed in the military academy and in professional schools. At the end of each semester, whenever I have the chance to share to my students my thoughts on teaching law, I always tell them that my presence within the four walls of the classroom is not to teach, but to train; not to torture, but to inspire; not to educate, but to help them learn. And, the most effective way to train, inspire and facilitate the learning process is to maximize teacherstudent interaction, depending on the subject and the audience. After all, whether the topic is as technical as scuba diving or military surveillance, the so-called experts in the subject will still have to learn from their students—one way or another. In the Bible, Proverbs 1:4 tells us, “A wise man will hear and increase in learning. And a man of understanding will acquire wise counsel”. For teachers, the moment they stop learning is the moment they stop caring for themselves and for their students. In my case, I never stopped teaching simply because I refuse to stop learning. For questions and comments, please e-mail me at sbmison@gmail.com.

farmers and their supporters made a blockade along the Davao-Cotabato Highway—which ended violently with deaths and injuries on the side of the protesters and police. Hunger cannot be solved by more laws or a stopgap measure of doling out food to the hungry. It needs political will of our leaders. Concrete and decisive steps aimed at ensuring the sustainability and productivity of our agricultural sector is drastically needed. Perhaps by addressing the problem of hunger, food security and poverty, we will be striking at the core of our intensifying drug problem. The State should shift from bullets to food. Our mantra perhaps should be “don’t kill the addicts, feed them instead!”

Monday, October 23, 2017 A15

Continued from A1

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ublicized arbitration cases. In at least three instances, the Philippine Government, through its implementing agencies, has been hailed to arbitration proceedings before international neutral third persons. The private sector proponents of Metropolitan Waterworks and Sewerage System, Ninoy Aquino International Airport Terminal 3 and Laguna Lake Rehabilitation and Dredging Project filed arbitration cases after unilateral adverse action by the successor administration. Executive Order 78, series of 2012. Under this executive issuance, referral to “neutral third persons” is now the rule. Provisions on Alternative Dispute Resolution (ADR) mechanisms must be included in PPP, Build-Operate-and-Transfer Law-re-

lated and joint venture agreements, whether entered into by national government agencies, government corporations or local government units. This executive order is anchored on Republic Act 9285, or the ADR Act of 2004.

What is ADR? The implementing rules of this landmark law defined the ADR system as a “process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, xxx, in which a neutral third person participates to assist in the resolution of issues, including arbitration, mediation, conciliation, early neutral evaluation, minitrial or any combination thereof.” Mechanisms differentiated. In arbitration, the neutral third person decides, resolves the dispute and renders an award, while in mediation, s/he facilitates communication and negotiation and assists the parties in arriving at a voluntary agreement. The mediator does not determine who is right or wrong. But before involving “outsiders,” parties may contractually bind themselves to undertake mutual discussions. Referral to a Panel of Experts may also be stipulated.

The panel can also act as the arbitrators or mediators. Sample Text. An ADR provision may be worded this way: “The Parties hereto agree that, in the event of any dispute or difference between them arising out of this agreement or in the interpretation of its provisions, they shall endeavor to meet together in an effort to resolve such dispute amicably. In appropriate cases, the Parties may execute a supplementary agreement to clarify issues. If a dispute cannot be settled by mutual discussion within 30 days from commencement of discussions, the Parties shall refer the matter for Mediation-Arbitration in accordance with the Alternative Dispute Resolution Act of 2004 and other applicable laws and rules.” This is a simplified or short version. The ADR is one way by which successor risk and breach of trust are addressed. Consistency and integrity of policies and contracts seem to the challenge in cross-administration PPP contracts.

The need for certification of compilation services Alfredo J. Non

DEBIT CREDIT Part two

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o understand the present, we should first understand the past. How did we get to this situation of requiring the certification of compilation services? Allow me to provide a short but relevant historical background on the pertinent segment of our accountancy profession. In 1970 and prior years, accountants and auditors in the Philippines were guided by generally accepted accounting principles promulgated in the United States. This is the same experience by our Asian neighbors whose accounting practice was greatly influenced by foreign colonizers (Singapore, Malaysia and Hong Kong— by the United Kingdom practice; Indonesia—by the Dutch practice; and Thailand and the Philippines—by the US practice). These accounting principles and practices in the US were the ones taught to us in college. The same principles and practices that we, accountants, studied while in college using American textbooks as reference materials. Prior to local accounting textbooks being published, we relied on traditional books published by Finney and

Miller; Karrenbrock and Simons and others. The Philippine Institute of Certified Public Accountants (Picpa), the association of Certified Public Accountants (CPA) in the Philippines, had its beginnings in 1929 when it was founded by a group illustrious pioneers in the accounting profession. The Picpa published a codification of generally accepted accounting principles in the Philippines. However, this codification, and even the accounting textbooks mentioned, only served as reference materials. They did not have a mandatory application effect in the Philippines, which the auditors can use to justify a qualified opinion in their reports. Therefore, in November 1981, the Picpa created the Accounting Standards Council (ASC) to set the gen-

erally accepted accounting principles in the Philippines. Since these principles were also approved by the Securities and Exchange Commission (SEC), it carries more authority and force than any previous publications. The Financial Reporting Standards Council (FRSC) was established by the Professional Regulatory Commission (PRC) (to succeed the ASC) under the Implementing Rules and Regulations of the Philippine Accountancy Act of 2004 to assist the Board of Accountancy (BOA) in carrying out its powers and functions to promulgate accounting standards in the Philippines. The FRSC carries on the decision made by the ASC to converge Philippine accounting standards with international accounting standards issued by the International Accounting Standards Board (IASB). The FRSC’s main function, therefore, is to establish generally accepted accounting principles in the Philippines. The FRSC monitors the technical activities of the IASB and invites comments on exposure drafts of proposed International Financial Reporting Standards as these are issued by the IASB. When finalized, these are adopted as Philippine Financial Reporting Standards (PFRSs). The FRSC similarly monitors issuances of the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, which it adopts as Philippine Interpretations–IFRIC. To assist FRSC in this task, it formed the Philippine Interpretation Com-

America’s best university president By Bret Stephens The New York Times

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everal years ago Robert Zimmer was asked by an audience in China why the University of Chicago was associated with so many winners of the Nobel Prize—90 in all, counting this month’s win by the behavioral economist Richard Thaler. Zimmer, the university’s president since 2006, answered that the key was a campus culture committed to “discourse, argument and lack of deference.” Reflecting on that exchange in March, Zimmer noted a depressing trend: While Chinese academics have made strides to “inject more argumentation and challenge into their education,” their American peers are moving “in the opposite direction.” As universities go, so ultimately go the fate of nations. The University of Chicago has always been usefully out of step with its peers in higher education—it dropped out the Big Ten Conference and takes perverse pride in its reputation as the place where fun goes to die. It was out of step again last year when Jay Ellison, the dean of students, sent a letter to incoming freshmen to let them know where the college stood in respect to the campus culture wars. “Our commitment to academic

freedom,” he wrote, “means that we do not support so-called ‘trigger warnings,’ we do not cancel invited speakers because their topics might prove controversial and we do not condone the creation of intellectual ‘safe spaces’ where individuals can retreat from ideas and perspectives at odds with their own.” The letter attracted national attention, with cheering from the right and caviling on the left. But its intellectual foundation had been laid earlier, with a 2015 report from a faculty committee, convened by Zimmer, on free expression. Central to the committee’s findings: the aim of education is to make people think, not spare them from discomfort. “Concerns about civility and mutual respect,” the committee wrote, “can never be used as a justification for closing off discussion of ideas, however offensive or disagreeable those ideas may be to some members of our community.” Those are fighting words at a time when professors live in fear of accidentally offending their own students and a governor needs to declare a countywide state of emergency so that white supremacist Richard Spencer can speak at the University of Florida. They are also necessary words. That isn’t because universities need to be the First Amendment’s most loyal guardians —

in the case of private universities, the First Amendment generally doesn’t apply. They set their own rules. Instead, it’s because free speech is what makes educational excellence possible. “It is the function of speech to free men from the bondage of irrational fears,” Louis Brandeis wrote 90 years ago in his famous concurrence in Whitney v. California. It is also the function of free speech to allow people to say foolish things so that, through a process of questioning, challenge and revision, they may, in time, come to say smarter things. If you can’t speak freely, you’ll quickly lose the ability to think clearly. Your ideas will be built on a pile of assumptions you’ve never examined for yourself and may thus be unable to defend from radical challenges. You will be unable to test an original thought for fear that it might be labeled an offensive one. You will succumb to a form of Orwellian doublethink without even having the excuse of living in physical terror of doing otherwise. That is the real crux of Zimmer’s case for free speech: Not that it’s necessary for democracy (strictly speaking, it isn’t), but because it’s our salvation from intellectual mediocrity and social ossification. In a speech in July he addressed the notion that unfettered free speech could set back the cause of “inclusion” because it risked upsetting

mittee (PIC) in August 2006, which replaced the Interpretations Committee created by the ASC in 2000. PFRSs and Philippine Interpretations–IFRIC approved for adoption are submitted to the BOA and PRC for approval. Cur rent ly, the Phi lippines through the SEC allows three financial-reporting standards or guidelines. Entities under each of these three types of standards follow different applicable financialreporting framework in accordance with the principles and guidelines promulgated by the SEC. Under existing international arrangements, the SEC, the FRSC, the BOA and the PRC have committed that the Philippine financial-reporting practices will be aligned with internationally accepted practices as early as a few years ago. This means that a CPA who will be doing compilation services as a separate service, or as part of a group of services offered, should have the same competency or proficiency like any other CPAs involved in public accounting, commerce and industry and in the other two sectors. Alfredo J. Non is the officer in charge of the Energy Regulatory Commission. He was a partner of the SyCip Gorres Velayo & Co. He is a Certified Public Accountant. This column accepts contributions from accountants, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. These can be e-mailed to boa.secretariat.@gmail.com.

members of a community. “Inclusion into what?” Zimmer wondered. “An inferior and less challenging education? One that fails to prepare students for the challenge of different ideas and the evaluation of their own assumptions? A world in which their feelings take precedence over other matters that need to be confronted?” These are not earth-shattering questions. But they are the right ones, and they lay bare the extent to which the softer nostrums of higher education today shortchange the intended beneficiaries. They’re also questions not enough university presidents are asking, at least not publicly and persistently. Instead, the prevailing conceit is that nothing is really amiss, that censorship concerns are overblown, that there are always creative ways to respect free speech while remaining sensitive to all sensitivities—a balancing act so exquisite that no student need ever be insulted and no administrator need ever take a stand. Zimmer knows what bunk this is; that if free speech—never a popular idea to start with—isn’t actively defended, it will rapidly be eroded. For using the prestige of his office to make the case both brilliant and blunt, he has become the most essential voice in American academia today.

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A16 Monday, October 23, 2017

Pinoys still vacation abroad despite weakening peso By Ma. Stella F. Arnaldo

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@akosistellaBM Special to the BusinessMirror

HE outbound travel industry continues to be vibrant, as Filipinos continue to go abroad for holidays and vacations, despite the weakening peso.

In an interview with the BusinessMirror, Aileen Clemente, chairman and president of Rajah Travel Corp., said: “Even as the peso depreciated, there have been more airline promos this year than last year.” The lower ticket fares, she asserted, “offsets” the impact of the depreciated peso, thus evening out the cost of traveling abroad. Her company, for one, has recorded a “15-percent to 20-percent increase in ticket issuance,” with many outbound tourists going to countries in the Asean, Japan and the United States. While these countries continue to be frequently booked, she has also noted an increasing number of Filipinos traveling to “new destinations like Iceland and New Zealand.” Iceland has a dramatic landscape, which offers visitors volcanoes, geysers, lava fields and an

opportunity to gaze at the aurora borealis (northern lights). Aside from its lively food and beverage scene by way of local wineries, New Zealand has also become popular because some sites were used as locations for the popular Lord of the Rings film trilogy. “Also, Singapore Airlines has more flights now to New Zealand, and PAL [Philippine Airlines] will start direct flights there soon,” Clemente explained. The Philippine peso is considered the worst-performing currency in Asia, and fell to a new 11year low on October 19, closing at 51.53 to the US dollar. L a st Fr id ay R aja h Tr ave l launched “Luxury Gold,” a sister brand of Insight Vacations aimed at the premium market. “Luxury Gold really ups the ante allowing smaller group size, having more

than a travel director—a travel concierge, luxury accommodations and more opportunities for relaxation, great dining experiences (including Michelin-starred restaurants, farm-to-table dining, actual cooking demos and actual cooking, etc.). It is truly an upgraded journey,” she said. “Most important,” Clemente added, “these are VIP experiences that you will not get elsewhere. Most tours allow V IP visits, meaning only the group would be in the museum before anyone else gets there, or after everyone has left. So it gives you more intimate experiences in usually crowded museums.” Under the Luxury Gold brand is the “Chairman’s Collection,” which are destinations and experiences personally handpicked by The Travel Corp., which owns Luxury Gold/Insight Vacations, along with 30-plus other global brands. “These include encounters with royalty, such as lunch with an Italian count at his grand Tuscan villa; a visit to the gardens of Alnwick Castle with the Duchess of Northumberland; dining with a French noble at Paris’s oldest café; and a drinks reception with Princess Anita von Hohenberg at Artstetten Castle,” Clemente pointed out. The tourism industry stalwart expressed optimism that these

new luxury tours offered by Rajah would be a welcome addition to the country’s strong outbound travel market. “In terms of Insight Vacations and Luxury Gold, our clients are the kind of travelers not so affected by currency movements. They are discerning travelers who value the experiences over the costs. They know that, in taking a Luxury Gold tour package, it is an experience that cannot be quantified.” She believes outbound travel will continue to grow, despite the weakening peso, which many economists have forecast to drop to 52 to a US dollar by year-end. “Travel is a way of life, and can be both for business and leisure. We are also part of the global economy, which means that travel in and out of the country will continue.” Currency forecasts for 2018 are mixed, from P52 to P54 to the greenback, depending on whether or not the Philippine central bank raises its key interest rates, in reaction to the US Federal Reserve’s anticipated rate hike. However, the Asian Development Bank recently projected continuing strength in the Philippine economy, expanding by 6.5 percent in 2017, and 6.7 percent for 2018, in terms of GDP. The Philippine government is targeting a GDP growth of 7 percent to 8 percent in 2018.

www.businessmirror.com.ph

PHL SHIPS 100,662 MT OF RAW SUGAR TO CHINA, JAPAN–VARUA By Jasper Emmanuel Y. Arcalas @jearcalas

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raders shipped 100,662.51 metric tons (MT) of raw sugar to China and Japan as part of efforts to reduce the country’s sugar inventory, according to the Philippine Sugar Millers Association Inc. (PSMA). PSMA Executive Director Francisco D. Varua said the volume is part of the 140,000 MT of sugar that Philippine traders would export to countries other than the United States by the end of November. “The SRA [Sugar Regulatory Administration] gave a deadline for the shipment of all ‘D’ sugar to the world market before the end of November,” Varua told the BusinessMirror in a recent interview. “As of

140,000 MT The total volume of “D” sugar that will be shipped by traders by the end of November October 5, the total shipment of ‘D’ sugar is 100,662.51 MT.” Varua said shipping 140,000 MT of ‘D” sugar would help reduce the country’s sugar inventory and improve domestic prices during the current crop year, which began on September 1. “The price of ‘B’ sugar now is P1,383 per 50-kilogram bag (lkg),” he added. The figure was 6.38 percent higher than the P1,300 per-lkg See “PHL ships,” A2

UK Labour Party threatens to back Tory rebels for vote on Brexit deal

Starmer Bloomberg

T real versus purported events TV5 anchor Ed Lingao (above) discusses the difference between fake news and legitimate news during a news forum hosted by the Philippine arm of the International Association of Business Communicators (IABC) at the DWIZ News Studio at Citystate Centre Building in Pasig City on October 19. Giving their remarks on news literacy are Joe Zaldarriaga, IABC Philippines president, and Manny Mogato of Reuters news agency (second and third from right, respectively). The event took place during the DWIZ news program In the Heart of Business, hosted by Bong Osorio, Roni Merk and Marou Pahati Sarne.

he United Kingdom opposition Labour Party could unite with rebels in Prime Minister Theresa May’s Conservative Party as a way to force her to give lawmakers a vote on the final deal to leave the European Union, the party’s Brexit spokesman Keir Starmer wrote in The Sunday Times. Starmer demanded May accept six changes to the so-called repeal bill, including giving parliament the final say on whether to approve it and adding a two-year implementation period following Brexit during which Britain would stay in the single market and customs union. Writing in the Times

online comment section “Red Box,” he vowed to “work with all sides” unless ministers adopt his suggested changes and end the paralysis over the bill. With May in charge of a minority government that needs the votes of the Democratic Unionist Party of Northern Ireland to advance legislation, she is vulnerable to opposition to the bill. Both Conservative and opposition members in Parliament have already proposed hundreds of amendments, including from May’s former cabinet colleague Dominic Grieve to require a formal vote to enact Brexit. See “UK Labour Party,” A2

Petron sues state-owned PNOC for contract breach Continued from A1

Petron lawyers asked the Regional Trial Court in Mandaluyong to issue a temporary restraining order (TRO) against the PNOC to stop the latter from performing acts aimed at ousting Petron of its leased properties. The oil firm has existing lease agreements with the PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations. The company supplies more than a third of the country’s petroleum requirements. The contracts will expire in August next year. There is a provision for renegotiation in the contract that, in case of failure to come to an agreement, the same terms and conditions shall apply. However, PNOC claims these conditions are disadvantageous to the government. Petron said it offered to negotiate the agreement with PNOC as early as 2016. However, it was constrained to seek judicial

intervention when PNOC president Reuben Lista communicated early this year that it will terminate the lease agreement with Petron, citing provisions in the contract that are allegedly “onerous, burdensome and disadvantageous” to the government. “If PNOC will continue to disregard its reciprocal obligations on the conveyance of our land, then they shou ld retur n the properties to us,” Petron said. “Petron has invested billions of dollars on these properties. PNOC’s actions clearly jeopardize the country’s fuel supply security and government’s thrust to develop key industries.” Petron also cited two followup letters from Lista dated August 1 and 31, demanding “to nullify certain provisions of the lease agreements that pose a stumbling block before we can proceed to negotiate the renewal.” In the letters, Lista called for the abandonment and cleanup of the contested sites on or before expiration of the lease.

T he lea sed proper t ies a re originally owned by Petron and acquired over several years to be used for its refinery, distribution and sales operations. Petron, however, was compelled to give up its land to the PNOC in 1993 to comply with the requirements of its privatization. To secure foreign and local investments in Petron and ensure stability of its operations, the transfer of the properties was enabled through a deed of conveyance and lease agreements that guaranteed its long-term and continuous use by Petron. The oil firm said the conveyance with lease-back transaction between Petron and the PNOC involves a reciprocal obligation: a) Petron conveyed to PNOC the leased properties at book value; b) in consideration of PNOC leasing the properties back to Petron on a long-term basis and according to its operational requirements. Hence, among the principal considerations for Petron’s conveyance of its properties to

PNOC was PNOC’s obligation to lease back the same properties to Petron. “By unilaterally setting aside the renewal clauses of the Lease Agreements and by categorically declaring its refusal to honor them, PNOC committed a fundamental breach of its Lease Agreements with Petron,” the company stressed. “PNOC disregarded the true consideration for the leasehold rights acquired by Petron over the properties, which included not only the rental payments but the properties themselves, which Petron had conveyed to PNOC pursuant to privatization,” Petron added. The government, for its part, said last Friday night that it has formed a negotiating team. “The board appointed a negotiating team,” Energy Secretary Alfonso G. Cusi said. “It is composed of three directors and, I think, another three from the management side. Cusi, who is also the PNOC chairman, said the newly formed

team’s marching order is to “find a win-win solution.” “Petron being also a responsible company, I’m sure they will be willing to resolve. PNOC, from its perspective, sees something in the contract that is not fair, it is not equitable, so what they have to do is bring it, discuss it with Petron,” Cusi said. “They have to go back to negotiation, then they report back. A negotiation can bring a positive result.” Cusi, however, said there is a need to clarify what the motion for a TRO is for. “I understand PNOC has not issued any order, and what has been expressed in their letter is desire to set aside a provision,” he said. “If Petron finds the position expressed by PNOC unacceptable, then parties should talk.” The energy chief agreed that the contract should be honored. “We cannot arbitrarily…unilaterally remove a provision. After negotiations and exhausting administrative processes, we will see if there are options available.”

Section 2 of the lease agreements for service-stations properties, as well as the lease agreement for the bulk plant properties between PNOC and Petron provides that, “in case the parties fail to come to an agreement, the same terms and conditions shall apply, except the initial rental rate for the renewal period shall be the rental rate at the time ofe x pi r at ion plu s 2 percent thereof, and subsequent rental rate shall be escalating by 2 percent per annum.” Meanwhile, Section 3 provides that, “should the lessee decide to reduce the area of the leased premises due to business or operational reasons, the rentals shall be reduced correspondingly on a per square meter per location basis.” “The reduction of rental for each affected property shall be effective on the succeeding month following the receipt by lessor of a written notice regarding the reduction of the leased properties”, the provision stated.