SBEP Magazine 2015

SBEP STRATEGIC BUSINESS ECONOMICS PROGRAM

NOVEMBER 2015

Contents

Now on its 41st year, the Strategic Business Economics Program is accepting limited applications to its Executive Education offering: Executive MBE (Master in Business Economics)

4 11 17

It's More Fun(ds) for Tourism Roads Danger & Opportunity

Cabotage Principle, Public Service, and Co-Loading Policy

and Executive CBE (Certificate in Business Economics) • A convergence of Economic Principles, Business Techniques, and Strategic Management • Designed for CEOs, CEO Designates, and Owners; Heads of Public Agencies and Institutions, and Senior Policymakers • A modular schedule suited for top executives • With research support from the School of Economics and the CRC Foundation Be part of a great tradition and a network of executives in an atmosphere of academic excellence and real business applications.

Strategic Business Economics Program, 6/F, School of Economics, APEC Communications Building, University of Asia and the Pacific, Pearl Drive, Ortigas Center, Pasig City / Email: sbep@uap.asia / Tels. 634-2820 / 634-3095 / 634-2821

22 26 36

SBEP Class 2015 The 2015 Golf Tournament and Homecoming Dinner Jakarta Diary

Editor-in-Chief

Victor A. Abola, Ph.D.

Editorial Assistant

Alonica R. Salazar

Contributors

Maria Catalina E. Cabral, Ph.D. Enrico L. Basilio, Ph.D. Edwin G. To Frederick L. Blancas Bernadette F. Raymundo

Victor A. Abola, Ph.D.

editorial

Infrastructures—From Squeaky to Quicky?

We are again tackling the problem of squeaky infrastructure in this SBEP Magazine, even though we had dwelled on it in 2011 in relation to the Public-Private-Partnership (PPP Projects) that earlier constituted one of the key pillars of Pres. Benigno Aquino, III’s economic program.

We need to do this because (1) we are facing horrendous traffic problems in Metro Manila and also in Cebu City; (2) we had faced huge cost increases due to the Manila truck ban in 2014, and (3) weak infrastructures continue to be the common complaint of both domestic and foreign investors.

Thus, in this issue we have three articles that aim to shed some light in addressing issues to significantly improve the situation. The undersigned focuses at the macro level—i.e., how infrastructure spending lagged badly in the past, and what direction this is taking for the future. Another article, authored by Undersecretary Cathy Cabral of DPWH, discusses the DOT-DPWH Convergence Program entitled “Tourism Road Infrastructure Program or TRIP”. This program seeks to fund and upgrade tourism roads through objective prioritization guided by the National Tourism Development Plan (NTDP) and the Tourism Act of 2009 (Republic Act 9593). The third article explains the Co-loading Law which allows foreign vessels to load cargo in its Philippine destination for shipment to another local destination via another foreign vessel. This is supposed to lower domestic shipping costs which have hampered the competitiveness of local products against foreign goods, which ship cheaper when coming from some neighboring countries, e.g., Thailand.

had gone down from 19.2% to 14.5%. Much of the savings saw its way into more robust infrastructure spending. And so from a low of 1.8% in 2005, this had risen to an estimated 3.3% by 2015. NG is intending to ramp this up further to 5.1% in 2016 and 6.7% by 2018. These figures exclude PPP projects which are finally taking off in 2016. All these data suggest that we are entering an infrastructure boom period and that there may be light at the end of the tunnel.

Usec. Cabral, on the other hand, explains the progress under TRIP, made possible by the cooperation between the DOT and DPWH, through a grant from the USAID’s COMPETE project. This entrusted to the REID Foundation the task of coordination among stakeholders and of functioning as a Secretariat for the Convergence Program. This enabled TRIP to obtain funding from NG and LGUs to the tune of P24.0 B in 2016 from merely P3.3.B in 2011. Under TRIP as of June 30, 2015, 1,549.59 km of tourism roads have been completed, 846 km were on-going, while 106.75 km. reached the detailed engineering/procurement stage. Besides, an additional 1,200 km is proposed in 2016. This benefits 15 regions, 75 provinces and 307 municipalities and cities. These developments will boost tourism into the countryside and expand business opportunities and jobs in the process.

An overall view is a prerequisite for understanding the miserable situation we have gotten ourselves into. The underspending in infrastructure had lasted for nearly three decades, i.e., 19802009. The large fiscal deficits incurred during the later years of the Marcos administration and the high interest rate policy that followed contributed to a very elevated debt-to-GDP of 86.8% by 1986 or almost thrice the level in 1980 in so short a span of time. (Note that troubled countries in Europe usually have a debt ratio of more than 70%, except for Spain). This resulted in a huge chunk of public funds going to interest payments, which hit a peak of 33% in 1987 compared to some 6% in 1980.

Dr. Enrico Basilio, Chief of Party of USAID’s COMPETE project, explains the formidable legal difficulties in amending the Cabotage Law(s) which prohibited foreign vessels from transporting cargo/ persons from one Philippine port to another unless the vessel is the same. However, a careful analysis of the legal impediments led the stakeholders to attack a specific provision of the revised Tariff and Customs Code (TCC). This consisted in removing the requirement that the movement from one Philippine port to another be on the same vessel. Under a Co-Loading Policy the proponents suggested allowing another foreign vessel to trans-ship the cargo within the Philippines. Their study shows a near halving of the cost/TEU in the sample Manila-Cebu route from P55,600/ TEU to a conservative P29,830/TEU. President Aquino pushed for the passage of the law (RA 10668) which will benefit not only producers in the Visayas and Mindanao but also consumers throughout the country.

We review the debt spiral process and find that there could also be a beneficial downward spiral which is what the economy is enjoying now—via higher GDP growth coupled with low interest rates. Thus, from 2010 to 2016 alone, interest payments as a percentage of total National Government (NG) expenditures

With public and private funds no longer a constraint, the provision of much-needed infrastructure has turned into one of careful planning and energetic execution. In short, Presidential leadership has become the master key to the solution of infrastructure problems.

2

SOLVING RP’s INFRASTRUCTURE WOES

SBEP TEAM

(L-R) Lea T. Riñon, Marketing & Alumni Affairs Coordinator; Alonica R. Salazar, Marketing & Alumni Affairs Manager; Wilrose M. Gorumba, Program Assistant; Victor A. Abola, Ph.D., Program Director; Viory T. Janeo, Academic Coordinator; Rowena A. Araña; Program Officer; and Ledinia G. Coates, Executive Assistant.

The SBEP Coordinating Committee, whose members include Dr. Rolando T. Dy, Director of CFA, Dr. Vaughn F. Montes, Ph.D., Fellow of ICD, and Dr. Victor A. Abola, SBEP Program Director, ensures faculty staffing from the University.

APPLIED BUSINESS ECONOMICS PROGRAM The Applied Business Economics Program (ABEP) is a Master’s program for young managers who are looking for more than the usual in a graduate business course.

In addition to the fundamental management areas of production, marketing, and finance, ABEP also covers macroeconomic and microeconomic analysis, industry analysis, forecasting, and project analysis. Equipped with these tools, the ABEP graduate is prepared to make sharp business and economic analyses as well as draw out implications of business decisions—at the level of the company, the industry, and the economy as a whole.

For inquiries, please contact Ms. Elsie Tingzon at 637-8549 / 637-0912 loc. 225 & 375 or email: abep@uap.asia

Business Economics Club

INDUSTRIAL ECONOMICS PROGRAM

To make sound business decisions, you’ll need more than just information. You’ll need insights, analyses, and well-founded forecasts.

CORPORATE INTERNSHIP

The Business Economics Club will give you all these, in a language which is simple, without being simplistic.

• Macroeconomic and industry analysis • Market research • Pre-feasibility studies • Forecasting • Socio-economic profiling

For any inquiries, you may call Ms. Mary Grace Agner at 637-0912 loc. 251 or 374. You may also reach BEC through fax no. 631-1280

For inquiries, please contact Mr. James C. Caswang at 637-0912 loc 348 or email james.caswang@uap.asia

We are inviting you to participate in the IEP Corporate Internship Program. The program matches companies of SBEP executives who need graduate student interns to do any of the following tasks:

The program aims to provide the graduate student interns the opportunity to sharpen the knowledge and skills they have acquired from the program.

Special Feature

It’s More Fun(ds) for Tourism Roads A DOT-DPWH Convergence Program on Enhancing Tourism Access By

Engr. Maria Catalina E. Cabral, Ph.D.1 Undersecretary for Planning and PPP, DPWH Master in Business Economics under SBEP, UA&P (2015)

“Because of the benefits brought by tourism and infrastructure, it is not only the economy that grows but also the welfare of many Filipinos. We are really giving attention to this and allocating appropriate funds.”

– President Benigno Aquino III (September 9, 2015, during a site visit of the Island Garden City of Samal Circumferential Tourism Road)

The Philippines is a blessed country with countless tourist destinations of limitless possibilities that can be globally competitive and become a substantial source of our dollar and peso revenues. And this is why the Department of Tourism (DOT) through the leadership of Secretary Ramon R. Jimenez, Jr. declared through a slogan, “It’s More Fun in the Philippines” challenging everyone, Filipinos and foreigners to discover and share the wonders of experiences the country has to offer.

No Funds, No Roads, “Bad Trip”: Context for Tourism Roads in the Philippines To enhance the trip experience, the tourism roads should (a) enable tour and transport operators to move tourists from the gateways to their destinations, and between service centers safely, seamlessly and in a relatively fast way; (b) improve the quality of the trip; (c) open up opportunities for logistics and supply chain

for supporting the tourist businesses in the area; and (d) upgrade the quality of connectivity within the community, which will facilitate faster market and social interactions among community members.

However, the quality of local roads was bad (less than 20% are paved) dampening the experience of our tourists since roads coming from an airport, seaport, or provincial bus terminal leading to the tourist destinations are often a combination of a national road and local roads, from provincial, municipal, down to barangay road. And most of the time, the so called “last mile” access to destinations is a local road in nature.

Road Network of the Philippines The DPWH could not fully support the upgrading and rehabilitation of these local access roads because these are the responsibilities of the Local Government Units, which in turn, do

1 The author wishes to thank the contributions of Mr. Ronilo Balbieran, Economist, REID Foundation; Prof. Maria Cherry Lyn Rodolfo, President, REID Foundation; and Rolando Canizal, Assistant Secretary for Planning, Department of Tourism.

4

SOLVING RP’s INFRASTRUCTURE WOES

Special Feature

September 9, 2015. Visit of President Benigno Aquino, III to the Island Garden City of Samal Island Circumferential Road, a TRIP Road.

not have the necessary funds to upgrade them. (The cost of a two-lane road with the width and length of a national road standard is at least Php 20 million per kilometer, which is almost already the whole budget of many municipalities.)

The most likely result of this experience is a “bad trip” (which is also a local expression of frustration) causing tourists to have a difficult time understanding the explanations on the political and administrative classifications and responsibilities on various sections of the road leading to their desired destination. Thus, instead of determining administrative excuses why roads leading to tourist destinations are not seamlessly paved on its entirety, a program that Road Network

Total (km)

National Primary Secondary Tertiary Local Road Principal Municipal City Barangay Total

32,526 7,060 14,051 11,415 177,529 30,132 15,349 15,283 116,765 210,055

Paved (km) 27,816 7,043 12,196 8,577 32,870 10,256 5,375 9,295 7,943 60,686

% of Paved 85.5% 99.7% 86.8% 75.1% 18.5% 34.0% 35.0% 60.8% 6.8% 28.9%

Source: National Road-DPWH; Local Road-DILG; National, Provincial and City Road Inventory as of 2014, Municipal and Barangay Road Inventory as of 1999

will creatively enable legal, financial, and technical cooperation between the DOT and DPWH should be created. An unwavering political will of the leaders of the two agencies is crucial in rolling out such a program.

The “TRIP”: Innovative Legal and Budgeting Framework On January 19, 2012, DOT and DPWH, signed an agreement to create the DOT-DPWH Convergence Program entitled “Tourism Road Infrastructure Program or TRIP”, in order to fund and upgrade tourism roads through objective prioritization guided by the National Tourism Development Plan (NTDP) and the Tourism Act of 2009 (Republic Act 9593). The most important provision of the Tourism Act insofar as tourism road infrastructure is concerned is found in Section 34: Section 34. Tourism Infrastructure Program – The Department, in accordance with the National Tourism Development Plan and local government initiatives, shall coordinate with the Department of Public Works and Highways and the Department of Transportation and Communications in the establishment of a tourism infrastructure program in the respective work programs of said agencies, identifying therein vital

BOX 1: Roads Under Regular Mandate of the DPWH National Primary – Directly connects major cities (at least around 100,000 people); Cities within Metropolitan Areas are not covered by the criteria.

National Secondary – Directly connects cities to National Primary Roads, except in Metropolitan Areas; Directly connects major ports and ferry terminals to National Primary Roads; Directly connects major airports to national primary roads; Directly connects tourist service centers to National Primary Roads or other National Secondary Roads; Directly connects cities (not included in the Category of Major Cities); Directly connects provincial within the same region; and directly connects major national government infrastructure to national primary roads or other national secondary roads.

National Tertiary – Other existing roads under DPWH which perform local function. access roads, airports, seaports and other infrastructure requirements in identified tourism areas. The said agencies and the DBM shall accord priority status to the funding of this tourism infrastructure program.

SBEP MAGAZINE 2015

5

special feature Both projects are implemented by The Asia Foundation.

More fun(ds), especially for local tourism roads

DOT Secretary Ramon Jimenez, Jr. and DPWH Secretary Rogelio Singson holding the Memorandum of Agreement for the DOT-DPWH Convergence Program, January 19, 2012.

The TRIP Technical Working Group (TWG) was created to provide the needed planning and programming activities in accordance with the objectives of the NTDP, Philippine Development Plan, and the provisions of the Convergence MOA. To jumpstart the Convergence Program, the TWG has established a set of multi-level criteria in the identification, evaluation, and prioritization of the tourism road infrastructure in various tourism clusters, formally termed as the “Tourism Road Infrastructure Project Prioritization Criteria (TRIPPC)”. The criteria seek to prescribe guidelines, and procedures in the identification, evaluation, validation, prioritization, and programming of tourism road projects.

In roughly four years after its formalization, a total of P60.481 billion has been invested from 2011 to 2015 for 463 tourism road infrastructure projects, which is 338 percent or P46.69 billion higher than the P13.79 billion allocated from 2006 to 2010. An additional P24 billion is proposed for FY 2016. These TRIP Projects will benefit 15 regions, 75 provinces, 307 municipalities and cities, and thousands of barangays.

TRIP Investments by Region (2012-2015) in Pesos

National Tourism Development Plan Framework The Research, Education and Institutional Development (REID) Foundation provides technical assistance to the Convergence Program and serves as the Secretariat to the TWG. The Convergence Program is grateful of the support of the United States Agency for International Development (USAID) to the Convergence Program under its Economic Growth Hubs project in 2012 and continues to provide the support under the Advancing Philippine Competitiveness (COMPETE) Project.

Source: DOT-DPWH

These tourism roads (whether national or local) will be paved according to national standard to make the trip experience of tourists consistent all the way to the destination. Secretary Rogelio Singson, in the launching of the Program, expressed his full support to the Program down to the design specifications, “Let's not look at tourism roads as backdoor roads. Let's consider them to the highest

standards of our national highways. So I’m conveying this to the regional directors of DPWH: Don't design roads that are in support of tourism as backdoor roads. We should design them according to national standards.”2 The LGUs did not have to pay for these expensive high standard roads, except that they are being requested to facilitate Right-of-Way Acquisition and provide for maintenance funds.

More Roads. More Fun. For everyone.

Considered as one of the flagship convergence programs of the Aquino administration, the TRIP is a response to two major country-wide challenges in 2011 that could substantially delay the delivery of more fun for tourists and therefore impede the potential economic impact of tourism development. These are 1) the relatively low competitiveness ranking of Philippine tourism relative to its neighbors and the major effect of poor road infrastructure quality especially of local roads, and 2) the sluggish economic environment that challenged the impact of the “good governance is good economics”3 platform of the Philippine Government.

The strong political will of the DOT and DPWH leadership, however, prevailed. Enabled by the Tourism Act of 2009 and guided by the NTDP 2011-2016, TRIP devised a top-down pump-priming approach for tourism infrastructure development supported with a pragmatic “bottom-up” process.

LGUs and Congressional representatives, along with their private sector stakeholders, were quick to cooperate with the Regional Offices of the DOT and DPWH in coming up with road project proposals compliant to the requirements of the Program. Incidentally, the Program was introduced at a time where prudent fiscal management resulted into surplus of government funds precisely looking for projects identified under that objective (apolitical) process. The DBM and the

2

P47.58 billion was funded under the DOT-DPWH Convergence Program, while the remaining P12.91 billion was released from other DPWH programs from 2011 to 2015 (e.g., preventive maintenance, access to tourist destination).

3 Speech of Secretary Rogelio Singson delivered during the MOA Signing of the DOT-DPWH Convergence Program. January 19, 2012.

SBEP MAGAZINE 2015

7

Special Feature

members of Congress supported it with fund allocation.

The TRIP has provided additional connectivity opportunities on the ground and has put destinations that previously seemed out of reach. As of June 30, 2015, 1,549.59 km of tourism roads have been completed, 846 km is on-going, 106.75 km is under detailed engineering/procurement stage and an additional 1,200 km is proposed in 2016.

And the Program has just started and we have a long way

to go in terms of upgrading all the roads designed to unlock the powers of economic multipliers of tourism activities across the country. As boldly described by Tourism Secretary Ramon Jimenez Jr.,“The DOT and the DPWH partnership will contribute to the promotion of inclusive growth and poverty reduction by integrating communities to the tourism value chain and building local institutions through better or improved road connectivity. Again, in pursuit of the vision that tourism is the people’s business.”

Moving forward, the Program aims to track and assess the actual versus planned outputs and outcomes of the system. Major goals are the expansion of the Program to include GIS Mapping of Tourism Road Projects; cooperation with DILG for the Implementation and Monitoring of the Tourism Roads; and the creation and implementation of Monitoring and Evaluation Systems and their tourism impact in cooperation with other development partners. The TRIP has expanded to other tourism infrastructure convergence programs—the RoadEnhancing Softscapes for Tourism (REST), the Tourism Water Infrastructure Program (ToUWA), and the One-Step Project - aimed at promoting inclusive tourism business in the country.

These expanded programs are implemented with other agencies including the Department of Trade and Industry, Department of Social Welfare and Development, Tourism Infrastructure Enterprise Zone Authority, National Anti-Poverty Commission, Local Water Utilities Administration, Road Board, Intramuros Administration, and various local government units.

With this TRIP Convergence Programs, we hope to provide better TRIP for all tourists, and fully say, “It’s More Fun in the Philippines”.

Strategic Business Economics Program

SBEP’s Upcoming Financial Seminars 1) Intensive Training on Bonds

(For CFOs, Treasury Managers, Bond Traders, Bank Officers, Risk Officers, Investment & Trust Managers, CPAs,

Lawyers, and Individual Investors) Coverage: Credit Analysis and Interest Rate Risk, Bond Types and Conventions, Basic Fixed Income Mathematics, Zero-Coupon Pricing and Yield Estimation, Bond Yield Curves, Fixed-Rate and Floating-Rate Bonds, Measures of Return on Investment, Interest Rate Sensitivity, Managing Portfolio Risk, Convexity, Bond Portfolio Management Models, Holding Period Yield Immunization, Bond Training and Portfolio Management Strategies.

Speakers: Victor Abola Ph.D. and Mr. Christian Nero Porlas, CFA Date: May 25, 26 & 27, 2016 TIme: 8:30 am to 5:00 pm Venue: Case Room 2, G/F, ALB Bldg., UA&P Registration fee: Php 30,000

2) Investing in the Stock Market

(For working people of all ages, entrepreneurs, and parents concerned about their family’s financial security) Coverage: Basic rules of savings and investments, Fundamental behavior of stocks and stock markets, Economic factors, Company-specific factors, and International capital flows, How to buy stocks and funds online, How to design a trading plan, How to increase the oods of a success via technical analysis, and How to forecast company earnings and share price movements.

Speakers: Mr. Alexander N. Gilles, CFA Date: May 24, 2016 TIme: 8:30 am to 5:00 pm Venue: Case Room 2, G/F, ALB Bldg., UA&P Registration fee: Php 7,000

8

SOLVING RP’s INFRASTRUCTURE WOES

MBE Graduates June 2015 Last June 6, 2015, five distinguished SBEP alumni were awarded a Master in Business Economics (MBE) during the twentieth UA&P graduation ceremony held at the PICC Plenary Hall. The recipients of the MBE completed all course requirements of the certificate program and successfully defended their thesis.

MARIA CATALINA E. CABRAL Undersecretary for Planning and PPP Department of Public Works & Highways "Strategic Plan for Water Supply and Sanitation Infrastructure Provision by the Department of Public Works and Highways (DPWH) with Case Study on Tourism Water Supply and Sanitation Infrastructure (TouWa) Program"

MARICAR V. CARANDANG Senior Business Manager Hutchison Global Communications, Ltd. "Increasing Value-Added Service Adoption in Philippine Mobile Services"

EDUARDO P. MALAGAPO CEO/Principal Al-Andalus International School "Enhancing the Competitiveness of Al-Andalus International School Under the K to 12 Curriculum"

ARNOLD T. DIVINA President & General Manager Dayton Commercial, Inc. "A Consolidated Strategic Plan for Dayton Commercial, Inc."

CHARLIE T. QUE Vice President Hutchison Global Communications, Ltd. "Overcoming Entry Barriers in the Philippine Telecommunications Industry: Entry Positioning Strategies for ABC Global"

SBEP MAGAZINE 2015

9

Special Feature

Danger & Opportunity By

Victor A. Abola, Ph.D. Assistant Professor School of Economics, UA&P

The horrific traffic problems being faced by Metro Manila workers and residents especially since 2015 have simply confirmed what investors have long complained about—poor infrastructure that could hinder rapid economic growth. The Ninoy Aquino International Airport (NAIA) has long exceeded its capacity and is tagged as one of the worst in the world, while the Port of Manila is congested.

With Public-Private Partnership (PPP) projects slow in execution, many appear justified to ask if there is light at the end of the tunnel?

Backgrounder In the Global Competitiveness Report of 2015-16, the Philippines ranked 90th from among 140 countries. Although it meant an improvement from the 95th slot in the previous year, this ranking remained as the lowest among ASEAN-6, as it lagged far behind Vietnam’s 76th place.

Few will disagree with this assessment. And the basic reason may be traced back to the 1980s when the government became highly indebted. In the graph below, we can see that for the 30-year period from 1980, infrastructure spending of the country averaged only 2% of GDP, compared to our neighbors which invested heavily in infrastructures at an average of just below to far above 5% of GDP.

SBEP MAGAZINE 2015

11

Special Feature

The country’s debt ratio (i.e., public debt to GDP) rocketed in the beginning of the 1980s up to the end of the Marcos regime in 1986 (see Figure 2). By the time Marcos had gone, the debt ratio had vaulted to 86.8% in 1986 compared to only 31.3% in 1980, as a result of the yawning fiscal deficits in the wake of the second oil price surge starting 1979.

and so the savings of almost 5% of NG spending could be channeled to infrastructure spending.

With regard to infrastructure and capital outlays, the Aquino administration has managed to bring this up to 2.8% in 2014 and projected to 3.6% in 2015. It is budgeting 5.1% of GDP to this growth-generating expenditures in 2016. It should be noted that these figures exclude PPP projects since these do form part of NG’s budget.

Debt Spiral Up or Down?

The reason for the sharp upward debt spiral in the 1980s and the downward spiral starting 2005 may be extracted from the debt spiral formula as follows:

d = d -1 (i – y) - z where

d = debt to GDP ratio

i = average interest rate on public debt

y = GDP growth rate in current prices

z = primary surplus to GDP ratio (i.e., surplus or deficit, excluding interest)

We note from Figure 2 that interest payments as a percentage of total national government (NG) spending moved in tandem with the debt ratio. Interest payments only accounted for some 6% of NG expenditures in 1980, but by the end of the Marcos era, it had reached 19% in 1986. This peaked at 33% in 1987 as interest rates remained high. But channeling much of its budget to interest payments left NG short of funds for infrastructure spending.

Improvements in Recent Years Fortunately, the country turned the corner in 2005 after Pres.

Macapagal-Arroyo decided to confront the looming debt crisis and raised “sin” taxes and reformed the VAT law (raising the rate to 12% from 10%, and removing a number of exemptions).

With interest rates abroad falling, the country’s debt ratio fell dramatically from 77.7% in 2004 to 52.4% in 2010.

Under the current Aquino administration, the government’s fiscal position further consolidated, as tax revenues continued to improve, while its efforts at minimizing corruption helped slow down spending. As a result, the fiscal deficit in 2015 is estimated at only 1.2% slightly up from 0.6% in the previous year. Thus, we think the debt-ratio has gone down further to 43.8% from 45.4% in 2014. Notably, this is below those of Thailand and Malaysia. Correspondingly, we think that NG spending on interest payments has dropped to 14.5% of total expenditure from 16.2% a year ago. Notably, in 2010 this was still at 19.3%,

12

SOLVING RP’s INFRASTRUCTURE WOES

Interest rate less GDP (current) growth rate

Change in Total debt/ GDP

=

BEG. Debt GDP Existing Debt %

GDP growth rate

X

(i - y)

-

PS GDP Primary Surplus GDP

In the 1980s we experienced a rapid upward debt spiral. This was primarily due to the fact that (i – y) was highly positive, as the government pursued a high interest rate policy to stem the outflow of capital. The “Jobo” bills yields of 1983-1984 exceeded 50% and real growth was negative 15% over 1984-1985. Relief came with the debt restructuring under the Brady Plan in 199192 and Pres. Ramos’ record of fiscal surpluses.

The period 2005-2010 saw the debt-ratio and interest expenditure ratio come down dramatically. But as it appeared to stall at the end of the Macapagal-Arroyo administration, it resumed a sharp downward slide starting 2012. The main reason was that the term (i – y) became negative as growth exceeded interest rates while at the same time the NG posted primary surpluses. With the current growth momentum and low interest rate (both abroad and domestically), it is quite likely that the said term will remain negative for some time and thus continue to

SBEP MAGAZINE 2015

13

Greetings from

Sen. Ralph G. Recto SBEP Alumnus

Class 1994

14

SOLVING RP’s INFRASTRUCTURE WOES

Special Feature the downward slide of the debt ratio. It will correspondingly increase money available for infrastructure spending.

On-going Improvements As explained above and seen in Figure 3 below, the government has been able to maintain infrastructure and capital outlay spending at around 3% of GDP. By 2015, it is expected to come close to 4% and to 5% by 2016. In its mediumterm plan, this spending is projected to reach 6.7% by 2018.

Sounds nice. But are things happening on the ground?

Some of the on-going infrastructure projects include: (1) the P352-B flood control program for Metro Manila under

the Master Plan to 2030, (2) the P34.5 B Tourism Road Infrastructure Program (TRIP) until 2016 aimed at making seamless transport connections to key tourist destinations, (3) P2.2 B Tourism Water Supply Infrastructure Project, (4) Upgrading and widening of MacArthur Highway in Northern Luzon and the Pan Philippine Highway in the South, and (5) Upgrading of EDSA. In short, a good part of the traffic woes is due to the ongoing infrastructure projects in Metro Manila and Luzon.

Will PPP Projects Take Off? Apart from the 3 projects completed by 2015 ( i.e., 20,000 new classrooms, Daang-Hari-SLEX Connector, and the Automated Fare Collection System), a number of small to large PPP projects are either on-going or expected to commence work in 2016. In Table 1, we identify eight such PPP projects. They have a total project cost of P175.26 B, but we estimate that some P40 B will be spent in these major projects in 2016. This will represent an additional 0.25% of 2016 GDP growth. If multiplier effects are factored in, this could easily add 0.5% to GDP growth. Thus, a 6.5% GDP growth in 2016 should not be difficult to achieve. This will also mean added income in the areas where these PPP projects are lodged.

All told, we think that 2016 will be a banner year for infrastructure projects, including PPP, even though their full benefits in terms of traffic and cost reduction may be felt mostly in 2017 and 2018.

Table 1: PPP Projects Likely to Commence/Continue in 2016 (In Billion Pesos)

1

Mactan International Airport Expansion

2

NAIA Expressway

3

LRT-1 Extension to Bacoor

4

Total Project Cost

Status/ Start

Projects Likely to Commence/Continue

17.50

3.50

15.90

5.58

Q4

64.90

6.50

Bulacan Bulk Water

Q4

24.40

2.44

5

South Integrated Transport Terminal

Q3

4.00

1.00

6

Southwest Integrated Transport Terminal

Q4

2.50

0.25

On-going

sub-total

Q1

Spending in 2016

129.20

19.27

7

SMC Skyway-3 (SLEX-NLEX Connector)

On-going

25.66

12.83

8

TPLEX

On-going

20.40

8.00

46.06

20.83

sub-total

Grand Total

175.26

40.10 SBEP MAGAZINE 2015

15

Special Feature

Cabotage Principle, Public Service, and Co-Loading Policy By

Enrico L. Basilio, Ph.D.1 Chief of Party USAID – Compete Project

In May 2015, Congress approved the Foreign Ship Co-Loading Act (RA 10668).

Two months later, President Aquino signed it into law.

The Cabotage Principle In his July 2013 State of the Nation (SONA) address, President Aquino declared: “I would also like to propose to Congress several laws that will help us sustain and improve on the reforms we have established. Let us amend the Cabotage Law in order to foster greater competition and to lower the cost of transportation for our agricultural sector and other industries…” For decades now, the business sector, especially those from Mindanao, has been clamoring for the lifting of the cabotage in order to promote competition in domestic shipping. The

call stems from the desire to improve service efficiency and reduce the cost of sea transport in the country. In their view, effective competition (with emphasis on

the word “effective”) can be achieved by allowing foreign shipping lines to operate domestically and compete with domestic shipping lines.

Table 1: Pros and Cons of Lifting Cabotage

Pros 1. Foreign shipping lines, if allowed to operate domestically, will provide the needed (a) service and (b) competition to local shipping lines. This competition is expected to result in transport cost reduction 2. Foreign shipping lines to adopt “consortium shipping” (co-loading of cargoes)

Cons 1. Allowing foreign shipping lines to operate domestically will lead to the demise of the domestic shipping industry 2. Un-levelled playing field a. Foreign shipping lines are subject to the 3% CCT (Common Carriers Tax) while the domestic shipping companies pay corporate income taxes and VAT b. Domestic shipping lines source their fuel domestically while international shipping lines may source cheaper fuel abroad c. Domestic shipping lines are mandated by MARINA to drydock their ships every 24 months 3. National emergencies and security

1 Currently serves as Chief of Party of the USAID Advancing Philippine Competitiveness (COMPETE) Project and lecturer at the Strategic Business Economics Program of the University of Asia and the Pacific (UA&P). He was former Chairman of the PCCI Transport Committee, Co-Chair of the Export Development Council Transport Logistics Networking Committee, and Co-Chair of the National Competitiveness Council Infrastructure Working Group.

SBEP MAGAZINE 2015

17

Special Feature

There are pros and cons to the lifting of cabotage: There are three (3) measures that have been proposed to address the cabotage issue: 1. Amend the Constitution and other related laws to take out the foreign equity restriction (40% limit) in public utilities 2. Amend the Public Service Act to redefine what constitutes public utility or service 3. Legislate a co-loading policy to allow the co-loading of foreign cargoes for domestic transhipment

Amending the Philippine Constitution and other related laws Strictly speaking, “cabotage” is not a law but a principle that is embedded in certain provisions of the Philippine Constitution as well as laws such as the Tariff and Customs Code of the Philippines (TCCP), Domestic Shipping Act, and the Foreign Investment Act (Negative List A): Under the provisions of the Constitution and existing shipping-related laws, the shipment of domestic cargoes from one

Table 2: The Cabotage Principle

LEGAL FRAMEWORK

PROVISIONS

(highlights/emphasis added by the Author)

1987 Philippine Constitution (Article XII Section 11)

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

RA 1937 - Tariff and Customs Code of the Philippines

Section 810. Privileges Conferred by Certificate of Philippine Registry. A certificate of Philippine registry confers upon the vessel the right to engage, consistently with law, in the Philippine coastwise trade and entitles it to the protection of the authorities and the flag of the Philippines in all ports and on the high seas, and at the same time secures to it the same privileges and subjects it to the same disabilities as, under the laws of the Philippines, pertain to foreign-built vessels transferred abroad to citizens of the Philippines.

Section 901. Ports Open to Coastwise Trade. All ports and places in the Philippines shall be open to vessels lawfully engaged in coastwise trade, subject to the provisions of law applicable in particular cases.

Section 902. Vessels Eligible for Coastwise Trade. The right to engage in the Philippine coastwise trade is limited to vessels carrying a certificate of Philippine registry.

Section 905. Transportation of Passengers and Articles between Philippine Ports. Passengers shall not be received at one Philippine port or any other port by a vessel not licensed for the coastwise trade, except upon a special permission granted by the Collector (Customs Commissioner); and subject to the same qualification, articles earmarked at a domestic port shall not be transported to any other port in the Philippines, either directly or by way of a voyage, in any other vessel than one licensed for the coastwise trade.

RA 9295 - Domestic Shipping Act of 2004 (Chapter III)

Sections 901, 902 and 905 of the TCCP were once again repeated in Chapter III Sections 5 and 6 of the 2004 Domestic Shipping Act. Section 5. Authority to Operate. No franchise, certificate or any other form authorization for the carriage of cargo or passenger, or both in the domestic trade, shall be granted except of domestic ship owners or operators.

Section 6. Foreign Vessels Engaged in Trade and Commerce in the Philippines Territorial Waters. No foreign vessel shall be allowed to transport passengers or cargo between ports or place within the Philippine territorial waters, except upon the grant Special Permit by the MARINA when no domestic vessels is available or suitable to provide the needed shipping service and public interest warrants the same.

Foreign Investment Act (RA 7042, RA 8179, EO 362 – Negative List A) 18

Restricts foreign equity to a maximum of 40% in areas of economic activities reserved for Filipinos by mandate of the Constitution and specific laws (RA 1937, RA 9295).

SOLVING RP’s INFRASTRUCTURE WOES

SBEP MAGAZINE 2015

19

Special Feature domestic port (e.g., Davao) to another (e.g., Manila) should be carried only by domestic shipping lines (emphasis on the word “domestic”). Foreign ships (100% foreign equity) are allowed to call in designated Philippine international ports (e.g., MICT and South Harbor at the Port of Manila, Cebu International Port, Subic Freeport, Sasa Port in Davao City, etc.) or other ports (provided they are issued special permit by relevant authorities) to load and unload foreign cargoes but not domestic cargoes (and passengers). On the other hand, the domestic transhipment of foreign cargoes by domestic shipping lines is allowed and welcomed. This is not violative of the Cabotage principle.

Can foreign shipping lines operate domestically? Yes, if they partner (through joint ventures) with domestic shipping operators provided their equity shall not exceed 40% (e.g., MCC). However, if the intention is to lift the cabotage in order to allow foreign shipping (100% equity) to operate domestically, then there is a need to amend Section 11 of Article XII of the Constitution.

There have been moves in Congress to amend the economic provisions of the Constitution, including the provision on public utility. Assuming the initiative proves to be successful, we may have either of the two possibilities: • Full lifting of the cabotage • Partial lifting if Congress passes a law that still limits foreign participation in public utilities – Higher than 40% foreign equity limit but not 100% – Declare specific domestic routes where foreign shipping lines can operate – Allow x number of foreign shipping lines to operate domestically (akin to the Foreign Banking Liberalization Act which allowed 10 foreign banks to operate locally)

The question is: Will the Constitution be amended? Without amending the Constitution, what else can be done to relax the cabotage? One is to amend the Public Service Act, the other is to legislate a Co-Loading Policy.

20

Box 1. Cabotage in ASEAN In ASEAN, Brunei, Singapore, Cambodia, and Lao PDR have no cabotage. However, majority of the member states (Philippines, Indonesia, Malaysia, Myanmar, Thailand, and Viet Nam) have cabotage restrictions. The experience of Indonesia is rather an interesting case. In the early 1990s, the Indonesian government lifted its cabotage to boost trade. In 2008, with the passage of the new maritime law, cabotage was restored. However, the sea transport of oil and gas was exempted from the cabotage restriction. Recent pronouncements by the Indonesian government point to further relaxation of the cabotage.

Under the ASEAN Framework Agreement on Services (AFAS), there is a move to increase foreign ownership in the services sector (including maritime) to 70% by 2015. This is also in line with the goal of ASEAN to create an ASEAN Single Shipping Market (ASSM) in support of the ASEAN Economic Community (AEC).

Amending the Public Service Act Recall that Section 11 pertains to “public utility”. What then is public utility or service? The definition of what constitutes public service is found in Section 13 (b) of the Public Service Act (CA 146, as amended by RA 2677 s. 1960):

SOLVING RP’s INFRASTRUCTURE WOES

"Sec. 13 (b) The term 'public service' includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas electric light, heat and power, water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or compensation to a third party or third engaged in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the

transportation, processing, and marketing of agricultural products of such third party or third parties shall not be considered as operating a public service for the purposes of this Act.

From this definition, we can see the “broader” application of the cabotage principle (or restriction to put it negatively) to include such industries as energy, water, telecommunications, and even ice plants!

In the case of the energy sector, the EPIRA Law divided the market into 3 distinct segments – generation, transmission, and distribution – and declared generation not being a public utility. As a result, 100% foreign equity is already allowed in generation and only transmission and distribution are subjected to the nationality provision. In 2003, the Supreme Court ruled that shipyards are not public utilities (G.R. No. 124293). On the other hand, there are court rulings that declare the operation of ports, airports, and light rails as public utilities.

At present, there is an initiative to craft a competition policy that will, among other things, (re)define public utility or service. But this is a tricky exercise. To take out transport services (land, air, sea) from the definition may prove to be difficult.

Legislating a Co-Loading Policy A parallel strategy to the Competition Policy currently being pursued is the crafting of a Co-Loading Policy. This option only requires an amendment of Section 1009 of the Tariff and Customs Code of the Philippines (TCCP).

Special Feature

As early as February 2002, this author wrote an industry paper published in the UA&P Industry Monitor entitled “The Future of the Cabotage Law: Heading for Open Waters?” that advocated for the liberal interpretation of the cabotage principle. The “open water” advocacy calls for increased competition in the domestic transshipment of foreign cargoes through foreign consortium shipping.

“Consortium shipping” by foreign shipping lines, howerver, is not allowed under Section 1009 of TCCP which mandates the “same vessel” to domestically transship the foreign cargo from one port to another port within the country.

To illustrate, let us assume that the foreign cargoes (imports) being carried by a Foreign Vessel A (FV-A) are destined for Manila and Davao. Once FV-A docks in Manila, the cargoes bound for Manila are unloaded from the ship. Then FV-A proceeds to Davao to transport the foreign cargoes destined for Davao. Can FV-A elect not to proceed to Davao? The answer is “yes”. FV-A can simply have the domestic transshipment of its foreign cargoes bound for Davao handled by a domestic shipping line. What if another Foreign Vessel B (FV-B) is going to Davao?

Can FV-A co-load its cargoes to FV-B? The answer is “no” because under TCCP Section 1009, the foreign cargo must be carried by the “same” vessel. To allow coloading of foreign cargoes by different foreign shipping lines, Section 1009 of the TCCP must be amended (see Table 3).

to the foreign port terminal where it will undergo customs processing/clearance.

With the proposed co-loading policy, the domestic transshipment time will be reduced to only 4 days (56% reduction in time) and the cost to

only Php 29,830/TEU (46% reduction in cost). The reduction in cost and time will come from the eliminated trucking expenses, customs-related expenses during transit of TEU from foreign terminal to domestic terminal, and high domestic shipping cost.

Table 3: The Cabotage Principle

Existing Section

Cons

(emphasis added by the Author) Section 1009. Clearance of Foreign Vessels to and from Coastwise Ports.

Passengers or articles arriving from abroad upon a foreign vessel may be carried by the same vessel through any port of entry to the port of destination in the Philippines; and passengers departing from the Philippines or articles intended for export may be carried in a foreign vessel through a Philippine port.

Passengers or articles arriving from abroad upon a foreign vessel may be carried by the same or another foreign vessel through any port of entry to the port of destination in the Philippines; and passengers departing from the Philippines or articles intended for export may be carried by the same or another foreign vessel through a Philippine port.

Box 2. CURRENT PRACTICE (9 days, Php 55,600/TEU) Foreign Vessel

Cebu • Time 1 day Domestic • Cost: 1,900 PHP Port

Manila • Time 1 day Intl. • Cost: 4,200 PHP Port

Inter- • Time 1 day Terminal • Cost: 3,000 PHP Trucking

• Time 2 days Customs • Cost: 3,200 PHP + 1,400 PHP

Cebu Int’l Port

• Time 1 day • Cost:

Inter • Time 1 day Terminal • Cost: 5,000 PHP Trucking

• Time Customs • Cost: TBD by BOC

Manila • Time 1 day Domestic • Cost: 1,900 PHP Port

•Time Trucking • Cost: 5,000 PHP

Domestic • Time 1 day Shipping • Cost: 30,000 PHP

PEZA

Economic Benefits What are the economic benefits of having a Co-Loading Policy? At present, it takes nine (9) days to domestically transship foreign cargo at a cost of Php 55,600 per TEU (Twenty Equivalent Unit or twenty-foot container) from Manila to Cebu. This is because the foreign cargo (container) unloaded at the foreign terminal in Manila (e.g., MICT or South Harbor) will have to be trucked to North Harbor (domestic port in Manila) for loading unto the domestic ship. Upon reaching Cebu, the domestic ship will also dock at the domestic terminal. Again, the foreign cargo will have to be trucked

Box 3. WITH CO-LOADING POLICY (4 days, Php 29,830/TEU) Foreign Vessel Manila • Time 1 day Intl. • Cost: 4,200 PHP Port Cebu Int’l Port

• Time 1 day • Cost: 1,430 PHP

• Time Customs • Cost: TBD Manila • Time 1 day Int’l. • Cost: 4,200 PHP Port Manila • Time 1 day Cebu • Cost: 15,000 PHP

•Time Trucking • Cost: 5,000 PHP

PEZA

SBEP MAGAZINE 2015

21

SBEP Class 2015

ABAYA, Nadia Kornelia K. “Nadia”

BIRON, Ferjenel G. “Ferj”

Consultant The Medical City

Chief Executive Officer Endure Medical, Inc.

FLORENDO, Alma A. “Alma”

Vice President – Project Development DMCI-Project Developers, Inc.

w

ANCHETA, Gerardo S. Jr. “Gerry”

BLANCAS, Frederick L. “Fred”

Vice President – Design & Engineering DMCI-Project Developers, Inc.

Head of Strategic Planning & Marketing Integrated Micro-Electronics Inc.

AVENIDO, Mario A. “Mar”

President/Chief Operations Officer Public Safety Mutual Benefit Fund, Inc.

GONZALES, Noel J. “Noel”

President/Chief Executive Officer Muebles Italiano

GUILLEN, Eduardo G. “Eddie” CALIMBAS, Adrian Crisanto M. “Ranie” Assistant Vice President – Construction DMCI-Project Developers, Inc.

Municipal Mayor Piddig, Ilocos Norte

BANAAD, Annagraziela S. “Gretchen” Vice President – Debt and Equity Securities Trading Division Head First Metro Investment Corporation

22

ELEPAÑO, Ronaldo R. Jr. “Junn”

First Vice President – International Business Development D.M. Consunji, Inc.

SOLVING RP’s INFRASTRUCTURE WOES

LAVILLA, Francis G. “Franz” Chief Operations Officer Endure Medical, Inc.

SBEP Class 2015

LAXAMANA, Leah M. “Leah”

Program Chair BS in Accountancy Renaissance School of Science and Technology

LEE, Hee Jun “Jim”

Financing Partnership Specialist Asian Development Bank

MAGALLANES, Dennis J. “Dennis” Category Financial Planning Head Nutri Asia, Inc.

POTICANO, Alwyn Valentino T. “Aly” Proprietor/President Magnific Taste Platers Food Services

RABANO, Jasel J. “Jasel”

Internal Auditor Public Safety Mutual Benefit Fund, Inc.

TINGCANG, Guillermo G. Jr.“Guiller” Vice President – Audit & Corporate Services Fastcargo Logistics Corporation

RAYMUNDO, Bernadette F. “Bernie”

Vice President – Supply, Quality Control & Product Dev’t. & Production Lubricant SEAOIL Philippines, Inc.

PAEZ, Cresente C. “Cris”

Representative of NATCCO Party List/ Chairman, Committee on Cooperatives House of Representatives

TAAS, Napoleon C. “Nap” Chief Information Officer Philippine National Police Corporate Auditor Public Safety Mutual Benefit Fund, Inc.

SAN ANTONIO, Diosdado M. “Dads” Regional Director - Region IV-A Department of Education

TO, Edwin G. “Edwin” Chairman and President Budgetwise Supermarket

VILLACAMPA, Cesar P. “Cesar” Assistant Vice President – Group Treasury Fastcargo Logistics Corporation

SBEP MAGAZINE 2015

23

SBEP’s 41st Anniversary Celebration:

The 2015 Golf Tournament and Homecoming Dinner

by Alonica R. Salazar Last March 27, 2015, the Strategic Business Economics Program celebrated its 41st anniversary featuring a Golf Tournament and a Homecoming Dinner at the Wack-Wack Golf and Country Club, Mandaluyong City. The success of both grand festivities could be attributed to the generosity and hard-work of Class 2015 the host batch.

The enjoyable day commenced with a Golf Tournament at the West Course of the Wack-Wack Golf and Country Club.

Dr. Victor Abola (SBEP Director), Mr. Donald Felbaum, (Managing Director of Optel Limited and SBEP Alumnus Class 1999), and Mr. Ador Abrogena (EVP of Banco de Oro and SBEP Alumnus Class 2003), led the ceremonial tee-off at 8:00am. Old friendships were rekindled and new ones forged as the tournament breezed through the day. A total of 47 26

alumni, faculty, current participants, and guests competed in the golf tournament.

Mr. Jun Molina (guest) came out as the Overall Champion and Mr. Bong Brobio (Class 2011) emerged as the Low Gross Champion. Division winners were Mr. Allan Rubrica (guest) for Class A; Mr. Te San Pedro (guest) for Class B; and our very own program director, Dr. Victor Abola for Class C. Batch Champion was Class 2008 represented by Mr. Sonny Laraya, Atty. JV Javier, and Mr. Nel Laset. For the Fun Holes, Mr. Jun Molina (guest) bagged Nearest to the Pin at Hole #14. Mr. Jhong Ceniza (guest) won the Most Accurate Drive at Hole #5 and Mr. Bong Brobio (Class 2011) bagged the Longest Drive at Hole #10. Unluckily, nobody won the Club Car golf cart, which was the Hole-in-One prize.

Our golf tournament players were

SOLVING RP’s INFRASTRUCTURE WOES

delighted to go home with an amazing giveaway package comprised of the following: NIKE dri-fit shirt, NIKE golf cap and Nike sleeve of balls. The SBEP and Class 2015 would like to thank the following sponsors for making the 2015 SBEP Golf Tournament a huge success and for contributing generously to the SBEP Endowment Fund: for Platinum Sponsors – National Grid Corporation of the Philippines and South Forbes Golf Club; for Gold Sponsors – Endure Medical, Public Safety Mutual Benefit Fund, Inc., Joratech Corporation, Pacsports, and Club Car; for Silver Sponsors – Metropolis Construction, Inc., Nutri Asia, Inc., Global Executive Solutions Group, Inc., Land Registration Systems, Inc., SeaOil Philippines, Fast Services Corporation, FastCargo Logistics Corporation, Santeh Feeds, Stradcom Corporation, First Metro

Like all past gettogethers, it was a night to remember with top and classic entertainment.

Investment Corporation, Cagdianao Mining Corporation / Nickel Asia, DMCI, Beta Electric, Semirara Mining Corporation, and Harbour Centre Port Terminal, Inc.; for Donors – Grand Monaco Estate Developers, Inc., Co Ban Kiat Hardware, RGE Agridev., and the Municipality of Piddig, Ilocos Norte.

The festivity continued on at the Banquet B of the Wack-Wack Golf & Country Club as family and friends of the alumni and Class 2015 celebrated the Homecoming Dinner with a feast prepared by ‘The Plaza.’ A total of 117 alumni, current batch, guests, faculty, and staff graced the Homecoming Dinner.

The entertaining program started with an invocation, ‘The Prayer’ sung by Mr. Noel Gonzales, Class 2015 President, and the renowned Filipina classical singer, Ms. Gerphil Flores.

The welcome address was given by Dr. Peter Lee U (Dean of the School of Economics) and the masters of ceremonies

for the night were Ms. Bernie Raymundo (Class 2015 Treasurer) and Mr. Noel Gonzales.

The highlight of the dinner was a spectacular show of amazing talent from celebrated Filipino artists spearheaded

by Ms. Gerphil Flores, 2nd runner-up at the 2015 Asia’s Got Talent; Mr. Kris Gonzales, the young baritone; Mr. Merjohn Lagaya, acclaimed violinist; and the multi-talented singer and SBEP Class 2015 President, Mr. Noel Gonzales.

The thrilling live performances and the fantastic raffle prizes glued the audience to their seats. Our lucky guests were happy to bring home the following major raffle prizes - 3 Golf Memberships for 1 year at South Forbes Golf City, 4 gift certificates for 2 pax for a 3D/2N stay in a Studio Suite at Alta Vista Boracay with breakfast, 15 pcs. TEFAL Cookware set, 1 Samsung Home Entertainment System, 3 gift certificates of Php 10,000 worth of beauty treatments at Vietura Aesthetic

Lifestyle at Sofitel, 2 food and beverage certificates worth Php 5,000 at the Makati Shangri-la,……and still a number of exciting door prizes.

PCSupt. Noel G. Constantino, CEO IV and Chief of the Supervisory Office for Security and Investigation Agencies, Civil Security Group of the Philippine National Police, also an SBEP Alumnus Class 2005, delivered the inspirational message to the alumni and guests. The homecoming dinner formally concluded with our program director, Dr. Victor Abola’s closing remarks.

The SBEP would like to convey its sincerest thanks and appreciation to all the sponsors and donors for their generous contribution to the SBEP Endowment Fund. Likewise, the program would like to acknowledge Class 2015 and the dependable SBEP staff for making the festivities of SBEP’s 41st Anniversary an unforgettable and remarkable experience for all the alumni and guests!

SBEP MAGAZINE 2015

27

Seminars

Intensive Training on Bonds

The SBEP organized a three whole-day “Intensive Training on Bonds” last May 27 to 29, 2015 at the PLDT Hall of UA&P. It was attended by 18 senior executives from varied industries and services sector.

The Intensive Training on Bonds equipped the participants with a systematic and integrated learning on all bond and bond-related products available in the market today. Computer based exercises were provided to the seminar participants to facilitate straightforward and practical learning.

Dr. Victor A. Abola, SBEP Director, also an Economist and Finance Expert, delivered the course for Days 1 & 2. The following topics were covered: Credit Analysis and Interest Rate Risk; Bond Types and Conventions; Basic Fixed Income Mathematics; Zero-Coupon Pricing and Yield Estimation; Fixed-Rate and Floating-Rate Bonds; Bond Yield Curves; Measures of Return on Investment; Interest Rate Sensitivity; Managing Portfolio Risk; Convexity; and Convertible Bonds.

For Day 3, Mr. Christian Nero V. Porlas, CFA, Head of Metrobank’s International Treasury Department, delivered the following topics: Bond Portfolio Management Models; Holding Period Yield Immunization; Bond Portfolio Management Strategies; ROPs and Foreign Denominated Bonds.

The Intensive Training on Bonds is being offered by the SBEP bi-annually, in May and November.

It is designed for the knowledge and appreciation of Chief Financial Officers, Treasury Managers, Bond Traders, Bank Officers, Risk Officers, Investment Managers, Trust Managers, Certified Public Accountants, Lawyers, and Individual Investors. Interested participants may call the SBEP Alumni Office at 6342820 / 6343095 / 6370912 loc. 222 or send an email to sbep@uap.asia. (alonica r. salazar)

30

SOLVING RP’s INFRASTRUCTURE WOES

SBEP Alumni Association As a member of the SBEP Alumni Association, you are entitled to the following privileges: 1.

2.

3.

4.

5.

20% discount on all SBEP Financial Seminars Copy of the SBEP Annual Alumni Magazine (to be sent by mail) Unlimited access to the UA&P Graduate School Library SBEP Alumni ID card (to be sent by mail) Copy of the Market Call (to be sent by mail every quarter) – a publication of First Metro Investment Corporation (FMIC) and UA&P Capital Markets Research Group. This highly informative newsletter gives you the current standing and a thorough analysis of the workings of our macroeconomy and the capital markets.

For those interested to join, please submit the following requirements:

– Accomplished Alumni Data Form

– One (1) piece 1x1 picture (preferably white background)

– Annual membership fee of PhP1,500.00 (check should be payable to the UA&P-SBEP Alumni Association, Inc.) For any SBEP Alumni concerns, please call our office at 6370912 to 28 loc. 222, 6343095 or email us at sbep@uap.asia

Strategic Business Economics Program Your Executive Edge!

SBEP Class 2015 Testimonials Ms. Nadia Kornelia Khoo Abaya Nadia Khoo-Abaya, or Nads as she prefers to be called, practices a profession that may be considered quite atypical for an SBEP student. She is after all, a doctor of medicine, and an anesthesiologist at that! She says that had she chosen a program that is still within the medical field, it would be more of the same, so to speak, and may have stymied the further expansion of her knowledge and options.

A low profile individual who shuns the limelight, Nads is a friendly, affable classmate who personifies and exemplifies the vision and aspirations of SBEP, her seemingly out of the ordinary profession notwithstanding.

—Joey Crisol Mr. Gerardo Sacdal Ancheta Jr. “He’s mostly my room buddy during out-of-town work-related sorties. He’s comfortable to discuss with anything which could be attributed to his being a God-centered and principled man.”

—Ranie Calimbas Gen. Mario Adiong Avenido “He’s a leader with vigor and wisdom, and has the compassion to listen to others. A tough guy who remains cool under pressure. Gen. Avenido is the true essence of an officer and a gentleman.”

—Jasel Rabano Ms. Annagraziela Singzon Banaad “Gretchen is a personable individual that gets on well with those around her. Her creative thinking, expertise, positive can-do attitude and drive as a finance-professional made her an absolute pleasure to work with.

Her strengths in staying across issues, pro-actively offering solutions and ideas and being adept on all aspects of communications make her a valuable contributor to any situation or team.

Gretchen could always be expected to bring her keen analytical skills to the 32

table and to be an excellent leader and ‘doer’ in any team situation.”

—Nap Taas Dr. Ferjenel Gonzales Biron “Dr. Ferj is a born leader, a man of words, of wisdom. He’s a hardworking true friend; and his life story will touch your heart, tickle your funny bones and challenge your mind.. I’m so blessed to have him as my dearest kapatid....”

—Noel Gonzales Mr. Frederick Llanes Blancas “Fred comes across as a jolly, caring and refined person. He readily shares his knowledge about the IT industry and the value of eating organic lechon.”

—Edwin To Mr. Adrian Crisanto Magana Calimbas “Ranie is a dedicated and a workaholic guy. He is serious looking but very friendly and easy to deal with. He is extra generous especially to those who are in need.”

—Gerry Ancheta Mr. Ronaldo Ramos Elepaño Jr. “I have known Jun for quite a long time now since we are both connected with the DM Consunji group of companies.

SOLVING RP’s INFRASTRUCTURE WOES

Jun is a warm, simple and happy person. He is humble and very approachable. He loves to eat. During our Jakarta trip, he made sure that we have tried all the delectable Indonesian food, most especially the desserts. He is very generous in sharing his wealth of professional and personal experiences which makes people close to him including myself who learned a lot.”

—Alma Florendo Ms. Alma Almenario Florendo “Construction is a tough and challenging industry. Alma has excelled herself in such an environment and at the same time fulfilled her role in raising her three children. She continues to develop herself to contribute to God, country and society.”

—Junn Elepaño Mr. Noel Jerez Gonzales “A classic rags to riches story. Beyond material success, his crowning glory is his distinct humility. Behind all the glamor, Noel remains to be compassionate and persevering.”

—Ferj Biron Mayor Eduardo Gamiao Guillen “Mayor Eddie has shown his dynamic participation in all class discussions.

Testimonials

Given his responsibility as an executive of his town, he has been very consistent in raising policy issues and challenges that national agencies must have to address. I would not hesitate to say that Mayor Eddie is extraordinarily proficient in communication skills which is extremely important to be able to bridge his people and the government.”

—Cris Paez Dr. Francis Gozum Lavilla “For a man to be called successful is an understatement. From pre-med to College of Medicine until today in the corporate world, I witnessed the remarkable evolution of a man who turned out to be a charismatic leader and an innovative entrepreneur.”

—Ferj Biron Ms. Leah Masangkay Laxamana “The first time I met Leah, I liked her right away because she is gracious, friendly and warm. I felt comfortable being with her. We instantly stroked a balance as I can sense her sincerity. I like

her for being a dedicated mother, a good wife and a passionate executive. She is committed, too. I would like to think we are two peas in a pod. We think alike. ” —Bernie Raymundo Mr. Jim Lee “Mr Jim Lee is a young professional whose passion for work and love for family exemplify the trait of a productive global citizen.

It was a great pleasure and privilege going through some learning experiences at the SBEP program with him.”

—Dads San Antonio Mr. Dennis Jandayan Magallanes “Dennis the man-ace. He always aces his tests and teachers. He surely awakens everybody with his wits, smile and charm.

Yo’ the man.”

—Alwyn Poticano Cong. Cresente Calago Paez “It is indeed a great opportunity for having the chance to give a testimonial on the greatness and wisdom of a very respectable and committed advocate of a better Filipino way of life, the Hon. Congressman Cresente C. Paez.

It’s a double blessing for me being in UA&P and of having the chance to meet the Good Congressman. He has always been very kind in making conversation with me where I came to discover of his intelligence, dedication and his mastery in the field of his advocacy and works. He has shared with me a lot of his thoughts in working for a change and I am truly inspired and more enlightened of the many things that are needed to make a sustainable development.”

—Eddie Guillen

SBEP MAGAZINE 2015

33

Testimonials sets direction. Nap is a no sleepyhead guy, as his name suggests; he is full of energy that infects the people around him.”

—Gretchen Banaad

Mr. Alwyn Valentino Tiu Poticano “Alwyn is an example of a person who knows his industry well and the intricacies of the services he provides to his clients in the food business. His experience-based exposure to the world of entrepreneurship is evident in his poise, know-how and innate ability to dissect critically relevant issues of business which surprises people given his easy demeanor.

A very amiable person with an engaging personality who listens assiduously, absorbs and process information seriously, and embraces the entire SBEP experience as a “positive distraction” to his usual business routine.”

—Dennis Magallanes Ms. Jasel Jadoc Rabano “She is a little lady who is not afraid to speak her mind, and whose world revolves around figures and reports. She’s not only the leader and mentor of her staff, she’s their friend, sister and mother as well. Jasel is the “Small but Terrible”, sporty, “Jack of All Trades” Internal Auditor of PSMBFI.” —Mar Avenido

in the evening, I wanted to stop and do the last case the following day. However, she insisted to finish the case so we would only be doing some fine tuning of the materials the following day…and she was correct.. Seaoil is very fortunate to have Bernie among its team of hardworking officers…”

—Leah Laxamana Mr. Diosdado Mayores San Antonio “It was fun sharing information with Dads about education in the Philippines and in Korea. I hope he keeps up his good health by following fruit-first juice principle on his meals. After seeing him do it, I am trying to do the same these days.”

—Jim Lee Gen. Napoleon Caballes Taas “A go-getter, an initiator, a leader. Nap is very willing to take upon himself matters that will ease up the load of his group mates. A person who stirs interest and

Mr. Guillermo Gelig Tingcang Jr. “I got to know Guiller up-close and personal during our SBEP classes. Being a probing and analytical person is a given as he heads Fast Logistics Corporate Services and Internal Audit.

He is a good listener with a great sense of humor. Our class had a chance to listen to his singing prowess which he normally showcases only in serving his beloved CFC community.

He is without question, a devoted family man with a big heart.”

—Cesar Villacampa, Jr. Mr. Edwin Go To “Edwin To is a typical nerd. He is one of the few who actually read the materials given to us. He has a brilliant mind that never tires of inquiring and learning.

Makulit but he gives valuable insights.”

—Fred Blancas Mr. Cesar Paragsa Villacampa Jr. “I’ve always known Cesar as a competent professional and a dedicated colleague. And such dedication and passion to growing our Company, and addressing the challenges it is facing— the one thing we’ve shared, had been magnified during our stint in SBEP.” —Guiller Tingcang, Jr.

Ms. Bernadette Foronda Raymundo “I first met Bernie when she attended the week day session before the batch went on its first out-of-town trip to Baguio. I found her very accommodating and willing to share ideas. We got to know each other better when we went to Baguio. Bernie is such a workaholic person and very dedicated to what she is doing. Proof of this was when we did the Projana cases. Since we spent so much time on the cases and it was late already SBEP MAGAZINE 2015

35

Jakarta Diary

By Mr. Edwin G. To and Mr. Frederick L. Blancas, SBEP Class 2015

at the n arrival o p u ff ta lty and S EP Facu B S e h t her with 15 toget irport.

0 2 s s la PC nal A The SBE Hatta Internatio professionalism of SBEP office. o Soekarn “Travel

Upon examining the well-thought and change of place travel itinerary, everyone’s immediate impart new vigor to the mind.” reaction was, “do we have enough time to – Seneca shop?”

Pre-Departure Briefing After months of classroom discussions and corridor campaign, the consensus of our united class was to pick Jakarta, Indonesia (over Shanghai) because it would be the first time for majority of us and we would like to better understand the culture and economy of our biggest ASEAN neighbor.

A week before our much-anticipated 5-day out-of-the-country travel to Jakarta, Indonesia (from April 22 to 27, 2015), our class attended a special session by our ever-supportive professors to give tips and guidelines on how to best tackle and present the cases to be used in Jakarta.

Toward the end of the afternoon session, we were informed that Ms. Marissa Bautista, our tour provider, would join us to discuss the travel itinerary, hotel accommodations, etc. Our electronic airline tickets, departure cards and luggage tags were distributed efficiently—the trademark

36

D-Day (Departure Day) Classmates, professors and SBEP support staff arrived at Terminal 2 between 6 to 8 AM to have ample time to receive our batch customized SBEP caps and to check in together for our 9AM flight to Jakarta. The flight departed on time and the plane landed at Jakarta International Airport (Soekarno-Hatta) by 12 noon.

“The world is a book, and those who do not travel read only one page.”

– Saint Augustine

bus, we felt the joy and pride of Mr. Surja that he was the official local tour guide of our class. He immediately pointed out the significant landmarks in Jakarta, the modus operandi of the traffic police and to our amazement, he was equally conversant with the economic data and situations of Indonesia, applying both macro and micro principles. He was quick to compare the customs and behaviors of Filipinos and Indonesians giving us a better perspective of our Asian neighbor. It was a pleasant surprise to have our “first” lecture on Indonesia and its culture from this wise man.

We instantly felt his passion for his work and care for all of us. Every morning he would join us for breakfast and made sure that we had a restful sleep. As soon as he boarded the bus, he would do a head count then he would give us trivia on Indonesia, e.g. where motorists would drop paper bills to gain access, where to buy Civet coffee, former president Sukarto’s potential wealth, the sushi bar, etc.

The facilities and amenities at Pullman Central Park Hotel surpassed our expectations.

The buffet breakfast at Pullman Hotel was a feast every morning with local and international selections everyday.

The 5 days of eating, shopping, traffic, country report, sight seeing, singing, selected lectures, and case analysis group work and

We were warmly (literally and figuratively) greeted by Mr. Surja, the preferred tour guide of UA&P.

The Tour Guide Mr. Surjadjaja Tanudiredja or Surja, is an Indonesian with Chinese descent. Within minutes upon boarding the

SOLVING RP’s INFRASTRUCTURE WOES

The c Dr. R lass listens oland o Dy. to the Pro jana

lectur e of

che to ial Atta he Trade c r e m , Com ring t gayoso troduction du r A a Ms. Alm, gives an in a Jakart . n io s Mis presentation with dramatization, further developed the camaraderie we started in the first out of town held in Baguio, and blossomed into lifetime friendship in Jakarta.

Looking back, the lectures and cases could surely be done in Manila or anywhere else, but the idea of travelling together as one SBEP family made the trip exciting and memorable.

Plant Visit – PT Liwayway The plant visit to PT Liwayway gave us a sense of nationalistic pride that a Filipino family-owned corporation can compete and lead the market share in the snack food industry. Mr. Jefferson Go, Marketing Manager of PT Liwayway

15 while on the The SBEP Class 20 way to the Plant Visit shared the economics of doing business in Indonesia and their plan to open more factories to serve the growing demand. And we were blessed with plenty of snacks to bring home.

Sunday Mass One distinct trademark of studying in UA&P is the importance it gives to the spiritual needs of the community. The entire class was invited to attend the Holy Eucharist on Sunday at the Jakarta Cathedral, which was well-attended by local mass-goers. Although the mass was done in Bahasa Indonesia, everyone was equally attentive and participated actively during the Holy Mass. We observed that the mass was solemn and it was attended by people of diverse races. Across the Catholic Church is a Moslem mosque.

This gave us a feeling that there is hope amid the chaos and confusion of this world as long as people continue to pray.

Jakarta, Indonesia in a day The much-talked about traffic in Jakarta did not discourage the group from exploring Jakarta, from museum to miniature park.

One of the highlights of the trip was to conquer the fear of being able to touch the endangered and dangerous Komodo Dragon, a giant lizard with venomous saliva. It was like a National Geographic feature coming to life. The close encounter of Nicki, Edward, Bernie, Jun and others with the reptile made their SBEP program more memorable, that any weekend lecture combined.

The SBEP Class 2 tour inside the O 015 takes an Oishi pose after a ishi Factory.

SBEP MAGAZINE 2015

37

lass BEP C S e h T .

Square by the ta hilla h cene staged a F e h t at up s Hold up epicts a holdd 2015 ”. r “Soldie

At the National Monument (Monas)

At the Natio nal Museum

Gaining Knowledge, Weight and Better Friendship Food in Jakarta could be spicy but this condition surely did not stop us from enjoying every meal – from breakfast, snacks, lunch and dinner. But Filipino food does not fail in comparison when it comes to taste. Mr. Surja made sure that we gained something from this trip. Surely, aside from gaining economic knowledge, we also gained more weight during the 5-day out-of-the-county lecture, but it was all worth it—for lasting friendship with our classmates and professors.

Formal grou p shot

Life’s Simple Joys

By Ms. Bernadette F. Raymundo, SBEP Class 2015 “A journey is best measured in friends, rather than miles.” – Tim Cahill The trip would not be complete without the much anticipated night out and shopping for souvenirs. Just as the common expression goes “All work and no play makes Jack a dull boy.” Almost like an unspoken tradition, karaoke was one of the most sought out group activity of majority of the class. Bonding over music and light drinks, we not only enjoyed each other’s company but also discovered more about each other. It was amazing to hear soft spoken and quiet classmates like Guiller, Cesar, Dennis, and Gretchen, to name a few, belt out difficult and high notes while some of us were encouraged to sing loudly (even if not in tune) by our diva and rock star classmates Noel, Dr. Ferj and Dr. Franz. We were energized and had a terrific time.

Mr. Noel Gonzales, President of the SBEP Class 2015, dished out a song in the bus.

As for shopping, we were advised that bargaining is a must when shopping in Indonesia. The class ventured out to Palace Place, Thamrin City and the Plaza Indonesia to buy souvenirs for work colleagues, friends and loved ones. Batik was the first thing that came to mind when shopping for Indonesian mementos. It would be impossible to visit Indonesia and not be overwhelmed by the many colours and patterns of the country’s most highly developed art in so many forms.

38

SOLVING RP’s INFRASTRUCTURE WOES

Trivia: The word batik originates from the Javanese tik and means to dot. To make a batik, selected areas of the cloth are blocked out by brushing or drawing hot wax over them, and the cloth is then dyed. The parts covered in wax resist the dye and remain the original colour. This process of waxing and dyeing can be repeated to create more elaborate and colourful designs. After the final dyeing, the wax is removed and the cloth is ready for wearing or showing.

Several of our classmates regrouped to either scout for antiques or buy books, fashion accessories, and signature apparels while some of us went for the sought after crunchy prawn crackers popularly known throughout Southeast and East Asia, Indonesia and Malaysia as the Krupuk Udang. It was a feast to the eyes when paper thin chips expand and curl into ­­­fluffy crackers upon contact with searing hot oil. We had the chance to indulge and enjoy this popular snack throughout our stay that we just had to get some for our loved ones to try. For the more adventurous and daring classmates who sought for a unique delicacy as a gift, the kopi luwak tops their list as this civet cat coffee is uniquely produced from the coffee beans digested and excreted by a palm civet.

While the trip to Jakarta was brief, it was enough to forge a stronger bond of friendship amongst the class of 2015.

Kudos to the faculty and support staff of SBEP for making our 5-day trip in Jakarta Indonesia a comfortable, enjoyable, and remarkable experience.

Kapihan

The SBEP Alumni Office is organizing a monthly kapihan at UA&P. Since June 2015, the following kapihan sessions have been realized:

2.

To get first-hand updates on what’s happening in the economy and the business environment – An invited guest speaker will start the Kapihan with an informal / short briefing on pressing economic issues and their impact on the business sector. The attendees can freely join the interactive discussion while having breakfast and coffee.

– UA&P economists, professors, alumni and distinguished guests from the government and private sector will be invited as speakers.

3.

To provide a venue for networking with fellow senior executives on a monthly basis.

– The SBEP boasts of its alumni (numbering 1650+) from hundreds of companies, representing not only top corporations, but also medium-sized, dynamic enterprises, professionals (lawyers, doctors, engineers, etc.), and government officials including the military. The diversity and level of background of the alumni contribute to a truly enriching exchange of theory, experience, and wisdom.

June 5 - “Building Your Brand” by Mr. Daniel Moran July 3 - “Change Your Stories, Change Your Lives” by Mr. Raju Mandhyan August 7 - “Why Your Strategic Choices Often Contradict Your Preferences”

by Dr. Ricardo Barcelona September 16 - “My Experience in Moving from Corporate Life after almost 27 years, to being an Entrepreneur….Its Travails and Achievements”

by Mr. Aton Atilano October 23 - “Engineering Solutions for Good Life” by Mr. Ericson Maquinto November 11 - “Off-Balance Sheet Equity Finance for Energy Management Projects of Commercial and Industrial End-Users in the Philippines” by Mr. Alexander Ablaza January 29, 2016 - “Integrating Renewable Energy in the Distribution Grid of Meralco Network” by Ms. Anna Maria Reodica The objective of the Kapihan is three-fold: 1.

To bring back the SBEP alumni to UA&P All alumni from Class 1975 to 2015 are encouraged to attend the Kapihan. This will be a monthly breakfast reunion for the SBEP alumni and their guests.

The invitation to the next Kapihan session will be sent to all alumni through email. The SBEP alumni may bring a guest(s) to the Kapihan.

Registration is for free. The only cost to the attendee is breakfast.

For more inquiries on our monthly Kapihan, please get in touch with Ms. Tata Salazar, marketing and alumni affairs manager, or with Ms. Lea Riñon, marketing and alumni affairs coordinator, by email at sbep@uap.asia or by phone at 634-2820 / 634-3095 / 637-0912 loc.

222.

It’s time to be updated and re-connected! Be part of the SBEPAlumni Loop!

SBEP MAGAZINE 2015

39

SBEP

2015

Class