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Strategic Analysis and Research by the

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CENTER FOR STRATEGY, ENTERPRISE & INTELLIGENCE

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I am blocking the P10 billion payment being asked for Hacienda Luisita. For that to be paid, they have to cut off my head and take me out. That is the root and end of this impeachment complaint. ~ Chief Justice Renato Corona speaking on GMA7's Unang Hirit (after 31 mins. on video)

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Volume 2 - Number 10 • March 12-18, 2012

His media hopping is what we may call defense by publicity. ~ Impeachment prosecutor Miro Quimbo, who had presented evidence to media despite a Senate ban, criticizing Corona's TV and radio interviews

4 Do We Need an Anti-Trust Law?

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With mega-conglomerates buying up or building market dominance, if not monopolies in key industries, Congress is looking again at anti-trust legislation • Reining in the monopolists: Constitutional, penal and civil provisions, plus industry laws try to keep the cartels in check • Where giants rule: The captive Philippine economy • Regional perspective: Asia’s competition policies and statutes

14 Prepaid Power for the Poor: Will It Sell?

Prepaid cards for electricity is among the many ideas to package and market products and services for low-income consumers. And the payoff is anything but low • Pay and plug: Electric meters that charge you before they give a charge • Fortunes at the bottom: Innovative ways to sell where money is scarce • Empowering the slums: A U.S. AID guide to urban poor electrification

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22 The Danger of Drug-Resistant Disease

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32 Cyberspace: The Next Big War?

Misuse of antibiotics, often due to poverty and poor health care, is spawning hardto-cure tuberculosis. One victim dies every 20 seconds and over half a million get the disease yearly. Among the high-prevalence countries: the Philippines • Beating the cure: The World Health Organization warns against resistant germs • When TB and HIV mix: The combination is almost always a death sentence

With modern society immensely dependent on computer systems and increasingly interconnected online, faceless intruders are breaking in to spy, steal, slash and sabotage. No wonder, from superpowers like America and China to teenage hackers probing for cracks in state and corporate websites, the world is gearing up for cyber conflict • Don’t be surprised: Though deemed unlikely, better be ready for e-war scenarios

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42 Wait Till You See This

A 40-inch touch-screen computer, cameras that focus after taking pictures, car control by smartphone, and more in our special roundup of recent high-tech shows in America, Europe and Russia. Here’s a glimpse of the near future in hardware, software and other amazing gadgetry

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POINT & CLICK You can access online research via the Internet by clicking phrases in blue

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Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.


Crafting the law for competition and choice “In the Philippine economy, just about anywhere one might turn, one is likely to find a sector dominated by a handful of firms.” That’s the first Strategy Point in Atty. Ron Salo’s incisive report on business competition and anti-trust legislation in the country. In his strategic analysis and research, the UP College of Law and University College London Master of International Law graduate (with Merit), harnessed not only his formidable academic knowledge, punctuated by a University College London dissertation (with Distinction), plus joint awards with two other law students for their UP dissertation.   Even more relevant and useful were Salo’s many years of drafting legislation and

executive issuances in both the House of Representatives and the Office of the President. He also participated in Cabinet-level deliberations of the Investment Coordination Committee under the National Economic & Development Authority, as undersecretary alternating for the Executive Secretary, as well as the Export Development Council of the Trade and Industry Department. Plus international conferences and negotiations, including those for the U.S. State Department’s Millennium Challenge Corporation $400-million plus assistance granted in 2010.

Atty. Ron Salo: ‘Maximize consumer welfare and market efficiency’

From his long experience in crafting legislation and policy, Salo has made a personal crusade of equalizing protection under the law to diminish somewhat the mammoth advantages of being big, rich, powerful and influential, while enlarging the common man and woman’s freedom and options, including consumer choice. “Fair and free competition,” argues the Managing Partner of Robles Salo Dulnuan Law Offices, “maximizes consumer welfare, enhances market efficiency, and preserves competition as a process in order to curb coercive, exclusionary and exploitative conduct of firms.” Leveling the playing and shopping field also strengthens businesses by giving them the same competitive environment that beef up firms elsewhere, particularly in Europe and North America. Hence, the right competition policy and legislation help both companies and consumers, while imbuing the economy with the same democratic and egalitarian choice we treasure in the political arena. That kind of holistic solution is exactly what we favor at the Center for Strategy, Enterprise & Intelligence. And like Atty. Salo, we hope our legislators vote for freedom and fairness, too.


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The Key to Fair Competition By Ron Salo

STRATEGY POINTS In the Philippine economy, just about anywhere one might turn, one is likely to find a sector dominated by a handful of firms The proliferation of industry-specific laws and industry-specific regulatory bodies have resulted in little actual regulation The Philippines has industry-specific laws to address unfair competition, but a comprehensive national law is still needed to harmonize their enforcement

Twenty-five years since the 1987 Constitution directed the State to regulate or prohibit monopolies in the public interest, and to categorically prohibit combinations in restraint of trade or unfair competition, the Philippine economy remains extremely vulnerable to anti-competitive behavior and unfair trade practices of firms and unscrupulous businessmen. This observation finds credence in the obviously few players in most of the country’s critical industries, such as telecommunications, media and oil distribution, among others. Worse, the Filipino people are oftentimes victims of uniform prices of essential commodities oftentimes simultaneously imposed by the few industry players. With a host of existing industry-specific laws to address unfair competition, is it possible that a comprehensive law on competition is still needed? Will it happen in the 15th Congress? In any case, after several failed attempts in past Congresses, the 15th Congress appears set to pass a national competition law (commonly referred to as antitrust law in the United States). In August, with the then-proposed acquisition of mobile telecommunications

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firm Digitel by the Philippine Long Distance Telephone Company (which would effectively give the latter control of 70% of the local mobile-service market) still pending, the House of Representatives approved on second reading House Bill (HB) 4835, which seeks to prevent building of business monopolies and cartels. The bill also seeks to create an independent regulatory body that will monitor competition in the market.

Foreign antitrust laws, such as the U.S.' Sherman Act and the Model Law on Competition of the UN Conference on Trade and Development (the “UNCTAD Model Law”), seek to eliminate conduct that tends to destroy competition. The Senate and the House bills have the same objective, particularly directed against unfair trade, anti-competitive conduct, and combinations in restraint of trade.

In January, the Senate approved a committee report on Senate Bill (SB) 3098, which seeks to institutionalize the Office on Competition created under Executive Order 45. The bill will soon be up for approval on second reading after plenary deliberations and debates. If SB 3098 is passed on third reading, the House and the Senate versions will be subjected to a bicameral conference committee to reconcile differing provisions.

Special laws. Apart from provisions in the Constitution, the Revised Penal Code, and the Civil Code, various special laws also address unfair competition practices in specific industries, including:

After both chambers approve the reconciled version, the bill will be transmitted to President Benigno Aquino III for his signature. Once the law is passed, the Philippines will join 111 countries in Europe, Latin and North America, and Asia that have already adopted comprehensive competition legislation, 81 of which adopted such legislation in the last 20 years. Competition laws’ fundamental objective is to promote and protect competition within markets by prohibiting practices that restrict or prevent free and fair competition. It is believed that fair and free competition maximizes consumer welfare, enhances market efficiency, and preserves competition as a process in order to curb coercive, exclusionary and exploitative conduct of firms.

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1. The Price Act protects consumers by stabilizing the prices of basic necessities and prime commodities while seeking to punish persons habitually engaged in the production, manufacture, importation, storage, transport, distribution, or sale of goods who engage in: Hoarding, which is the undue accumulation beyond normal inventory levels, unreasonable limitation or refusal to sell, or unjustified taking from the channels of trade; Profiteering, which is the sale or offering for sale of any basic necessity or prime commodity at a price grossly in excess of its true worth, and/or; Cartel, which is a combination or agreement between two or more persons engaged in the production, processing, storage, supply, or sale of any basic necessity or prime commodity designed to artificially and unreasonably increase or manipulate its price (Sec. 5).

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6 2. The Electric Power Industry Reform Act of 2001 prohibits engaging in any anti-competitive behavior, such as cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets. 3. The Downstream Oil Industry Deregulation Act of 1998 liberalizes and deregulates oil industry to ensure a competitive market to promote fair pricing, adequate and continuous supply

of environmentally clean and high-quality petroleum products. 4. The Anti-Dumping Act of 1999 protects Filipinos enterprises against unfair foreign competition and trade practices. 5. The Intellectual Property Code of the Philippines protects intellectual property owners from infringement and unfair competition, and penalizes persons using false designations of origin or description of fact, or committing misrepresentation.

Local antitrust laws and regulations in the big picture Antitrust laws and regulations actually exist in Philippine law. Provisions based on U.S. antitrust law (which was passed in 1890 and revised in 1976), can be found in the Philippine Constitution, the Revised Penal Code and the Civil Code. 1987 Constitution. Under Article XII, Section 19 of the 1987 Constitution, the State is mandated to regulate or prohibit monopolies when the public interest so requires. It prohibits, without exception, combinations in restraint of trade or unfair competition. The Constitution does not define what constitutes unlawful monopolies, or combinations in restraint of trade or unfair competition practice. Thus, separate legislation is necessary. Revised Penal Code. Article 186 of the Revised Penal Code (RA No. 3815) penalizes monopolies and combinations in restraint of trade. Specifically, the following acts are penalized: 1. Entering into a conspiracy or combination in restraint of trade or to prevent by artificial means free competition in the market; 2. Monopoly of merchandize to alter prices by spreading false rumors or any other artificial

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means to restrain free competition in the market, and; 3. Acts of manufacturers, producers, processors or importers prejudicial to lawful commerce, or of increasing market price in any part of the Philippines (Article 186). Other frauds in commerce and industry, such as falsely marking gold and silver articles and altering trademarks are also penalized (Article 187). Machinations in public auctions, such as soliciting gift or promise in consideration for refraining from taking part in any public auction, or attempting to cause bidders to stay from an auction by threats, gifts, or promises in order to reduce the price of the thing auctioned are likewise prohibited (Article 185). Civil Code. The Civil Code of the Philippines (RA 386) allows the collection of damages arising from unfair competition in agricultural, commercial, or industrial enterprises or in labor (Article 28, New Civil Code). Damages may also be collected in cases of abuse in the exercise of rights and in the performance of duties such as abuse of a dominant position by a monopolist. The Civil Code lists the means by which unfair competition may be committed – force, intimidation, deceit, machination, or any other unjust, oppressive or high-handed method.

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Other industry-specific laws exist, such as for petroleum (Batas Pambansa Blg. 33, June 6, 1979); medicines (Republic Act No. 9502, June 6, 2008); and rice (Presidential Decree No. 4, as amended, September 26, 1972). Limitations of existing antitrust laws and regulations. The present laws have been framed to substantially cover all practices that constitute unfair trade, anti-competitive conduct, and combinations in restraint of trade. However, they appear to lack specificity such that their applicability to a particular case remains a fact-driven exercise. From there, with a dearth of jurisprudence on the application of antitrust measures, it is difficult to predict with certainty how Philippine courts will resolve charges of antitrust practices. In 1997, no less than the Supreme Court acknowledged the need to “recast our laws on trust, monopolies, oligopolies, cartels and combinations injurious to public welfare – to restore competition where it has disappeared and to preserve it where it still exists…. (W)e need to perpetuate competition as a system to regulate the economy and achieve global product quality,” as cited by Anthony Amunategui Abad in his June 2005 presentation on “Recommendations for Philippine Anti-Trust Policy and Regulation.” One law, one office to cover everything. Both HB 4835 and SB 3098 (collectively referred hereafter to as “the Bills”) specifically aim to define prohibited acts that are considered anti-competitive, and to establish the office that will enforce the provisions of the law.

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The Bills generally recognize three types of cartels: 1. A combination of firms providing goods in relevant markets acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity; 2. A group of firms that agree to restrict trade for their mutual benefit, which may or may not be of an international scale, and; 3. Firms or sections of firms having common interest designed to promote the exchange of knowledge resulting from (i) scientific and technical research, (ii) exchange of patent rights, and (iii) standardization of products among themselves with the intent of preventing or distorting competition. The Bills define monopoly as a privilege or undue advantage of one or more firms, consisting in the exclusive right to carry on a particular business or trade, and/or to manufacture a particular product, article or object of trade, commerce or industry. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service—for instance, Section 4 (k), HB 4835. Prohibited acts. The Bills prohibit agreements that prevent, distort or restrict competition, specifically the following: 1. Price fixing, which is agreement among competitors to raise, suppress, fix or otherwise maintain the price at which their goods and services are sold (i.e.

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8 establishing or adhering to price discounts, holding prices firmly, eliminating or reducing discounts, adopting a standard or formula for computing prices, etc.) 2. Bid rigging, which is an agreement to fix prices at auctions or in any other form of bidding, with the purpose and effect of creating a monopoly or cartel, or lessening competition (i.e. cover bidding, bid

suppression, bid rotation and market allocation). Abuse of dominant position. The Bills penalize the abuse of dominant position, which is committed by engaging in unfair methods of competition, or in unfair or deceptive trade practices, or entering into combinations in the form of trust or otherwise, or conspiracies, with the purpose

The Philippine economy in a nutshell Anthony A. Abad's 2005 presentation “Recommendations for Philippine Anti-Trust Policy and Regulation” provides a neat overview of the Philippine economy from the perspective of market competition. Abad cites various sources in reporting, “The top 5.5 percent of all landholding families own 44 percent of all tillable land and the richest 15 percent of all families account for 52.5 percent of all the national income … only 10 corporations in 1991 accounted for 26 percent of all revenues, 40 percent of net income, and 34 percent of total assets of the top 1000 corporations.” He also reports that certain key industries – petroleum, iron and steel manufacturing, fertilizer, pulp and paper, home-appliance manufacturing, tobacco and cigarettes, and tire manufacturing – are dominated by three to four firms in each sector, as measured by these firms' market share in relation to total market size. All this, Abad attributes directly to “failed economic policies of the past, particularly from a surfeit of regulation and a dearth of competition,” referring to import substitution, protectionism (“in the guise of nationalism”), the allocation of resources through regulation (high tariffs and outright quotas on imports), and barriers to entry for potential competitors (franchise and license requirements). The Philippine economy, he summarizes, is largely captive to a small group of economic interests who

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have succeeded in maintaining market dominance by successfully excluding other firms from entering and competing in local markets. According to Abad, the concentration of economic power has led to concentration of political power in the hands of the elite, with 60 to 100 political clans controlling all elective positions at the national level, and “(t)he marriage of economic and political power presents a formidable hindrance to any form of change that may, or threaten to, alter the existing status quo.” Efforts of previous administrations in the areas of trade and investment liberalization and deregulation, Abad reports, have not been enough to achieve the sustainable and stable competitiveness necessary to make the Philippines globally competitive. Competition, he continues, is still necessary for improving capital accumulation, factor productivity, efficiency in resource allocation, and technological advancement and innovation. If trade and investment liberalization are needed to entice investors to come to the Philippines, he concludes, “measures must also be adopted to make them stay,” including “the enforcement of existing laws and the introduction of new measures to foster and maintain fair competition in the Philippine economy.”

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A national antitrust law: Key to fair competition?

and effect of preventing, restricting or distorting competition (Section 9, HB 4835). Abusive agreements fall under the definition of abuse of monopoly power, and include the following: • Predatory behavior towards competitor • Limitation and control of markets • Market allocation • Arrangements to share markets or sources of supply • Price discrimination • Exclusivity agreements • Tie-in arrangements • Boycott Anti-competitive mergers. The Bills prohibit any firm engaged in commerce, trade or industry to acquire, directly or indirectly, the whole or any part of the stock or other share capital, assets or voting rights of one or more firms engaged in any commerce, trade or industry where the object or effect of such conduct is to prevent, restrict or substantially lessen competition. Mergers of banks or banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions and other special corporations are not prohibited, but the favorable recommendation of appropriate government agency shall first be obtained. HB 4835 proposes the creation of an independent Philippine Fair Competition Commission to implement the national policy and attain the objectives of the proposed law (Section 5 of HB 4835). On the other hand, SB 3098 creates the Office for Competition under the Department of Justice (Section 5 of SB 3098).

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One particular blogsite, The Vincenton Post, published a post in August 2010 that called antitrust law “President Aquino's Most Evil Proposal,” citing arguments by an author, Raymond Niles, from his book The Case Against Capitalism. Among the arguments cited: 1. Antitrust law punishes the best companies; 2. Antitrust is used by unscrupulous companies against their competitors; 3. Antitrust is arbitrary and non-objective, and 4. Capitalism doesn’t need antitrust. Proponents of the proposed measures, however, are convinced that comprehensive competition legislation will bring advantages that will outweigh ideological objections. Besides, that market imperfections require a strong regulatory framework to address is a belief shared by majority of jurisdictions, including the developed countries in Europe and North America. The following characteristics of the Bills are particularly noteworthy: 1. Specificity of criminal acts The Bills now specifically define the unlawful uncompetitive practices oftentimes committed by firms and unscrupulous businessmen. This is a direct response to the observation made by our

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10 Supreme Court on the need to arrive at a more definitive law pertaining to antitrust – to monopolies, oligopolies, cartels and combinations injurious to public welfare. Despite the existence of the law against antitrust in the country’s Revised Penal Code since 1930, we have yet to

2. The structure of the office The UNCTAD Model Law on Competition provides at least three design choices for the regulatory office: a. The bifurcated judicial model – the Authority is empowered to be investigative, and must bring enforcement actions before courts of general jurisdiction, with rights of appeal to general appellate courts.

A law is facially invalid if men must necessarily guess at its meaning and differ as to its application hear of someone to be prosecuted for uncompetitive conduct. Perhaps this is the primary reason why firms and businessmen engage in noncompetitive behavior -- they know no criminal liability will attach in any way to their actions. It is also possible that the existing laws are vague in themselves, such that the prosecution arm of the government is left guessing whether a specific uncompetitive conduct falls squarely within their definitions. The prosecution arm is certainly aware of the void-for-vagueness doctrine, which holds that a law is facially invalid if men of common intelligence must necessarily guess at its meaning and differ as to its application. While the doctrine’s application in invalidating criminal statutes is yet to be definitively ruled upon in the Philippines, it will nonetheless pose a constitutional challenge to existing penal provisions on antitrust.

b. The bifurcated agency model – the Authority is empowered to be investigative, and must bring enforcement actions before specialized competition adjudicative authorities, with rights of appeal to further specialized appellate bodies or to general appellate courts. c. The integrated agency model – the Authority is empowered with both investigative and adjudicative functions, with right of appeal to general or specialized bodies.

With the passage of the law, such challenge will certainly be minimized if not completely forestalled.

Each of the models involves certain tradeoffs. For instance, the bifurcated agency model may improve the quality of decisionmaking by concentrating adjudication in a small group of specialized and expert judges. This model may be resourceintensive, however, where courts of general jurisdiction provide a ready alternative, and may also raise justice or due process concerns if access to courts is limited. The integrated agency model may be the most administratively efficient enforcement scheme, but it raises significant due process risk, which needs to be safeguarded against, particularly in the Philippine jurisdiction. In this regard, it should be noted that HB 4835 follows the bifurcated judicial

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model, while SB 3098 follows an integrated agency model. Consistent with our concept of due process, where one cannot both be prosecutor and judge at the same time, HB 4835 would appear to be more constitutionally aligned as far as the structure of the enforcing office is concerned. 3. Collusive bidding is already prohibited in government transactions; this time, private transactions The Bills prohibit any conduct to fix price at an auction or in any form of bidding including cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation. Republic Act 9184 already prohibits these collusive bidding practices

in government transactions. By virtue of these proposed measures, these anticompetitive practices will also be outlawed in private transactions, where these practices are also manifest, if not more blatantly committed. Whether the proposed measures, when passed and harmonized, will really result in a national antitrust law that will promote fair competition in the country’s critical industries and suppress anti-competitive behavior among firms remains to be seen. Nonetheless, the proposed measures hold much promise, if only for the expected integration of definitions of anti-competitive behavior under a national objective of promoting free and fair competition.

Competition policy: Still a work in progress around Southeast Asia A 2005 paper by Professor G. Sivalingam of the University of Malaya in Malaysia compares competition policies around the Association of Southeast Asian Nations (ASEAN), framed around some interesting observations, including: 1. Of the 10 member nations, only three – Indonesia, the Philippines, and Thailand – have a competition law 2. The most advanced member nation, Singapore, does not have a competition law 3. ASEAN itself has not developed a common competition policy

To elaborate, he cites a 1999 APEC (Asia Pacific Economic Cooperation) study that found APEC members were reluctant to formulate and implement competition policies because of resistance from “the politicians and bureaucrats, who perceive an erosion of discretionary authority.” He also cites studies that identify “interest groups in the public sector, resisting competition for public enterprises (and) … powerful private sector lobbies wishing to protect their markets.” In addition, “inadequate bankruptcy rules and policies enable the government to keep ailing public enterprises to serve social and political purposes.”

Sivalingam attributes the reluctance of ASEAN nations to enact competition laws to their incomplete transitions from mixed economies pursuing “growth with distribution” – with state enterprises to help insure proper distribution of the gains from economic growth – to market-oriented economies with states promoting fair competition.

Indonesia's legislation springs from 1997 Asian crisis. Indonesia's competition legislation, which was passed in 1999, emerged from the 1997 Asian financial crisis, in exchange for International Monetary Fund aid. Its “Law Concerning the Prohibition of Monopolistic Practices and Unfair Business Competition” was inspired by German

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law, and is implemented by a Business Supervisory Committee. At the time of the paper's publication, there was insufficient data to assess the effectiveness of the law or the implementing committee, but Sivalingam does bring up a criticism of the policy. According to the Asean Focus Group at the Australian National University: “(M)any of Indonesia’s anticompetitive problems have been the direct result of government-sanctioned monopolies, in the form of protection for cronies and state-owned enterprises. It would have been far simpler to remove these distortions at their source, rather than to create a whole new, complex apparatus,” referring to the competition law. Malaysia has been considering legislation since 1993. Malaysia has a Consumer Protection Act, but no comprehensive competition law, even as it has been drafting one since 1993 that is partly based on the Fair Trade Act of Japan. The country has privatized several government agencies – education, power, water, telecommunications – and infrastructure development. The only privatized activity that has a regulatory commission is telecommunications. The paper quotes a commentator in positing that Malaysia's failure to enact a competition law might indicate “a reluctant attitude . . . toward competition policy,” which might in turn be because the government fears such a policy “might hinder

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economic development because it deprives the government of its discretionary and regulatory power for development.” Singapore has no comprehensive competition law. Singapore's economy is already fairly liberalized and deregulated, and Sivalingam posits that Singapore might be figuring that its international competitiveness is sufficient to create an environment to govern domestic competition. Addressing this idea, he quotes other authorities' concern that an open trade and investment regime might be a good device for promoting competition, it might not stand up to concerted efforts of domestic firms to collude or restrict entry, and adds that success in trade and liberalization also need a competitive domestic market environment. Thailand has laws but also anti-competitive forces. Thailand's 1997 Constitution explicitly calls for the State to “encourage a free economic system through market forces, ensure and supervise fair competition, (and) protect consumers and prevent direct and indirect monopolies,” among other things. Even before that, however, there were three laws enacted in 1979: the Price Fixing and Anti-Monopoly Act, Consumer Protection Act, and Public Limited Companies Act, the last of which was enacted to encourage large family-held companies to be listed on the Thai Stock Exchange in order to improve publicdisclosure standards.

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In 1999, two other laws were enacted: the Trade Competition Act, to restrict abuse of monopoly dominance and price-fixing, and the Prices of Goods and Services Act, “to protect consumers against unfair service charges and to oversee sufficient supply of goods to meet domestic consumption.” The Trade Competition Act is enforced by the Trade Competition Commission, which has the power to regulate restrictive agreements as well as mergers and acquisitions, and to stop any anti-competitive act, including the formation of cartels. However, as of the time of its publication, the paper notes that the commission “has only tried two cases, reflecting the strength of latent anti-competitive forces in Thailand.” Vietnam's government still dominates economy. Vietnam, the paper reports, is undergoing a gradual transformation from a socialist to a capitalist economy. It has no comprehensive competition regime, but has given property rights, which it held exclusively, to farm households, and introduced new laws since 1987 to encourage foreign direct investment. However, the government continues to be dominant in the economy, and state-owned enterprises continue to operate as monopolies. Least-developed Laos. Laos is still a leastdeveloped country, with three quarters of the population dependent on subsistence agriculture, an underdeveloped private sector, and very little foreign direct investment. The economy remains centralized, and entry into various entries is still highly regulated. Public monopolies continue to denominate. The paper also noted, nonetheless, that there was some attempt to introduce competitive bidding for hydroelectric projects, and that the telecommunications sector was

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undergoing some liberalization. The paper concluded that given Laos' state of underdevelopment, talk of competition policy and law might be a little premature. Myanmar is a poor agrarian economy with military-held public monopolies. Myanmar is “a poor agrarian economy with very high levels of government intervention,” the paper reported, adding that “public monopolies are held by the military, which restricts entry into several sectors of the economy.” As in the case of Laos, the paper holds that “the introduction of competition policy and law is premature.” Brunei's economy is oil-rich and governmentdominated. Brunei saw no reason to encourage foreign direct investment or promote further privatesector development until the 1997 Asian financial crisis, according to Sivalingam. The government continues to be dominant in the economy, operating several public monopolies, although the banking sector has been liberalized and is now dominated by foreign banks. Developing a comprehensive competition policy or law is not a high-priority item as long as the economy can continue to live off its oil revenues, the paper reports. Cambodia also a least-developed country dominated by public monopolies. Cambodia's economic growth continues to depend on foreign direct investment and textile exports. The paper posits that given the country's lack of development – 80% of the population live in rural areas, and a third live in absolute poverty, and the services sector is largely informal – comprehensive competition policy or law might be unrealistic for the country for now.

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Loading Up a Charge: Will Pre-paid Electricity Work Here? By Verbo Bonilla

STRATEGY POINTS Prepaid electricity can provide electricity to people who might not otherwise be able to afford it Prepaid electricity may have benefits that outweigh the costs to both consumers and suppliers Care must be undertaken to ensure that the first prepaid electricity service in the country is implemented successfully In January, Meralco, the country’s biggest power distributor, announced that it hoped to get approval to testmarket prepaid electricity service soon, and possibly launch it for the public at large before the end of the year. Given that it tried to launch the service four years ago, this latest announcement might not have been totally new, but it's probably safe to say that prepaid electricity is still a novel idea for many Filipinos.

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Then again, what would the difference be between today’s pervasive prepaid phone service and the impending prepaid electricity from Meralco? If one can recall, the introduction of the “Smart Load” prepaid proposition for mobile communications less than a decade ago led to the explosion of the telecoms industry. Now, prepaid phone service dominates the market, with people topping off their cellphone text loads with phone credits purchased from the local convenience store.

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Loading up a charge: Will pre-paid electricity work here?

Will prepaid electricity from Meralco wind up electrifying the country, both figuratively and literally? Will more people get access to electricity who couldn't before? More pointedly, will prepaid electricity redound to the benefit of the majority of Filipinos, most especially the consumers? Impetus for a more efficient distribution service. Meralco hopes to gain much from launching the country’s first-ever prepaid service. For a long time, there has been increasing pressure from government and consumers for Meralco to lower the costs of its operations and become much more efficient. Prepaid electricity may provide a solution to this problem. Pressure came particularly from the AntiPilferage Act of 1994, which mandated, among others, gradual decreases in the amount of system losses — technical as well as non-technical losses such as due to pilferage, theft, or non-payment of electricity bills – being passed on to end-users of electricity as part of their bill. More recently, in 2008, the Energy Regulatory Commission issued a resolution which affirmed the Anti-Pilferage Act and further decreased the cap on this “recoverable systems loss.” Because of this resolution, private utilities like Meralco may only recover 8.5% of systems losses, from the previously allowed 9.5%, thenceforth from year 2010. Meralco has taken great pains to decrease its system losses. For instance, at the start of 2010, it invested P1.2 billion to increase operational efficiency. In announcing this investment, erstwhile Meralco President Jose P. de Jesus said, “To reduce our system loss by 1 percent, the estimated investment will

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be P1.2 billion.” The utility firm has largely succeeded in reducing these losses, from a high of 11.10% in 2004 down to 7.94% in 2010, according to Meralco’s 2010 Annual Report. Bringing down losses a charge at a time. How can prepaid electricity further bring down systems losses and make Meralco much more efficient? Well, the fact that payments under the prepaid setup occur upfront, prior to the delivery of electricity, already dispels the problem posed by potential nonpayment of consumed electricity. Also, under the prepaid system, electricity service is retailed in more affordable amounts, something not possible under the previous system. Because electricity is made more accessible and affordable this way, there would be less incentive for pilferage and theft, a major source of system loss. Prepaid electricity presents many other benefits for the firm. A study of South Africa's experience with prepaid electricity, the first-ever implementation of this scheme, identified the following benefits for Eskom, that country’s power distributor: 1. No need for an additional billing system; 2. Lower meter-reading costs because no meter readers are needed; 3. No more disconnection, reconnection, and associated administrative hassles; 4. Ease of installing prepayment meters; 5. No need to access the customer’s property; 6. No more complaints about inaccurate meter reading, and; 7. Ease of managing revenues (p. 920). These benefits are efficiency gains that can amount to millions of pesos worth of savings for the utility firm.

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16 Since the tests on prepaid metering were started four years ago, however, Meralco has had to resolve questions on regulatory requirements – e.g., how to recoup the costs of prepaid meters —and find the right value proposition to offer the public. This year, working together with Smart Communications, the country’s largest mobile company, Meralco hopes to finally roll out the service.

Of the impending launch of the system, Panlilio disclosed, “What will make Meralco’s implementation different is our leveraging on the strength of prepaid telecoms in the Philippines. The Filipino’s love affair with his prepaid mobile is a powerful vehicle we will ride on, making the Philippine implementation somewhat unique versus the early adopters of the service.”

Loading up and topping off electricity. Prepaid electricity may be operationalized in various ways; some of the types of prepayment systems are detailed in the box above. For the Philippines, the system would take advantage of the country’s wide mobile communications network, revealed Alfred Panlilio, Meralco’s senior vice president for customer retail service.

Panlilio also disclosed that the purchase of Meralco prepaid electricity will be the same as mobile-phone loading: a consumer provides the local convenience store with his mobile number, and the store loads that number through text messaging. The consumer afterwards gets a confirmation text, saying that his meter is loaded, and electricity is immediately provided.

Types of prepayment meters Detailed below are the three types of prepaid electricity meters, with information sourced from Ebico, a UK-based gas and electricity supplier: • The Key Meter. A meter that uses a special plastic key with security features. The key is taken to a local charging point and loaded with credits. The key meter can provide readings and other information and has the capability to update prices automatically. • The Token Meter. A token meter is operated by inserting cardboard tokens (cards) with a magnetic strip on the back. The tokens can be purchased from authorized agents. After putting the card in the meter, it will no longer work and must be disposed of. Other variations of the meter may take in real cash, but are considered less safe. In a token meter, new electricity prices must be adjusted manually. • The Smartcard meter. This meter uses a smartcard, which is the same size as a credit card. It operates by downloading information from an electronic chip on the card. The smartcard is taken to a local charging shop and loaded with credits. Just like the key meter, the smartcard meter can reflect various information including up-to-date electricity rates. With mobile phones used in loading credits, Meralco’s prepaid electricity system may well use a variation of the smartcard meter. In this case, the electronic chip may be imbedded in the meter and is able to receive information over the air (like a mobile SIM card).

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Loading up a charge: Will pre-paid electricity work here?

HOW PREPAID ELECTRICITY MAY BE IMPLEMENTED IN THE PHILIPPINES Electricity Grid

20 Digit Number

Prepaid Meter

Billing Company's Data-base

Check Electricity Quota

SMS Order

Your electricity quota is over: No token SMS Token: Authorizing electricity supply

Fund Transfer

Mobile Phone Company

Check Credit

Electricity suplied

Well

Electric Water Pump

 

Source: Controlling groundwater pumping online, Department of Natural Resource Economics, Sultan Qaboos University, Oman, 19 June 2009

As part of the service, the consumer also gets an alert when his load is running low, approximately four days before the electricity is cut off. Such a system would be convenient for household consumers on a tight budget. Such a system would also reflect the synergy between Meralco and Smart Communications, which Meralco president and Smart chairman Manuel Pangilinan discussed in Sept. 2010, when he said: “With Meralco, we’re considering prepaid electricity services, to capitalize on Smart’s wireless infrastructure and its robust prepaid billing platform.” Will it benefit consumers? We’ve discussed how the prepaid electricity system can be beneficial for the utility firm, but what about the consumers? The assessment of the South African experience cited above also identified

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several advantages for the consumer, including: 1. A better understanding of how much energy is being consumed; 2. A better management of one’s budget; 3. The ability to load electricity as needed, and; 4. Removal of disconnection/reconnection costs and time lags for reconnection. Prepaid electricity also leads to “an increase in the habit of saving and energy efficiency among consumers,” according to an article on the Argentine experience with prepaid electricity published by Energia, an international network concerned with gender issues and sustainable energy. “Prior to prepayment metering, 28% of respondents reported trying to save electricity at home. After installation, 90% of women respondents and 60% of men reported trying to save electricity.”

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18 Another major benefit is the access to electricity the prepaid scheme provides those who could not otherwise afford it. In South Africa, for instance, the prepaid scheme allowed for the provision of the service in poor communities in dispersed rural areas. In Argentina, it facilitated the access of low-income urban communities to electricity.

the gap between members of the population with and without access to electricity. This gap is still sizeable, as according to One Goal, Two Paths, a 2011 World Bank study, there are still up to 15 million Filipinos, or 16% of our population, without access to electricity (p. 22). Downsides to prepaid electricity. Prepaid electricity has its disadvantages as well as its share of detractors.

Similarly, prepaid electricity in the Philippines has the potential of narrowing

The money at the bottom of the pyramid From snacks, shampoos, mobile communications, and now prepaid electricity, companies have packaged goods and services in small, convenient, and more affordable sizes. This is sachet marketing, an approach to tap the market comprised of the world’s poor, otherwise called the “bottom of the pyramid,” or BOP. Ever since the 2004 book, The Fortune at the Bottom of the Pyramid (excerpt here), of management guru C.K. Prahalad, the concept of marketing to the poor has taken off. Prahalad showed that there is money at the BOP and that innovative business models can be successful and profitable. More than that, the BOP concept allows businesses to work towards social transformation in a profitable manner. Others have since contributed to the growing literature on the subject. The paper, The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid (presentation slides here), published by the World Bank, and Marketing to the Have-Less: A Viable Business Strategy, an Asian Institute of Management (AIM) paper, both stress that the BOP comprises a $5-trillion market of largely unmet needs. The AIM paper expounds on the characteristics of the market -- the have-less pay more; they are not expensive to serve and maintain; they comprise the largest segment of the population, and; yet they have limited options-- and on the imperatives for success. A working paper, Fortune at the Bottom of the Pyramid: An Alternate Perspective, published by the Indian Institute of Management emphasize the avoidance of “undesirable inclusion”-- marketing products that are not likely to enhance the poor’s well-being—and “undesirable exclusion”—not offering products that are likely to enhance the well-being of people at the BOP. Innovation, such as in the form of sachet marketing, is a prevalent theme under the new business paradigm of selling to the poor. Sachet marketing enables access to goods or services by lowering the price purchase barriers. According to the World Bank publication above, other business strategies that work are: focusing on the BOP’s needs, localizing value creation (such as franchising); and unconventional partnering with governments and other stakeholders. Serving the World’s Poor: Innovation at the Base of the Pyramid, cited the innovative “Smart Load” prepaid mobile communication, which led to a 47% increase in Smart’s customers in just 10 months. This form of sachet marketing enabled the company to attain among the highest profit margins in the Asia-Pacific region.

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Loading up a charge: Will pre-paid electricity work here?

The consumer group Freedom from Debt Coalition, for instance, asserts that end-users will be at the losing end on the use of prepaid electricity. In a Sun Star report, Freedom from Debt Coalition’s Cebu secretary-general Aaron Pedrosa claimed, “Prepaid electricity would mean further limiting access to power without necessarily improving the quality of service.” Prepaid electricity, he continued, “precisely discriminates on the basis of who can afford it” while circumventing

established regulations, such as the magna carta for residential electricity consumers, on the disconnection of service.

The assessment of South Africa’s experience with prepaid electricity, earlier cited, appears to support Lessons for successful slum this assertion of electrification Pedrosa. The study found that “many In the case of slum electrification, the study Innovative users considered it Approaches to Slum Electrification (2004), published by the U.S. Agency for International Development, underscored that as a big hassle to buy traditional approaches in providing electricity do not work in electricity frequently the slums. This is because of low revenue expectations, legal and consumed their issues in providing service to settlers with no land tenure, time and heightened narrow streets, and lack of safety in slum areas, among their worries of not others. It highlights several lessons learned from studying five having power in the different case studies. These lessons for a successful slum house (p. 920).” electrification program (p. 5) are the following: • Engaging all stakeholders – governments, electricity companies, communities, service recipients, and intermediaries • Designing for slum conditions-- poor physical starting conditions, including narrow alleys, poor housing materials and unsafe wiring • Partnering with intermediaries-- community agents, women’s NGOs, community associations, or community distribution companies • Competing with illegal service providers and controlling theft • Making it easier to pay for electricity-- flexible payment options and easier complaint resolution (such as through prepayment?) • Lowering costs to the electricity company • Government policies supporting electrification • Recognizing women’s roles in electrification-- a gender perspective to ensure that the utility is meeting the requirements of the primary users

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The assessment also identifies the problems experienced by the supplier: 1. The cost of maintenance of prepayment meters went up, instead of down, due to unanticipated problems; 2. Prepayment cannot handle largesize currents, and; 3. Although prepayment

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Loading up a charge: Will pre-paid electricity work here?

technology reduced the incidence of pilferage, it did not necessarily solve the problem.

On the whole, however, the study found that the benefits of prepaid electricity easily outweighed its costs. The analysis concludes that “in general, the simulations confirmed Weighing costs and benefits. the system’s potential as a mean(s) to The disadvantages increase social welfare.” It presented by prepaid also cited a general level of electricity, as well as satisfaction among prepaid “The study found its advantages, were users, and that, “at least in the that the benefits case of Carmen de Areco, selfconsidered in a study titled Prepaid Meters disconnection does not seem of prepaid in Electricity: A Costto be a major issue.” electricity easily Benefit Analysis 2008 outweighed its using actual data from From the above, there appears Carmen de costs, confirming to be a case for supporting the Areco, the first town its "potential as a implementation of prepaid in Argentina electricity in the Philippines. means to increase to adopt the scheme. If the aforementioned costsocial welfare” The analysis noted benefit analysis and the arguments that the experiences of other countries scheme’s adoption who have adopted prepaid can be “expensive for electricity are to be the sole firms and risky for low income consumers,” basis, it appears that the scheme is wholly as their little or volatile incomes may advantageous both for the household force sparse usage and “involuntary selfconsumers and the distribution company. disconnection.” The cost-benefit analysis Indeed, it has a strong potential to provide also considered the change in consumption more Filipinos, especially those with low habits implied by the switch from incomes, with greater access to electricity, conventional to prepaid electricity, which might be reason enough to look which may lead to a reduction in the forward to seeing it implemented utility of consumers. properly here.

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NEWS ON THE NET Business

U.S. House of Representatives passes 'Crowdfunding Act' Crowdfunding has been defined as a collective cooperative effort by people who network and pool their resources to support initiatives of people or organizations seeking support. A popular website that facilitates crowdfunding for creative projects is Kickstarter; a Rocketboom NYC interview with its cofounders explains the mechanics of the website. Locally, a new venture called ArtisteConnect is looking to offer the same basic services. While the idea behind crowdfunding is simple enough, until last week it was illegal for startup businesses in the U.S. to raise capital this way, particularly through the use of social networking sites. The JOBS (Jumpstart Our Business Startups) bill, which would allow startup businesses to raise capital through crowdfunding, was recently passed in the U.S. House of Representatives, with surprising bipartisan support giving some reason to hope that the bill can make it through the Senate as well. Proponents believe that making crowdfund investing can pave a path for the U.S.' economic recovery. However, critics are quick to offer their

sobering opinions, asserting that crowdfunding can be more troublesome than it is worth.

PLDT core income down 7% to P39 B in 2011 Philippine Long Distance Telephone Co. (PLDT) has reported that its core net income fell seven percent last year, plunging to P39 billion in 2011 from P42 billion in 2010. Core income disregards financial data from the company’s non-core businesses, which include derivatives and foreign exchange transactions. More information can be gleaned from PLDT's annual report, released last week. “These results reflect the consolidation of the operating performance of Digital Telecommunications Philippines, Inc. (Digitel) from its acquisition which closed on Oct. 26, 2011,” PLDT stated. In conjunction with negative sentiments from other markets – particularly China's – PLDT's revelation of lower earnings in 2011 contributed to tumbling share prices last week. Coming from a high last Monday when the Philippine Stock Exchange index (PSEi) closed at 5,030.58, the PSEi fell 63.19 points to close at 4,967.39 the following day.

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Globe reaches out to technopreneurs Globe Telecom has announced that it is setting up an incubator program focusing on aspiring technopreneurs. The project will move forward through Globe partnering with the technology-inclined entrepreneurs in order to build an end-to-end support system, merging the resources of the telecom industry giant with the manpower of business startups. Globe business group head Minette Navarette has said that the incubator program will provide an efficient environment for building and testing, seed funding for executing ideas, and a startup development program which includes mentoring and community feedback. Concurrently, conglomerate head Manuel V. Pangilinan has announced the launch of IdeaSpace Foundation, Inc., a non-profit organization facilitating a multimillion-dollar incubator and accelerator program for supporting technopreneurs and startup ideas with global potential. Edward M. Zablocki of the University at Buffalo, State University of New York, further discusses the incubator program as an effective economic tool in a paper available at the ipHandbook website.

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An Old Killer Now Resists New Cures The growing threat of extreme drug-resistant tuberculosis By Joanne Angela B. Marzan

STRATEGY POINTS Drug-resistant TB afflicts more than half a million new victims in the world every year. And half of new TB cases are already drugresistant

Extreme drug-resistant TB victim in Cambodia: Killing one victim every 20 seconds in nearly 70 countries Photo: James Nachtwey/xdrtb.org

If unchecked, M/XDR-TB could reach the virulence of centuries past before antibiotics, when patients wasted away waiting for death

Award-winning war photojournalist James Nachtwey vied for the TED Prize to fulfill a mission: to “break a story the world needs to know about.” In 2007, Nachtwey won the $100,000 TED Prize, given to an individual with “one wish to change the world.”

The Philippines is among the high M/XDR-TB burden countries. While new cases are down, treatment is out of reach for poor patients

For the Dartmouth-educated photographer, that wish was to tell the tragedy and peril of a mutating germ that, as his website xdrtb.org explains, kills someone somewhere every 20 seconds, often within weeks of being diagnosed, with no reliable cure, and now reported in at least 55 countries, including the Philippines. The World Health Organization (WHO) defines extensively or extreme drug-resistant tuberculosis (XDR-TB) as a form of multidrug-resistant tuberculosis (MDR-TB) resistant to the two most powerful first-line anti-TB drugs (isoniazid and rifampicin) as well as to the most powerful secondline medicines (any fluoroquinolone and any of the three injectable drugs: amikacin, capreomycin and kanamycin).

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A killer that resists the cure

As early as 2006, WHO already “expressed concern over the emergence of virulent drug-resistant strains of tuberculosis (TB)” and called on “measures” that need to be “strengthened and implemented” to hinder the “global spread of the deadly TB strains.” But at the 2009 ministerial meeting of high M/XDR-TB burden countries, WHO Director General Margaret Chan counted 55 countries that had reported XDR-TB cases. And if the spread continues, the contagion could get as deadly as the time before antibiotics, and consumption victims just had to wait for death. ‘Alarming’ prevalence in the Philippines. At the same conference, then-Health Secretary Francisco T. Duque raised the alarm about the higher-thanusual MDR-TB rate in the Philippines: 4% of new TB cases and 21% in re-treatment cases, against world averages of 1.7% and 7.7%, respectively. “That approximately means 12,000 MDRTB cases annually according to the Global TB Report of WHO,” said Duque. How many of those thousands turn into the extreme kind? By WHO’s estimate, 4.6% of all drugresistant TB cases are XDR-TB patients: nearly one in every 20. Counting 1,435 MDR-TB patients in treatment by December 2008, Sec. Duque warned three

years ago: “These figures are both alarming and significant, because the prevalence rates observed in the Philippines are higher compared to the global average.” And normally effective treatments weren’t stopping the spread of MDR-TB. Citing a national TB prevalence survey, the health chief reported: “The trend of MDR-TB cases showed that quality DOTS [Directly Observed Treatment, ShortCourse] treatment helps substantially in the prevention and control of new MDR-TB cases, but the transmission continues as shown by the increase in prevalence among the new cases from 1.5 to 2.1%.” Since then, health authorities and professionals had wrestled the number of new MDR-TB cases from about a thousand in 2008 and 2009 to 522 in 2010. But state funding and vigilance are needed to keep the virulence in check. Reason: the special drugs needed to fight resistant tuberculosis are expensive, so poor patients would not be able to afford them and could end up not only succumbing, but also spreading the infection to others.

At 2009 Beijing conference, then Health Secretary Francisco Duque reports ‘alarming’ MDR-TB data YouTube video

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How the killer spreads. The 2007 XDRTB Fact Sheet prepared by the WHO and Stop TB Partnership discussed two ways one can get XDRTB. One is

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the usual way: getting infected by one who has the extreme drug-resistant infection. “A person needs only to breathe in a small number of these germs to become infected (although only a small proportion of people will become infected with TB disease),” the fact sheet said. The second way is for the germs in a TB patient to mutate into the XDR kind “when anti-TB drugs are misused or mismanaged,” with microbes that survive inadequate medication developing a resistance to it. “This happens when TB control programmes are poorly managed, for example when patients are not properly supported to complete their full course of treatment; when health-care providers prescribe the wrong treatment, or the wrong dose, or for too short a period of time; when

the supply of drugs to the clinics dispensing drugs is erratic; or when the drugs are of poor quality,” the WHO explained. While XDR-TB can be treated, even in countries with good health programs, as many as half of patients do not get well. “Successful outcomes also depend greatly on the extent of the drug resistance, the severity of the disease and whether the patient’s immune system is compromised,” stated the XDR-TB Fact Sheet. So how many get the disease every year? By WHO’s estimate, more than half a million a year. That’s 500,000-plus sufferers able to infect others by germs in their breath or on what they wear and handle. Of that global contagion, only 3% get WHO-standard treatment. Indeed, in tens of thousands

When diseases learn to beat the treatment According to World Health Organization (WHO), antimicrobial resistance (AMR) is “resistance of a microorganism to an antimicrobial medicine to which it was previously sensitive.” “Resistant organisms (they include bacteria, viruses and some parasites) are able to withstand attack by antimicrobial medicines, such as antibiotics, antivirals, and antimalarials, so that standard treatments become ineffective and infections persist and may spread to others. AMR is a consequence of the use, particularly the misuse, of antimicrobial medicines and develops when a microorganism mutates or acquires a resistance gene,” WHO explained. In addition, WHO calls on everyone to make AMR a global concern because of the following reasons: 1. AMR kills 2. AMR hampers the control of infectious diseases 3. AMR threatened the return to pre-antibiotic era 4. AMR increases the cost of healthcare 5. AMR jeopardizes health-care gains to society 6. AMR threatens health security, and damages trade and economies Aside from TB, other diseases that are affected with antimicrobial resistance are: malaria and gonorrhea.

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of those new cases, the very reason nonresistant TB became multidrug-resistant is poor treatment. The pandemic potential. In her welcome address at the 2009 Beijing conference, WHO Director General Chan cited a 2009 WHO TB Report estimate that “more than half a million new cases of MDR-TB occurred during 2007” and that “over half of these cases were resistant to multiple drugs right from the start, and not as a direct result of substandard treatment.” That’s a quarter to a third of a million people who got infected by MDRTB sufferers. “This is the true alarm bell,” the former Hong Kong Director of Health warned. “This tells us that resistant strains are now circulating in the general population, spreading widely and largely silently in a growing pool of latent infection.” She added: “In most low-income countries, especially in Africa, the magnitude of the problem is unknown, as this form of TB is so difficult to diagnose.” The high M/XDR-TB burden countries are: Armenia, Azerbaijan, Bangladesh, Belarus, Bulgaria, China, Congo, Estonia, Ethiopia, Georgia, India, Indonesia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Myanmar, Nigeria, Pakistan, Philippines, Russia, South Africa, Tajikistan, Ukraine, Uzbekistan, and Vietnam. And one thinks XDR-TB is a problem just for poor countries and communities, in fact, it could turn into a SARS-type

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global pandemic spreading by cough and contact with no reliable treatment to retard the contagion. “Unchecked, XDR-TB could take us back to the treatment era that predates the development of antibiotics,” warned Chan. “Preventing and managing drug-resistant TB is a global health imperative.” In one of the ministerial meeting’s output report, The Beijing “Call for Action” on Tuberculosis Control and Patient Care: Together Addressing the Global M/XDR TB Epidemic, the members states of WHO “note with grave concern that M/XDRTB poses a threat to global public health security” and “severely undermines” the “efforts to implement the Stop TB Strategy and dramatically reduce the global burden of TB.” The report added: “More than half a million new MDR-TB cases are estimated to emerge annually as a result of inadequate treatment and subsequent transmission” and that “only some 3% of cases of MDR-TB are being treated according to WHO standards.” In 2010, another WHO report showed that 68 countries have already reported at least one case of XDRTB (see map next page).

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26 THE COLORS OF A GLOBAL CONTAGION

Countries that had reported at least one XDR-TB case by end 2010

Argentina Armenia Australia Austria Azerbaijan Bangladesh Belgium Botswana Brazil Burkina Faso

Bhutan Cambodia Canada Chile China Colombia Czech Republic Ecuador Egypt Estonia

France Georgia Germany Greece India Iran (Islamic Rep. of) Ireland Israel Italy Japan

Kazakhstan Kenya Kyrgyzstan Latvia Lesotho Lithuania Mexico Mozambique Myanmar Namibia

Nepal Netherlands Norway Pakistan Peru Philippines Poland Portugal Qatar Republic of Korea

Republic of Moldova Romania Russian Federation Slovenia South Africa Spain Swaziland Sweden Tajikistan Thailand

Togo Tunisia Ukraine United Arab Emirates United Kingdom United States of America Viet Nam

Source: World Health Organization: The STOP TB Department

While case count fell, so did patients. WHO data showed that the number of notified MDR-TB cases have gone down in the Philippines: from a high of 929 in 2008 and 1,073 in 2009, the numbers

are down to 522 cases in 2010 (see figure below). But the number of TB cases continue to rise, all of which have the potential to turn MDR or XDR, depending on the quality of treatment.

TOTAL TB AND MDR-TB CASES IN THE COUNTRY 200,000

Time trend, cases

150,000

174,389 142,576

145,892

568

929

2007

2008

153,167

Cases

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50,000

0

1,073 2009

522 2010

Source: WHO Interactive Website (user input required to generate information)

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WAGING A LIFE AND DEATH BATTLE Treatment outcomes of MDR-Tb cases, % 70

63

60

Success Died Failed Interrupted Not evaluated

53

Percentage

50 40 30

24

21

20 12

11 10 0

4

1

10 1

2007

2008 Source: WHO Interactive Website (user input required to generate information)

On the other hand, WHO data also showed that while MDR-TB treatments had a 63% success rate in 2007, fully 11% of MDR-TB patients died. Things got worse in 2008: successful treatment fell to 53% while mortality rose to 12% (see chart above). In the 2007 study, The Philippines Case Study by Maria Imelda D. Quelapio, Thelma E. Tupasi, Nona Rachel C. Mira, Maria Tarcela S. Gler of the Tropical Disease Foundation, the authors said immediate diagnosis is crucial for a timely treatment. “In our experience, 12%–20% of confirmed MDR-TB patients died during the long process of diagnosis, 7% while awaiting treatment, 4% to 7% refused treatment, and 22% to 26% were lost before treatment. The public health consequences

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of continuing transmission, further amplification of resistance, clinical deterioration and death before management underscore the need for rapid methods of MDR-TB diagnosis for more timely treatment,” the authors explained. The high cost of staying alive. However, once diagnosed, the next hurdle an M/XDR-TB patient needs to overcome is the high cost of treatment, costing a staggering $3,500 per course of treatment — 175 times the cost of first-line drugs. In addition, the authors believe that drug supplies have become limited due to the increase in demand globally. The case study added, “Mobilization of more resources and engagement of the scientific community and the

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pharmaceutical industry to accelerate the development of affordable, novel anti-TB agents is essential for an effective response to the threat of MDR-TB, particularly XDR-TB.” According to a 2010 report by the Washington-based Center for Global Development (CGD), titled “The Race Against Drug Resistance,” first-line TB drugs are “decades old” and “widely available” but second-line TB drugs are “too expensive to be in widespread use.” With the high-cost of second-line TB drugs, it no longer comes as a surprise that a number of those infected with M/XDR-TB in the Philippines have already succumbed to the disease.

because the deprivations of the poor in food, clean water and sanitation, shelter, health knowledge and care, make them susceptible to tuberculosis. Aside from this, the study showed, “economically poor and vulnerable groups are at greater risk of infection with Mycobacterium tuberculosis compared with the general population because of overcrowded and substandard living or working conditions, poor nutrition, intercurrent disease (such as HIV/AIDS), and migration from (or to) higher-risk communities or nations.” The findings affirm conventional knowledge: TB cases among people from poor countries, crowded urban areas, and the homeless are much higher.

WHAT MUST BE DONE: RESPONSIBILITIES OF KEY ENTITIES Global health donors National governments

Drug and diagnostic manufacturers Health care providers and patients

Support health improvements including effective treatment options, information systems, R&D incentives Regulate and oversee drug supply, enforce laws, maintain functioning health systems, including drug testing and resistance surveillance, support R&D efforts Ensure products are safe and effective Share and use relevant information about drug quality and efficacy, adhere to protocols and treatment guidance, advocate for policies to improve quality of care by containing drug resistance

Source: “The Race Against Drug Resistance,” Center for Global Development (2010)

Global poverty fuels TB. In the 2005 WHO study, Addressing Poverty in TB Control, the link between income poverty and TB was taken into account (see figure below). Poverty exacerbates the spread of the disease not only because it makes proper treatment unaffordable, but also

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S. R. Benatar and R. Upshur in their 2010 study, Tuberculosis and Poverty: What could (and should) be done?, assert that tuberculosis continue to exist and has even mutated to more deadly forms because the root of the problem still exist: global poverty. In fact, the study said that 95%

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THE DEADLY NEXUS BETWEEN TB AND POVERTY

• Food security • Income stability

• Access to water, sanitation and health care

• Loss of 20-30% of annual wages among the poor • Global economic costs: US$ 12 billion annually Source: Addressing Poverty in TB Control, World Health Organization (2005)

of TB cases and 98% of TB deaths are in developing countries.

members, and substance misuse as a coping strategy for impoverishment.”

“When living conditions for millions of people remain at the level of preindustrial revolution England/Europe and health care services are so inadequate that easily affordable treatment cannot be provided for all who need it in good time and for the full duration required, we should not be surprised that the burden of suffering from tuberculosis can only get worse,” Doctors Benatar and Upshur said.

With the emergence of drug resistant tuberculosis, the global fight against TB is far from over. A concerted effort among all stakeholders is needed to combat this ageold disease. The WHO has come up with a six-point Stop TB Strategy to combat TB and all of its forms, once and for all:

The study noted how poor adherence to treatment has become an ongoing practice among developing countries which may be due to any of the following: “competing priorities faced by poor populations: the need to earn money on a daily basis, duties towards family

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1. Pursue high-quality DOTS expansion and enhancement 2. Address TB-HIV, MDR-TB, and the needs of poor and vulnerable populations 3. Contribute to health system strengthening based on primary health care 4. Engage all care providers 5. Empower people with TB, and communities through partnership 6. Enable and promote research The second recommendation is the most

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A killer that resists the cure

important: providing the most vulnerable communities not only proper health care and information, but also the livelihood, education, and safe and clean environment to block the spread of TB and its mutation

to deadlier forms. If we don’t, even the rapid advances of modern science and technology may not save even humanity, rich or poor, from a global contagion slashing through our most formidable defenses.

XDR-TB + HIV = RIP It’s bad enough to have extreme drug-resistant tuberculosis. But it gets hopeless when the XDR-TB combines with HIV, which erodes even the body’s defenses. “TB is a leading cause of morbidity and mortality among people living with HIV,” said the World Health Organization. According to WHO, “the risk of developing tuberculosis (TB) is estimated to be between 20-37 times greater in people living with HIV.” Of the 9.4 million TB cases in 2009, more than one in every eight sufferers, or 1.2 million, were among people with HIV. And of the 1.7 million people who died of TB, 400,000 or 24% had HIV. In Tugela Ferry in KwaZulu-Natal, South Africa, “40 percent of adults are infected with HIV and a staggering 80 percent of TB-infected adults also have HIV,” said the paper, HIV and Tuberculosis: A Lethal Convergence by John Cohen. As if these numbers weren’t bad enough, in 2005, the rural town had an XDR-TB outbreak, with 44 residents diagnosed with both XDR-TB and HIV. “All but one died,” Cohen said. “Half of these patients only lived 16 days after they were admitted to the hospital— too short a time to even receive the results of the cumbersome test used to diagnose XDR-TB.”

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More state-ofthe-art vehicle proposed for PNoy Lawmakers filed House Resolution No. 2191 calling on the Department of Budget and Management to earmark funds for the purchase of a new bulletproof and bombproof State vehicle for President Benigno Aquino III. The future acquisition will replace the flood-damaged Mercedes Benz S-Guard presidential car which the Presidential Security Group sidelined after it broke down during a trip last year. The proposal was welcomed even by the opposition in the lower house. Minority Leader Danilo Suarez announced that the opposition unanimously supports the bid to make such purchase since it is for the protection of the head of state. The DBM said that there are available funds for the purchase both from the contingency funds for the breakdown of his vehicles as well as from government savings.

House strengthens anti-money laundering law The House of Representatives has approved House Bill No. 4275, a bill amending the Anti-Money Laundering Law. It expands the definition of money laundering and the list of predicate crimes as well

as the covered transactions and institutions. On the other hand, the Senate's versions of amendments in the AMLA are split into two: Senate Bill 3009 and Senate Bill 3123 to facilitate the passage. Just last month, the Anti-Money Laundering Council reported to President Benigno Aquino III that the Financial Action Task Force (FATF) has downgraded the Philippines from its “grey” list to its “dark grey” list of vulnerable jurisdictions because of the failure of Congress to pass amendments to the AMLA and the terrorist financing suppression bills. The Senate seeks to approve the bills by the end of May, just in time for the June plenary session of the FATF.

Defense moves to block bid on Corona dollar accounts The defense panel asked the impeachment court to junk the manifestation of House prosecutors reserving their right to present evidence on Chief Justice Renato Corona’s dollar accounts should there be developments allowing the presentation of such evidence. Corona's lawyers said that it would put the Chief Justice “at an unwarranted disadvantage and what the prosecution should do is to await the resolution of the temporary restraining order obtained by Philippine Savings

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Bank. In television interviews, Corona said that he would make a public disclosure of his dollar accounts next week during the presentation of evidence by his defense lawyers. Senate President Juan Ponce Enrile has once called on Corona to personally testify and defend himself before the impeachment court. However, Corona's lawyers dismissed this idea and instead placed the wife Cristina Corona in the lineup of their witnesses. Cristina will testify on the couple’s bank records as well as her husband’s statements of assets, liabilities and net worth (SALN).

On Int'l Women's Day, Gabriela wants US troops out Members of the activist women’s organization Gabriela commemorated International Women’s Day, March 8, with a rally to protest the upcoming Balikatan joint military exercises between the Philippine and US forces. The group demanded the US forces to leave the country to end women abuse and intervention in state affairs. The group also proceeded to the Pandacan oil depot, where they called on President Aquino to address the pressing issue of continuous oil price hike. International Women's Day was established at the International Conference of Working Women in Copenhagen in 1911.

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Cyberspace: The Next War?

In the face of espionage, cybercrime, and hacktivism, cyber security is becoming the new focus of national and corporate defense around the world By Marishka Noelle M. Cabrera

STRATEGY POINTS With modern nations and corporations so dependent on computer systems to run essential facilities, hostile elements can use the Internet to invade and sabotage Although a cyber war is unlikely at this time, the high political, economic, and social costs of such attacks has prompted governments to create their own e-security strategies “Cyberspace is real. So are the threats that come with it. It is the supreme irony of our information age: the very technologies that empower us to create and to build, also empower those who would disrupt and destroy.” That, in a nutshell from the White House, is both the boon and the bane of our high-tech, networked world. Explained U.S. President Barack Obama in his 2009 address on cybersecurity: “This world — cyberspace — is a world we depend on every single day. It’s our hardware and

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our software, our desktops and laptops, cellphones and Blackberries that have become woven into every aspect of our lives. It’s the broadband networks beneath us, and the wireless signals around us. The local networks in our schools and hospitals and businesses, and the massive grids that power our nation. The classified military and intelligence networks that keep us safe, and the World Wide Web that has made us more interconnected than at any time in human history.”

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Cyberspace: The next war 33

Indeed, the virtual petty crime and world is at once mischief-making an evidence of to shutting progress and 21st down critical century living systems, or and a playground even potentially for those seeking triggering to wreak havoc physical armed of cataclysmic warfare,” the proportions. report warns. Our dependence What’s more, Barack Obama unveils cyber strategy: 'Technologies that create can also destroy' YouTube video on computer analyzing technology has motives and made the information society all the more goals of cyber attacks becomes difficult vulnerable to threats in cyberspace, and because attacks can be carried out remotely the anonymity of the perpetrators only and with “near impenetrable” anonymity. aggravates the problem. “As power shifts from the physical to the The Switzerland-based World Economic virtual world, a new paradigm for ensuring Forum’s Global Risks 2012 report lists cyber a healthy digital space must emerge,” attacks No. 4 threats most likely to happen the report emphasizes. In its “cyber risks in the coming ten years, after severe income constellation” of threats, individual hacking disparity, chronic fiscal imbalances, and and fraud could eventually compromise rising greenhouse gas emissions, and ahead major systems controlling key infrastructure of water supply crises. And the objectives of and facilities, leading to governance failure cyber threats, the report adds, are sabotage, at the national and even international level espionage or subversion. (see graphic). “The real world consequences of virtual world attacks can range from mundane

Naturally, business is taking cyber threats seriously, and spending big bucks to

THE CYBER RISKS CONSTELLATION Major Dangers in Information and Communications Systems Terrorism

Cyber attacks Massive incident of data fraud or theft

Critical systems failure

Massive digital misinformation Origin Risk Increasing capabilities for cyber crime and attacks

Global governance failure

Failure of diplomatic conflict resolution Pathways Balance-of-power tips as new actors can wage effective interference and disrupt commerce

Manifestation The traditional system of global governance is undermined

Source: Global Risks 2012 report, World Economic Forum, 2012

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34 defend itself. The 2011 Global Information Security Survey by business services giant Ernst & Young polled 1,700 cyber security professionals and information technology leaders in 52 countries. Fully 72% “see an increasing level of risk due to greater external threats.” The chapter “Insights on IT Risk” presents ladders of threats and responses for enterprises to match increasing sophistication and vulnerability

of systems with more capable defense and adaptability. What is a cyber attack? Generally, a cyber attack is regarded as any disruption or “attempt to compromise the function of a computer-based system.” According to a backgrounder from the Council on Foreign Relations, a cyber attack can include acts of cyber war, terrorism, espionage, protest,

THE CYBER THREAT AND RESPONSE LADDER Increasing sophistication and organization; criminally motivated

Corporate espionage

Advanced persistent threat

Risk

Unsophisticated attackers; targets are anyone with a vulnerabilty

Resources and sophistication of attacks

Intermediate Advanced Basic

Threat level

"Hobbyist" • Fun • Challenge

Organized crime • Criminal intent • More coordinated attacks • Financially motivated (e.g., theft of credit card numbers for use or sale)

Corporate espionage • Economically motivated • Theft of intellectual property

Advanced persistent threat (APT) • Long-term pattern of targeted, sophisticated attacks aimed at governments, companies and poltical activists • Politically and economically motivated • Well-funded, sophisticated

Disconnection from internet Sensitive data "airgapped" Counter inteligence operation PC virtualization Outbound gateway consolidated Sensitive data/networks segregated Propriety email scanning Proxy authetication Constant phising simulation Improved access control

Refocused patching and configuration management efforts Searchable event repository Network instrumentation Build incident response capabilty

Degree of response Charts from “Insights on IT Risk” study by Ernst & Young, 2011

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Cyberspace: The next war

and vandalism. To be sure, some cyber attacks can be relatively innocuous, but what worries the world are those that can bring about devastating effects to critical infrastructure and public services, as well as massive data breaches that may lead to economic and political mayhem. In the past decade, the world has seen a myriad of cyber attacks ranging from acts of activism or hacktivism to cyber espionage, theft, and network intrusions. The Center for Strategic and International Studies enumerates significant cyber incidents since 2006, while an article from Naked Security gives a list of cyber security breaches from 2010 to 2011 by CSIS expert James Andrew Lewis. Security software vendor McAfee—alarmist tendencies notwithstanding—warns of the vulnerability of crucial infrastructure, such as the gas pipelines and power plants, in the event of a cyber attack, as elaborated in the report “In the Crossfire: Critical Infrastructure in the Age of Cyber War” co-written by the Washington-based Center for Strategic and International Studies. A follow-up report entitled, “In the Dark: Crucial Industries Confront Cyberattacks,” shows that there is still “constant probing and assault” faced by crucial utility networks. The paper admits, “Our survey data lend support to anecdotal reporting that militaries in several countries have done reconnaissance and planning for cyberattacks on other nations’ power grids, mapping the underlying network infrastructure and locating vulnerabilities for future attack.” Furthermore, the report posits that the Stuxnet worm, a malicious software or

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malware that infected Iran’s nuclear facilities and other industrial systems in 2010, has “transformed the threat landscape” because of its sophistication over any other malware used by cyber criminals. The report asserts, “It is a concrete demonstration that governments will develop malware to sabotage their adversaries’ IT systems and critical infrastructure.” There is growing speculation that the worm emanated from either the U.S. or Israel, based on an article from The Economist. For its part, Israel doesn’t want to be left behind in this new form of warfare. “We want to be a cyber power,” declared Prime Minister Benjamin Netanyahu addressing an Israeli cyberwar conference last year. As for the U.S., Matt Fussa, a fellow interviewed at the Woodrow Wilson Center for Scholars, rated cyber threats against America at 8 on a scale of 1-10, while its defense preparedness has a grade of 2. In the case of cyber espionage, China and Russia are the most active, or so the report “Foreign Spies Stealing U.S. Economic Secrets in Cyberspace” from the Office of the National Counterintelligence Executive states. Chinese actors are seen as “the world’s most active and persistent perpetrators of economic espionage,” while Russian intelligence services “are conducting a range of activities to collect economic information and technology from US targets.” In the report “Cyber Security and U.S.China Relations” from The Brookings Institute, authors Kenneth Lieberthal and Peter W. Singer regard U.S.-China ties as extremely important both politically and economically, but “the issue of cyber

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36 security threatens to become a major source of friction.” Consequently, the manner in which these two nations choose to resolve the issue “will be critical not just to the future of the Internet and its billions of users but also to overall global order beyond the world of cyberspace.”

to pay for data breach is alarming. In a 2010 report, the Michigan-based Ponemon Institute assessed a benchmark sample of 45 organizations in the U.S. and found that the median cost of cyber crimes amounted to $3.8 million, but “can range from $1 million to $52 million per year per company.”

In a keynote speech of Ambassador Liu The independent research organization Xiaoming at the Second Worldwide Cyber also determined the external and Security Summit held in London, he internal costs related to cyber crime. recounts how China faces serious threats in Information theft is the highest external cyberspace like any other country, as well cost, while business disruption, equipment as the measures it damages, and revenue has taken to ensure loss follow behind. cyber security. The Internally, spending Chinese ambassador is still required for to the U.K. reiterated, detection, recovery, “It is the reality of ex-post response, these international investigation, cyberspace crimes escalation that motivates and incidence China to support management, international and containment Teenage hacker at Israel cyberwar action. China of the breach. conference: ‘I’ll help defend my country and stands for extensive attack its attackers’ YouTube video international Further, all industries cooperation and can fall victim exchanges at multiple levels.” to cyber crime. The report reveals the defense, energy, and financial services Russia, for its part, has taken steps in industries incur higher costs than the retail, addressing the issue of cyber security. Along transportation, consumer products, services, with China, Tajikistan, and Uzbekistan, the education, and communications industries. group has elaborated in a potential General Assembly resolution an international code In last year’s World Petroleum Congress of conduct for information security, which in Doha, Shell IT manager Ludolf identifies the rights and responsibilities of Luehmann warned cyber attacks could states in “information space,” promotes severely impact world oil supply, based constructive and responsible behaviors, on a Reuters report published in ABSand enhances cooperation to address CBN News. "It will cost lives and it will common threats. cost production, it will cost money, cause fires and cause loss of containment, Costs of cyber attacks. In terms of environmental damage - huge, huge financial and political impact, the price damage," he says.

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Cyberspace: The next war

(Cyber) war is upon us. Or not. The costs of cyber attacks are undeniably high, but cyber security expert James Andrew Lewis of the Center for Strategic and International Studies doubts in his article that strings of cyber attacks will eventually escalate into a full-blown cyber war. After all, nations “do not go to war for espionage.” Lewis even notes that nothing this year would qualify as a cyber attack, if we go by the definition used in the U.S. cyber security strategy. “[T]he strategy sets a very high threshold that is derived from the laws of armed conflict for defining a cyber attack,” he says. The CSIS senior fellow and director of Technology and Public Policy Program explains further: “Nations are afraid of cyber war and are careful to stay below the threshold of what could be considered under international law the use of force or an act of war. Crime, even if state sponsored, does not justify a military response.” While there is “intense hostility” over cyberspace, it stays below the threshold of an attack. Lastly, attacks over cyberspace will not be decisive. Lewis emphasizes, “Cyber attacks are fast, cheap, and moderately destructive, but no one would plan to fight using only cyber weapons. They are not destructive enough to damage an opponent’s will and capacity to resist.” Cyber weapons will, however, be used to supplement traditional weaponry in times of war. Spying can do the most damage to the West, The Economist says. “[T]he loss of high-tech know-how that could erode its economic lead or, if it ever came to a shooting war, blunt its military edge.” “Still, the more likely use of cyber-

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weapons is probably not to bring about electronic apocalypse, but as tools of limited warfare,” the article concludes. Cyber security is part of national defense. Still, concern over the rising number of cyber attacks, whether by nonstate actors or state-sponsored aggressors, has prompted governments to create specific defense strategies against threats in cyberspace. The Federal Bureau of Investigation (FBI) worries cyber attacks are becoming a top terror threat, according to a report from InformationWeek. The fight against terrorism remains to be the number one priority of the U.S. "But down the road, the cyber threat will be the number one threat to the country. I do not think today it is necessarily [the] number one threat, but it will be tomorrow," FBI director Robert Mueller III told the Senate intelligence committee in a hearing last month. James Clapper, director of national intelligence, adds that the biggest challenge to protecting against cyber attacks has much to do with the “difficulty of providing timely and actionable warning of attacks.” Last year, the United States released its Department of Defense Strategy for Operating in Cyberspace which tackles the DoD’s five strategic initiatives: treat cyberspace as an operational domain to organize, train, and equip; employ new defense operating concepts to protect DoD networks and systems; partner with other government agencies and the private sector; build robust relationships with allies; and leverage the nation’s ingenuity through an exceptional cyber workforce and rapid technological innovation.

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38 ASSESSING THE G20 Likewise, security threats. Germany has As such, the its own cyber report found that security strategy Israel, Finland, that focuses and Sweden are on strategic seen as the best areas, such as prepared to defend the protection themselves against of critical cyber attacks, information with a rating of 4 infrastructures, and ½ (out of 5), securing IT while Mexico is The interactive index presents the cyber power of systems in the least prepared each of the G20 countries according to their ability the country, with a score of 2. to withstand cyber attacks. Findings are based on strengthening Meanwhile, the research conducted by the Economist Intelligence Unit, sponsored by strategy and technology IT security United States, consultancy firm Booz Allen Hamilton in the public United Kingdom, Interactive graphic by The Economist Intelligence Unit and Booz Allen Hamilton administration, Germany, effective crime Denmark all got a control in score of 4. China, cyberspace, and the use of reliable and Italy, Poland, and Russia received a score of trustworthy information technology, among 3, while India and Brazil got 2 and ½. others. The German government has since launched the Cyber Defense Center in Bonn. The report also imparted recommendations on how to strengthen cyber-preparedness, In its National Security Strategy released such as: set up bodies to share information in 2010, the United Kingdom regards cyber and best practices; increase public awareness security as “one of the highest priority and promote cyber security education and national security risks” to the country and training; encourage integration of cyber that cyber attacks can “have a potentially into existing processes and structures; and devastating real-world effect.” As such, in enhance attribution capabilities by investing 2011, U.K. came out with a separate Cyber in new technologies, among others. Security Strategy with the vision of deriving “huge economic and social value from a Future of cyber security. In the face of vibrant, resilient and secure cyberspace.” growing threats in cyberspace, governments and businesses are scrambling to keep up Is the world ready? A report by Brusselswith the methods of the ill intentioned in based think-tank Security and Defence the hopes of protecting knowledge and Agenda and McAfee assesses the cyberinformation, their most precious assets. preparedness of countries around the world. Results were gathered through surveys and Initiatives, such as the Partnering for Cyber interviews with leading authorities and cyber Resilience (PCR) of the World Economic experts between late 2011 to early 2012 Forum, support a more globally united regarding their perceptions and analyses on approach on the issue of cyber security. In the prevailing mindset and approach to cyber the World Economic Forum website, the

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‘We could face a cyber-attack equivalent of Pearl Harbor’

After land, sea, air, and outer space, a fifth domain of war, as the Pentagon calls it, arises. Some analysts believe war in this realm is already upon us, while others think it is still just hype. The Pentagon is taking it very seriously. “We’re now in a very different world,” U.S. Defense Secretary Leon Panetta said last year. “We could face a cyber-attack that could be the equivalent of Pearl Harbor.” Former counterterrorism adviser to Presidents Bill Clinton and George W. Bush, Cyber War co-author Richard Clarke paints a catastrophic picture. “A cyber attack could disable trains all over the country,” he warned in the radio talk show Fresh Air. “It could blow up pipelines. It could cause blackouts and damage electrical power grids so that the blackouts would go on for a long time. It could wipe out and confuse financial records, so that we would not know who owned what, and the financial system would be badly damaged. It could do things like disrupt traffic in urban areas by knocking out control computers. It could, in nefarious ways, do things like wipe out medical records.” In “Blown to Bits: China’s War in Cyberspace, August-September 2020,” published last year in Strategic Studies Quarterly of the U.S. Air Force, author Christopher Bronk floats the scenario of conflict between China and the United States in less than a decade. He discusses China’s burgeoning cyber capabilities and their severe application “in the context of an unlimited total war with the U.S. … Such a conflict would witness the full display of all [Chinese military] capabilities, both conventional and asymmetric, and potentially even nuclear.” Bronk concludes: “The only certainty in cyber conflict is that conflict there will not unfold in the ways we may expect.” Brian M. Mazanec’s “The Art of (Cyber) “The only certainty in cyber conflict War” in the Journal of International is that it will not unfold in the ways Security Affairs presumes that China regards cyberwarfare as a “tool of national we may expect.” Christopher Bronk power.” He says: “These capabilities are focused not only on collecting sensitive information, but also on achieving military effects capable of causing economic harm, damaging critical infrastructure, and influencing the outcome of conventional armed conflicts.” For Thomas Rid, reader in war studies at the University of London’s King’s College, war by computers won’t happen. His article “Cyber War Will Not Take Place” in the Journal of Strategic Studies, asserts that cyber war has not happened in the past, is not happening in the present and it is unlikely to happen in the future. “All past and present political cyber attacks,” he explains, “are merely sophisticated versions of three activities that are as old as warfare itself: subversion, espionage, and sabotage. That is improbable to change in the years ahead.” Rid further argues in his Foreign Affairs article “Think Again: Cyberwar,” published just this month, that it is “very unlikely” that cyber weapons can cause massive collateral damage. “As the destructive potential of a cyber weapon grows, the likelihood that it could do far-reaching damage across many systems shrinks,” the article says. U.S. Air Force Major David Farmer believes current security and war thinking for cyberspace. His 2010 paper “Do the Principles of War Apply to Cyber War?”, concluded: “There is no need to create new Principles of War that apply exclusively to the cyber domain.” Still, it’s a tenet of scenario building that the most dangerous event is the one you think would never happen. Hence, as America, China and other cyber-wary countries clearly believe, it’s better to gear up for a war that may never happen than be defenseless against, well, another Pearl Harbor. After all, one of the principles of war is surprise.

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Cyberspace: The next war

PCR encourages both public and private organizations to recognize their individual roles in ensuring a “safer, more resilient digital environment” wherein everyone is interdependent. NATO or the North Atlantic Treaty Organization, for its part, has dedicated a section in its website about defending against cyber attacks. The section includes news, articles, videos, photos, and reports on the organization’s efforts to deter attacks in cyberspace. Even as governments gear up for cyber attacks, organizations with immense dependence on electronic systems cannot

leave their hardware and software protection entirely in state hands. Banks, enterprises, universities and other entities should coordinate with governments and one another, while first of all, securing their own houses. Evaluation standards like the U.S. Deparment of Homeland Security’s Control Systems Security Program are a good starting point. So is the WEF’s Partnership for Cyber-Resilience, which links state and private entities for e-security. While one cannot block every threat, cyber-resilience enhances recovery from attacks and future defense. And since our cyberworld is interconnected online, defending one corner of it helps advance the security of everyone.

AMERICA'S iSTRATEGY U.S. Department of Defense (DoD) Strategic Initiatives for Operating in Cyberspace U.S. Department of Defense (DoD) Strategic Initiatives for Operating in Cyberspace 1. Treat cyberspace as an operational domain to
 organize, train, and equip, so that DoD can take full advantage of its potential 2. Employ new defense operating concepts to protect DoD 
networks and systems 3. Partner with U.S. government departments and
 agencies and the private sector to enable a whole-of-government cybersecurity 
strategy 4. Build robust relationships with U.S. allies 
and international partners to strengthen collective cybersecurity 5. Leverage the nation’s ingenuity through 
an exceptional cyber workforce and rapid technological innovation

Comprehensive National Cybersecurity Initiative

Reviewed and revised under Cyberspace Policy Review, 2009 1. Manage the Federal Enterprise Network as a single network enterprise with Trusted Internet Connections. 2. Deploy an intrusion detection system of sensors across the Federal enterprise. 3. Pursue deployment of intrusion prevention systems across the Federal enterprise. 4. Coordinate and redirect research and development (R&D) efforts. 5. Connect current cyber operations centers to enhance situational awareness. 6. Develop and implement a government-wide cyber counterintelligence (CI) plan. 7. Increase the security of our classified networks. 8. Expand cyber education. 9. Define and develop enduring “leap-ahead” technology, strategies, and programs. 10. Define and develop enduring deterrence strategies and programs. 11. Develop a multi-pronged approach for global supply chain risk management. 12. Define the Federal role for extending cybersecurity into critical infrastructure domains. Sources: Department of Defense Strategy for Operating in Cyberspace (2011); Comprehensive National Cybersecurity Initiative (2009)

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NEWS ON THE NET World

Huge death toll doubles in Yemen 'slaughter' The death toll from a sophisticated attack by Islamic extremists against soldiers in Yemen jumped to 184 Tuesday, three Yemeni officials told CNN. Air raids on militant positions since the attack have left at least 42 militants dead in Abyan province, security officials said. The attack Sunday at an army base by Ansar al-Sharia, which is allied with al Qaeda in the Arabian Peninsula, originally claimed the lives of 90 soldiers and wounded many others. A spokesman for the Yemeni Embassy in Washington issued a statement giving a much lower death toll, saying "73 martyrs" died in the "battles in Abyan." But officials on the ground in Abyan gave CNN the higher death toll. The attack "illustrates AQAP's complete disregard for human life," U.S. Secretary of State Hillary Clinton said in a statement.

Russian protesters fear Putin will get tough At least 39 people were killed in Russia's opposition said on Tuesday they feared Vladimir Putin had decided to use force to smother their protests after

riot police detained hundreds of demonstrators challenging his presidential election victory. After three months of peaceful anti-Putin protests, police hauled away more than 500 people, including opposition leaders, who attended unsanctioned protests in Moscow and St Petersburg on Monday or refused to leave after a rally that was permitted. The police intervention sent a clear signal that Putin is losing patience with opponents demanding more democracy, openness and political reforms, and will crack down if they step out of line.

Global march of banana fungus revealed Lawmakers filed House A banana and plantain fungus which has spread across the world originated in South East Asia, new research has found. Black leaf streak disease (Mycosphaerella fijiensis) affects leaf photosynthesis, and causes premature ripening. It also delays harvests and can affect banana quality, size and numbers. A Molecular Ecology Journal study found "an original and unprecedented global scenario of invasion". It is the most important and destructive banana disease in the

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world, says one of the authors, Stephanie Robert. "It starts with small flecks and spreads to the whole banana leaves - the disease can totally destroy the whole banana plant," she says. Using genetic markers, the team were able to map the streaks on 735 banana leaves from 37 different countries and identify genetic similarities. "The historical hypothesis was that it came from South East Asia," Ms Robert says.

Four people killed in Afghanistan Kandahar bomb blast Four people have been killed and 10 injured in a bomb blast at a police post close to the Afghan border with Pakistan, Afghan officials say. The bomb was planted in a motorbike, officials say, and and a woman and a child are among the dead. No-one has claimed responsibility for the attack. Spin Boldak in Kandahar province is a busy border crossing close to the Pakistani town of Chaman. The town is situated 70 miles (110km) from the provincial capital, Kandahar.

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Tech Expo Roundup: First Quarter 2012 By Tanya L. Mariano

STRATEGY POINTS Technology expositions help manufacturers and developers by highlighting the latest innovations, and by bringing the best minds together Technology expositions help consumers and the attending public by highlighting both future and imminent practical applications of technology The first tech expos of 2012 are spotlighting practical consumer devices and ambitious lifeextension technologies

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Only three months into 2012, and already the technology world is abuzz with what’s new in the industry as showcased in this year’s first couple of expos, from the recently concluded International Consumer Electronics Show, iWorld 2012, Global Future 2045, and the Mobile World Congress, to the ongoing SXSW ("South by SouthWest”) Interactive 2012. Here is a roundup of some of the best and most talked about innovations, ranging from practical consumer products to ambitious life-extension technologies. International Consumer Electronics Show (January 10-13; Las Vegas, NV). Produced by the Consumer Electronics Association, a major trade association “promoting growth in the $186 billion U.S. consumer technology industry,” the International Consumer Electronics Show (CES) aims to tap global markets and connect the industry to encourage the

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Tech expo roundup: 2012 starts off with a (high-tech)

success of consumer electronics innovations, according to the official CES website. Its Innovations Design and Engineering Awards, launched in 1976, lets consumer technology developers and manufacturers submit their newest products for review by a panel of engineers, industrial designers, and trade press members.

possible by capturing the entire light field, which means “all the light traveling in every direction in every point in space,” rather than just capturing a single plane of line as a conventional camera does, according to its website. The camera retails for $399-$499, depending on the photo capacity selected. Earlier, it was named one of TIME magazine’s 50 Best Inventions of 2011.

This year’s honorees include: • The Audiovox Corporation for its RCA USB Wall Plate Charger, a wall outlet attachment that turns any dual standard outlet into two USB outlets and a single standard outlet. • The Ford Motor Company for its MyFord Mobile App, an application that gives drivers remote control of certain functions of their Ford Focus Electric cars via a website or a smartphone. Owners will be able to check charge status and start charging, locate charging stations, heat or cool the car’s interior, lock and unlock the doors, and locate the vehicle via its built-in GPS. • The Lytro light field camera, a revolutionary digital camera that allows users to focus on any part of the photo after it’s taken. This is made

• Samsung Electronics for its SUR40 tabletop LCD display computer with multitouch technology, designed in collaboration with Microsoft. It features a 40-inch panel that allows people to “share, collaborate, and explore together using a large, thin display. Not only can the SUR40 recognize fingers and hands, but it can also detect other objects placed on the screen supporting up to 50 points of contact at one time,” according to a Samsung news release.

 

Wall plate charger turns standard outlets into USB outlets. Photo from the RCA

The Lytro, the world’s first light field camera. Photo from the official Lytro website

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Aside from Innovation Awardees, another product that caught a lot of attention is the Tobii Gaze, a computer interface that uses eye-tracking and eye-control technology to enable users to control the computer with their eyes. The technology is currently used in a host of research fields, but Tobii hopes to bring it to the consumer electronics market by 2013-2014, according to a company press release created for the CES.

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44 The following is a video showing the Tobii Gaze interface being used with Windows 8.

the magazine, “The software has an intuitive interface, does not hog much memory or slows down the computer iWorld and, most (January importantly,   26-28; San it does not Tobii Gaze lets users control their computer with their Francisco, come with any eyes. Video uploaded to YouTube by EyeTrackingOEM CA). One can’t annoying pophelp but marvel ups. Like a at the magnitude of Apple’s impact on the stealth assassin, the software works sliently world, with an entire tech expo, which it in the background, making certain the Mac is didn't even organize itself, dedicated to their running sound and secure 24x7.” The ESET “iThings.” Cybersecurity for Mac is priced at $39.99 and up. This annual exhibition, organized by IDG World Expo, a leading events production Mobile World Congress (February company based in the U.S., has been dubbed 27-March 1; Barcelona, Spain). The the “ultimate fan event” for Apple product MWC featured a product and technology creators and aficionados, featuring Apple exhibit with 1,400 exhibitors, as well as technology-infused art, music, and film, as keynotes from distinguished individuals in well as learning and shopping opportunities. the mobile technology industry. Among PC World Magazine’s top picks are the Jot Touch by Adonit, an iPad stylus with pressure sensitivity that allows for superior control, made possible via Bluetooth, a spring tip, and iPad software all working together, as well as the aptly named FileThis Fetch, a service that will automatically fetch your financial statements from the bank or credit-card companies, for instance, whenever a new statement is available, for $2 a month. Aside from an FM transmitter, a microphone, a stylus, and a camera attachment, among others, International Business Times also cited the ESET Cybersecurity for Mac, created by security solutions developer ESET. According to

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Winners of the 17th Annual Global Mobile Awards include: • The Citrix Receiver by Citrix Systems for the “Best Mobile App for Enterprise.” According to the official Citrix website, the app is an “easy-to-install client software that lets you access enterprise data, applications and desktops from any computing device including smartphones, tablets and PCs.” It is an essential component of a Citrix-enabled IT infrastructure, which is made up of “apps, desktops, and services delivered at high speed over any network, via an encrypted connection, to any device, anywhere.” • WhatsApp for “Best Overall Mobile App.” WhatsApp is a messaging app that lets

WORLD TECHNOLOGY


Tech expo roundup: 2012 starts off with a (high-tech)

iPhone, Android, BlackbBerry, Nokia, and Windows Phone users send messages to each other via their internet data plans, avoiding SMS charges. • Samsung, which bagged the “Device Manufacturer of the Year” award, as well as the “Best Smartphone” award for its Galaxy S II, and Nokia, whose QWERTYkeypad equipped C3-00 mobile phone was named the “Best Feature Phone or EntryLevel Phone.” • The iPad 2 by Apple for “Best Mobile Tablet.” PCWorld Magazine also noted five hardware trends at this year’s MWC: the use of quad-core processors to increase the computing power of smartphones, the emergence of bigger, high-definition screens, the gradual increase in adoption of near-field communication technology by major manufacturers including Samsung, LG, Nokia, Orange, Huawei, Acer, and ZTE, more and more phones with LTE (long term evolution), and the presence of cheap smartphones, such as those produced by Nokia and ZTE, for people who do not need an expensive quad-core phone. Global Future 2045 (February 17-20; Moscow, Russia). More scientific congress than trade show, the first-ever Global Future 2045 saw “futurists,” including

Ray Kurzweil, come together to tackle the newest developments in the area of life extension, covering fields such as cognitive science, robotics, and modeling of living systems, among others. The congress was organized by a non-profit organization, also called “Global Future 2045,” with the goal of “creating a network community with the world’s leading scientists in the field of life extension and to support them as an investment hub, contributing to various projects,” according to its official website. At the end of the event, the congress finalized a resolution, to be submitted to the United Nations, “demanding the implementation of committees to discuss life- extension Avatar projects as a necessary tool in the preservation of humankind, as well as defining ethical parameters for scientists worldwide.”

One ambitious project that is spearheaded by its General Chair and Founder, Russian media mogul Dmitry Itskov, is the Avatar project. As reported by online tech magazine Wired, Itskov actually launched the project back in 2011 but divulged more details at Global Future 2045. It is similar to the U.S. Defense Advanced Research Projects Agency undertaking (which goes by the name “Avatar,” as well) that hopes to build remotely operated bi-ped robots to act as “surrogates” for soldiers to facilitate The 2012 CES presented the best and the latest in consumer combat technology, including some environmentally focused casualty products. Still image grabbed from a video by BBC recovery and

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Tech expo roundup: 2012 starts off with a (high-tech)

sentry control, as well as help clear rooms, reports web magazine Engadget.

conference. The Award aims to uncover “the best new digital work, from mobile and tablet apps to websites to kiosks and Itskov’s project is far, far more ambitious, installations and beyond, while celebrating however. In about 30 years, if all goes well, those who are building tomorrow's online the 31-year-old says he will have trends,” from the following categories: built holographic bodies that can act as activism, amusement, art, business, classic “host” for human (projects launched consciousness, before January 1, according to 2011), community, Wired. educational resource, In the following experimental, video, Itskov film/TV, motion says he believes graphics, music, the benefit of personal (e.g., having this portfolios, blogs,   Can man and machine become one by 2045? life extension etc.), social media, Russian mogul Dmitry Itskov thinks so. Video technology student designers, uploaded to YouTube by Global Future 2045 should be made and technical accessible to achievement. everyone, and discusses why he thinks we can start transplanting our consciousness Hosted on the website is a full list of this come 2045 and how he plans on getting year’s finalists, as well as last year’s winners. there. More expos coming up. From the very SXSW Interactive (March 9-13, Austin, practical USB wall socket to Dmitry Itskov’s TX). Another interesting event for tech yet-to-be-developed consciousness-hosting enthusiasts is the ongoing SXSW Interactive, hologram, this year’s events have already which highlights cutting-edge, emerging brought a hodgepodge of gadgetry and big technologies. It is one of three legs of dreams. And 2012's just getting started. SXSW, the eagerly awaited and always wellUpcoming tech expos will include: attended annual film, music, and interactive conference and festival held in Austin, Texas. • CTIA Wireless 2012 – May 8-10 in New Orleans, LA The event will showcase the best new • 2012 World Expo – May 12-August12 in websites, startup ideas, and video games, Yeosu, South Korea and will have a distinguished lineup of • COMPUTEX Taipei – June 5-9 in Taiwan speakers, including Ray Kurzweil and TIME • IFA – Consumer Electronics Unlimited – Magazine’s Lev Grossman. August 31-September 5 in Berlin, Germany • CREATEC Japan – October 2-6 in Tokyo The SXSW Interactive Awards, formerly • Hong Kong Electronics Fair – April 13-16 known as the SXSW Web Awards, will • LeWeb – June 19-20, and December 4-6 in also be given out on the last night of the Paris, France

CONTENTS

BUSINESS

NATION

WORLD TECHNOLOGY


NEWS ON THE NET Technology

Google reboots Android Market, launches Google Play Internet giant Google is looking to rebuild Android Market with the introduction of Google Play, a comprehensive venture that has integrated Google Music and Google eBookstore. The move is set to raise the competitiveness level of Google's app store. In what can be seen as a tacit admission that their previous model wasn't working, Google Play is specifically designed to bring together all of the company's disparate offerings and facilitate a single, connected Google experience for its users, as well as old and prospective content partners. The rebranding is seen as a surprising move, given that Google has spent considerable time building up the Android name and the now defunct Android Market.

Tuesday. Reports from various news sources have pinpointed LulzSec leader Hector Xavier Mosegur as the catalyst for the U.S. government's recent bold moves against Anonymous and other connect hacktivist groups. Monsegur, also known by his alias Sabu, was said to have been arrested and convicted in August 2011 -- subsequently cooperating with the government and agreeing to be their mole. Anonymous has commented on the arrests via Twitter account @ YourAnonNews, saying that they "will still be stronger than ever. LulzSec has been dead f or a while."

Apple extending olive branch to Motorola, Samsung?

Authorities implement crackdown on Anonymous and LulzSec

Apple is said to be looking for a way to resolve its numerous lawsuits against different companies, starting, perhaps with a willingness to negotiate licensing deals with Samsung Electronics and Motorola Mobility, the latter of whom filed its own patent-infringement suit against Apple in January.

Last week marked the U.S. government's biggest move yet in its efforts to combat hacktivist group Anonymous. Four of its leaders and one other activist were arrested and charged last

This may signal a reprieve and a possible end to smartphone companies going for each other's throats and filing lawsuit after lawsuit against each other. After all, the strategy isn't unheard

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of -- Apple does currently have licensing agreements with Nokia and IBM. Licensing deals are a neater solution, and in the long run are more profitable than waiting years for a legal win, e.g., Apple's recent victory over HTC and some of its Android devices took nearly two years.

Rise of 'nomophobia': More people fear loss of mobile contact Internet security firm SecurEnvoy recently came out with research confirming that more people feel anxious and ill at ease when they are without their mobile phones. What's even more interesting is that the stress put on their emotions is inversely proportional of their age, meaning that younger people nowadays seem to not be able to function properly without their mobile phones with them. Nomophobia, or "no mobile phone phobia," has increased 11% in four years, with 66% of the respondents involved in the research being nomophobic. The youngest age group (18 -24) is at the head of the nomophobiaafflicted list at 77%. A study published by the Indian Journal of Community Medicine shows that the phenomenon exists beyond the Western hemisphere, and is also present in Asia.

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TCR Volume 2 Issue Number 10  

March 12-18, 2012

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