Businessmirror october 25, 2017

ASEAN DEFENSE SUMMIT ASEAN defense chiefs link arms during a brief photo session at the start of the Asean Defense Ministers’ Meeting and its Dialogue Partners on Tuesday in Clark, Pampanga.

The annual meeting, which the Philippines is hosting this year, also includes its dialogue partners, such as the United States, Russia, China, Japan, South Korea, Australia, New Zealand and India. AP/Bullit Marquez

media partner of the year

United nations

2015 environmental Media Award leadership award 2008

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Wednesday, October 25, 2017 Vol. 13 No. 14

‘Adventurous’ millennials boost PHL travel business 35M

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Un-interfaith dialogue and Fr. Julian Carron’s disarming beauty

@akosistellaBM Special to the BusinessMirror

Duterte mutes voice of some agencies in Neda Board

By Elijah Felice E. Rosales

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@alyasjah

resident Duterte has removed 11 members of the National Economic and Development Authority (Neda) Board in a bid to streamline the decisionmaking process of the committee that he chairs.

Under Administrative Order (AO) 8, the President has slashed by half the number of members of the Neda Board. A total of 11 heads of agencies were removed from the committee tasked to decide on major social and economicdevelopment plans and policies of the government.

Pursuant to the AO, the Neda Board will now be composed of the President as chairman, the socioeconomic planning chief as vice chairman and the executive secretary, Cabinet secretary, deputy See “Duterte,” A2

ISLAMIC STATE THREAT IN PHL SPREADS IN REMOTE BATTLES

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ATU Salibo, Philippines—The leader of the Islamic State (IS) in the Philippines, Isnilon Hapilon, is dead. The city his forces seized, Marawi, on the island of Mindanao, is all but completely back in government hands after months of scorched-earth combat.

But the Islamic State’s influence in the Philippines is far from over, and communities on Mindanao are bracing for the next battles.

“I don’t like to fight. But this is our land and we will not let them take this like they destroyed Marawi,” said a veteran Christian militia fighter who goes by the nom de guerre Commander Ilangilang. [She named herself after the tree blossoms that bloom densely around her hometown.]

She says it is only a matter of time before the IS’s black flag flutters in the mountainous periphery on the outskirts of Kauran, the farming community where she grew up and where she talked to Times journalists recently, about 90 miles south of Marawi.

“That’s why I have these,” she said, gently tapping her caliber-.45 pistol and a separate revolver, both holstered loosely around her thin waist.

The commander said she picked up her first gun when she was 13, in the early-1970s, and her family was em-

PESO exchange rates n US 51.5070

They may be close to being defeated in Marawi, but they can spread out.”—Commander Asiong

broiled in fighting Muslim separatist rebels in the area.

That separatist movement, and the sectarian and political resentment that drove it, never really went away.

It evolved into Muslim militant groups that fought the government for decades, and in recent years proved to be fertile ground for the Islamic State ideology and recruiters, as that Middle East-based movement sought to extend its influence around the globe.

That the old and resilient militant cells here are now being strengthened by the brand and resources of the IS’s international network has people worried all over Mindanao—including even some of the Muslim militants whose former comrades joined the Islamic State.

See “Islamic State,” A2

The estimated millennial population in the Philippines For her age, she is pretty much well traveled, having gone to several states in the US, Vancouver in Canada, and the nearby Asian cities of Hong Kong, Singapore, Kuala Lumpur, Tokyo, Bangkok and, most recently, Saigon.

See “Millennials,” A2

business news source of the year

P25.00 nationwide | 5 sections 32 pages | 7 days a week

By Ma. Stella F. Arnaldo

URPLE ROSE, 35, describes herself as a “corporate slave” with limited vacation leaves.

She works in a large universal bank, shepherding inward remittances from Filipinos all over the world.

But when she can get away, she flies abroad for vacations.

2016 ejap journalism awards

Teddy Locsin Jr.

free fire

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nterfaith dialogue assumes the authenticity of the participants. Religion offers shape and direction to human life, it does not confuse and dehumanize. Satanism and its modern variants in perverted religion are not invited to the table. Real religion is a repeated encounter between a person and reality, it is always individual. Even the Judaic religion with the theme of the Chosen People only appears to contradict that; but it starts with one man’s disobedience, and goes on to another man’s obedience in the teeth of everything good in him, which Some Greater One sought to test by demanding the sacrifice of his son.

Continued on A10

BMReports

Why poverty prevails despite robust growth

By Michael M. Alunan

Special to the BusinessMirror

A

Conclusion

LLOW me to borrow and tweak former US President Clinton’s campaign slogan but, this time, emphasize the importance of physical-wealth creation or the physical economy, or the lack of it as causing mainly massive local poverty: “It’s the [physical] economy stupid!”

Fair pie-sharing vs increasing the pie

INEQUITABLE or unfair distribution of the pie is a valid concern.

More so with prevailing oligarchic control and presence of rentiers and rent-seekers in society, or those enjoying benefits from the labor and ideas of others, without investing anything except the privilege of connections.

Marxist-Lefts carp about the

Children are seen here watching television of a neighbor in Pasay City. The unfair distribution of the country’s wealth is a valid concern that is being linked to oligarchs, who are merely rentseekers. NONIE REYES

pie not equally shared. What if the theoretical pie is now equally shared, but you have a shrinking pie, or no pie to start with, will everyone be equally better? Of course not, as economics is also

more about increasing the pie—or production and being creative.

Biblically, the original economics in Eden, and long before the God of Abraham, the Jews,

n japan 0.4541 n UK 67.9841 n HK 6.6029 n CHINA 7.7588 n singapore 37.8227 n australia 40.2012 n EU 60.5259 n SAUDI arabia 13.7349

Continued on A2

Source: BSP (24 October 2017 )

A2 Wednesday, October 25, 2017

BMReports BusinessMirror

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Why poverty prevails despite robust growth Continued from A1

Christians and Muslims gave the 10 Commandments to Moses, He issued his first economic policies to humankind in Genesis, page 1.

These were not distribution instructions or guidelines on handling market squabbles about pie-sharing, but clear-cut executive orders to be 1) fruitful and multiply, meaning be productive and reproductive; 2) have dominion over creatures and nature; and 3) live in the “image and likeness” of God, which cannot be defined in human physical attributes like race, color, etc., but must be abstract and ironically concrete, being the epitome of metaphor and, by deduction, can only mean being righteous and, because He is the Creator, becoming creative as well.

By being productive, having dominion over nature and being creative means conquering nature’s inherent limits by making it sustainable through human creativity, science and technology, i.e., discovery of agriculture, livestock growing, reforestation, etc. Multiplying means reproduction as a product of love for each other, to perpetuate life itself and in recognition of what Julian Simon considers “humans” in his book as “The Ultimate Resource.”

Marxists, free-marketers are flipsides of same coin?

MARXIST-socialist-leftists on one extreme and free-market capitalists on the other extreme are actually flipsides of the same coin,

Millennials. . .

Continued from A1

She was 25, she said, when she went on her first vacation sans her parents and sibling:“That was in July 2006. I went to Hong Kong with my college barkada.” Aside from trips to abroad, she also frequently travels to local hot spots like Boracay, Dumaguete, Cebu and the like.

Purple Rose typifies most travelers these days—young, middle class, career-driven urban professionals who consider vacations a must-do every year. Local travel fairs and expos held anytime throughout the year have promotions geared particularly toward her age group and budget.

And for most travel agencies and tour operators, millennial travelers, those from the ages 18 to 35, are an expanding market for their business, which build up more profit for them.

Aileen Clemente, president and chairman of Rajah Travel Corp., projects her company revenues to increase by 15 percent to 20 percent in 2018, because of the long-term corporate planning they have undertaken, and also because of the diverse products it offers, especially for the youth outbound travel market.

She told the BusinessMirror in an interview: “We are in a good position [to achieve our targets], as we have really planned for the long-term evolution of our business. We are not your traditional travel agency, but we value the relationship with our clients. We are not perfect, but we adjust. We keep the humanity of our transactions and still take advantage of new technology.”

Also, she said, the company expects this growth “because we have diverse products

but we were made to believe both extremes were diametrically opposed ideologically, which they are. But talking about coins for a change, both have something in common. Both squabble over the sharing of the economic pie. Marxist-leftists believe the pie is unfairly shared, which make it inherently political and contentious. Marxists claim assets of the wealthy are “congealed labor” or accumulated surplus value from the toils of the exploited throughout history, and their solution is a class struggle or bloody revolution.

Similarly, free-market capitalism is a permanent battle about sharing the pie, a dog-eat-dog market competition that smacks of social Darwinian “survival of the fittest,” which reduces humans into beasts.

Here, humans survive like wild predators without concern for others in the “law of the economic jungle,” whereby you end up with winners and losers.

Many also die, even in greater numbers from diseases resulting from poverty, albeit not too drastic and noticeable, being slow deaths. Mortalities from respiratory diseases alone, which are curable and preventable, total about 85,000 a year. More die from poor hygiene and lack of potable water and toilet facilities.

Financial growth, but declining physical wealth?

IT’S undeniable markets and freer distribution of products are vital, but what creates real value is physical wealth creation, a concept started by Gottfried Wilhelm Leibniz

coming up as well. Apart from Contiki Holidays, which is popular among those 18 to 35 years of age, we are also selling ‘U by Uniworld’ for those aged 21 to 45 years. These are river cruises for the youth.” Cruises for ‘U by Uniworld’ start in April 2018.

According to the United Nations, Asia is home to 1.4 billion millennials—defined as those between 15 and 34 years of age—35 million of whom are in the Philippines. Often described as the “techie generation”, several studies indicate that about 85 percent of millennials look to social media for travel inspiration, and 96 percent will post about their travel experiences on social media.

But Clemente dispels notions that the young make their travel reservations purely online because of the easily available technology and travel products and hospitality companies now having gone online.

“They still go to travel agencies because there are many who want to experience something unique,”she stressed. As most young people are, millennials are an adventurous bunch.

“Millennials go ever y where,” she asserted. “For our Contiki Holidays and U by Uni-world, they join tours and tourists from other countries. So the tour itself is very international. And they build friendships along the way. Most of these tours are in Europe, although we also have some in Australia-New Zealand, the United States, Canada and South America.”

Many of the activities on these youth tours include biking, hiking, going up in hot-air balloons, etc. “They also may have pajama parties on board the river cruise,” she cited as other example of youth-oriented activities.

For another, Clemente said Contiki “also

(1646–1716). Leibniz was a German scientist, founder of calculus and a polymath of many talents, whose ideas on physical economy and those after him, like Alexander Hamilton, were erased from history.

In short, the issue is not between protectionism versus liberalization, regulation versus deregulation, nationalism versus globalization, or totalitarianism versus democracy, or socialism versus capitalism or central planning versus free market. The real issue that is causing so much poverty is collapsing wealth creation, which produces real value and productive jobs.

Economic growth we see is often mere financial growth, but the real, physical economy may be collapsing. Agriculture as a percentage of GDP has steadily declined from 31 percent in the late-1960s to only 9.7 percent in 2016. Industry as a share of GDP also plunged continuously, from 40.52 percent in 1980 to 27.8 percent of GDP in 2014, partly because of stiffer import competition.

When services don’t count

MAKING up for the difference are services, such as education, health, transportation, communications, trade, banking, security, music and arts, government services, etc., which are socially necessary as they complement and enhance the productive sectors—agriculture and industry.

Unfortunately, other services have dubious contributions to society, and the economy.

Elevator boys who are found in many buildings don’t contribute any value but, because they get salaries, they are counted as part of services and, therefore, contribute to the

owns an island in Mykonos, and also a chateau in France. So the accommodations in these tours are also not the typical places youth travelers stay in,” such as youth hostels or pension inns.

Under Contiki Holidays, Rajah offers Camping Classics, which allows travelers to get in touch with nature at secure Contiki campsites; Concept Tours, with accommodations in exclusive Contiki villas and chateaus; and Time-out Tours, which offers comfortable travel at centrally located hotels with excellent facilities.

“U” by Uniworld is an affiliate of Contiki Holidays, and offers cruises down the Rhine, Danube and Seine rivers, passing through Amsterdam to Frankfurt, Frankfurt to Regensburg, Regensburg to Budapest, around Paris and around Budapest.

Contiki Holidays, including U by Uniworld, tours cost anywhere from $835 to over $3,000 per person, depending on the destination, and may last from five to 24 days.

A global Nielsen report on millennial travelers published recently said: “Unlike older generations that historically may have traveled for work or for special occasions like the annual family trip, millennials are untethered when it comes to getting away.

In fact, millennials who travel say they will make a long-haul trip at least twice a year, and one-third say they make four long-haul trips each year.”

With the list of Philippine holidays out, Purple Rose says she is already on the lookout for airline promo fares and researching online for new destinations she has yet to explore.

“I’m thinking of going to Europe next year,” she smiles, dreaming of what unique travel adventures lie ahead for her.

economy. We don’t need PHDs—“Push Here Dummies”—to run our volatile elevator economy up and down. Similarly, new jobs like dispatchers, barkers and fare collectors, have been created at jeepney terminals. But are all nonproductive jobs, sharing in the income of the driver.

At our subdivision, from one sarisari store, there are now two inside and two right outside, all selling to the same households. Can we say the economy grew because retailers increased four times?

But the pie is not increasing; more are just sharing in the same pie. One sarisari store closed shop after SaveMore and Robinsons set up nearby.

Physical economy in agriculture

IN the agriculture-market nexus, both farmers and consumers are at the mercy of traders. We can’t blame traders, as they simply follow their business instinct for maximum profit and what is logically convenient in least efforts and costs but may translate to retail prices hitting 10 times farm-gate prices.

Given a choice between trucking 10 tons of vegetables a day and 100 tons a day but earning the same, a trader will logically choose 10 tons a day, as that’s what’s taught in business school; and it’s common sense.

If he chooses 100 tons a day, he spends on 10 more trucks, 10 times more storage, 10 times more drivers and personnel, 10 times more fuel, 10 times more toll fees, insurance fees, etc. A trader has no loyalty to production, and his master prophet is profit or higher margins even at lesser volumes.

Islamic State. . .

Continued from A1

In a twist that would have been unimaginable even after they signed a peace deal with the Philippine government three years ago, members of the Moro Islamic Liberation Front (MILF), are now leading their former enemies in the army against what some believe could become the next big Islamic State (IS) uprising.

They are fighting in the forbidding marshlands of the town of Datu Salibo, about a 130-mile drive south from Marawi. Local Islamist groups claiming to represent the IS have been trying to recruit the young with promises of cash and adventure, according to Commander Asiong. He is the self-appointed spokesman of the same Christian militia unit that Ilangilang belongs to: Red God’s Army.

Asiong, 60, a former soldier turned community leader, said that, even with the militants in Marawi close to total defeat, the IS’s reach on Mindanao has spread. It has been aided by operatives in the Middle East who have posted well-produced videos of the socalled religious war, he said, and particularly by how the IS loyalists in Marawi managed to fight off the government for months.

“They may be close to being defeated in Marawi, but they can spread out,” Asiong said in his tiny shed in Kauran. His years of army service, spent fighting Muslim militants, have left him with deep scars in his neck and torso, and his left leg was all but cut away to save it after several bullets hit him there.

“They can regroup, join other IS allied groups here,” he said. “While we have guns, our community is no match for them. So we pray that the government finishes them in Marawi.

If not, there is nothing we can do except to protect ourselves and fight to the death. We will defend our land until troops arrive.”

On Monday the Philippine defense secretary declared an end to the fighting in Marawi, saying that the “last group of stragglers” in the siege there had been killed.

Duterte. . .

Continued from A1

governor of the Bangko Sentral ng Pilipinas, chairman of the Mindanao Development Authority and the secretaries of budget, finance, public works, transportation, energy and trade as members.

The secretaries of interior, agriculture, environment, science and tourism will no longer participate in the Neda Board meetings.

Also removed were the chairman of the Metro Manila Development Authority; chairman of the Housing and Urban Development Coordinating Council; secretary of the Presidential Communications Development and Strate-

Given a chance to earn more from imports, he won’t hesitate.

In contrast, a farmer will go for 100 tons, which means 10 times more output, 10 times more jobs, 10 times more packing, 10 more times storage, 10 times more trucking, etc.

Consumer symbiosis, trader-farmer paradox FARMERS and consumers have this symbiotic relationship.

If farmers produce volume and more variety, it means cheaper prices and more choices for consumers. Unless farmers are empowered and organized complete with all logistical support of his own, the middleman-trader will always meddle with the imperfections in the market.

Expectedly, traders will only procure our example of 10 MT a day, leaving the farmer with unsold harvests that dampen farm prices. Farmers, ironically, become the victims of their own successes in production, as their produce are not all absorbed by traders, resulting in a production paradox with traders, who will always prefer to profit from higher margins than from burdensome volumes in an imperfect market.

We cannot simply leave the imperfect market alone to the machinations of Adam Smith’s “invisible hand,” which could legitimately be pickpocketing the wallets of the helpless farmers and, thus, also contribute to why farmers remain shackled in poverty.

Asiong and Ilangilang spoke to journalists for The New York Times over goat-meat stew in Asiong’s hut. As we talked, the sound of explosions kept coming across the distance— mortar fire from an army camp targeting local rebels in a swampy region miles away.

On Christmas Day two years ago, a breakaway faction from the MILF called the Bangsamoro Islamic Freedom Fighters (BIFF), attacked several areas, including Kauran, and killed 11 Christian farmers, Asiong said.

While the BIFF says it is not officially affiliated with the IS loyalists who fought in Marawi, the local authorities think otherwise.

The rebel force has welcomed the Marawi offensive and has helped divert the army’s attention by attacking nearby civilian communities. In June, as heavy fighting was going on in Marawi, BIFF militants briefly held more than 30 students in the remote town of Pigkawayan, about 50 miles south, forcing the military to spread its forces even more thinly.

A spokesman for the group, Abu Misry Mama, said in a brief telephone interview: “The fighting in Marawi is a good distraction. All I can say is, they do not belong to our group, which continues to fight for a separate homeland. But the enemy of my enemy is my friend.”

Another of those jihadi friends, a group that has explicitly pledged loyalty to the IS, is fighting government and MILF forces in the marshlands near Datu Salibo.

The IS militants here are headed by the militant commander Abu Turaipe and are believed to number a few hundred. He was once allied with MILF, but broke away in protest over the peace deal with the government.

The swamp battle with the IS militants has been going on since August, but has gotten little press coverage, largely because the area is inaccessible and much of the attention has been focused on Marawi.

Von al Haq, the MILF’s military commander, said that his fighters were “swimming while attacking, because the swamp waters are very deep.” But the MILF and army alliance has slowly been winning and, in one offensive last

month, reported that it had recovered at least 20 improvised bombs and a number of black IS flags. Nassrolah Gani, a 35-year-old police officer whose unit is helping the military in recovering casualties from the crocodileinfested marshland, said his men would be easily lost in the swamps were it not for their MILF guides.

Boots get sucked off by the mud, and thorny bushes are a natural impediment to moving faster. Their assault rifles often get wet, making them less reliable. “It’s an open, mostly flat marshland, where you are open to sniper fire,” Gani said. “When you enter the swamps, you’ve already dug your own grave.”

Gani added the latest intelligence data they received indicated that there were several Malaysian fighters who had joined Abu Turaipe’s group. Whether they had escaped from Marawi to this new front was hard to tell, but he believes their presence has bolstered the enemy force.

“We used to fight the MILF, but they are now fighting alongside us. So what is the bigger enemy? It is the Daesh-inspired groups,” he added, using another name for the IS. Rommel Banlaoi, a security analyst who heads the Philippine Institute for Peace, Violence and Terrorism Research, says other southern cities are at increased risk of attack by energized IS loyalists.

“They have won the battle strategically, as they have proven how long they can endure the fight against government forces,” he said, adding that the Marawi battle will stand as an example of“martyrdom that can inspire others.”

After the spectacle of the Marawi siege, more foreign fighters will be attuned to the fight on Mindanao, where past government efforts had aimed at ousting Muslims in favor of the Christian majority.

“Mindanao will continue to suffer the challenges of armed conflicts and violence because of many issues associated with the struggle of the people there for selfdetermination”being advocated by the Muslim forces, Banlaoi said. “It has simply become the new land of jihad.” The New York Times

gic Planning Office; undersecretary of the Presidential Management Staff; governor of the Autonomous Region in Muslim Mindanao; and the president of the Union of Local Authorities of the Philippines.

Duterte said the Neda Board shake-up is part of the administration’s policy “to streamline the decision-making process in the bureaucracy”. With the reorganization, he hopes the Neda Board will be able to deliver “a more effective and speedy disposition of matters presented for their approval”.

On top of the Neda Board shakeup, the President has also reactivated the Neda Board Executive Committee, also with him as the chairman. The socioeconomic

planning chief will also serve as vice-chairman, while the Executive secretary, Cabinet secretary and the secretaries of finance and budget will sit as members.

The Neda Board Executive Committee has the capacity to “provide policy direction and resolve policy issues” without the need to convene the whole of the Neda Board.

Under the AO, the Investment Coordination Committee (ICC) was also reorganized, with the secretary of agriculture stripped of an ICC seat. The Executive secretary, Cabinet secretary and the secretary of energy, on the other hand, were granted membership in the ICC. The finance chief remains to be the chairman, with the socioeconomic planning chief as cochairman.

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Editor: Vittorio V. Vitug • Wednesday, October 25, 2017 A3

Party-list lawmakers bare ‘hidden’ pork in ’18 budget bill

By Jovee Marie N. dela Cruz

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@joveemarie

wo party-list lawmakers on Tuesday questioned the “hidden pork barrel” in the final version of the proposed 2018 General Appropriations Act, which was approved on third reading last month by the House of Representatives.

tinio

Party-list Reps. Antonio Tinio and France Castro of ACT Teachers, in a news statement, said the lower chamber reshuffled a total of P46 billion in next year’s national budget.

The legislators slammed the budget cuts in social services, while insertions were made for additional congressional pork, particularly in the budget of the Department of Social Welfare and Development (DSWD) and the Department of Public Works and

Highways (DPWH).

“Apart from the P40-billion increase for education, specifically for the Universal Access to Quality Tertiary Education Act, we noted increases in the budget of departments for additional hidden pork despite earlier claims that the 2018 budget is porkfree,” Tinio said.

“We found a P6.95-billion increase in the budget of the DPWH for its local programs, from P64.831 billion to P71.782 billion. There was also an increase for the calamity fund of the Special-Purpose Funds of P5.2 billion, from P25.5 billion to P30.7 billion,” he said.

These cuts and insertions to the final version of House Bill 6215 were made by a small committee composed of a handful of legislators selected by the House leadership, and voted upon and approved on third and final reading without informing the House members on the changes made.”­—Tinio The lawmakers also noted the increases in the budget of the DSWD for the protective services for individuals and families in difficult circumstances of P1.93 billion, from P3.418 billion to P5.349 billion.

“These are projects that have been nominated by legislators or programs with a postenactment nature, where politicians may have a say in identifying beneficiaries, thus classifying them as hidden pork,” Tinio said.

For her part, Castro said, “We are very alarmed at the increases in hidden pork barrel in the 2018 budget and even more alarmed at the decreases in the budget for social services.”

“The Department of Education received the biggest budget cut of P 33.072 billion, from P126.033 billion to P92.961 billion, in the basic education facilities, which will fund additional school buildings for our public schools,” she said.

“The Department of Transportation budget was also cut by P8.237 billion from the rail-transport program, aviation-infrastructure program and the land public transportation program,” Castro added.

Also, she said the Commission on Higher Education and the state universities and colleges received budget cuts from their scholarship programs and maintenance and other operating expenses by a total of P6.619 billion.

Castro added the budget for the development program of irrigation systems of the National Irrigation Authority was also cut by P978 million.

“The budget of the DSWD for the sustainable livelihood program was cut by P2.074 billion, from P6.85 billion to P4.775 [billion],” she said.

Castro added the Department of Trade and Industry and the Department of Information and Communications Technology’s budgets were cut by P1.6 billion and P1 billion, respectively.

“These budget cuts in social services will only further limit the available services of the government for the people,” Castro said.

Transparency

The lawmakers also decried the lack of transparency in the manner in which the House made amendments to the general appropriations bill.

“These cuts and insertions to the final version of House Bill 6215 were made by a small committee composed of a handful of legislators selected by the House leadership and voted upon and approved on third and final reading without informing the House members on the changes made,” Tinio said.

Since the bill was certified urgent by the President, he added, the constitutional requirement that hard copies of the final version be given to individual

members for their perusal was dispensed with, thus, depriving legislators any opportunity to study the amendments. Tinio said, “The third-reading vote was literally a rubber-stamp vote.”

Earlier, House Appropriations Committee Chairman and Davao City Rep. Karlo Alexei B. Nograles said Congress is strictly compliant with the decision of the Supreme Court, which declared as unconstitutional pork-barrel funds or lump-

sum, discretionary funds that legislators in the past were able to control through postenactment methods or measures.

Nograles added that, under the present budget and proposed P3.767-trillion national budget for 2018, legislators cannot interfere in the disbursement and utilization of the funds, as well as the implementation of the projects and programs, as this is purely an executive function.

Economy

A4 Wednesday, October 25, 2017 • Editors: Vittorio V. Vitug and Max V. de Leon

BusinessMirror

MICC technical working group favors lifting of open-pit mining

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By Rea Cu

@ReaCuBM

he technical working group (TWG) of the Mining Industry Coordinating Council (MICC) has endorsed the lifting of the ban on open-pit mining in the country, provided that the laws and regulations governing the process will be “strictly enforced” by the Department of Environment and Natural Resources (DENR), according to Environment Secretary Roy A. Cimatu.

“In the 28th MICC meeting held on October 24 wherein a quorum was acting and present throughout, [the] majority of the MICC members voted to recommend a change in the policy of the DENR with regard to Department Administrative Order [DAO] 2017-10, particularly, that the DENR lift the ban on open-pit mining provided that mining laws are strictly enforced,” the MICC news statement issued on Tuesday said.

The MICC TWG added that the

DENR, through the Mines and Geosciences Bureau (MGB), should be tasked to take a close look and act on the issues involving the expansion of 24 mining areas covered by mineral production sharing agreements.

The MICC is cochaired by Cimatu and Finance Secretary Carlos G. Dominguez III. With regards to the review of the first batch of the 26 mines ordered either closed or suspended by previous Environment Secretary Regina Paz L. Lopez, the MICC

expects preliminary results of the review by January 2018 and the final report by March of the same year.

As proposed by Dominguez, the MICC agreed to conduct another review in 2019 and succeeding ones every two years, thereafter, in line with the MICC mandate under Executive Order 79 on a review of all mining operations once every two years.

In April the DENR issued DAO 2017-10, imposing a ban on the openpit method of extraction for copper, gold, silver and complex ores.

In August the MICC tasked its TWGs on economic concerns and on environmental protection and legislation to review and formulate the MICC policy recommendations in relation to the open-pit mining ban.

President Duterte’s policy directives on mining include: improving the regulatory functions of the government on mining; investigating and resolving issues concerning security and safety in small-scale mining; addressing the adverse environmental and social impacts of mining, particularly in coastal areas; strengthening regulations on open-pit mining; and strictly implementing the mining law and other environmental laws and regulations to ensure the protec-

DAO 2017-10 An order issued by the DENR imposing a ban on openpit method of extraction for copper, gold, silver and complex ores tion of the environment.

In line with the issue on the 26 mines ordered either closed or suspended, the MICC earlier said it will tap the expertise of the Development Academy of the Philippines to implement and manage the fact-finding and science-based review process on these mining operations.

Finance Undersecretary Bayani H. Agabin bared that the clustering of the mines for review were based on the types of minerals and locations, which are as follows: technical review team (TRT) 1 for gold, copper and nickel mines in the Cordillera Administrative Region, Cagayan Valley (Region 2) and Mindoro, Marinduque, Romblon and Palawan (Region 4-B); TRT 2 for iron and nickel mines in Central Luzon (Region 3); TRT 3 for chromite, nickel and iron mines in Eastern Visayas (Region 8) and Caraga; TRTs 4 and 5 for nickel and chromite mines in Caraga.

‘Bright prospect for Asean econ regional bloc’

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he United States expects bright economic prospects for the Asean regional bloc, with the youth contributing to the achievement of opportunities.

Ambassador Daniel Shields, Charge d’Affaires of US Mission to the Asean, said the regional bloc was “critically important” for the US, noting that US investments in the Asean over the years were higher than it had invested in Japan, China, India and South Korea combined.

“So we really think the economic future of the Asean is very bright… They [Trump administration] immediately sent a signal that the Asean is really an important priority for the US, not just Asean the organization, but Southeast Asia as the region as well,” he said in an interview on the sidelines of Young Southeast Asian Leaders Initiative Summit last week.

Shields cited the Asean Single Window (ASW) as an example of a US initiative with the regional bloc.

The ASW uses electronic means to facilitate customs clearance and trade within the Asean.

He said the US, through the US Agency for International Development, provided $10 million for the ASW initiative. PNA

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PHL vows intensified drive against wildlife trafficking

By Jonathan L. Mayuga @jonlmayuga

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nder scor ing the importance of protecting and conserving migratory s p e c ie s , t he c ou nt r y ’s t o p environment official vowed to intensify the campaign against wildlife trafficking to prevent the extinction of wildlife species imperative for human survival.

At a news conference during 12th Meeting of Conference of Parties (COP) to the Convention on the Conservation of Migratory Species of Wild Animals (CMS) on Monday, Environment Secretary Roy A. Cimatu said it is essential for the Philippines and its Southeast Asian neighbors to protect migratory species.

The Philippines, which is hosting the event for the first time, is one of 17 megadiverse countries in the world, but is also suffering from the rapid rate of biodiversity loss.

Wildlife trafficking and illegal wildlife trade remain a big challenge for the Philippines because of poor law-enforcement, despite a number of laws meant for the protection and conservation of endangered wildlife species.

“As host of this triennial COP meeting, and this being touted as the most attended ever for the CMS, the Philippines will consider this event a great opportunity to show to the Asean community and the rest of the world the importance of the country and the region in protecting migratory species and safeguarding their habitats throughout their journey and range,” Cimatu said.

As the only Asean country that is party to the CMS, Cimatu said the Philippines needs to work harder to ensure that the region’s migratory species and the habitats critical to their survival are protected. “Right now, we are the only member-state in the Asean region, that’s why we are encouraging other members to join the CMS,” he added.

At the same time, the environment chief said the Philippines remains committed to combating illegal trade and trafficking of wildlife species, including those that are endemic to other countries.

“We know that while some terrestrial animals, like elephants, do not exist in our country, their byproducts and derivatives find their way here, which makes it imperative for us to join the fight against wildlife trafficking and illegal trade,” Cimatu said.

Convention on Migratory Species Executive Director Bradnee Chambers underscored the importance of international cooperation, especially among CMS partynations, to ensure the survival of migratory species.

“By their very nature, migratory species—be it avian, terrestrial and aquatic—need international efforts to ensure their survival.

$20B The estimated worth of the illegal global wildlife trade covering around 7,000 species, according to CITEs.

They face threats that can be best addressed through international cooperation,” Chambers said.

Ibrahim Thiaw, deputy executive director of the United Nations Environment Programme, for his part, underscored the importance of protecting and conserving animal wildlife as they bring in much-needed revenue through ecotourism.

He said the gorilla, for example, can potentially bring in annual revenue of $1 million through ecotourism. He said species is important to ensure a healthy ecosystem, of which humans are also a part of. “Without species, there will be no ecosystem. With no ecosystem, there will be no water, no clean air,” Thiaw added.

John E. Scanlon, secretary-general of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) said around 7,000 species are traded globally, with estimated worth of around $20 billion.

Scanlon is pitching call for stiffer penalty and fines, including longer jail terms of at least four years, for those caught engaging in wildlife trafficking and illegal wildlife trade.

In the Philippines the illegal wildlife trade is estimated to be running into billions of pesos, but Director Theresa Mundita S. Lim of the Department of Environment and Natural Resources’s (DENR) Biodiversity Management Bureau said there’s no actual accounting or auditing yet to support such assumption.

Among the endangered species being hunted as part of the illegal wildlife trade for their meat, skins, shells or internal organs, are the pangolins, snakes particularly cobra, sharks and rays, marine turtles and for pets, civet or locally called musang, birds like the Philippine cockatoo and other birds of prey like hawks and eagles.

She said by estimate, the government is losing about P12 million in annual revenues representing uncollected fines for violations of laws related to wildlife protection and conservation.

Lim expressed hope the country’s hosting of the CMS meeting will help encourage other government agencies to support the DENR in estimating the value of the country’s wildlife resources, as well as the economic losses caused by wildlife trafficking and illegal wildlife trade.

DOE may not extend ‘degressed’ FiT rates for hydro and biomass projects

By Lenie Lectura @llectura

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HE Department of Energy (DOE) is not inclined to extend the implementation of the “degressed” feed-in-tariff (FIT) rates for hydro and biomass power projects.

Energy Secretary Alfonso G. Cusi said FiT rates for the two renewableenergy (RE) sources “will end December this year,” and said he does not mind if many will disagree with his opinion.

It can be recalled that the Energy Regulatory Commission (ERC) has lowered the FiT rates for hydro and biomass power projects with commercial operations set anytime from January to December 2017.

The degressed FiT rates are P5.8705 per kilowatt-hour (kWh) for hydro and P6.5969 per kWh for biomass. The approved rates are lower compared to the July 2012 FiT rates of P5.90 per kWh for hydro and P6.63 per kWh for biomass.

“FiT rates for run-of-river hydro and biomass shall be degressed at a rate of 0.05 percent for the period January to December 2017, which is two years from the January 2015 FiT effectivity,” an earlier ruling from the ERC stated. The said FiT rates were based on installation ceilings set by the DOE. The ERC is the agency that sets the FiT rates.

Under the FiT rules, the eligible RE plants shall be entitled to such degressed FiTs corresponding to the

year when they started commercial operation. The ERC may approve a different digression rate for different technologies.

This rule, the ERC said, is meant to encourage the RE producers to invest at the initial stage and hasten deployment of RE. The FiT is basically an incentive in the form of guaranteed power rate given to RE producers for 20 years. However, consumers are the ones who shoulder the FiT-All, a separate line component in the power bills.

“You know, based on our per capita, it is difficult for us to provide subsidy or even FiT. As much as possible, we want to bring down our energy tariff. The consumers are the ones who shoulder the FiT”, Cusi said.

Agriculture/Commodities BusinessMirror

www.businessmirror.com.ph

Editor: Jennifer A. Ng • Wednesday, October 25, 2017

A5

Millers see rebound in sugar prices as industrial users buy less HFCS

By Jasper Emmanuel Y. Arcalas

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@jearcalas

he Philippine Sugar Millers Association Inc. (PSMA) expects the domestic price of sugar to rebound to P1,500 per 50-kilogram bag (Lkg) by December, as local inventories continue to ease up.

PSMA Executive Director Francisco D. Varua said millers were able to reduce the country’s raw sugar end-inventory for crop year (CY) 2016-2017 due to increased withdrawals of raw and refined sugar in the last two months.

“As a result of massive withdrawal of raw and refined sugar in the last two months, we have been able to reduce the end-inventory as of end-September to manageable level,” Varua told the BusinessMirror in a recent interview.

“We expect, perhaps, by December, domestic sugar prices will start to recover, or it might be even better. The price of ‘B’ sugar [domestic sugar] right now is P1,383 [per LKg]. We hope it would be able to go up to P1,500 by December,” Varua added.

The country’s raw-sugar balance at the end of CY 2016-2017 was pegged at 391,918.80 metric tons (MT), 69.23 percent h ig her t h a n t he 231, 58 9. 20 MT recorded in the previous CY

ending August 31, 2016.

Data from the Sugar Regulatory Administration (SRA) showed that the millsite price of raw sugar has been steadily increasing since the start of CY 2017-2018. Latest report from the SRA showed that as of September 24, millsite price of domestic sugar reached P1,364.67 per Lkg, higher than the P1,356 per Lkg price level recorded at the start of the CY. A crop year in the Philippines runs from September 1 to August 31 of the following year.

Varua added industrial users have shifted to procuring locally produced refined sugar from highfructose corn syrup (HFCS) in the recent months.

“Plus, there has been increased refined-sugar withdrawal because, you all know, the industrial users have started to buy domestic sugar and shifted a little bit away from HFCS,” he said.

Earlier, the SRA attributed the decline in the millsite price of sugar to the increased entry of HFCS in the country last year.

The volume of imported HFCS

P1,500

The projected millsite price of sugar by December, from the current P1,383 per 50-kilogram bag last year displaced nearly 30 percent of the market share for locally produced refined sugar, according to the SRA. Varua added the additional sugar exports made by the Philippines to the United States and other markets abroad also helped in reducing the country’s sugar inventory.

Varua said traders have recently shipped 100,662.51 MT of raw sugar to China and Japan, part of the 140,000 MT of sugar that Philippine traders would export to countries other than the US by the end of November.

Furthermore, the Philippines has already exported an additional 56,092.25 MT of sugar to

the US at lower tariff rates under a preferential trading scheme.

However, data from the SRA showed that the volume was lower than the 61,154.49 MT additional allocation granted by Washington to Manila for fiscal year 2017.

The SRA said the 56,092.25 MT was the only volume covered by the total verified “A” quedan permits.

The SRA, a government-owned and -controlled corporation attached to the Department of Agriculture, noted that the Philippines has a carryover volume of 57,684 MT of “A” sugar after filling up the original quota of 136,188.54 MT. Under the tariff-rate quota system of the US, sugar exporters must ship their allocations for fiscal year 2017 on or before October 31.

For fiscal year 2017, which ran from October 1, 2016, to September 30, the US granted the Philippines a total sugar quota of 197,355 MT. Sugar traders have earlier welcomed the additional quota, saying this would help reduce the countr y’s high inventor y and stabilize prices.

PHL milk output likely to rise 4% this year T

he country’s milk production this year could expand by nearly 4 percent to 22,000 metric tons (MT), from the 21,160 MT recorded output 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, attributed the increase in output to growing demand for fresh milk.

“Local milk production is projected to reach 22,000 MT in 2017 and will likely continue expanding on an annual basis due to increasing consumer preference for fresh milk and improved dairying capabilities,” read the report, which was published recently.

The Gain report added that the country’s dairy cattle herd is expected to sustain increments of about 500 to 1,500 heads annually on the back of growing number of government-held multiplier farms.

“In 2017 the Bureau of Agricultural Statistics estimates the country’s dairy cattle herd at 11,700 head, an increase of 5 percent from the previous year,” it read.

“Da ir y catt le nu mbers increased as a result of ongoing government herd buildup programs and the growing number of NDA [National Dairy Authority] dairy multiplier farms, as the Philippine seeks to develop its dair y sector. Dair y cattle numbers are expected to continue increasing by about 500 to 1,500 head per year for the next

22 kg

The per-capita milk consumption in the Philippines

several years,” it added.

The Philippines produces less than 1 percent of its total annual dairy requirement and virtually imports the shortfall to meet its domestic demand pegged at 2 million MT, according to the Gain report.

“Average Philippine milk production per animal [8 liters per day] remains low due mainly to poor feed and management practices, as well as high production costs and a lack of adequate dairy infrastructure,” the report read. “By comparison, the average daily milk yield in the United States is around 30 liters per day and about 20 liters per day in the United Kingdom.”

Filipinos’ per-capita milk consumption is estimated at 22 kilograms (kg), relatively lower compared with Thailand at 26 kg, Malaysia at 52 kg and the US at 287 kg, according to the Gain report.

“With a strong economy, an expanding middle class and a growing population of roughly 102 million in 2015, the Philippines is a large and rapidly expanding market for milk and milk products,” the report added.

Local dairy production in the first half expanded by 11 percent to 11,700 MT, from 10,540 MT

FARM TOURISM The Department of Tourism launches its farm-tourism program aimed at encouraging more visitors to enjoy the colorful Philippine countryside and tour farms. Leading the launch are (seated, from left) Sen. Cynthia A. Villar, Tourism Secretary Wanda Corazon T. Teo and Party-list Rep. Sharon S. Garin of Aambis-Owa. Photo courtesy: DOT

recorded a year ago, according to the NDA. “Based on the report of the Philippine Statistics Authority [PSA], the noted intervention by the NDA and Philippine Carabao Center for cattle, carabao and goat-milk production, coupled with higher demand for cow’s and carabao’s milk, resulted in higher milk production and better pricing,” the NDA said.

Bulk of the dairy output during the January-to-June period, or about 72.46 percent, came from

NDA-assisted farms.

The NDA said the country’s dairy production came from the country’s 56,837-head dairy herd.

“Of this inventory, dairy cattle registered a number of 25,697 heads and the number of dairy carabaos reached 17,802 heads.

Goat inventory totaled to 13,708 heads,” it said.

“By animal source, 63 percent of the total volume of milk produced came from dairy cattle, 34 percent from carabao and 3 percent from goat,” it added.

Last year the Philippines produced 21,160 MT of milk, which was 3.78 percent higher than the 20,390 MT recorded output in 2015.

The Department of Agriculture is allocating at least P1 billion next year for the importation of Girolando heifers from Brazil, as part of the government’s plan to ramp up local milk production to meet at least 10 percent of annual domestic requirement by 2022 and reduce the country’s reliance on imports. Jasper Emmanuel Y. Arcalas

Zinc at 10-yr high forces Indian miner to forgo tradition

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industan Zinc Ltd., a unit of billionaire Anil Agarwal’s Vedanta Ltd., has broken with its usual practice and hedged about a quarter of its annual metals production as prices trade near their highest level in years.

The company has locked in prices for 220,000 metric tons of zinc and 30,000 tons of lead, it said in an earnings statement on Monday. Zinc, used to galva-

nize steel for the auto industry, climbed to the highest in a decade this month and lead has risen to the strongest level since 2011. The decision to hedge was taken even as the company expects prices to remain elevated.

“We normally never hedge, but the volatility in the zinc prices was so high in the recent quarter that we decided it may be a prudent strategy to hedge a part of our production,” CEO Sunil

Duggal said on a conference call.

Zinc shortages will persist in the next few quarters, keeping prices at $3,000 to $3,500 a ton, he added. The metal was at $3,163 on Tuesday.

Zinc has soared 23 percent this year, extending a 60-percent jump in 2016, as cuts in global mine supply and China’s crackdown on pollution and mine safety created a shortage. Price swings have increased with the metal’s 60-day

volatility near the highest level since June. Macquarie Group Ltd. said this month zinc may peak between $3,350 and $3,400 within six months.

The Udaipur, India-based miner said it hedged zinc at $3,084 a ton and lead at $2,418 a ton. About 165,000 tons of the forward sales were for the first quarter of next year and the rest for the following three months. Lead traded at $2,508 a ton on the London Metal

Exchange on Tuesday.

“This is a sort of an exception we have done,” Duggal said. “I am not saying that we will not look at further hedging as prices increase.”

An increase of 3 percent in g loba l zi nc dem a nd i n 2017 and similar growth next year w i l l probably keep t he ma rket tight and prices high in the short and medium term, Duggal added. Bloomberg News

BOI approves grant of perks to 2 agri-processing expansion projects

T

he Board of Investments (BOI) has approved two agriprocessing and production projects with a combined worth of P86 million.

In a statement on Tuesday, the government’s main investment-promotion agency announced that the expansion of 557 Feather Meal Corp.’s poultrydressing facility and R-LEY Trading’s roasted cashewnuts factory have qualified for government incentives.

Feather Meal Corp.’s project qualified under the 2017 Investment Priorities Plan’s agriculture, fishery and forestry category, while R-LEY’s investment was approved under the list of eligible export activities.

Feather Meal Corp.’s new facility for poultry dressing with processing plant and cold storage in Tarlac caters exclusively to the processing requirements of San Miguel Foods Inc. (SMFI).

The expansion adds an additional 12.48 million birds annually. Its existing registered capacity is 19.968 million a year, representing an increase of 63 percent in annual production capacity.

R-LEY Trading, meanwhile, is considered a medium-scale enterprise, with an expansion project worth P7.87 million in Roxas, Palawan.

Its investment will entail installation of additional equipment to boost cashew production.

The expansion project involves acquisition of automatic machines to be imported from Vietnam, decorticating machine, shelling machine, sorting machine, peeling and packing machines.

With the expansion, it will also process roasted whole cashew nuts.

R-LEY is an existing processor of semiprocessed cashew nuts and has been selling to several trading centers in Palawan, Pampanga, Bohol, Iloilo and Cebu since 2012, but it is not registered with the BOI. “In acquiring new machines, the firm will increase its production by over 800 percent over five years,” Trade Undersecretary and BOI Managing Head Ceferino S. Rodolfo said in a statement.

The firm produced 11,250 kilograms of cashew nuts in 2016.

In the first year of expansion, it will produce 20,000 kilograms (kg), and by the fifth year, production is seen at 102,000 (kg).

Commercial operation is slated to start on October 2017 with an initial 19 employees, which will increase to 66 personnel by the fifth year.

A8

Banking&Finance

Wednesday, October 25, 2017 • Editor: Jun B. Vallecera

BusinessMirror

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Cryptocurrency use in PHL triples

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By Rea Cu

@ReaCuBM

he use of virtual money, known as cryptocurrency, in the Philippines has grown three times its size from when regulators first issued guidelines, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

From transactions valued at some $2 million a day in February this year, cryptocurrency transactions at present average $6 million daily instead, or an escalation by 200 percent.

But cryptocurrencies, most notably Bitcoins, are hounded by issues of trust and are infamously volatile, which is why their adoption has not been as widespread as their supporters want them at this point.

And this is also why the BSP is still evaluating the use of cryptocurrenies in local commercial transactions before allowing for their unhampered use in the Philippines.

“That’s an experiment, We’re not yet there. There’s a lot of experimentation going on in some countries. We’d like to see first how that works. So, in a way, it’s cautious, but it’s also not prohibiting. In my mind, it’s too soon to move in that direction,” BSP Governor Nestor A. Espenilla Jr. said at The Asset forum on Tuesday at a local hotel.

For one, issues on strengthening the technological capacities and operational aspects in the country will need to be addressed before implementing such a platform.

Citing as an example hacking instances on electronic or virtual wallets is still being experienced, making the platform volatile.

“To begin with, the trust level for cryptocurrency is not that high at this point in time. And there are many technical, as well as operational, issues because these things have value. They are traded like commodities. Right now, they are at historical highs. If you want to use these things as payments, you don’t want it volatile,” he added.

Earlier in the month, the BSP released guidelines on cryptocurrencies, or the exchange of virtual currencies under BSP Circular 944. Transactions using the digital coins were seen growing at an estimated $6 million daily from $2 million

Minimum threshold set higher for LGU treasurers

T

he Department of Finance (DOF) has signed a memorandum of agreement (MOA) with the Civil Service Commission to institutionalize the department’s Standardized Examination and Assessment for Local Treasury Service (SEAL), to further enhance capacity development for local treasurers.

According to Finance Secretary Carlos G. Dominguez III, the SEAL is a three-level certification program to professionalize and provide capacity development for local treasurers through the Bureau of Local Government Finance (BLGF).

“Local treasurers should not only safeguard local finance, but they should make revenues grow. At all times, they must have the right skills, updated competencies and ethical orientation to perform their jobs well,” Dominguez said.

Under Department Order 056-2016, the DOF set additional standards, qualifications and benchmarks for competencies of local treasurers and assistant treasurers who are appointed by the finance chief, and are under the technical and administrative supervision of the BLGF. The SEAL program will focus on tacticaloperational competencies (Level 1), strategic-managerial competencies (Level 2), and leading-for-innovation competencies (Level 3) to instill a culture of excellence, integrity and proficiency for modern local treasury service.

“I have directed the BLGF to lead this program across all LGUs [local government units], and we will invest in quality and effective trainings for local treasury operations, through the Philippine Tax

Academy that we are now setting up. We must bridge the identified and emerging competency gaps in local finance in these modern times,” he added.

The first and second levels of competency exams, namely, the Basic Local Treasury Examination (BCLTE) and the Intermediate Local Treasury Examination (ICLTE), are set to be simultaneously administered by the CSC nationwide on November 26.

In the recently approved CSC Resolution 1701330 dated September 20, 2017, the BCLTE will be conducted this year, twice in 2018 and once every year thereafter.

Passing the BCLTE will lead to Local Treasurer Eligibility (LTE), which shall be an equivalent eligibility to the second level or first-grade eligibilities, such as the Career Service Professional and the eligibility granted under Republic Act 1080.

The LTE shall be appropriate for appointment to local treasurer and assistant local treasurer positions, and to positions under the financial services in the civil service, which do not require the practice of profession and are not covered by bar or board or special laws, subject to meeting all the qualification requirements of the positions.

The BCLTE is a requirement in the DOF’s SEAL Level 1 Certification for designations of local treasurers and assistant local treasurers effective June 2018. It will also have weight in the evaluation of candidates for appointment of local treasurers.

The BCLTE is open to all those interested to join the local treasury service that meet the CSC admission and qualification requirements applicable for the regular eligibility examinations. Rea Cu

to $3 million.

“First of all, we see the benefit of cryptocurrency in promoting efficient money transfer services, for example.

But we also realize that cryptocurrency can be used for such schemes like money laundering and other criminal activities,” Espenilla said.

According to the BSP, digital currencies can be used for money-laundering practices, but can be countered by antimoney laundering controls and knowyour-customer procedures.

“So we issued regulations earlier this year. We have actually allowed the use of cryptocurrency in remittance services, but we also impose obligations to fulfill antimoney laundering commitments. Reporting requirements with these things become visible and also put in place basic consumer protection arrangement,” he added.

Espenilla said the BSP only tries to regulate the exchange of cyrptocurrencies but, as soon as these are converted into regular money, that is where the anti-money laundering indicators set in.

“What the BSP is trying to regulate is the exchange, when you convert a cryptocurrency, such as Bitcoin, into the equivalent of normal money, that’s the point that it touches the real world. That’s really where we have put in place controls, such as money-laundering controls, so that it’s more visible and we can understand what’s happening,” he said.

In August the BSP approved the registration of two companies who want to engage in the operation of Bitcoins, This was part of efforts to regulate the fast-growing virtual currency industry.

Dominguez bares fiscal operations Plan B

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he Department of Finance (DOF) hinted broadly of difficulty obtaining consensus from legislators on the matter of crafting a tax-reform program able to support the country’s long-term growth requirement and on Tuesday bared of a stopgap, worst-scenario alternative.

Finance Secretary Carlos G. Dominguez III bared apprehension that the Senate and the House of Representatives may not be able to present a tax-reform program able to support President Duterte’s very ambitious infrastructure buildup program and for this reason told reporters of the existence of a Plan B. He said should the Comprehensive Tax Reform Program (CTRP) being crafted right now present the economic managers with prospective revenues lower than expected, the government would then be forced to scale back the budget deficit to no more than three percent of local output or the GDP. “Yes, there is a Plan B. The Plan B is to stick to the 3-percent deficit-to-GDP. That is a hard number. We cannot afford to go beyond that,” Dominguez said at The Asset forum on Tuesday.

The economic managers capped last year’s budgetary shortfall as percent of local output to only 2.4 percent of GDP, instead of as much as 2.7 percent of GDP. The budget deficit last year totaled P353.4 billion.

For this year, the cap was set at 3 percent

of GDP, or no more than P482.1 billion. The budget gap in the first nine months totaled P213.1 billion.

The DOF previously endorsed a tax-reform package version seen generating revenues amounting to P157 billion initially.

The package proposed by the House of Representatives under House Bill 5636 projects revenues amounting only to P134 billion, while the Senate under Senate Bill 1592 is projecting revenues of only P59.9 billion.

The first package of the CTRP aims to lower the personal income-tax rates while implementing offsetting measures, such as expanding the taxpayer base, limiting valueadded tax exemptions and increasing oil and automobile excise-tax rates, among others.

“We are happy with the house version (but) there is a Senate version which has not been voted on,” he said.

Meanwhile, the finance chief pointed out that the slow down in foreign direct investments (FDI) in the country, can be attributed to the lack of improved infrastructure, alongside the lack in improvements in line with the ease of doing business in the economy.

“First of all, I think the slow down in FDI is a direct result of the fact that our infrastructure is very poor, you know, but the foreign investors look at the government, basics of doing business and, so far, that has been inefficient, and we are trying to correct that,” he said. Rea Cu

HSBC trader’s conviction will echo through $5-trillion FX market

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lobal currency traders and compliance officers who monitor them were put on high alert after a New York jury convicted a former HSBC Holdings Plc. executive of fraud for front-running a large client order.

The verdict is a victory for US prosecutors in their first attempt to hold individuals accountable since a global currencyrigging probe that led to banks paying more than $10 billion in penalties. Mark Johnson faces a maximum sentence of 20 years in prison, although he’s likely to get much less.

Traders will almost certainly come under pressure to avoid conduct that could be seen as harming their clients and profiting unfairly at their expense, said Mayra Rodriguez Valladares, a former foreignexchange analyst for the Federal Reserve Bank of New York.

“Front-running is a crime,” she said.

“This should be a lesson to senior executives that they should invest in more training of ethics for traders and more in systems to detect irregularities.”

The verdict is likely to echo worldwide.

Although Johnson, HSBC’s global head of foreign exchange in 2011, was in New York at the time of the transaction, the trade was executed primarily in London, where Johnson’s co-defendant, Stuart Scott, was overseeing it. Scott, the bank’s former head of currency trading in Europe, remains in the UK as he fights extradition to the US. “This conviction will embolden the US in other cases,” said Peter Henning, a law professor at Wayne State University in Detroit. “The US authorities have shown they’re able to police global markets.”

“At its very essence,” he added, “this was a theft case.”

Johnson, the first banker to go on trial following the investigation over foreign-exchange trading, was convicted of defrauding Cairn Energy Plc. in what prosecutors said was a clear case of frontrunning the company’s $3.5-billion order.

London-based HSBC wasn’t accused of wrongdoing, but the bank has been under investigation over currency trading and is in talks with the Justice Department and US regulators to resolve the matters, according to a July 31 regulatory filing. Rob Sherman, a spokesman for HSBC, declined to comment.

Johnson was convicted on Monday on nine of 10 fraud and conspiracy counts after a monthlong trial in Brooklyn, New York. He plans to appeal.

According to prosecutors, Johnson and Scott were among 11 currency traders feverishly buying pounds just before the Cairn transaction. The traders in New York and London jumped ahead, driving

up the price of the pound to its highest in two days on December 7, 2011, minutes before the 3 p.m. deal, according to the US. Prosecutors said the other traders were tipped by Johnson.

Johnson spent three days on the witness stand in his own defense, but it was his own words from six years ago that formed the most compelling parts of the prosecution’s case. The government played recordings of 29 phone calls, including one in which he said, “I think we got away with it.” Jurors asked to re-hear several of these calls before delivering their verdict.

The only charge on which he wasn’t convicted was linked to a 50-second recording in which Johnson excitedly said, “Ohhhhh, f---ing Christmas,’’ after he learned the Cairn Energy order would go ahead as planned. A juror who declined to provide his name said the call was too brief to convict Johnson on that count.

Case clippings

By Justice S J Ranada Jr.

INITIATIVE AND REFERENDUM–concept and purpose Initiative has been described as an instrument of direct democracy whereby the citizens directly propose and legislate laws (as provided under Republic Act 6735). As it is the citizens themselves who legislate the laws, direct legislation through initiative (along with referendum) is considered as an exercise of original legislative power, as opposed to that of derivative legislative power, which has been delegated by the sovereign people to legislative bodies such as Congress.

Marmeto v. Comelec 26 Sep 2017

GR 213953 Del Castillo, J

Bitcoin pioneer says new coin to work on multiple blockchains

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eff Garzik, one of a handful of key developers who helped build the underlying software for Bitcoin that is known as blockchain, has seen its shortcomings firsthand. So he decided to create a better digital currency.

He’s calling it metronome and says it will be the first that can jump between different blockchains. For example, coins that are used for applications on the ethereum blockchain will be able to move to ethereum classic before jumping onto Qtum or Rootstock, which connects with the Bitcoin blockchain, Garzik said.

The mobility means that if one blockchain dies out as the result of infighting among developers or slackened use, metronome owners can move their holdings elsewhere.

That should help the coins retain value, and

ensure their longevity, Garzik, cofounder of start-up Bloq that created metronome, said in a phone interview. It will be unveiled on Tuesday at the Money 20/20 conference in Las Vegas.

“Institutional investors should be very excited to see something like this,” Matthew Roszak, the other cofounder of Bloq and chairman of industry advocate Chamber of Digital Commerce, said in a phone interview.

“We’ve built a thousand-year cryptocurrency, something that’s built to last.”

That’s a concern for many digital currencies. Infighting among developers and various supporters, and the slow pace of enhancements on the Bitcoin blockchain have helped to limit use. Both Bitcoin and its main rival, ethereum, have split into several versions.

New blockchains are also being launched every month, creating uncertainty for investors and leading to wild swings in many cryptocurrencies’ prices. While Bitcoin’s price has increased nearly sixfold this year, a split-off version, Bitcoin cash, is down 23 percent since its inception in July, according to CoinMarketCap. While seeking to sidestep some of these challenges, metronome will have some of its own. It’s starting out with zero users, compared with 35 million active Bitcoin users a month. There are more than 1,100 tokens and currencies competing for users, according to CoinMarketCap. The token will first be issued on ethereum, and support for ethereum classic and other blockchains is expected within months.

Metronome’s coins will be produced and supported by autonomous distributed software that isn’t controlled by anyone, and can’t be changed. This software will auction off metronome, beginning in December, and keep and use the proceeds to boost the currency’s price. The rest of the project will be open sourced, so anyone will be able to build applications with metronome in mind.

Bloq will provide developer tools for corporate users. The company and others that helped create and promote the cryptocurrency will retain 2 million metronome coins, out of an initial trove of 10 million to be auctioned off in December. Every 24 hours, 2,880 new coins will be added to the supply.

Metronome sidesteps a problem that’s common for consumers that want to jump

from one blockchain—say, Bitcoin—to another. They have to go to an online exchange, and sell their Bitcoins and buy another cryptocurrency. That includes exchange fees, plus the risk of losing out on any appreciation of the currency they dump. With metronome, they won’t have to do either.

Metronome owners will be able to receive a digital receipt for removing their coins from one blockchain. They can send the receipt to another blockchain, to add metronome there.

The new cryptocurrency will make it easy for people to sign up for recurring subscription payments, and let numerous payments to be sent in one batch, Garzik said.

“If I had a clean slate of paper this is what I would design,” Garzik said. It remains to be seen if others will agree.

ExportUnlimited BusinessMirror

Editor: Efleda P. Campos • Wednesday, October 25, 2017 A9

PHL food exporters urged to join major US trade fair

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OCAL exporters are invited to showcase the country’s premium export-food products in the North American region as part of the Food Philippines delegation to the 43rd edition of Winter Fancy Food Show (WFFS) from January 21 to 23, 2018, at the Moscone Center, San Francisco, California, USA.

Led by the Center for International Trade Expositions and Missions (Citem), the Food Philippines participation next year seeks to expand the country’s market foothold

in the North American mainstream market by tapping the increasing demand for specialty food products in the United States.

“WFFS is one of the major trade

Trade chief to Zambo MSMEs: Maximize government programs

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AMBOANGA—The Department of Trade and Industry (DTI) officially launched Trabaho, Negosyo, Kabuhayan (TNK) on October 6 in the Zamboanga Peninsula.

During the event, the country’s trade chief called on local entrepreneurs to maximize the use of government programs to create businesses and gain employment to empower themselves.

Trade Secretary Ramon M. Lopez highlighted the government’s initiatives to extend to all Filipinos the benefits of the current Philippine economic growth by strengthening the micro, small and medium enterprises (MSMEs), creating robust industries and boosting investments.

These, in turn, will lead to job generation and sustained entrepreneurial revolution, according to him.

“TNK’s goal is to create a culture of Filipinos who are success-driven, independent and know how to appreciate the value put on one’s work. The core of the program is to empower the bottom of the pyramid to empower the nation,” he said.

The business confidence index of the Philippines is at 38 percent, which has an impact on various industries such as manufacturing, agriculture, and export, he said.

The DTI is currently using the 7Ms of Successful Entrepreneurs framework (mindset, mastery, mentoring, money, machine, market and models) as a strategic approach to empower entrepreneurs and encourage Filipinos to start their own businesses, thus helping them improve the quality of life.

Apart from national and international trade fairs, there are partnerships with premier malls, shopping destinations, as well as airports to enhance market access

for local entrepreneurs through the Go Lokal! stores and other pasalubong centers.

These Go Lokal! stores and pasalubong centers serve as incubation stores for MSMEs where their products gain public exposure for free before they enter bigger markets.

MSMEs were also encouraged to utilize the government’s business-expansion program through the Pondo para sa Pagbabago at Pagasenso or the P3 program, which offers low-interest financial assistance via recognized microfinancing institutions.

The trade chief called on officials from the Department of Interior and Local Government (DILG) and local government units to provide spaces in their respective public markets for MSME products and entrepreneurs.

Meanwhile, at the sidelines of the TNK launch, Lopez also attended the Zamboanga Peninsula Investment Conference, wherein he encouraged stakeholders to continue partnering with the government in raising the investment profile of the region and improving the investment climate.

“We can address inequality and reduce poverty by implementing programs that sustainably create jobs and increase incomes through exports and investments, as well as through smart, innovation-led entrepreneurship,” he said.

Also at the event were Trade Undersecretary Rowel S. Barba, Labor Undersecretary Joel B. Maglunsod, Small Business Corp. President Maria Luna Cacanando, as well as Zamboanga Sibugay Gov. Wilter Yap Palma, Zamboanga City Mayor Isabelle Climaco-Salazar, Rep. Celso Lobregat of the First District of Zamboanga and Rep. Manuel Jose Dalipe of the Second District of Zamboanga.

upcoming events Compiled by Kristina Noelle S. Andaya Knowledge Processing Division, DTI-EMB

NOV 2-16

Event: OBMM to GCC Countries for Food and Non-food Venue: UAE, Oman, Kingdom of Saudi Arabia

nov 6-12

Event: Israel PHL Trade and Innovation Exploratory Mission Venue: Tel Aviv, Israel

nov 13-22

Event: USA Kosherfest 2017 Venue: The Meadowlands Exposition Center, New Jersey, USA

nov 19-25

Event: Halal: Japan Halal Expo Venue: Tokyo Metropolitan Industrial Trade Center, Taito-kan, Tokyo, Japan

nov 20-22

Event: Ripples Plus: Japan Tokyo IFFT Interior Lifestyle Venue: Tokyo Big Sight, Tokyo, Japan

fairs in the US where exporters in the Philippines can showcase their unique specialty-food products and cater to the growing health-conscious consumers in the west,” Citem Executive Director Clayton Tugonon said.

Food companies that will be part of the Philippine delegation can take advantage of the business-matching activities with international buyers in WFFS 2018. Their market representatives can also participate in Citem-led export-capability program to equip them with relevant knowledge on the market trends and requirements in North America.

Organized by the Specialty Food Association, the WFFS is the US West Coast’s largest annual trade show devoted exclusively to specialty food and beverages. The event features close to 1,500 exhibitors

and showcases more than 80,000 different specialty food and beverages across the globe.

Specialty foods are defined as products of the highest grade, style and quality. Their special nature is derived through the following qualities: uniqueness, origin, processing method, design, supply limit, packaging and channel of distribution.

To a high-quality product exhibit, Citem is tapping local manufacturers and exporters compliant with US’s international safety and quality regulations and requirements, such as the United States Department of Agriculture Organic, US Food and Drug Administration and other certifications.

In its participation in WFFS 2017, 20 local companies under

Food Philippines secured a total of $48.73 million negotiated sales in 463 inquiries from trade buyers. With an initial target of $47 million, the country’s delegation recorded its highest sales in its four years of participation in the WFFS. Among the country’s best-selling items in its previous participation are premium rice and tuna. The country’s corn snacks also garnered positive reception for its crunchier, tastier and bigger servings, compared to those from other countries. Other top Philippine products include banana chips, nuts, coconut products and other tropical fruits.

The US is one of the largest foreign investors in the Philippines and the country’s third-largest trading partner. The Philippines has been among the largest beneficiaries of

the US’s Generalized System of Preferences scheme for developing countries, which provides preferential duty-free access to the US market.

Food Philippines’s participation in the WFFS 2018 is organized by Citem, in partnership with the Philippine Trade and Investment Center in San Francisco and Los Angeles, as one of the Department of Trade and Industry’s major efforts to intensify the promotion of Philippine specialty food products in overseas trade shows.

Citem is committed to developing, nurturing and promoting globally competitive small and medium enterprises, exporters, designers and manufacturers by implementing an integrated approach to export marketing in partnership with other government and private entities.

DTI brought potential investors for start-ups at Slingshot Asean

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HE local start-up community was given a rare opportunity to meet potential business partners as several investors from Asean countries and their partners attended Slingshot Asean Summit 2017.

The summit brought together entrepreneurs and innovators into one conference set on October 20 at the Philippine International Convention Center in Manila.

Organized by the Department of Trade and Industry (DTI), Slingshot Asean 2017 aimed to highlight the milestones of the start-up community in the Philippines and across Asean.

With the theme “Partnering for Change, Engaging the World,” the summit presented a platform for a new breed of businesses in various sectors, such as information technology, agriculture, health care and finance, and among others.

“We are encouraging the growth of start-ups in the country as part of the government’s efforts in boosting the economy and creating jobs for Filipinos in the country,” Trade Undersecretary for Trade and Investments Promotion Group and Asean Committee on Business and Investment Promotion Chairman Nora K. Terrado said.

“Start-ups are able to utilize and promote new technologies that drive future economic growth, and contribute to a continue changing social environment and global economy,” Terrado said.

Trade Secretary Ramon M. Lopez (seventh from left) on October 20, called on start-ups and investors to take part in transforming Asean into a regional hub for innovation during his keynote speech during the Slingshot Asean Startup and Innovation Summit at the Philippine International Convention Center. Lopez said by linking and collaborating with other businesses and investors within the Asean region, local start-ups can scale up their operations and create more opportunities for jobs and employment. Lopez, with Asean NOC Director General for Operations Marciano Paynor Jr. (sixth from left), Trade Undersecretary Nora K. Terrado (fifth from left), Export Marketing Bureau Director Senen M. Perlada (left), Presidential Adviser Joe Concepcion (fourth from left), and YEI Advisory and Operating CEO Victoria Elenowitz (second from right) also led the opening ceremony of the Slingshot Startup Alley, which featured over 50 technopreneur exhibitors across the Asean region.

Slingshot A sean featured plenary talks, learning hubs and pitching competitions with gover nment representatives and industry experts, including venture capitalists, angel investors, representative from the private sector and academe. Asean Startup Alley was also expected during the event where over 50 start-ups showcased their products and services. DTI said the event had over 1,000 local and international participants.

Panel discussions included topics on disruptive enterprises, regional network building, and fund-

ing opportunities for both Philippine as well as Asean start-ups.

Slingshot Asean is the third staging of DTI’s SlingShot Summit, with a larger audience representing 10 Asean member-states as part of the Philippines’s official hosting of the Asean Summit and related meetings this year.

In 2015 and 2016 Slingshot Philippines took initiatives to form series of dialogues between public and private sector with its output as the creation of Startup Ecosystem Development Program. These programs have been rolled out as building

blocks for linkages between government and private-sector initiatives in enhancing the Philippine startup ecosystem.

Artie Lopez, cofounder and Startup Coach at Brainsparks, a start-up incubator and one of the private-sector partners of Slingshot Asean, said, “One of the problems for start-ups is getting potential investors to know about them. Slingshot helps with that by bringing in both foreign and local investors in one place at one time to learn more and get involved with the local start-up ecosystem.”

PHL creative industries receptive to LatAm market

By Maria Luz S. Medialdia Supervising TIDS, DTI-EMB

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HE Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB) conducted a focus group discussion (FGD) on the opportunities of the creative services in Latin America and the Caribbean. It was held on October 10 at the DTI International Building in Makati City.

The FGD is one of the interventions under the EMB’s RIPPLES Plus Program where capacity-building sessions provide platforms for service exporters to understand business opportunities and be informed about the recent global market landscapes. This time, the FGD was focused on doing business with Latin America and the Caribbean, particularly in the creative sectors covering the animation, game development, film, music, software development and other information-technology (IT)-enabled services, the businessprocess outsourcing sector, as well as innovation in digital education.

The information session was attended by eight companies and 29 participants from the said sectors.

The opportunities of the creative industries and IT services in Latin

THE Services Division of the Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB) conducted a focus group discussion (FGD) on “The Opportunities in Latin America,” together with the speakers from WBagadion Group of Cos. and invited RIPPLES Plus Enrollees from the informationtechnology business-process outsourcing and creative sector. They include (from left): Filipinas Mantilla and Rudolf Jay Velasco (DTI-EMB), John Jairo Villa (WBagadion), Ingrid Javalera and Maria Luz Medialdia (DTI-EMB), Daisy Macawile (ISupport Worldwide), Samantha Acebuche (Stratpoint Technologies), Maria Teresa Loring (DTI-EMB), Weng Bagadion (WBagadion), Sofia Adap (Xurpas), Roberto Panganiban (CPI Outsourcing), Aileen Aparica (Cheq Systems), Kendrick Haw (Toast and Brew Animation and Game Design Studio), Magoo del Mundo (Toast and Brew Animation and Game Design Studio) and Romaness Cornelia (ISupport Worldwide).

America and the Caribbean were presented by John Jairo Villa, expert on IT Creatives in Latin America. In Latin America, the IT and creative industries are called Orange Economy, the color that represents and connotes “an infinite opportunity.”

In Latin America, these industries are called Orange Economy because they trigger the development of people, the economy and, eventually, the country. Colombia, Mexico, Chile, Argentina and Peru are Latin America countries where these in-

dustries have a strong presence. They offer IT services covering software, including mobile applications, video games, media and audiovisuals, such as virtual, augmented and mixed reality. He also presented video clips and graphics about the Latin America creative industry revealing the fastpaced growth for the last five years.

This only shows positive opportunities for Philippine creatives to do business and engage with their Lating America counterparts.

Weng Bagadion, CEO of WBagadion Group of Cos., shared with the participants how her company started out in Latin America. Within a period of four years, she experienced reception, and is determined to impart to the Philippine companies the opportunities there for the Philippine creative industry.

Phi lippine companies t hat participated in the FGD are Isupport Worldwide, Xurpas, CPI Outsourcing, Stratpoint, Toast and Brew, I-Tech Global and CheQ Systems. These companies signified interest to participate in an Outbound Business Matching Mission slated for 2018, an aggressive move em to access the Latin America market for the Philippines’s IT creative industry.

A10 Wednesday, October 25, 2017 • Editor: Angel R. Calso

Opinion BusinessMirror

www.businessmirror.com.ph

editorial

Agriculture sector needs more perks

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Piñol said he has directed the Legal Office of the DA to draft the bill mandating the grant of fiscal incentives to processors using local farm products, following his meeting with Grow Asia’s Philippine Partners for Sustainable Agriculture (PPSA). PPSA, in turn, would provide inputs to the bill, including the list of countries using the same strategy to support local farmers. The DA is targeting to present the draft bill to the House of Representatives and the Senate before the end of the year.

This proposal, if approved, would certainly make local farm products more attractive to processors. Currently, the Philippine government grants a number of fiscal incentives to foreign investors, such as tax holidays and duty-free importation of capital equipment. Giving the same fiscal incentives enjoyed by foreigners to Philippine micro, small, and medium enterprises (MSMEs) that use a lot of farm products as raw materials would certainly help them grow and prosper.

While Piñol’s proposal is a welcome development, the DA could consider expanding the grant of fiscal incentives and other perks to other farm-related industries, such as manufacturers of agricultural equipment. According to a study conducted by the Philippine Center for Postharvest Development and Mechanization, the Philippines continues to import farm machines despite the existence of 400 local manufacturers of agricultural equipment. If the government cannot set aside funds needed to help this sector, fiscal incentives may be the key to unlocking its potential.

The DA could also look into the possibility of giving additional incentives to firms that would build farm infrastructure, such as silos for storing grain and big cold-storage facilities. This proposal, however, should be complemented by the continuous implementation of reforms aimed at eliminating red tape.

The agriculture sector got less than what stakeholders had hoped for in terms of the budget from the national government. The DA had aspired for a budget of more than P200 billion for 2018 to bankroll various initiatives aimed at boosting production, but it has been given only P60 billion. The amount is only 10 percent of the P643 billion given to the Department of Public Works and Highways for next year.

If funds would not permit the grant of a higher budget for the DA in the coming years, Congress and the government must back Piñol’s proposal. The previous administration had wanted to rationalize fiscal incentives to boost government revenues. The Duterte administration would do well to consider offering more incentives to entice more Filipino entrepreneurs to go into agriculture.

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Members’ contributions are the lifeblood of SSS Art Amansec

All About Social Security

W

orkers derive a sense of empowerment from being able to provide for their personal, as well as their loved ones’, basic needs, and even the simple pleasures and luxuries that life has to offer. But when unforeseen contingencies strike, it can make them feel helpless and distressed at their mounting bills and financial obligations, especially when these events impair their ability to earn a living.

The Social Security System’s (SSS) tagline “Buti na lang may SSS” draws inspiration from the relief and assurance that members and beneficiaries experience upon their availment of benefits during times of financial contingencies such as sickness, maternity leave, disability, old age or retirement, and death.

Over the years, there has been a series of benefit enhancements in the SS program. Of course, the most recent and significant was the grant of across-the-board P1,000 additional benefit for pensioners in January.

About 2.2 million pensioners im-

mediately received the additional pension. Even new retirees will enjoy the additional P1,000 pension.

Central to boosting benefits of the pension fund is how well the SSS manages the four components of the pension fund’s finances, namely, contribution collections and investment income for the revenues side, and benefit payments and operating expenses for the expenditures side.

Members’ contributions are considered the lifeblood of the SSS, accounting for about 80 percent of total SSS revenues, while the remaining 20 percent come from earnings gener-

Members’ contributions are considered the lifeblood of the SSS, accounting for about 80 percent of total SSS revenues, while the remaining 20 percent come from earnings generated from SSS investments. Since 2015, the SSS collection has increased by about 10 percent. From P132.6 billion in 2015, it jumped to P144.4 billion in 2016. Its estimated collection by end of 2017 is P159.5 billion or a 10.5 percent increase from last year.

ated from SSS investments.

Since 2015, the SSS collection has increased by about 10 percent. From P132.6 billion in 2015, it jumped to P144.4 billion in 2016. Its estimated collection by end of 2017 is P159.5 billion, or a 10.5-percent increase from last year.

What did the SSS do to increase its collection? For one, it launched a program called Run Against Contribution Evaders (RACE), which runs after delinquent employers. Media has been supportive of its “Oplan Tokhang” against erring employers that it consistently features the ar-

rest of court-convicted employers, sending a strong message to the public that those who violate the SS law will face the full force of the law. As of June, a total of 7,515 cases have been filed in court against delinquent employers.

SSS collection is expected to further increase with the soon-to-be implemented program called Warrant of Distraint, Levy and Garnishment (WDLG). This is a new means of collecting delinquent employer contributions. Similar to the tax collection of the Bureau of Internal Revenue, WDLG will allow the SSS to take real and personal properties as payment for unpaid contributions.

The SSS will immediately implement the WDLG as soon as it is approved by the office of President Duterte.

However, the greater difficulty lies in collecting from SSS members who lack a regular source of income, are employed abroad, or working in the informal sector. The SSS has initiated various measures to address this, including expanding the number of SSS foreign offices catering to overseas Filipino workers; accreditation of cooperatives and microfinance institutions as SSS collecting agents to reach out to See “Amansec,” A11

Un-interfaith dialogue and Fr. Julian Carron’s disarming beauty

T. Anthony C. Cabangon

Editor in Chief

Senior Editors

10252017

o encourage processors to use local farm products as raw materials, the chief of the Department of Agriculture (DA) had pitched the idea of offering fiscal incentives to them. Agriculture Secretary Emmanuel F. Piñol reasoned out that the government extends fiscal incentives to foreign investors, so why not give the same to local firms? Piñol believes that the grant of perks would help boost the productivity of farmers as they would be assured of a ready market should Congress give its nod to his proposal.

Teddy Locsin Jr.

Free fire Continued from A1

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hat doesn’t speak well of God but there it is. God had a reason that the man at the moment could not comprehend but obey God he did and it took an angel’s hand to stop him.

It is still happening to every parent who loses her child with no angel around. Real religion cannot start as universal dogma; that is ideology with which men of faith have nothing to do because it denies the personal encounter and sustaining root of faith. It is only the personal we can be sure of; only of our thinking, right or wrong, that we can be certain.

That is why Santayana was never a man of faith. He was drawn to the Church by its ritual as others are to the political power of religion.

Faith starts in one person, and then another, without answers to fundamental questions: Why is there something rather than nothing? Was it made or was it always there; and how is that possible?

Common sense puts the burden of proof on the negative because there is something and we don’t know why. Why am I here and what am

I to do? In short the mystery of reality. To get over these hurdles he must look for natural answers; it is all he can do at first; but finding none adequate, if he is honest, he won’t be satisfied with unanswered questions. He may or may not take a leap of faith—from nothing to something. At best a guess. And that is what marks true religion, be it one of the great or primitive ones.

And while it is brave to insist that if nothing suffices, then nothing will do; really, haven’t you decided

Real religion is faith married to doubt until death does them part, when, finally, we shall see the answer if any, not as through a glass darkly but face to face. The unmistakable sign of religious fakery is certainty and intolerance. I agree with the author that the fastest way for everyone to appreciate the likeness of the human condition is found in friendship. Like Mary Magdalene turning at the unexpected sound of her name and saying, “Teacher,” so must we, at a strange voice calling our name, turn and without yet seeing from whom it came, answer, “Friend.” to stop at the edge of the precipice until the question is rendered moot by your extinction.

Every great religion starts with that encounter: Buddhism, Judaism, Christianity, Islam; the last three arising from the same book, the same genitive impulse of fearful wonder. Even Buddhism, with its unique resignation to an ineffable reality that may be just ignorance, does not foreclose transcending it by good deeds. Because

at the root of all real religions is that encounter between a person and whatever he thinks is out there or inside him—and that’s true of everyone else.

And that is how, when he has found a religious answer, he should regard his fellow man of the same or another faith or none at all—as one like himself: a person filled with a fearful wonder whom he must treat as he would himself; for there but for his God’s grace goes he. He must join Cromwell, that man of militant faith who yet enjoined his Parliament to “Consider in the bowels of Christ that ye may be wrong” after all. Even Jacob wrestled with the angel. Doubt dogs the man of faith.

Real religion is faith married to doubt until death does them part, when, finally, we shall see the answer, if any, not as through a glass darkly but face to face. The unmistakable sign of religious fakery is certainty and intolerance. I agree with the author that the fastest way for everyone to appreciate the likeness of the human condition is found in friendship. Like Mary Magdalene turning at the unexpected sound of her name and saying, “Teacher,” so must we, at a strange voice calling our name, turn and without yet seeing from whom it came, answer, “Friend.”

Opinion BusinessMirror

www.businessmirror.com.ph

Unearned premium reserves

A ticking bomb Edgardo J. Angara

Dennis B. Funa

INSURANCE FORUM

U

nearned premium reserves (UPR, or UEPR in some jurisdictions) is an item appearing in the liability portion of the balance sheet. It reflects the amount of premiums written but not yet earned. It is a technical reserve. Indeed, it has been said that “technical reserves of life and nonlife insurance represent the most important item of the liabilities in the balance sheet of the commercial insurance companies.”

It is among the several mandatory reserves required under the law. This reserve is for an unexpired risk. Loss reserves, on the other hand, are for an expired risk.

The unearned premium is “the premium corresponding to the time period remaining on an insurance policy.” It is proportionate to the unexpired portion of the insurance. Unearned premiums are “portions of premiums collected in advance by insurance companies and subject to return if a client ends coverage before the term covered by the premium is completed” (see Section 80 of Insurance Code).

They may be considered as deferred income. They are set aside in a reserve. Premiums are earned based on the amount of time that has actually elapsed under an insurance contract. Specifically, premiums are earned when exposed to the risk covered.

The insurer has to maintain this reserve for UPR to meet the sudden need for cash in case a policyholder or the insurer decides to cancel the policy anytime during its tenure.

All insurance companies have to maintain this reserve. In certain jurisdictions, the insurer maintains an added reserve called the Unexpired Risk Reserve. But this is not required under Philippine jurisdiction.

Unearned premiums appear in the balance sheet as liabilities because they are subject to refund to the client. As the insurer earns the premium, the amount earned is moved from the liability account to a revenue account in its income statement. It becomes earned only “when the policies are past their due.” Thus, eventually, at the end of the policy, all premiums are earned.

Premiums are not recognized as revenues right away. They are not immediately considered as “premium income.” They are recognized as revenues pro rata over the period of the policy. The UPR represent the unexpired portion of policy premiums.

The rationale for UPR was explained in the book Theory and Practice of Insurance by J. Francois Outreville: “An insurance coverage is usually written for one year and the premium is payable in advance at the beginning of the period of coverage. Since the insurer is liable for all losses occurring during the period of the contract, the premium does not become fully earned until

Amansec. . .

continued from A10

workers in hard-to-reach areas; and subsidy partnerships with various agencies, such as the International Labor Organization, which benefited thousands of emergency workers in typhoon-hit areas.

The SSS also launched the AlkanSSSya Program to make payment of monthly contributions less burdensome for self-employed and informal sector workers, as they needed to set aside only about P10 per day for their SSS savings. The AlkanSSSya Program covers a diverse range of informal-sector workers, such as farmers and fisherfolk,

Unearned premiums appear in the balance sheet as liabilities because they are subject to refund to the client. As the insurer earns the premium, the amount earned is moved from the liability account to a revenue account in its income statement. It becomes earned only “when the policies are past their due.” Thus, eventually, at the end of the policy, all premiums are earned. the contract has expired. In the annual statement of an insurance company, the unearned premium reserve would represent the proportion of the premium that is not earned by the company at the end of the accounting, fiscal or calendar year. It is also referred to as ‘reserve of unexpired risks.’

For example, if a one-year insurance policy is issued on July 1, and if we assume that the fiscal and accounting year both end on December 31, then, only half of the premium is considered to be earned. Because the calculation of the unearned premium reserve on an individual policy basis would be, if not impossible, at least very uneconomical, formula methods have been developed.”

In determining the earned premium, the length of the policy and the time that has elapsed are material. There several methods used in calculating the UPR. A review of different jurisdictions would show that different methods are used by different jurisdictions.

The most basic formula is the flat-rate method or the “40 percent” rule. It is still required in some jurisdictions. The “1/8ths” or the “8th” method applies when reserving is done on a quarterly basis.

In the Philippines the 24th method is now mandated under the Insurance Code. The pro rata temporis basis or the 365th method is deemed to be the most accurate.

The 365th method assumes that risk is spread evenly over the 365 days of a year of cover. Thus, where a policy has elapsed for 100 days, 265/365th of the premium is considered as being yet unearned.

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@ yahoo.com.

tricycle drivers, market vendors, garbage recyclers and even inmates engaged in handicraft-making and other livelihood programs during their imprisonment.

The AlkanSSSya Program is a signature collection program that recently bagged the 2017 Best Government Practice Award conferred by the Development Academy of the Philippines on October 17.

Despite these structural barriers to collection, the SSS work force remains undeterred and fully committed in carrying out its mission to provide social protection to Filipino workers. The SSS is proud of its 60 years of service as a steady shoulder of support for the Filipino worker in the face of financial contingencies.

I

n January 2016 Oxfam released a report saying that the huge gap between the rich and the poor has reached new extremes with the world’s top 1 percent already owning more wealth than the remaining 99 percent combined. Last January the World Economic Forum reported the income and wealth inequality is one of the top risks faced by the global economy.

Dr. Niceto Poblador, professor emeritus of the University of the Philippines (UP) College of Business Administration, pointed to that destabilizing fact in a paper, entitled “Western Capitalism at the Crossroads: Finding a New Role for Business.” The theme was discussed in a recent roundtable discussion organized by the UP Center for Integrative and Development Studies, the Management Association of the Philippines Centre International de Formation des Autorites et Leaders Philippines and the United Nations Institute for Training and Research.

Poblador said that capitalism is in crisis today mainly because of its “failure to distribute the benefits of

economic prosperity equitably to all segments of society, and its inability to make economic opportunities equally accessible to everyone.” In sum, the noninclusive growth allows the few to accumulate so much wealth, while those at the “bottom of the pyramid” languish in poverty.

He cited ineffectual government agencies, corruption in public office, poor political dynamics and antiquated tax laws as the primary causes for the gross inequality.

He didn’t spare business from the indictment: “The single-minded pursuit of profit is, in our thinking, a major reason, if not indeed the principal one, for the disparity in the economic fortunes of the different segments of society today. By

Wednesday, October 25, 2017 A11

being totally absorbed in pursuing the economic interests of their owners to the exclusion of everyone else, businesses have been mainly responsible for the concentration of wealth and economic opportunities among a very small minority of the members of society—the capitalist class.”

He argued, thus, “The sustainability of a business can only be achieved in a sustainable community; a community characterized by widespread poverty and great income inequality is not sustainable; therefore, addressing the social and economic needs of society is in the strategic (i.e., longrun) interest of a business.”

Felimon Berba, a successful business executive, stated that business must unavoidably maximize profits.

For the owner-investors and their firm’s managers and employees, it would be hard to attract investors who will assume the risk without an assurance of a return. It’s equally hard to recruit good managers and loyal staff without a decent compensation package. That’s what enables a firm to maximize profits. And having made money it can then afford to discharge its corporate social responsibility (CSR).

One can see from the entire exchange the difference in perspectives and viewpoints between an academic economist and a hands-on entrepreneur.

The ‘rural-to-urban migration’ paradox Michael Makabenta Alunan

on the contrary

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he burgeoning urban-poor problem and all its other attendant social problems like squatter-housing congestion, joblessness, criminality, drugs, prostitution, traffic, streetchildren and juvenile delinquency are blamed partly on the massive “rural-to-urban migration.” n City glitters as magnets. Past efforts to reverse migration proved ineffective. Former First Lady Imelda R. Marcos, then-Metro Manila governor, transformed the metropolis into the “City of Man” and even ridiculously offered free fares back to the provinces only to fail.

The more she beautified the city, the more its glitters attracted rural folks who were lured by the promises of a better life, stable jobs, neon lights, shopping malls and other amenities.

Location theory in economics asserts that urbanization is a natural direction and is actually good for business, on one hand, as it creates bigger markets and concentrates them for easier distribution of goods and services.

Growth in urban demographics also made it more lucrative for real- estate developers of condominiums and housing, and for business-process outsourcing industry and other foreign investors.

In turn, it triggers more jobs, need for education, health services and other amenities. n Push-pull factors worsening problems. While all these demographic movements are welcome to business, on the contrary, they are unwelcome, particularly from the same well-heeled and scented crowds of business.

Expectedly, the magnetic attraction triggers a backlash as it reinforces the

problem of rural-to-urban migration and the “eyesores” it creates.

The problem is not only caused by the magnetic pull, but there are also “push factors,” like agricultural backwardness, devastations caused by natural disasters like Supertyphoon Yolanda and severe droughts or the raging insurgency wars and military onslaughts in the countryside.

It is no wonder you have pockets of ethnolinguistic groups in many slums, or even indigents living on street pavements, particularly the sea-faring Badjaos who don’t have basic skills, but to beg in the streets.

In short, it is widespread countryside poverty, which accounts for 76.1 percent of total poverty, that is pushing younger rural folks to seek “greener pastures” in the “concrete jungles,” leaving behind their parents, thus, farmers are on the average older at 58 years old. n Land reform partly causing problem? Land reform, a milestone program of former President Corazon C. Aquino, aimed to solve problems in agriculture, but, on the contrary, it has created new problems, not only because of poor support services, but because land reform hastened land parceling, thus, reducing efficiency and reversing the benefits of economies of scale.

Unless farmers bond together into

cooperatives to keep lands contiguous, being fragmented will deprive them of the benefits of economies of scale. Even landowners, allowed retention limits per child, were also forced to fragment their lands, and further more with their grandchildren.

Contributing further to the problem are more and bigger farmer families from succeeding generations, all dependent on the same piece of land, thus increasing inefficiently the man-to-land ratio.

Obviously, productivity drops steadily, inevitably forcing younger generations to move to the cities, and reinforcing pressures toward farmers getting older on the average. n Rising disguised unemployment? Increasing family labor for the same piece of land indicates increasing “disguised unemployment” or “surplus idle labor.” More so, with prevailing backward farm practices limited to planting and harvesting, manifesting so much idle time in-between seasons.

Another paradox happens when backward agriculture is modernized.

We must willingly welcome change and modernization as we are not Luddites, who oppose technologies, but consider modernization as the only way to bail out agriculture from backwardness, although it is also true that mechanization will partly displace rural workers.

As more rural folks get dislocated with modernization, the more they will migrate to the cities, and, thus, the dilemma. But never stop modernization as it is the right thing to do, but we must also bolster industry and socially necessary services to absorb displaced rural labor. n Benefits of rural-to-urban migration. As we complain about rural-tourban migration, it actually also offers benefits. For one, it increases city labor supply and expand urban markets, benefiting consumer industries.

Although still earning less, their sheer volume as part of the urban poor still accounts for the bulk of consumers. Even if they can’t spend much

Brexit talks are running out of time

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n view of the deepening Brexit gloom ahead of the meeting, last week’s amicable European Union (EU) summit was moderatelyencouraging: At least the talks didn’t break down. Both sides ought to understand, however, that when they meet next time, moving to actual trade negotiations is essential.

Instead of negotiating the shape of their future trade arrangements, Britain and the EU continue to dither over the size of the exit payment the United Kingdom owes the EU. Further delay serves neither side’s interests.

The other two items in the exit package—on which the EU wants “sufficient progress” before moving to the

next stage—are the rights of EU citizens in Britain after March 2019 and the future of the Northern Irish border.

These are complicated and important questions, but the interests of both sides are reasonably well aligned on these issues. The settlement of financial liabilities is tougher, because the sides have staked out clear positions and they’re far apart.

Britain is talking about a payment of €20 billion ($23.5 billion), whereas the EU may have something closer to 60 billion euros in mind. There’s no right answer: Europe’s treaties don’t say how the liabilities of a departing member should be calculated. There’s scope for structuring a payment

somewhat larger than €20 billion in ways that would make it easier for UK Prime Minister Theresa May to put before taxpayers. But if the EU takes a harder line, May’s government might be unable to deliver, and the talks could stay bogged down.

Rather than let that happen, Europe ought to allow the dispute over liabilities to go to independent arbitration—or agree to start the next phase of talks without resolving the issue of the size of the payment.

To be sure, it’s in Europe’s interests to drive a hard bargain: It has less to lose and a stronger negotiating hand. Even so, there’s a danger of miscalculating May’s capacity to make concessions.

I fully agree that the singular sociopolitical risk the global economy faces is the ever-growing gap in wealth and income in our society.

The solution Poblador prescribed: A “bottom-of-the-pyramid” strategy, an inclusive business model.

The big question is, who will be the agent of change and by what manner of changeover? Poblador suggested business, particularly big tech firms like Facebook, Google or big groups like Ayala. I disagree.

Business, as an institution, is not intended to be a reformer. On the contrary, many of them are largely socially and economically conservative. And in the Philippines, they are mostly family dominated. The change can only be initiated and championed by the State, governed and headed by a “systems” leader.

A consultative chief executive who can draw in business, civil society and academia to work in a collaborative mode.

Reform can begin with reforming the business and management education curriculum so that business schools will produce business entrepreneurs or executives conscious of their firm’s CSR. And for those who had already made it, an exemplary business behavior.

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

and seldom go out shopping, their huge numbers still fill up malls and fast-food chains. Even during the crises years, they bolstered fast foods and telcos, the latter which gained for the Philippines the monicker text capital of the world. Other businesses benefit from the explosion in urban demographics.

Second, faster money circulation in the metropolis allows money to pass through many hands among the poor, including the jobless and marginalized like jeepney barkers, watch-your-car boys, street children, etc.

Third, once they start earning, many of them remit back home to the provinces, thus improving disparity of income between urban and rural folks.

Fourth, an expanded urban market triggers bigger demand for food, thus, boosting back agricultural production.

Last, resulting rural growth helps provide jobs and higher incomes for rural folks, thus cushioning partly the ruralto-urban migration. n Right not to be left behind?

While policy-makers worry about stemming the flow of rural folks leaving their farms, we must respect people’s right to migrate or make choices, in another right, in pursuit of happiness and not be left behind, even if it means escaping rural misery only to end up in urban poverty.

The problem is the same with the 12 million Filipino migrants and overseas Filipino workers, who seek greener pastures, mostly in the brown deserts of wartorn Middle East countries. Nobody can stop them, and whatever they do, even for selfish reasons, they contribute a lot to their families and to the Philippine economy.

Regardless, about who are left behind and whose rights must be protected, it is urgent we give attention to agriculture, where 76.1 percent of those living below the poverty line reside.

E-mail: mikealunan@yahoo.com.

The recent election left her in charge of a minority government. After an accident-strewn performance at the recent Conservative Party conference, her premiership is fragile. The price of pushing her too hard might be a change of leadership or even a change of government.

Neither path would be certain to advance the EU’s goals in the talks; either would cause further delay and uncertainty. Plainly, the burden of that would fall mostly on Britain, but Europe’s producers and consumers also have an interest in an orderly transition to new trading rules. Achieving that should be the top priority—and there’s no more time to waste.