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Key legislator calls GIE ecozone perks major source of tax leakage

REPRESENTATIVE Jose Ma. S. Salceda, who chairs the House Ways and Means committee, said he does not support the continuation of taxes based on Gross Income Earned (GIE), calling it a source of abuse and adding momentum to the government’s bid to end GIE tax incentives enjoyed by economic zone locators.

On Friday, the House of Representatives approved on third and final reading House Bill 4157 or the Corporate Income Tax and Incentives Rationalization Act (CITIRA) which removes the perpetual 5% tax on GIE and limits income tax holidays to three years.

Mr. Salceda, who represents the second district of Albay, said that GIE is the “mother of abusive transfer pricing.”

Transfer pricing is practiced by companies that transact with affiliates and is regulated by global accounting standards, which require that such transactions reflect a fair, commercial, “arms-length” price. A parent company’s sales to a foreign affiliate could be priced in such a manner as to cause the affiliate to lose money or minimize earnings, thereby evading tax.

“The data clearly establish that abuse of transfer pricing has resulted in tax leakages of P295.8 billion from 2011 to 2017,” Mr. Salceda said.

He added that GIE “unfairly favors” certain industries over others.

“GIE is unfavorable to those with high gross margins, such as service-oriented firms with virtually no cost of goods sold. GIE unfairly disadvantages firms whose main source of revenue is job creation (such as business process outsourcing (BPO) companies) because they do not spend on raw materials,” Mr. Salceda said.

Mr. Salceda also said that removing GIE will “improve the effectivity of the deductions-based incentives that encourage job creation, infrastructure, research and development, and workers’ training, and use of domestic products.”

HB 4157 seeks to cut the current 30% corporate income tax rate — the highest among major Asian markets — by one percentage point every other year until it falls to 20% in 2029.

Amendments to the original version of the bill grant businesses near Metro Manila a four-year income tax holiday and three years of reduced corporate income tax, while those farther away will enjoy a proposed six-year income tax holiday and four years of reduced corporate income tax.

“Removing the GIE will improve efficiency. The GIE makes it difficult to determine ‘true’ cost of goods, especially for service industries. Businesses with legitimate operating and administrative costs will not be able claim these costs as deductions, increasing their tax burden,” said Mr. Salceda. — Vince Angelo C. Ferreras

House could tweak DoE budget to achieve total electrification

SPEAKER Alan Peter S. Cayetano said Tuesday that the House is considering possible augmentations to the budget for the energy, education, and health sectors.

“Maaring magkaroon talaga ng (It looks like the budget will have) adjustments, but education, health, energy, agriculture ang mukhang titignan (are what we are looking at),” Mr. Cayetano said in chance remarks to reporters.

Mr. Cayetano said the Department of Energy (DoE) might be given more funding to address the problem of unavailable of electricity in some areas.

“I don’t think may dahilan in this modern age na may lugar sa Pilipinas na walang kuryente. (There is no reason in this day and age for some parts of the country not to have electricity) Of course, alam din naman natin minsan napakalaking lugar, dadalawa bahay (We also need to consider that some large areas may have few residents), so yung expense na lalagyan mo ng kuryente yun (which makes it not viable to invest in electrification). But we are talking in general, dapat walang municipality or barangay na di energized (no municipality or barangay should be without power). So ang pondo ata diyan ay P1 billion. So we are asking kung magkano ’to complete it in two or three years (We have a preliminary figure of P1 billion and are trying to find out how much is needed to get it done in two or three years),” he said.

The DoE has a proposed budget of P1.40 billion for 2020. Of this, P82.4 million will be allocated for national and regional energy planning program; P112.5 million for renewable energy development; P32.3 million for energy efficiency and conservation; and P91.7 million for electric power industry development.

He noted that the House is also looking at the budget for the K to 12 program in oder to make senior high school graduates more employable after graduation.

“Tinitignan namin yung DepEd, especially yung K to 12 tracks. Kaya tayo pumayag ng two years, kasi pag graduate, dapat accredited na at yung diploma ng bata ay di lang sa DepEd, kundi pwede na siya sa field na pinili niya yung track (We are also looking at the Department of Education’s programs, especially K to 12. We agreed to an additional two years for high school because we were told that graduates would have the proper credentials to work after graduating from the student’s chosen track),” Mr. Cayetano said.

For 2020, the proposed budget for the K to 12 program is P2.5 billion, lower than the P3.2 billion allocation in 2019.

The health sector will also be considered for budget realignment.

“Sa health, we are looking at the primary healthcare system. Sa dami ng problema sa kalusugan, ano ba ang dapat tutukan at pinaka-effective. Kung di kaya ang Pilipinas, mag-pilot projects tayo,” said Mr. Cayetano.

The Department of Health has a proposed budget of P88.72 billion.

To recall, Mr. Cayetano said earlier that he will support at least P9 billion in additional funding for the procurement of palay, or unmilled rice, to support the market and prop up farmer incomes.

He also backed additional allocations for upgrading military and police camps

The Speaker said that minimal changes in the budget might be discussed on Friday as the House will tackle also lump sum funds.

“Probably three or four minimal changes lang by Friday kapag nagbotohan. Most of the major changes baka sa bicam na. None of these will be in the category of pork or lump sum na paghahatian ng mga kongresista,” said Mr. Cayetano. — Vince Angelo C. Ferreras

Brokers reject blame for BoC corruption

CUSTOMS BROKERS said they reject any attempts by the government to pin blame on them for corruption at the Bureau of Customs, with the industry saying it will “fight” to defend the livelihood of its nearly 12,000 licensed members and proposed instead that Malacañang focus on modernizing the bureau’s systems.

Officials from the Chamber of Customs Brokers were responding Tuesday to a threat from President Rodrigo R. Duterte to remove the accreditation of brokers in order to “cut corruption overnight.”

“They can expect a fight from us licensed Customs Brokers. We are 11,900 strong,” Chamber of Customs Brokers president Adones S. Carmona said in an interview on ANC television.

He added that brokers go through a thorough training and vetting process to obtain their professional licenses.

“What will be affected are the students who enrolled in (the) Bachelor of Science in Customs Administration (program) in over 85 universities and schools… It’s a four-year course and they need to review for a six-month period for the licensure examination… We will really fight head on because we are fighting for our profession and for our survival.”

The President’s Spokesperson Salvador S. Panelo did not immediately reply when asked to comment.

Philippine Association of Customs Brokers in Education president Norberto V. Castillo said in the same program that if the government is serious about fighting corruption in the BoC, it should “upgrade the technology and professionalize the ranks (of the bureau).”

He noted that the President cannot simply order the removal of brokers because the government is bound by law to implement the Customs Brokers Act of 2004.

In a news conference at the Palace last week, Mr. Duterte said: “Take away the brokers and you would have cut corruption overnight.”

“Itong sa Customs, ang gusto ko, wala na ang brokers. Pagka may brokers, may corruption talaga ‘yan. Ngayon, sinasabi ko, sabihin mo sa Pilipino, kung gusto talaga nila walang corruption, tanggalin na natin ‘yan… (I want brokers gone from Customs. When you have brokers, you have corruption. I want to tell the people that their removal is key to eliminating corruption)” the President added.

Mr. Carmona said Customs brokers should not be singled out when corruption is also rampant in other government agencies. “It is unfair because the President had singled us out. There is corruption in the government… in the BIR (Bureau of Internal Revenue). Will he also do away with the CPAs (Certified Public Accountants)? In PhilHealth, do they do away with medical practitioners?” he said.

Mr. Duterte, in his annual address to Congress in July, denounced persistent government corruption, noting the recent unearthing of massive fraud in the public health insurance system.

“Huge amounts of medical funds were released to cover padded medical claims and imaginary treatment of ghost patients. I am grossly disappointed,” he said.

The President also claimed to have fired and caused the resignation of more than a hundred officials and appointees of government “without regard to relationship, friendship and alliance.”

He also promised a comprehensive cleanup at the BoC. — Arjay L. Balinbin

BFAR sees aquaculture making up for weakness in ocean fishery

THE Bureau of Fisheries and Aquatic Resources (BFAR) said the fisheries industry’s performance in the third quarter will be “fair to good,” with the aquaculture sector expected to take up any slack should ocean fisheries show any weakness.

“Kung humina sa third quarter ang dagat, mayroon naman tayong produksyon sa aquaculture (If the sea-based fisheries are weak, we’re counting on aquaculture) so we are projecting fair to good production. We will see at the end the year. I hope we can get that 2% (target growth),” BFAR Director Eduardo B. Gongona told reporters.

In the second quarter, fisheries output rose 1.90% year-on-year led by yellowfin tuna, round scad, tiger prawn, and tilapia, which brought growth in first-half production to 1.51%.

In volume terms, production hit 1.1 million metric tons (MMT), up 4% year-on-year.

Commercial fishery production declined 2.4% to 280,810 metric tons (MT), that of aquaculture fell 0.3% to 548,390 MT. Production in municipal waters rose 4.3% to 309,860 MT.

“Nagfo-focus tayo sa aquaculture ngayon (We are focused on aquaculture now)… we believe na iyan ang maga-angat ng palaisdaan (this will lift the fisheries sector) within the next three, five, 10 years… kasi nagre-rehabilitate tayo ng (because we are rehabilitating) municipal waters, which is the most productive sector,” Mr. Gongona said.

He noted that the Department of Agriculture aims to increase production and income of farmers and fisherfolk, and as such the agency has realigned its programs to help achieve the DA’s goals.

“Nag-concentrate muna kami doon sa maraming ani, maraming kita kasi (We are concentrating on segments with the potential for large harvests and profit since they) generate more employment,” he said. — Vincent Mariel P. Galang

World Bank releases $280 million for PRDP

THE Department of Agriculture (DA) has obtained $280-million worth of funding from the World Bank to implement the Philippine Rural Development Project (PRDP).

“The World Bank has approved an additional $280 million for PRDP,” Agriculture Secretary William D. Dar said in a statement.

PRDP is administered by the DA and jointly funded by the World Bank, the national government, and participating local government units (LGUs). It aims to establish an up-to-date, value-chain oriented and climate-resilient agriculture and fisheries industries.

The projects are executed with LGUs and the private sector, which are expected to help provide key infrastructure, technology and information to boost income, productivity, and competitiveness in target areas.

Since it began in 2013, the program has received a total of $760 million from the World Bank.

Mr. Dar said separately that $500 million was also obtained to implement a Provincial-Led Agriculture and Fisheries Extension System and $300 million to fund inclusive development projects in Mindanao provinces.

The DA also handed out P480.24-million worth of machinery and other inputs to members of irrigator and farmer’s associations in Northern Mindanao.

“The assistance is part of the government’s provision for equipment to increase productivity and income of rice farmers and make them more competitive,” the DA said. — Vincent Mariel P. Galang

Davao business sector calls for measures to keep out swine disease

DAVAO CITY — The Davao City Chamber of Commerce and Industry has called on government to implement measures to prevent the spread of African Swine Fever (ASF) to Mindanao.

In a press statement Monday, Arturo M. Milan, president of the business group, said there is a need to protect the hog industry of the island by securing the virus’s possible entry points.

“Given the potency of this ASF virus, we believe that strict control measures should be implemented in all ports and airports to prevent ASF-infected pork from entering Mindanao,” Mr. Milan said.

He said Mindanao has the ability to keep out diseases like this, after having prevented the entry of foot and mouth disease.

“We need to improve these measures since just one pig can infect the pork and swine industry, and may cause loss of jobs,” he said.

Last week, the city government, through acting mayor Sebastian Z. Duterte, issued an executive order forming a body that will come up with measures to prevent the entry of ASF.

In Executive Order 37 creating an African Swine Fever Task Force, Mayor Duterte said: “There is a need to create a body that will look into the formulation of appropriate policies and implementation of programs to protect the public and the swine industry from the threats of ASF in Davao City.”

Eduard C. So, president of the Davao Hog Farmers Association, added that only pigs can be affected by ASF, and not humans consuming infected meat.

“(ASF) has no effect on humans, only on swine,” Mr. So said in a forum. He added that Mindanao’s hog farms send about 40% of their output to areas outside Mindanao, particularly the Visayas.

Mr. So said that despite the lack of danger to humans, the industry has felt the pinch after news that the disease has infected pig farms in Luzon, although he said it is hard to quantify the impact. — Carmelito Q. Francisco

High-grade nickel ore key to filling Indonesia market gap — MGB

THE nickel industry’s ability to supply high-grade products will be key to exploiting the market opportunity resulting from Indonesia’s nickel ore export ban, the mining regulator said.

“We can capitalize on the opportunity… we have nickel. What worries me is if the market will insist on high-grade nickel,” Mines and Geosciences Bureau (MGB) director Wilfredo G. Moncano told reporters.

The MGB estimates that nickel ore production grew 3% to 11.306 million dry metric tons (DMT) in the first half of 2019.

The United States Geological Survey ranks Indonesia the top nickel producer in 2018 with 560,000 tons, followed by the Philippines with 340,000 tons. Both countries’ top export market for nickel is China.

Mr. Moncano noted that Philippine nickel is mostly lower-grade, but added that international buyers may still have an interest in ores with nickel content of between 1.3% and 1.5%.

Reuters reported on Monday that a major nickel mine in Tawi-Tawi, which produces high-grade ore, has suspended operations indefinitely due to an audit being conducted by the local government.

The audit is part of the preparations to implement the Bangsamoro Responsible Mining Law.

The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) suspended operations of all four mines in the area in a memorandum order dated Aug. 5.

It said 90% or 2.34 million wet metric tons (WMT) of high-grade ore exported to China came from Tawi-Tawi in 2018.

Mr. Moncano said suspended mining companies should speedily comply with the corrective measures required to resume production.

“If they expedite action on the corrective measures, then on the part of MGB, bibilisan namin namin ang (we will expedite) validation,” he said.

As of August, two companies are awaiting the lifting of MGB suspensions — Zambales Diversified Metals Corp. and Strong Built Mining Development Corp. Five are still complying with an agency resolution dated Nov. 12, 2018 — Ore Asia Mining and Development Corp., Krominco Inc., Mt. Sinai Exploration and Development Corp., Wellex Mining Corp., and AAMPHIL Natural Resources Exploration and Development Corp.

Three companies have had their suspension orders lifted — Berong Nickel Corp., Carrascal Nickel Corp., and Emir Mineral Resources Corp.

Three mining companies are appealing their suspensions to the Office of the President — Claver Mineral Development Corp., Oriental Synergy ining Corp., and Libjo Mining Corp. — Vincent Mariel P. Galang

PAGCOR threatens to cancel licenses of tax-evading POGOs

THE gaming regulator said online gaming firms that evade taxes could face cancellation of their licenses and labor inspections, among other measures.

The Philippine Amusement and Gaming Corp. (PAGCOR) said in a statement Monday that Philippine Offshore Gaming Operators (POGOs) that are not complying with tax rules could face “the imposition of interest on outstanding arrears, forfeiture of performance bonds, imposition of demerits/administrative sanctions and charging of cash penalty, cancellation of license.”

PAGCOR Chairperson and CEO Andrea D. Domingo said the regulator has issued letters to all POGOs and service providers seeking their support for the Department of Finance’s (DoF) crackdown on POGOs that are not remitting taxes withheld from their foreign workers.

Meanwhile, the Department of Labor and Employment’s (DoLE) Bureau of Local Employment (BLE) director Dominique Rubia-Tutay said her agency will be inspecting companies for compliance with immigration, work permit and tax rules.

“We will validate and inspect their presence and their work in the company and then check if they’re compliant on immigration, work permits and also taxation,” she told reporters after the DoLE budget hearing in the Senate on Tuesday.

Ms. Tutay said that among the 177 POGO service providers inspected as of June, 8,371 foreign workers were found to be working without Alien Employment Permits (AEPs), accounting for 20% of the sector’s work force of 41,742.

Of those with no work permits, only 1,693 foreign workers were able to comply within a given deadline.

She estimates that an additional 6,678 foreign workers could be working without AEPs. — Beatrice M. Laforga

Heritage advocates urge brake on reclamation, focus on redeveloping older communities

THE rush to reclaim land represents a failure to nurture vibrant communities in older and often historic parts of the Manila Bay area, heritage and conservation advocates said.

“As an urban planner, I think it is proof that if we push reclamation it shows that we are (giving up) on our ability to develop our communities,” Mark Richard D. Evidente, president of the Heritage Conservation Society, said at forum on Manila Bay-area communities.

The forum, known as “A Horizon of Heritage, was organized by Oceana Philippines in the city of Manila.

The Manila Bay area spans 199,400 hectares (ha) incorporating the provinces of Cavite, Bulacan, Pampanga, and Bataan as well as Metro Manila’s Paranaque, Pasay, Manila, Malabon and Navotas districts.

The Philippine Reclamation Authority counts 23 dump-and-fill projects along the bay as of late June, in varying stages of completion, ranging from about 14 ha to 1,900 ha.

Oceana Philippines Vice President Gloria E. Ramos said: “The 1987 Constitution… is very clear. It’s the policy of the state to guarantee… (a) full and balanced ecology… in accord with the rhythm and harmony of nature… it is the duty of everyone not to destroy the environment.”

Mr. Evidente said local government units should focus on developing existing communities, using their urban planning powers and the authority granted by the Local Government Code.

“The tendency is if you have reclamation, you will focus a lot of your administrative energy on developing these things, and you’ll forget about the people who actually need your help… the communities who have been there for a long time,” he said in interview.

He also cited the efforts of Manila Mayor Francisco Moreno Domagoso to redevelop older parts of the city, giving importance to heritage.

“I think they are missing a great opportunity to really revitalize the life of their cities if they focus in reclamation rather than redeveloping what they already have,” he added.

Mike Lu, president of the Wild Bird Club of the Philippines (WBCP), said animals are also affected by the loss of habitat caused by reclamation, in particular migratory birds.

“With reclamation, we are obliterating everything, not just the wildlife, not just livelihood. When we do reclamation, we destroy the sea… the reclamation materials (have) to come from somewhere. It will come from the mountains. We destroy the mountains,” he said.

Benjamin M. Vallejo, associate professor at the University of the Philippines Institute of Environment Science and Meteorology, said the benefits of reclamation can only be realized by investors, who evade the costs imposed on communities.

“Kailangan timbangin ng ating government authorities (the authorities should weigh) the risks and outcomes over the long term,” he said. — Vincent Mariel P. Galang

Helping the Pasig River commuter system succeed

It’s remarkable, what a long-unopened filing cabinet can yield. On this trip to Manila, we found a faded document with the ambitious heading:

“Concept Paper: A Pasig-based commuter transport system for Metropolitan Manila and environs.”

I had just been introduced to Commodore Brillante Ochoco, Commandant of the Philippine Coast Guard. Upon learning that I was an advertising man, he asked me to suggest a topic for a talk that he needed to make before members of the United Nations Walking Corp., a fanciful name for what I assumed was a gathering of gentlemen of leisure over coffee, much like the Inter-Continental Hotel 365 Club and the old Escolta Walking Corp. at the venerable Botica Boie on the Escolta.

My mischievous self was tempted to suggest the Battle of Manila Bay led by another commodore, George Dewey, but I decided instead on a more benign theme that had to do with water (Philippine Coast Guard equals water, get it?). For a “walking” club, why not a topic on transport. Thus, water plus transport equals a Pasig River transport system.

This was back in the early 1980s, well before EDSA had become a monstrous parking lot. But even then, traffic congestion tormented Metro Manilans. I therefore wrote a concept paper on a commuter system reviving the pre-war use of the Pasig River.

My dusty 40-plus year old paper reads:

1. The current situation

1. 1. Continuing growth of Metro Manila population and resultant urban sprawl.

1. 2. Escalating commuter transport problems caused by increase in number of motor vehicles, increase in number of commuters moving from the suburbs to Metro Manila’s business and commercial districts, inadequacy of existing thoroughfares and inadequacy of the transport systems themselves.

1. 3. Negative effects on manpower productivity, traffic safety and on the ecology, as well as on cost-of-living, especially for low-income workers.

1. 4. North-South commuter needs filled by Metrorail. East-West needs currently being met by standard land transportation systems, with corresponding problems and limitations.

2. The opportunity

2. 1. Historically, the Pasig River has served as one of the principal transportation routes serving Manila and the towns of Rizal.

2. 2. For years, however, the Pasig has hardly been employed for commuter transport (there are crude ferry services in operation at the present time).

2. 3. The Pasig has also severely deteriorated because of pollution. Its banks are lined with slum dwellings. In this regard, the Metro Manila Commission and the national government have launched a determined program to save the Pasig and restore it to its former beauty and usefulness.

2. 4. Running the East-West route, the Pasig passes through Metro Manila’s major business and commercial districts, including Mandaluyong, Makati, Santa Mesa, Quiapo, Santa Cruz and San Nicolas/Binondo and all the way up to the vicinity of the Port Area. The Metro Manila and Rizal towns through which the Pasig flows are, incidentally, among those suffering the most from traffic congestion.

3. The concept

To solve the foregoing problem, we propose to take advantage of the opportunity provided by the Pasig River, thus:

THE METRO-MANILA LOVE BOAT
Commuter Transportation System On the Pasig River

The Love Boat Transport System will have the following features:

3. 1. Air-conditioned boats carrying the equivalent load of a standard bus in terms of passengers, plying the length of the Pasig from the farthermost Rizal town up to downtown Manila (Quiapo/Santa Cruz), with stops in Makati, Mandaluyong and other points.

3. 2. Love Boat fares to be made affordable for average income workers.

3. 3. Regular departure and arrival schedules to be observed. Fixed Love Boat stations to be designated. Corresponding wharves and facilities to be constructed.

Why did I suggest calling it the Love Boat? Because First Lady and Metro Manila Commission Governor Imelda Romualdez-Marcos had successfully launched the Love Bus, a commuter system that operated on regular and predictable schedules while offering air-conditioned comfort at a reasonable price. Besides, there was a weekly TV sitcom, The Love Boat, being aired at the time.

At any rate, Commodore Ochoco’s speech, in which he proposed the Pasig River transport system, was so well-received, it got wide newspaper coverage and Mrs. Marcos herself became interested in the concept. She sent for Ochoco, who took me along to the meeting. The First Lady agreed to develop the concept further.

An overseas investment group also expressed interest in the concept and held several exploratory meetings with us,

Pleasantly surprised at the enthusiasm that his proposal had generated, Ochoco also arranged for us to actually sail the entire length of the Pasig River. Columnist Ruther Batuigas joined us on the trip.

Unfortunately, historic events overtook our incipient project. The People Power Revolt of 1986 scuttled any further discussions of the idea. Ochoco was promoted to Rear Admiral and Flag Officer in Command of the Philippine Navy, but was soon displaced along with the ejection from Malacañang of the Marcoses.

However, a Pasig River commuter transport system was too good an idea to let go of. Through the various administrations that came after Marcos, attempts to establish and operate such a system have been made by private and government entities, with varying degrees of success and failure.

A news item last year read: “The new Pasig River Ferry System, which will begin operations in December 2018, aims to have 29 stations and 24 boats servicing 76,000 commuters per day or 19,836,000 per year — not yet including passenger volumes for weekend schedules, tours, or express routes. The new stations will be established along the river in the cities of Manila, Mandaluyong, Makati, Taguig, Pasig, and Marikina…

“At present, the Pasig River Ferry Service which is run by the MMDA has 12 stations: three stations are in Pasig City — Pinagbuhatan in Eusebio Avenue, San Joaquin on San Bernardo Street, and Maybunga on Dr. Sixto Avenue; two in Makati City — Guadalupe on J.P. Rizal Extension, and Valenzuela on A. Bonifacio Street; one in Mandaluyong — Hulo Station on Coronado Street; six in Manila — Lambingan on Bautista Street in Sta. Ana, Sta. Ana on Pedro Gil Street, Polytechnic University of the Philippines (PUP) Mabini Campus in Sta. Mesa, Lawton, Escolta on Muelle dela Industria, and Plaza Mexico in Intramuros.

“Aside from the ferry service, the Technical Working Group also proposes improved connectivity to the ferry stations through additional pathways such as bridges, linear parks and esplanades leading to the ferry stations. The addition of the bridges, parks and esplanades will also serve as a network of open spaces that will provide Metro Manila’s dense urban population with a ‘breathing space’ as well as an evacuation area during times of calamity.”

The story added that several government agencies had been mustered for the project. I also found this item online: “Early this year, President Rodrigo Duterte approved the revival of the Pasig River Ferry to solve the severe traffic in Metro Manila. Makati City Representative Luis N. Campos, Jr. said that at least P2 billion was required to revive the ferry system with smaller boats passing through more stations at a faster speed.”

Frankly, it shouldn’t take an accidental discovery of old files and the efforts of a curious columnist to unearth information that affects millions of traffic-weary Metro Manilans. If I hadn’t exhumed my old files which, in turn, prompted me to research the topic, I wouldn’t have learned about these welcome developments.

No wonder the earlier efforts to operate the system didn’t fly. Neither will the current efforts succeed unless wide awareness, interest, comprehension and conviction are generated for it. Without Advertising, Promotions and Publicity, even the best products and services are doomed to fail.

The fellow who coined the saying, “Build it and they will come!” was a miserable failure. No one learned about what he had built. And nobody came.

 

Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.

gregmacabenta@hotmail.com

Beware of China giving gifts: The risk of joint development of the South China Sea resources

A few weeks after his fifth visit to China, President Rodrigo Roa Duterte claimed that Chinese President Xi Jingping offered him a controlling stake in a proposed joint energy exploration in the West Philippine Sea if the Philippines would set aside the 2016 United Nation Convention of the Law of the Sea (UNCLOS) award that invalidated China’s historic claim in the South China Sea. According to President Duterte, his Chinese counter-part advised him to “Set aside the arbitral ruling — set aside your claim then allow everybody connected with the Chinese companies, they want to explore. If there is something, we will be gracious enough to give you 60%, only 40% will be theirs (Chinese companies).”

President Duterte did not say whether or not he had accepted President Xi’s seemingly sincere and generous offer for the joint exploration of the West Philippine Sea. However, Associate Justice Antonio Carpio claimed that Foreign Secretary Teodoro Locsin, Jr.’s timely intervention prevented President Duterte from making a “unilateral declaration” to set aside the 2016 UNCLOS award to the Philippines. According to Justice Carpio, the foreign secretary’s clarification that the Philippines was not setting aside or abandoning the award before China could accept President Duterte’s unilateral declaration setting aside the award, prevented the Philippines from being bound by the chief executive’s unilateral declaration. This incident showed the perils of absolute acceptance of China’s Trojan Horse in the South China Sea dispute — joint development of the disputed waters’ resources.

One of the most popular yet untried approaches in the resolution of the South China Sea dispute is the joint development of the South China Sea resources by the claimant states. The prospect for joint development, however, is hampered by claimant states’ distrust of each other. The claimant states’ determination (especially China) to apply force and coercion to assert their territorial claims undermines any prospect for fostering trust and more cooperation in resource sharing. This situation is further complicated by China’s heavy-handedness in enforcing its territorial claims over the South China Sea on its terms. As a result, while all parties in the dispute agree on cooperative development in principle, they fail to translate it broadly in practice.

It is frequently suggested that claimant states put aside their territorial claims and instead, engage in the exploration and exploitation of oil, gas, hydrocarbon, and fishery resources. Interestingly, however, there has been no progress in this area because the other claimant states are also wary of China’s formula for joint development based on the late Deng Xiaoping’s exhortation: “Sovereignty is ours, set aside disputes, pursue joint development.” China’s offer of joint development includes a caveat — “that the other claimant state would have to accept China’s indisputable claim on the South China Sea even before the negotiation for a joint development will take place.”

Another issue against joint development is that China has used it as part of its Salami tactic against the Association of Southeast Asian Nations (ASEAN). This tactic involves offering each claimant state a joint development venture as a means of resolving the South China Sea dispute. China was able to apply this tactic when it convinced the Philippines and Vietnam to join a Joint Maritime Seismic Undertaking (JMSU) in the South China Sea.

However, by joining the JMSU, the Philippines and Vietnam became complicit in China’s tactic for two reasons: 1.) the agreement undercuts the position of two ASEAN member states, Malaysia and Brunei, since it tacitly lends validity to China’s extreme claims to islands and maritime space in the South China Sea; and 2.) by signing a trilateral deal, the Philippines and Vietnam derogated the united front that ASEAN had successfully formed to deal with China in the South China Sea dispute in the aftermath of the Mischief Reef Incident in the mid-1990s.

NOT A BAD IDEA
Joint development of resources in a disputed area is not a bad idea. However, joint exploration of natural resources in the South China Sea should not be seen as a means to circumvent the territorial disputes or as a prerequisite for cooperative political relations among the claimant states. Rather, it should be considered as the result of improving relations among the disputing states that can further enhance reconciliation among them. Claimant states and private companies expect the territorial dispute to be resolved first, before starting oil exploration and drilling operations to prevent harassment or armed confrontation.

Any progress towards any cooperative activities in the disputed waters will only occur if China makes unilateral accommodation to the other claimant states by accepting the July 12, 2016 UNCLOS award to the Philippines. This will be followed by reciprocal restraint by the small claimant states that will involve accepting China’s growing naval presence in Southeast Asian waters and the holding of confidence-building measures between their respective navies and the People’s Liberation Army’s Navy. These developments will set clear maritime demarcations, and generate norms on joint resource exploration and development.

This will also convince external powers to limit the deployment and operations of their naval forces since the littoral states have learned to cooperate in managing their disputes in the South China Sea.

Cooperative joint development ventures involve domestic bureaucracies, private companies, ordinary citizens, and other interest groups in the process of conflict resolution. Private companies will seize the opportunity to cooperate by increasing trade and investments that will foster integration among the disputing states’ civil societies as their citizens interact with their counterparts from the other claimant states through business contacts, tourism, scientific, and cultural links, and academic exchanges. Joint development ventures in the South China Sea will create powerful constituencies among the claimant states that will have vested interests in peace and will lobby within their countries for policies of reciprocal restraint and economic integration between China and the other claimant states.

 

Dr. Renato Cruz De Castro is a Trustee and Convenor of the National Security and East Asian Affairs Program, Stratbase ADR Institute.

Giving our farmers the ‘credit’ due them

When a farmer needs credit, and whose only asset is the land under patent which he tills, where does he go?

Previously, landowners were prohibited under CA (Commonwealth Act) No. 141 from selling or mortgaging their lands for the first five years from the grant of free patent. These lands could not also be held liable for the satisfaction of any debt contracted prior to the expiration of the period. And, even if sold beyond the five-year period, the landowner, his widow, or legal heirs, were still granted by law the right to redeem or repurchase the same within five years from the date of sale.

The public policy objective of these free patent restrictions is sound, that is, to provide a home and decent living to small independent landowners, and to give them every chance to preserve for themselves and their families the land that the State had graciously given them as a reward for their labor in cultivating the same.

These restrictions, however, unduly limit our farmers’ access to credit, as their lands, which are almost always their only assets, cannot be used as collateral for loans. This effectively limits their opportunity to create capital and make investments to modernize and increase farm productivity. In fact, despite the lapse of the five-year prohibitory period, lands under patent remain unattractive to banking institutions, considering the landowner’s right of redemption for another five years, which conflicts with banks’ interest at quickly disposing of their hard assets to maintain their solvency and liquidity.

With the passage of RA No. 11231 or the Agricultural Free Patent Reform Act, signed into law by President Rodrigo R. Duterte on Feb. 22, lands acquired under a free patent are no longer subject to the restrictions previously imposed under CA No. 141. Thus, free patents shall now be considered as titles in fee simple, granting landowners full and unrestricted ownership rights. Further, free patents issued before the effectivity of RA No. 11231 also benefit from the law, as it applies retroactively, such that all restrictions previously imposed shall be removed and immediately lifted, but without prejudice to the right of redemption for transactions made in good faith prior to the law’s effectivity.

Indeed, for decades, these lands had been “dead capital,” miring our farmers into deeper poverty, and hindering the country’s economic growth in the process. But with this new law, lands covered by free patents become immediately tradeable and bankable, granting farmers ready access to credit which they can use for whatever purpose they deem best for their lands, consistent with the law’s declared policy to allow efficient and effective utilization of said lands in order to contribute to wealth creation, entrepreneurship, and economic development.

Truly, this law not only breathes life into dead capital, but also empowers our farmers, promotes agricultural entrepreneurship, alleviates poverty, and boosts development in the agricultural sector, all while spurring the country’s economic growth.

But while this law brings so much promise, we can only hope that our farmers will not simply barter away their lands for easy cash, forcing them back where they originally were — without lands and homes.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.

 

Tanya D. Ibañez is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), Cebu Branch.

(6332) 231-4223

tdibanez@accralaw.com

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