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DoF backs plan to tap BNPP to lower power costs

THE FINANCE department is backing a plan to study the feasibility of tapping nuclear energy as a means of lowering electricity costs.
“I want to encourage [Energy Secretary Alfonso G.] Cusi to really study it well and we will support him as much as we can if its safe and if it makes economic sense,” Finance Secretary Carlos G. Dominguez III told reporters last week.
“That is something that we should consider if we want to bring down power rates. It might be a good investment (because some facilities are) already there,” he added.
Mr. Dominguez said that the government has settled all debt taken on to construct the Bataan Nuclear Power Plant (BNPP).
The plant was built in 1976 by President Ferdinand E. Marcos at a cost of over $2 billion.
Construction was halted in 1986 after Mr. Marcos was ousted.
Mr. Dominguez said plants similar to BNPP have been safely operating for the past 40 years.
“It is probably the asset that we will use to lower the cost of electricity,” Mr. Dominguez said.
“We have to have all the safety measures, but I think it’s something that we should really consider,” he added.
The DoE completed the draft national policy on nuclear energy last year.
Mr. Dominguez noted that the government is currently in the process of rehabilitating the Agus-Pulangi Hydroelectric Power complex to also lower the cost of electricity, ahead of the expected depletion of the Malampaya gas field.
“We are also investing quite a bit of money, probably close to half a billion dollars, in refurbishing the Agus system. That currently is running at only 40% capacity. We will probably bring that up to something like 88.5% capacity. That should help lower the cost of electricity,” he said.
The project, which will be financed by China, is expected to begin construction in 2020, and completed by 2022. — Elijah Joseph C. Tubayan

US pork industry backs free trade deal with PHL

THE US National Pork Producers Council (NPPC) said that it hopes Washington will conclude a free trade agreement (FTA) with the Philippines, which it views as a priority market.
In a statement, NPPC President Jim Heimerl said: “The Philippines is a large pork-consuming nation, with a fast-growing population and a burgeoning middle class. It also has some of the highest food prices of any Southeast Asian nation and would benefit from a free trade agreement.”
The NPCC said that US shipped nearly $100 million worth of pork to the Philippines in 2017, with room to grow under an FTA.
It also noted that pork is one the most competitive US export products.
NPCC said that it welcomes progress in addressing issues under the bilateral Trade and Investment Framework Agreement (TIFA) with the Philippines, and is hoping that the progress on such matters would move the US to initiate FTA negotiations with the Philippines.
“We thank the Trump administration for the steps it is taking to expand US pork access to many international markets including the Philippines,” Mr. Heimerl said.
The US Department of Agriculture (USDA) earlier said that the Philippines is expected to import 285,000 metric tons (MT) of pork this year, up 18% from the 241,000 MT last year.
According to the Philippine Statistics Authority, the Philippines imported 260,720 MT in 2017, up 16.52% from a year earlier.
The Philippines was reported to have begun FTA negotiations with the US in September 2017 with the first round of talks focused on labor, intellectual property and agriculture. — Reicelene Joy N. Ignacio

BIR reduces reporting workload for district offices

THE BUREAU of Internal Revenue (BIR) ordered its district offices to dispense with the monthly reporting of “irrelevant” information concerning withholding taxes, and focus on attaining collection targets.
Revenue Memorandum Order (RMO) 47-2018 dated Oct. 10 and made public on Oct. 26, discontinued the Monthly Report on Registration and Remittance of Withholding Taxes, and Accomplishment Report on Pre-Audited Withholding Tax Returns.
“The preparation of the Monthly Report on Registration and Remittance of Withholding Taxes (Form No. W7) and the Accomplishment Report on Pre-Audited Withholding Tax Returns (WTRs) (BIR Form No. W8) by all concerned Revenue District Offices, including the concerned revenue offices under the Large Taxpayers Service, and its subsequent submission to the Miscellaneous Operations Monitoring Division (formerly Withholding Tax Division) of the Collection Service is hereby terminated,” it said.
“In case of need for information that are otherwise available in the said reports, the concerned Office under the Information Systems Group of this Bureau shall extract the desired information, in so far as available in the Integrated Tax System or other electronic systems or facilities of this Bureau, in coordination with the Miscellaneous Operations Monitoring Division,” it added.
The BIR said that the level of compliance with the said reports was “notably low,” amid the lack of available manpower as there was a need to pay “immediate attention to high-priority activities.”
The BIR said that despite measures to streamline processes, its personnel are still required to perform such manual procedures due to existing Revenue Regulations.
“After reevaluation of the governing revenue issuances and the availability of information in the Bureau’s data warehouse, these reports may be considered irrelevant and can therefore be dispensed with in order that the concerned revenue personnel of the RDOs can focus their efforts towards the attainment of their tax collection targets,” it said.
The BIR collected P1.44 trillion in the nine months to September, up 11% from a year earlier, but 2% below its P1.47-trillion target, according to the Bureau of the Treasury.
The latest collection total is equivalent to 70.62% of the original full-year target of P2.039 trillion.
The Development Budget Coordination Committee (DBCC) on Oct. 16 lowered the overall revenue target by P26 billion to P2.820 trillion due to the deferred implementation of the electronic receipts and fuel marking program under the Tax Reform for Acceleration and Inclusion law. The BIR has yet to disclose its new target reflecting these adjustments. — Elijah Joseph C. Tubayan

Solar dev’t agency bills filed in House

THREE new bills seeking to create a solar energy development agency were filed at the House of Representatives.
House Bills no. 8311 and 8326 both proposed to establish a Solar Energy Development Center as an agency of the Department of Energy (DoE).
The bills, written by Manila-3rd district Rep. John Marvin C. Nieto and Camarines Sur-2nd district Rep. Luis Raymund F. Villafuerte, Jr. respectively, provided that the Center shall be led by a 6-member Board of Directors.
The Board, as proposed, will be chaired by the President, who is authorized to appoint two members. The three other members will be the secretaries of the DoE, Department of Environment and Natural Resources (DENR) and the Department of Science and Technology (DoST).
House Bill 8337, written by Laguna-2nd district Rep. Joaquin M. Chipeco, Jr., seeks to establish a Solar Energy Development Authority to be headed by a five-member Board.
In this version, the Board of Directors will be led by a chairman, two members and two ex-officio members from the DoST and the DENR.
In his explanatory note, Mr. Chipeco noted that in the Philippines the private sector is active in solar energy development.
“In the Philippines, it appears that the private sector is taking the lead in developing and promoting the use of solar energy as an alternative to fossil and other ‘dirty’ fuels,” Mr. Chipeco said.
“There is therefore a need to come up with a regulatory regime and coherent policies and strategies with respect to this relatively new economic and scientific development.”
The bills propose to authorize the solar agency to conduct research into alternative energy sources.
Aside from the three House Bills, Congress is also considering Senate Bill 497, written by Senator Antonio F. Trillanes IV. — Charmaine A. Tadalan

PMO starts liquidating assets of Bicol dev’t agency

THE PRIVATIZATION Management Office (PMO) has begun the liquidation process for the Partido Development Administration (PDA), the Department of Finance (DoF) said in a statement.
The DoF said that Finance Secretary Carlos G. Dominguez III directed the PMO to “set in motion the process of disposing of the assets.”
Mr. Dominguez also told the PMO to “ensure the disposition of assets of the PDA pushes through.”
The Finance department said that the move was “in line with the Duterte administration’s goal of ridding Government of its non-performing assets (NPAs).”
Proceeds of the liquidation will also be used to settle PDA’s outstanding liabilities.
The Governance Commission for Government-Owned and Controlled Corporations recommended the abolition of the PDA in 2017 as it was determined to have overlapping functions with another government agency, and that it did not serve its objectives.
The PDA was created in 1994 with the goal of accelerating the development of 10 municipalities in the fourth district of Camarines Sur.
The Office of the President issued a memorandum order last month saying that “the PDA and its various operating units have been consistently operating at a loss for several years, which necessitates continuous subsidy from the National Government.”
Malacañang said that “despite the operation of the PDA for almost twenty (20) years, the 4th District of the Province of Camarines Sur has the highest poverty incidence level compared to other districts of the Province, and has a higher poverty incidence compared to the average for the entire Bicol Region.”
Mr. Dominguez also asked the PMO to speed up the liquidation of the Technology Resource Center (TRC).
The TRC was ordered abolished in 2014 under the previous administration amid alleged links to the Priority Development Assistance Fund (PDAF) scandal.
Some functions of the TRC were transferred to the Department of Science and Technology in 2015. — Elijah Joseph C. Tubayan

CTA orders BIR to refund nearly P13 million to PAL

THE COURT of Tax Appeals (CTA) sitting en banc has ordered the Bureau of Internal Revenue (BIR) to refund nearly P13 million to Philippine Airlines, Inc. (PAL), affirming a ruling of the court’s first division.
The ruling covers P12,912,430.88 which was found to have been erroneously-paid excise taxes for the import of liquor, wine and cigarettes on international flights in 2006 and 2008-2012.
In a decision dated Oct. 18, the CTA en banc denied the petition for review filed by the BIR which contested the the first division ruling partly granting the refund sought by PAL. The BIR had claimed that the airline is not entitled to a refund as it was not able to prove that the prices of imported items were lower than domestic prices.
The CTA en banc, however, said PAL complied with the conditions for the tax exemption in Presidential Decree No. 1590 which granted it “a franchise to operate and maintain air transport services domestically and internationally.”
It accepted the evidence PAL presented to prove that the imported items are not locally available “in reasonable quantity, quality, or price.” The airline had submitted Philippine Wine Merchant price lists for the applicable periods.
“We agree with the findings of the Court in Division that respondent PAL was able to comply with all of the aforementioned conditions for tax exemption under P.D. 1590,” the CTA en banc said.
PAL originally claimed a refund of P30,099,193.82 which was partially granted in January 2017 as P12,912,430.88 was proven to have been exempt from excise tax. — Vann Marlo M. Villegas

Revisiting the rules on offsetting arrangements

Offsetting (or netting) may arise in business transactions where there is a debtor-creditor relationship. Considering that two parties can be both debtor and creditor of each other, offsetting can be resorted to in order to reduce, or even extinguish the liability, if the legal conditions are present and if the criteria under Philippine Financial Reporting Standards (PFRS) are met.
While offsetting is not defined under Philippine law, the concept is introduced as “compensation” under the Civil Code.
Compensation takes place when two persons, in their own right, are creditors and debtors of each other. In one Supreme Court case, compensation has been defined as “a mode of extinguishing to the concurrent amount, the obligations of those persons who in their own right are reciprocally debtors and creditors of each other,” and “the offsetting of two obligations which are reciprocally extinguished if they are of equal value, or extinguished to the concurrent amount if of different values.”
Although it is clear under the Civil Code that offsetting may take place between parties who are both debtor and creditor of each other, and in some instances even without their consent, it is a different scenario altogether when it comes to taxation.
Under existing tax regulations, the Bureau of Internal Revenue (BIR) has categorically prohibited the practice of offsetting the due to/due from and/or payable/receivable transactions of taxpayers.
In June 2016, the BIR issued Revenue Memorandum Circular No. 61-2016 prescribing the policies and guidelines for accounting and recording transactions involving “netting” or “offsetting.” Although the effectivity of RMC 61-2016 was suspended by virtue of RMC 69-2016, the BIR lifted the suspension in the last quarter of 2016 upon its issuance of Revenue Memorandum Circular 127-2016.
Under RMC 61-2016, the BIR mandates that taxpayers shall, at all times, recognize at gross the accrued receivables or payables arising from the sale or lease of goods or properties or the performance of services for income and value-added tax or percentage tax purposes.
The same Circular further provides that income payments subject to creditable and withholding taxes shall be recorded at gross, and any amount offset against the income payments by the payor not subjected to tax shall not be allowed as deductible expense of the payor. This is pursuant to RR 12-2013, which disallows an expense to be deductible if no withholding tax is remitted.
To provide a full understanding on transactions with an offsetting arrangement, the Circular provides for three illustrations:
1. A manufacturer sells its food products to a supermarket that, on the other hand, charges a service fee to the manufacturer for the display of its product in the store of the latter. The manufacturer issued a sales invoice for the full amount of the products sold. However, the supermarket records its purchases net of service fees, which it records as a discount. For VAT purposes, the service fees disguised as a discount in this scenario are not within the discount contemplated under the provisions of RR 16-2005, as amended. Hence, the service fee disguised as discount shall be considered revenue regardless of the “netting arrangement” between the payor and payee. The parties shall record the sale of goods and service fees at gross amount instead of netting the transaction and making it appear that there is a discount.
2. In the telecommunications industry, companies interconnect their telecommunication service networks with one another. As part of their revenue sharing or fixed-rate charge arrangement, parties bill each other for interconnection fees, or access charges on voice and data transmissions passing through their respective network. The interconnection, sharing, or access charges, shall form part of the gross revenue of the company receiving the same, and a corresponding interconnection fee expense and set up of liability shall be recorded by the company paying the share or charge. In this scenario, the outright set-off of payments due to the other telecommunication company against the gross revenue of the collecting telecommunication company is prohibited.
3. A bank extends a loan to its depositor who happens to maintain a deposit account with the bank. The bank earns interest income from the loan extended to the depositor while at the same time, incurring interest expense on the deposit account. In this case, the bank shall declare in its percentage tax return the full amount of the interest earned from the loan extended without offsetting the interest expense due to the depositor.
It may be inevitable for some businesses to enter into a “netting” arrangement in order to settle an obligation. It is, however, necessary for taxpayers to be mindful of their procedures when recording transactions for settlement arrangements. For both accounting and tax purposes, the “substance over form” of business settlement agreements must be considered, and each particular transaction must be recorded separately.
Taxpayers may have potential tax exposures on income tax, value-added tax (VAT) and other tax obligations as a result of noncompliance with the prescribed guidelines for accounting and recording of transactions involving offsetting. Taxpayers are strongly encouraged to evaluate their compliance with RMC 61-2016, so that risks on possible tax deficiencies can be minimized, especially in case of future BIR tax audit investigations. A prudent and careful study of changes to tax policies and obligations should be a priority for every business, professional, and entrepreneur.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
 
Kristine Joyce A. Dalangin is a Senior Associate at SGV — Financial Services Tax.

Soriano: Boy Wonder

In our primary and secondary school, some boys had surnames like Aquino, Araneta, Arroyo, Cojuangco, Laurel, Lopez, Roxas, Tañada, Tuazon, and the like. These are names of the highborn. And I should include on this short the list the name Soriano.
We had a classmate in high school named Andres Soriano. Quite a few asked whether he is related by blood to the Andres Soriano who owned big companies like San Miguel Corp., ANSCOR, and Philippine Airlines.
But this is a different Soriano, a commoner so to speak. Incidentally, we have in our class an Ayala, not related to Soriano and likewise a commoner. This Ayala is mighty proud of being a commoner and a musician, and describes himself and his band as Bagong Lumad. He recently staged a series of concerts at the Ayala Museum.
But back to Soriano. Because of his first and last names, he gets attention for all the wrong reasons. Hence another classmate, Dalandan (a very indio name; friends teasingly call him Orange) gave Andy Soriano a piece of advice. Keep a low profile because he could be mistaken for the big-time Soriano, which could lead to bad consequences like being kidnapped for ransom or being bullied by school toughies.
Andy was a high school seminarian at San Jose Minor Seminary before transferring to the Ateneo de Manila high school. He then obtained degrees in economics and philosophy at the Ateneo. Upon completing his undergraduate studies, he entered law school and passed the bar exams with flying colors. He worked for several Justices at the Supreme Court, and later moved to the private sector, including having solo practice and teaching law, before getting appointed as Regional Trial Court Judge.
Dalandan, also known as (a.k.a.) Orange or Meong, describes Soriano as a quiet, simple, and unassuming guy. Meong’s impression of Andy then was one who was comfortable being alone. Another school chum, Posadas, a.k.a. NoyP, had a moniker for Andy: Wonder Boy. NoyP observed Andy being often in a state of rumination and wonder.
Andy has always kept a low public profile. Keeping a low profile is a desirable trait for Judges and Justices. It is a way of maintaining independence and impartiality and having an arm’s length relationship with different parties.
Andy has gained the spotlight upon handling the controversial case that the Duterte administration has filed against Senator Antonio Trillanes IV. The Duterte administration claims that Trillanes failed to comply with the amnesty requirements. Thus, through Proclamation 572, it has sought the revival of the coup d’etat case and the issuance of a warrant of arrest against Trillanes.
The Judge was most circumspect in penning the decision. Unlike the other Judge who immediately issued an arrest warrant against Trillanes, Judge Andy deliberated on the matter for a number of days. He listened to several witnesses presented by the opposing parties, and gathered the evidence.
In the end, his decision was nuanced and complex but coherent and solid. On the one hand, he upheld the legality of Proclamation 572, saying that it does not violate due process and the equal protection clause. On the other hand, Judge Soriano pointed out that Proclamation 572 has no factual basis for the issuance of a warrant of arrest and a hold-departure order and that the “case has long been dismissed as per the Court’s Order dated September 21, 2011,” In conclusion, “the Court finds no reason to disturb the doctrine of immutability of a final and executory judgment.”
The decision is even-handed. It does not have a trace of partisanship; it is the triumph of the rule of law.
In the aftermath of his ruling, Judge Andy has gained praises for his courage in defying the administration. The opposition to Duterte treats him as a hero. Indeed, in the worst of times, in desperate times, the nation is in need of heroes.
Methinks, however, that Andy does not think of himself as a white knight in shining armor. For him, he is just being true to his job description. The task of any Judge is to be a trier of fact, and Judge Andy does it assiduously, painstakingly, with a lot of rumination and discernment. Thus, my friend NoyP’s description of Andy is thus apt: Andy is Boy Wonder.
On the question of hero, I recall a passage in a play that my mom, sister, and I recently saw — Ang Buhay ni Galileo, a Filipino adaptation done by the late Alan Glinoga of Bertolt Brecht’s Life of Galileo. The passage goes: Kapus palad ang bayan na nangangailangan ng bayani. (Unhappy is the land that needs heroes).
The character of Judge Andy gives life to the meaning of Brecht’s saying.
In the same play, another passage struck me: Ang kamangmangan sa katotohanan ay katangahan lang ngunit ang sabihin mong kasinungalingan ang katotohanan ay krimen. (A man who doesn’t know the truth is just an idiot, but a man who knows the truth and calls it a lie is a crook).
Judge Andy is the seeker of truth. But who is the idiot, if not the crook?
 
Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.
www.aer.ph

Secretary Mon Lopez and lessons in entrepreneurship

Secretary Ramon Lopez of the Department of Trade and Industry is among the hardest working Cabinet members we have today. Under his purview is the unenviable task of attracting foreign investments, shepherding local industries to global competitiveness, creating international trade opportunities and protecting local consumers from unfair trade practices, among many others.
Without doubt, however, the brightest spot in the Secretary’s body of work are his efforts towards developing a culture of entrepreneurship among the youth and disadvantaged communities. This will be the Secretary’s enduring legacy.
Entrepreneurship, as we all know, is the foundation of a strong economy. The proliferation of micro, small and medium enterprises (MSMEs) is what keeps the economy productive and what increases our tax base. They are the drivers of invention, innovation and our greatest source of employment. They support large conglomerates by bridging supply chain gaps. Successful MSMEs who rise in competitiveness progress to become large enterprises with a national and/or international presence.
Examples of economies with a strong culture of entrepreneurship are Germany, the US, India, Taiwan, and China. Each are mammoth manufacturing machines that enjoy huge trade surpluses and, consequently, prosperous societies.
Under Secretary Lopez’s leadership, several programs are now in place within the DTI to promote and support entrepreneurs. Among them are the Kapatid Mentor Me Project, the Negosyo Center, the SME Roving Academy, Shared Services Facilities, the Domestic Trade Exchange, Go Lokal and the Town One Project Program. Some of these programs have been preexisting, others are new initiatives of the Secretary himself. Suffice to say, never before has there been a stronger push for entrepreneurship than there is today.
Secretary Lopez has been a personal friend since the late 1990s and through the years I have come to respect his work ethic, sense of nationalism and, above all, his humility. To be honest, I have always felt guilty for not being as active as I should be in spreading the gospel of entrepreneurship. While I should have raised my hand to join the Kapatid Mentor Me Project, work commitments have prevented me from doing so.
I still plan on being a mentor at some point. In the meantime, however, I would like to share five nuggets of wisdom that I have learned over my 30 years of being an entrepreneur. As many may appreciate, academic knowledge is one thing, but wisdom derived from business success and, especially, failure can be more valuable to MSME’s trying to get off the ground.
LESSONS IN BUSINESS
Businesses with greater chances of success are those that solve a problem.
Often times, when entrepreneurs contemplate what products or services to take to market, they decide based on perceived demand, on the success of other similar businesses or simply what is convenient for them. Nothing wrong with that — but the probability of success in doing what others are already succeeding in is far less than when you are a maverick.
Through the years, I have owned businesses relating to food manufacturing, exports, business services, restaurants, and real estate. In every field I was involved in, the ventures that succeeded were those that provided a solution to a problem.
To find that “problem,” try to identify what people often complain about. The more complainers there are, the bigger your market can potentially be. Ask yourself, is there a better way of doing it? Will people be willing to pay a premium for a better way?
A personal example comes to mind. Back in the early ’90s when the Internet was still unavailable, I noticed that basic business services were prohibitive for most start-up businesses. Telephone lines were scarce, the cost of a telex or fax machines were exorbitant, as were offices spaces in central business districts.
These were the problems we set out to solve. It was the reason why Fax ‘N Parcel, a one-stop business center, was born. We were able to charge P6,000 a year for a simple mailbox in a Makati or Ortigas mailing address — a large sum at that time. We also made a 30% mark-up for telex, fax and freight services. We provided secretarial services and conference room rentals and charged handsome toll fees by the hour. The business was a success for its time as people were willing to pay for the convenience. It proved that solving someone else’s problems has value.
BE EXCELLENT IN ONE THING
One cannot be a specialist in many things, especially when starting a business. Fledgling businesses need to specialize. Being outstanding in one thing is how to stand out and explosive growth only happens when you specialize.
Excellence is difficult to attain. Not only do you need to be the authority in your field, the quality of your products or services must also be a notch above the rest. You should be able to deliver a superior customer experience every time.
An excellent example that comes to mind is a Filipino company called S.C. Vizcarra. Although the company has been operational since 1925 as a purveyor of Filipino handicrafts, the third generation has successfully reinvented the enterprise to be the best in locally designed and engineered bags.
In the last 10 years, S.C. Vizcarra has become the last word in bags made with flawless craftsmanship using leather, woven materials and fabric, or a combination thereof. The company now supplies the top fashion houses of the world and also exports its own brand under the brand name, Zacarias. Their success came on the back of being excellent in one thing.
YOUR EXCELLENCE IS WHERE YOUR TALENTS LIE
What is it that you do best? What are you passionate about? Whatever it is, it is likely where your field of excellence lays.
Pierre Marmonier is a Frenchman who settled in the Philippines some 20 years ago. Born in Léon, Pierre, as a young boy, learned the art of making jams and fruit preserves based on the age-old traditions of his hometown. For as long as I have known Pierre, jam making was his passion and best pastime.
He has since made it into a business. Today, Pierre is the man behind The Fruit Garden, the local equivalent to the global conglomerate, Hero Jams. From a backyard business, Fruit Garden’s products are now enjoyed in most luxury hotels in the Philippines, Korea, and ASEAN. He is also part of the supply chain of many food manufacturers.
MIND YOUR BRAND
All things being equal, the strength of your brand is the tipping point that makes business flow your way. It is what makes customers choose you over others.
Too, a strong brand is critical to scale up your business. Having a multitude of customers loyal to your brand ensures you of a client base when you scale your distribution channels from one to one hundred.
And since your brand speaks not only about your product but also the integrity of your management, a strong brand compels other companies to do business with you, whether as a customer, supplier, or an investor.
In branding, it’s important to talk about your single, most remarkable competitive advantage, not all of them. For instance, a cereal brand that claims to be high in fiber, cheaper, and made with organic ingredients is likely to be less remembered than one that simply claims to help in weight loss. The principle of specialty applies in branding too.
BUILD A GREAT TEAM
The strength of a company is the collective strength of its employees.
Ideas are a dime a dozen but employees who have the ability to execute are worth their weight in gold. In business, it’s all about the ability to execute despite the hurdles faced. It can spell the difference between a still-born project or one blossoming to fruition.
As entrepreneurs, our job is to find good talent and retain them.
Until I have the time to serve in Secretary Lopez’s entrepreneurship programs, I hope these humble nuggets of wisdom can help those under his stewardship.
 
Andrew J. Masigan is an economist.

Let the third telco come naturally

There was already a third telecommunications company “telco” to the Globe Telecom and Smart Telecom “duopoly.” In August 2010, San Miguel Corp. (SMC) bought Bell Telecommunications Philippines, Inc. (BellTel) and set up Vega Telecoms, to challenge the emerging duopoly of Globe and Smart (philstar.com, Aug. 17, 2010).
And why did SMC not assert itself as that third telco — for six years neglecting to use its valuable 700-megahertz (MHz) spectrum telco assets? The Philippine Long Distance Telephone Co. (PLDT)/Smart and Globe asked the National Telecommunications Commission (NTC) for the reallocation of the idle SMC frequencies to improve their broadband wireless networks in response to public clamor for better services. The NTC declined their requests (The Philippine Star, Nov. 26, 2015).
But then the partnership talks of SMC with Telstra, the largest, and one of the oldest telecom companies in Australia, collapsed in March 2016. What a surprise when SMC President Ramon Ang turned around and sold Vega Telecoms to the duopoly he was fighting, and with it the coveted 700 MHz spectrum telco assets! (InterAksyon May 31, 2016). Not bad at all for SMC, which got $69 million from the sell-off, 50-50 from PLDT/Smart and Globe (GMA News, May 31, 2016). NTC might have also sold off its avowed objective to topple the duopoly.
Soonest after the 2016 national elections, then-presumptive President Rodrigo Duterte decried the “dismal state” of telecommunications in the country and issued “a stern warning to telcos to provide faster Internet service or foreign investors will be allowed to do the job” (CNN Philippines, May 22, 2016). After his third State of the Nation Address (SONA, July 2017), President Duterte angrily declared that he would unilaterally decide by himself if the third telco is not known by November or December. Information and Communications (DICT) Acting Secretary Eliseo Rio, Jr. said during a Senate committee hearing last week declared that the third telco will be announced on Nov. 7 (CNN Philippines, Oct. 22, 2018).
At least five local firms — Converge ICT, Udenna Corp.; TierOne Communications International, Inc.; LCS Group of Companies; Philippine Telegraph and Telephone Corp. (PT&T) and Now Corp. have bought the P1-M bidding forms. Three foreign firms have also submitted bids: China Telecom Corp. Ltd.; Mobiltel Holding GmbH from Austria; and Telenor Group from Norway (The Philippine Star, Oct. 22, 2018).
Transparency in Public Service (TIPS), a civil advocacy group, said the public might end up shortchanged or have national security compromised with the forced entry of a third telco (Ibid.). The Senate hearing discussed the national security aspect at length (without resolution yet) and the automated selection process objected to by TIPS. The DICT has assigned points for each category (speed, coverage, and financial capability) based on committed thresholds and minimums. “In effect, they (the government) will be making a highly crucial decision based on a promise and a pledge — and simply hope that the companies will keep their word, TIPS worried (Ibid.).
The technicalities of the business bid for evidently have not been sorted out and clearly defined as terms of engagement: how will the frequencies be awarded, redistributed or shared among players in the industry; will the telcos build their own infrastructure — e.g., will towers be shared; what about interconnection charges — mandated or market-driven; and how about other highly technical issues on the handling of the public utility company that a telco is, balancing consumer demand and needs, versus government control. Why are so many bidders seemingly eager to foray in such undefined and weakly regulated territory?
Finance Secretary Carlos Dominguez III said the government should focus on developing stronger regulation on the country’s telecommunications industry instead of looking for a new major player. “The regulation on the local telco industry is not up to par,” he said (philstar.com, Aug. 17, 2010). “What the public is getting is inferior to what the public is getting elsewhere. That is the job of the regulators. Are we asking the right questions or are we rushing into something that may not help (in) the long run because the regulatory environment is not sufficient?” Secretary Dominguez so rightly asked (bworldonline.com Aug. 15, 2018).
The International Finance Corp./World Bank Group (IFC/WB) studied the Philippine telecom industry (May 2018). While penetration is at par with East Asian neighbors, there is indeed a worrisome lag in service quality of both mobile and fixed broadband services, where out of 87 countries ranked in overall speeds and availability of both 3G and 4G networks, the Philippines ranked #86 and #79 respectively.
The IFC/WB study suggests that a third mobile operator in the Philippines is not viable without substantial reforms. The major gap identified is “insufficient regulatory capacity and limited authority to enforce quality and performance standards.” Recommendation is to clarify the roles of respective institutions (DICT, NTC), build up regulatory capacity and strengthen mandates in upholding competition in the market. Based on the observation that inefficient capital investment and sub-optimal regulatory framework have led to poor digital infrastructure, the study proposed streamlining of approval and control systems and asymmetric working policies to ease in new entrants disadvantaged by the foothold of earlier players — such as interconnection, infrastructure sharing, and technology neutrality. The IFC/WB commented that the constitutional 40% foreign ownership cap for public utility might be reviewed for true competition and efficiency in the industry.
The IFC/WB group has offered to review the regulatory framework and operating environment of telecoms jointly with government and with the participation of players in the industry. Only with the commitment from government to make changes in regulations and to strictly enforce these can new entrants be processed under set qualification standards. The industry regulator will assess and choose operators — who will be aided by the IFC in the analysis and funding of their financing/capitalization under the PPP (public-private participation) scheme.
Case studies of near-monopolistic telecom markets in Mexico and Colombia show that regulation is key to keeping competition healthy, and the industry fair and responsive to the public. Both countries suffer extreme congestion of the mobile market while service is poor and expensive. Lack of regulatory enforcement led to failure to achieve targets, and condoned the opportunistic megaplayers.
Like Carlos Slim Helú, richest man in Mexico; from 2010 to 2013, the richest person in the world, according to Forbes magazine, and as of August 2018, the seventh richest in the world. He accounts for 40% of the listings on the Mexican Stock Exchange, while his net worth ($54.5 billion 2017) is equivalent to about 6% of Mexico’s gross domestic product. He owns América Móvil, the seventh largest mobile network operator (more than 360 million subscribers globally) and one of the largest corporations in the world. Slim’s telecom empire reaches almost every country in Latin America.
América Móvil holds over 70% of the Mexican telecom market. But Slim’s enormous appetite for acquisition and monopolist control has been curbed by the firm resolve of Mexican President Enrique Peña Nieto who in 2014 signed a law aimed at increasing competition in the telecommunications arena by imposing a 50% maximum market share. Slim had to bow to tight regulation and careful watching by the Federal Institute of Telecommunications (reuters.com, July 9, 2014).
And the third, fourth, fifth telcos came naturally, in renewed trust and hope for fair competition.
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com

Just a routine matter

By Tony Samson
ROUTINE is defined as “a usual fixed way of doing things,” which is often how life is lived. T.S. Eliot describes routine too — “I have measured out my life with coffee spoons.” The felt absence of routine may rank next only to the loss of regular income for a retiring executive. So used is he to checking his schedule of the day that a completely blank calendar is sure to throw him off.
The calendar on the phone has a monthly setting that marks how busy one feels. Each date in the 30-day window is tagged to show that there is at least one activity or reminder for that day (check out karaoke bar).
A day is divided into hourly slats where meetings, conference calls, presentations, seminars, trips, plant visits, trysts, acupuncture, root canal, and meals are distributed. Travel time is not recorded, even if takes up chunks of time. Does a blank page constitute a life without purpose? Does routine drive life, or is it the other way around? (Turn off alarm; Check pillow for saliva stains.)
Routine is comforting to linear corporate types, used as they are to calendaring appointments and being told what to do and achieving time-bound targets. This is not so for entrepreneurs and plumbers who are on the receiving end of disruptions. But that’s another story.
What can be more distressing to the creature of habit than not having an agenda except to wait for what the day will bring? Should she get a small dog?
The need of once very busy executives for routine makes them easy recruits for holding companies and start-ups, at bargain rates, or even NGOs for free. While the comfortable flurry of entries to feed the calendar satisfies the need for routine, it does not address the other regular item that is lost, the revenue stream.
The retiree’s lament becomes, yes, routine — I’m busier than ever but making less money than before. He is quick to add before the still employed colleague starts to get nervous (is he going to hit me for a loan?) — But I’ve never been happier, free of all that stress. Really?
The pining for routine goes beyond “keeping busy.” Routine offers comfort and a vague sense of being constantly needed. How does the routine day so openly despised when coming with such predictable frequency magically turn into a nostalgic desire? Didn’t the job fall into a rut (the same root word of routine, after all)?
True, waking up, dressing, driving to work and the camaraderie of office mates who can discuss the same cast of characters without having to ask what the initials stand for provide predictability and small talk. (So, is he getting more forgetful now?)
Losing routine days should not lead to being unmoored, as if the pegs of our lives have been pulled out to cast us adrift, our sheltering tent blown away by the wind. Rather than hastily replacing office routine with another sort of busy-ness, why not experiment with a non-routine day?
`This simulated experience of unpredictability can occur in the middle of a work week. (Golf every Wednesday does not count.) A long two-hour lunch left blank can be a good start. Maybe it can be spent with a visit to the museum or a body scrub or just lunch alone in a previously untried place. It’s enough to leave the activity blank up to the last minute. At 11:45 a.m., you can decide what to do with the vacant lot in your subdivision of time.
Unscheduled activities are sometimes referred to as “derailers,” something that can throw the train off its rails, and out of its rut. Such derailers often refer to crisis events that are life threatening. Anyway, there’s no need to get into practice. Life’s disruptions are becoming too numerous and have become now just a routine matter.
 
Tony Samson is chairman and CEO, TOUCH xda
ar.samson@yahoo.com

Duterte tags Bacolod officials in drugs

By Arjay L. Balinbin
Reporter
AT THE CELEBRATION of Bacolod City’s 39th MassKara Festival, President Rodrigo R. Duterte gave village chiefs and policemen there a stern warning against drug trafficking, saying he will have them killed.
“Kayong mga barangay captain — may barangay captain dito, p_____ i__ mo, gusto kitang ipangalanan pero [pag]bigyan kita. Huminto ka o umalis ka sa Bacolod. Pumunta ka doon sa Spratly, doon ka maliligo araw-araw,” the President said in his televised speech in Bacolod City on Saturday evening, Oct. 27. (You village captains — there is a village captain here…I want to name you, but I will give you [a chance]. You stop or leave Bacolod. You go to Spratly [Islands] and bathe there every day).
“Papatayin talaga kita. Magsumbong ka na kung sinong sumbongan mo (I will really kill you. You can report now to whoever you run to). Human Rights, you can go to hell with them. Do not destroy the young. May barangay captain dito nasa droga (There is a village captain here who is involved in drugs),” he also said.
He added: “Mamamatay ka talaga, tingnan mo (You will really die, watch out)…. I wanted to be nice but, you know, it’s irritating na pati dito, mga pulis, kayo rin mga pulis, l_____ kayo (that even the police here. You policemen. You son of a _____). Bantay kayo. Isali ko kayo lahat. Eh itong pinahuli ko puro pulis itong mga y____ na ito (You all watch out, I will include you. These people whom I ordered arrested are all policemen).”
The President also clarified his arrest order against former customs intelligence officer Jimmy S. Guban after the Senate said he would remain in its custody during its inquiry on illegal drugs is not a “cover-up” for the former customs official, regarding his involvement in the multi-billion peso drug shipment last August.
“Nagkamali itong mga senador. Akala nila gina cover-up ko si Guban. I mean they can interrogate Guban pero gusto ko siya hulihin kasi may krimen,” Mr. Duterte said. (The senators got it wrong. They thought I was covering up for [Mr.] Guban. I mean, they can interrogate [Mr.] Guban, but I want him arrested for his crime).
Mr. Guban has been detained in the Senate since Sept. 11 after the Senate blue-ribbon committee cited him in contempt for “lying” during a hearing on the P6.8-billion worth of smuggled methamphetamine or shabu.
On former Customs commissioner Isidro S. Lapeña, whom he transferred to the Technical Education and Skills Development Authority (TESDA), Mr. Duterte said: “Hindi corrupt ‘yan. Hindi ko ku’nin ‘yan kung corrupt. Sigurado ako, nalusutan lang talaga kasi hindi nila kaya — kasi insider eh.” (He is not corrupt. I would not hire him if he were corrupt. I am certain the smugglers just really got past them, because there were insiders).

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