Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 10159

PSEi to trade sideways on month-end slowdown

By Denise A. Valdez
Reporter
LOCAL STOCKS are expected to continue trading sideways this week with a slight downward bias in anticipation of tamer trading during the month-end.
Despite falling 0.14% or 11.7 points on Friday, the Philippine Stock Exchange index (PSEi) remained above the 8,000 mark by the end of last week at 8,053.20. This kept the main index up 6.08 points or 0.08% on a weekly basis.
The week-on-week uptick was driven by a 1.34% gain in services and 1.1% in industrials, outpacing the slowdown from a decrease in holding firms shares which fell 0.94%.
The week’s turnover value was at P34.21 billion, with net foreign buying at P3.06 billion.
Eagle Equities, Inc. Research Head Christopher John Mangun said the robust performance of the market over the past weeks may lead to a dull trading week ahead.
“Going into [this] week, we may continue to see it trade sideways with a slight negative bias as investors take some profits after the incredible run that we have seen in the last three weeks,” he said in a weekly market report.
Mr. Mangun noted the main index has risen 7.8% for the month — therefore, even a 1% to 2% drop in the coming week will keep the January trading record as “one of the best months that we have had for a while.”
Online brokerage 2TradeAsia.com also said this week may be the right opportunity to enter a technical pause.
“It seems timely for the market to build a new base (at least above 8,000), since its rise from 7,489 at the start of 2019,” it said in a market note.
It also flagged the Chinese New Year break, the adjournment of the local congressional session ahead of the upcoming May election, and upcoming January inflation data as reasons for local shares to trade sideways this week.
2TradeAsia.com also pointed to the United States-China trade deal as one of the factors that will influence this week’s performance.
“This year…we see (earnings per share) improving 12.3% before rising by 17.8% in 2020. Upsides may be considered, pending the outcome of US-China trade talks before end-March’s deadline. Range-trade & go for stocks with commendable upside opportunities. Immediate support is 7,960-8,000 resistance 8,100-8,150,” it said.
But Mr. Mangun of Eagle Equities kept the door open to a possibility for the PSEi to breach the 8,100 mark by the end of January if trading volumes and the flow of foreign money increases this week.
“US equities markets have also started slowing down after bottoming out a few weeks ago. If they continue at this pace, then we may see more foreign money flow into our market,” he said.
He noted the market looks promising, saying, “the PSEi chart looks extremely attractive after the golden cross that we saw on the moving averages and if we take cues from this, we may see it continue to gain traction as more and more investors gain confidence and start coming back into this market.”

How PSEi member stocks performed — January 25, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, January 25, 2019.
psei012519
 
Philippine Stock Exchange’s most active stocks by value turnover — January 25, 2019.
pseiactive012519

House bicam members asked to consider extra P10B for DoH

SPEAKER Gloria Macapagal-Arroyo proposed an additional P10 billion in funding for the Department of Health (DoH) to the House contingent of the bicameral conference committee tasked to harmonize the 2019 budget bills.
Of this total, P5 billion will be allocated for Health Facilities program, with the remainder going to the Health Human Resources Development.
“There should be consistent support to our health sector because DoH plays a very crucial and frontline role and in the never-ending need for sufficient and timely health care especially in our poor communities,” the Speaker said in a statement on Sunday.
“It needs all the funding support it can get especially in the light of the passage of the Universal Health Care bill.”
The Speaker made the proposal after Health Secretary Francisco T. Duque III asked for more funding for the completion of over 1,000 health facilities.
The additional funds will also help avert layoffs of some 6,000 health personnel including doctors, nurses and dentists.
Ms. Arroyo had earlier asked the House contingent, led by Appropriations Committee chair Rolando G. Andaya, Jr. of the 1st district of Camarines Sur, to include in the 2019 General Appropriations Bill an additional P20 billion for the Department of Agriculture and P350 million for the Department of Public Works and Highways for land acquisition for a housing project to accommodate over 8,000 urban poor families at the National Government Center in Quezon City.
The Bicameral Conference Committee is set to reconvene on Monday at the Manila Polo Club to resume work in reconciling the House and Senate versions of the budget bill.
Separately, Mr. Andaya reiterated that the budget proceedings should be made public to ensure transparency.
“We stand firm in our earlier position to allow the media to cover the bicam proceedings. All amendments to the proposed budget must be discussed in the bicam and must be known to the public,” Mr. Andaya said in a statement Sunday.
“If we don’t see it in the bicam, it’s pork. If we don’t approve it in the bicam, then it’s also pork.” — Charmaine A. Tadalan

Senate bill seeking to restore VAT exemptions for petroleum products

SENATOR Aquilino L. Pimentel III has filed a bill restoring the value-added tax (VAT) exemptions on petroleum products.
Senate Bill No. 2163, filed on Jan. 21, amends Section 109 of the National Internal Revenue Code (NIRC) in order to include the importation or sale of petroleum products as among the transactions exempted from VAT.
Mr. Pimentel, who chairs the Senate committee on trade, commerce and entrepreneurship, noted that prices of fuel and other commodities have steadily risen since the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law. While the high prices were anticipated, the senator also pointed out that the sharp rise in global oil prices was unexpected.
“As a result, Filipinos have had to contend with higher prices on both basic goods and transport,” he said in his explanatory note.
“As a means of easing the burden on the public, this bill proposes to exempt petroleum products from value-added tax. So as to retain some revenue for the government, excise tax on petroleum products shall still be imposed,” he added.
In 2005, Republic Act No. 9337 or the expanded VAT law gave petroleum products their VAT exemption under the NIRC. As a mitigating measure, the law reduced the excise tax on diesel, kerosene, and bunker fuel oil.
In Republic Act No. 10963 or the TRAIN law, the importation of fuel, goods and supplies used for international shipping or transport operations by persons engaged in such businesses is VAT-exempt.
Meanwhile, the government continued the implementation of the scheduled increase of excise taxes on fuel in 2019 as prescribed in the TRAIN law. Excise taxes on gasoline and diesel rose to P9 per liter and P4.50 per liter, respectively.
Several measures have also been filed in the Senate seeking VAT exemptions for electricity generation, transmission and distribution, system loss charges, and construction materials for social housing, among others. Other bills called for the reduction of the VAT rate from the present 12% to 10%.
The Department of Finance had yet to reply to requests for comment at deadline time. — Camille A. Aguinaldo

PCC’s cement probe to look into effects of safeguard duty

THE Philippine Competition Commission (PCC) said it will factor in the recent imposition of a safeguard duty on imported cement into its ongoing investigation into the cement industry.
“There are many possible consequences of the safeguard duty. Will it affect (competition in the industry)? It’s a possibility,” Johannes R. Bernabe, a commissioner of the anti-trust body told reporters last week in Quezon City.
“So the question is with the safeguard duty will the volume of imports be reduced. If the volume of imports is reduced, does that mean that the local producers will have more space to market their output, will they be more competitive compared to imported cement? Presumably, because the price of imported cement will now have increased. That’s something that we will have to consider,” he added.
He said the PCC has yet to analyze the data on the safeguard duty’s impact on supply, among other considerations.
The Department of Trade and Industry’s (DTI) provisional safeguard duty, to be imposed for 200 days starting next month, is set at a specific rate of 4% per 40-kilogram bag of cement.
The DTI decided to impose the temporary tariff increase due to the injury that cement imports have caused to domestic industry.
Cement imports surged to more than 3 million metric tons in 2017 from only 3,558 metric tons in 2013.
Imports accounted for 15% of the total national supply in 2017 from only 0.02% four years prior.
Cement importers have warned that the measure may trigger a shortage with the government pursuing a massive infrastructure program.
The Philippine Cement Importers Association had said that domestic cement demand can only be met by a top-up of imports; domestic plants, the group said, are producing some 26 to 28 million metric tons (MT) per year, and unable to cope with demand of 31 to 32 million MT.
However, the DTI has different estimates of the supply situation, saying domestic capacity totals 35 million MT a year, amid demand of 25 million MT.
The PCC said it will have to look into these data.
The regulator launched its cement investigation in 2017, as a response to a complaint lodged by former trade undersecretary for consumer production Victorio Mario A. Dimagiba, who alleged that members of the industry entered into anti-competitive agreements.
Such are prohibited under the Philippine Competition Act (PCA) of 2015 or Republic Act 10667. Anti-competitive agreements restrict “competition as to price or components thereof or other terms of trade; fix price at an auction in any form of bidding including cover bidding, bid suppression, bid rotation, and market allocation,” among others.
Also, the abuse of dominant market positions by engaging in activities that will bring about a substantial lessening of competition is also prohibited.
The PCC has said that the report on the findings on the cement investigation will be released this year.
To date, the competition regulator has received 162 inquiries and informal complaints on possible anti-competitive agreements and conduct.
It has launched 12 preliminary inquiries — four based on verified complaints and eight initiated motu proprio.
At present, eight full administrative investigations, including that on cement, are underway.
Parties found violating the PCA can be fined as much as P100 million for a first offense and P250 million for a second offense, depending on the extent of the damage to the economy. — Janina C. Lim

Malampaya scheduled for maintenance shutdown

Malampaya offshore gas project — BW FILE PHOTO

THE Malampaya gas-to-power project is scheduled for a maintenance shutdown in October this year, Energy Secretary Alfonso G. Cusi said last week citing an advisory from the operator the offshore drilling platform.
“I want to know. They said it is October,” he said about the advanced notification from the project operator.
Mr. Cusi said he had asked Energy Undersecretary Donato D. Marcos to write Shell Philippines Exploration B.V. (SPEx) in November last year and asked about SPEx, a unit of Anglo-Dutch company Royal Dutch Shell plc, is the operator of Service Contract 38 off Palawan, along with Chevron Malampaya LLC and the Philippine National Oil Co.-Exploration Corp. as joint venture partners.
“Another question is, what are the preparatory measures that are being undertaken that there will be feedstock, fuel, for the plants that are dependent on them,” Mr. Cusi said, adding that he has yet to be informed about the duration of the maintenance shutdown.
Mr. Cusi said the reason why he had asked the operators for an advanced schedule was because the DoE had in the past been surprised about the Malampaya shutdown that resulted in the power plants dependent on the project’s gas resorting to more expensive fuel to run their facilities.
He said he was not subjecting SC 38 to a stricter scrutiny of its contract.
“[I’m] just saying that your DoE is planning, your DoE is looking forward, looking at what are the options to prevent ‘yung mga price shock,” he said.
In 2017, the Malampaya offshore facility was out from Jan. 28 to Feb. 16, prompting power plants that run on natural gas to temporarily use more expensive fuel. Manila Electric Co. (Meralco) sources part of the power it distributes from many of these plants.
The shutdown resulted in an increase in power rates by P0.6634 per kilowatt-hour, which Meralco was allowed to collect in three equal installments of P0.2211 centavos in March, April and May, 2017.
The Malampaya shutdown affected the supply of natural gas to the power plants of South Premiere Power Corp. in Ilijan, Batangas City as well as First Gen Corp.’s Sta. Rita, San Lorenzo, San Gabriel and Avion plants. These plants were supplying 3,211 megawatts (MW) to the Luzon grid, of which 2,565 MW is supplied to Meralco’s franchise area.
The shutdown coincided with the scheduled maintenance of other power plants such as Sem-Calaca Power Corp.’s unit one and Quezon Power (Philippines), Ltd. They account for 585 MW of Meralco’s power requirements. — Victor V. Saulon

Gov’t budget utilization improves to 97% in 2018

FUND USAGE by national government agencies improved in 2018 to 97% from 95% a year earlier, the Department of Budget and Management (DBM) said.
The fund usage was measured via the Notice of Cash Allocations (NCA), the DBM said.
Meanwhile, the full-year result was unchanged from the third-quarter NCA utilization rate in the third quarter.
The NCA is a quarterly disbursement authority issued by the DBM to government agencies, allowing them to withdraw funds from the Bureau of the Treasury to pay for contracted projects.
Agencies used P2.89 trillion of the P2.98 trillion worth of NCA releases in 2018, with P89.84 billion left unused.
In the fourth quarter, national government agencies used a total of P811.4 billion worth of NCAs of the P834.9 billion the DBM released, leaving a balance of P23.5 billion worth of unused NCAs.
The Department of Public Works and Highways, the Judiciary, the Civil Service Commission, the Office of the Ombudsman as well as the Autonomous Region of Muslim Mindanao logged a 100% utilization ratio in 2018.
Meanwhile, the Congress, the Department of the Interior and Local Government and the Department of National Defense tallied utilization rates of 99%.
On the other hand, “other executive offices” had the lowest NCA utilization rates last year at 71%, using only P51.62 billion out of the allocated P72.36 billion.
They were followed by the Department of Energy at 76% with unused NCAs amounting to P551.86 billion, and the Department of Tourism at 77%, with P890.58 billion worth of unused funds.
The government started to implement the annual cash-based budgeting scheme this year, from the previous two-year obligation-based system.
With the new appropriations scheme, inspection, verification, actual payment and delivery of goods and services must come within the fiscal year the budget was proposed for, providing an incentive for on-time implementation of state programs and projects.
However, the 2019 budget has yet to be passed by Congress and signed into law, following the criticism of the shift to a cash-based system and illegal “insertions” that favored certain districts. — Karl Angelo N. Vidal

CTA dismisses P39-M Zuelling Pharma refund claim

THE Court of Tax Appeals (CTA) dismissed the P39.93-million tax refund claim of Zuellig Pharma Asia Pacific Ltd. Phils. ROHQ. over alleged unutilized input tax attributable to zero-rated sales for 2010, citing lack of jurisdiction.
In a Jan. 21 decision, the CTA, sitting en banc, affirmed the March 9, 2017 decision and May 9, 2017 resolution of its second division which found that Zuellig did not file its petition to the court on time.
“Petitioner presents no new argument to persuade us that it has a meritorious case. It merely reiterates the arguments it raised in its Motion for Reconsideration which have been extensively addressed by this Court in the Assailed Resolution,” the CTA ruled.
According to the National Internal Revenue Code (NIRC) of 1997, a taxpayer claiming a refund must file its administrative claim with the Bureau of Internal Revenue (BIR) within two years after the close of a taxable quarter.
The BIR has 120 days after the taxpayer’s filing of all supporting documents to decide on the claim. However, it can file its judicial claim within 30 days after the expiration of the 120-day period if the bureau fails to act within the prescribed period.
The CTA found that Zuellig failed to comply with the NIRC, filing the petition to the court’s second division on Sept. 25, 2014 when the end of the 120-day period and the 30-day period to file to the CTA was on Dec. 2, 2011.
“Considering all these pronouncements, Petitioner’s judicial claim for the aforementioned quarters was filed way beyond the mandatory 120 + 30 days to seek judicial recourse,” it said.
“Such non-compliance with the said mandatory period of 120 + 30 days is fatal to Petitioner’s claim of refund on the ground of prescription, resulting in the Second Division’s lack of jurisdiction over the said judicial claim,” it added.
The CTA cited a Supreme Court ruling which said that a taxpayer claiming a refund has 30 days from the filing of the complaint in the BIR to submit all the required supporting documents, pursuant to a revenue memorandum circular, for the 120-day period to start. If more documents are needed, the BIR must request the taxpayer to submit it within 30 days.
The court also said that the BIR on June 29, 2011 requested Zuellig to submit more documents which it complied with on July 5 in the same year, which would be the start of the 120-day period. However the company submitted additional documents in 2012 until 2014 without notices from the BIR.
“Evidently, Petitioner belatedly filed its Petition for Review with the Second Division on September 25, 2014. The Court in Division did not acquire jurisdiction,” the court said. — Vann Marlo M. Villegas

Prior disclosure or a customs audit: Which is the wiser option?

(Second in a series)
As discussed in last week’s column, Customs Administrative Order (CAO) No. 01-2019 has been issued. The CAO covers the conduct of the post clearance audit (PCA) and implementation of the prior disclosure program (PDP). Considering the high penalties — ranging from 125% to 600% of the revenue loss — to be imposed during a customs audit, it is imperative for an importer to consider if it will be beneficial to avail of the PDP.
The PDP is a program based on international best customs practices. The PDP authorizes the BoC Commissioner to accept, as a potential mitigating factor, prior disclosure by importers of errors and omissions in goods declaration resulting in deficiency in duties and taxes on past importations.
PDP is an option given to importers who do not want to go through the trouble of a full audit. This would enable the importer to voluntarily disclose or report to the BoC any errors in goods declarations and in payment of duties, taxes and other charges with significantly lower penalties.
WHO QUALIFIES FOR THE PDP?
Any importer, whether issued with an Audit Notification Letter (ANL) or not, may avail of the PDP. The applicant needs to submit a duly accomplished form prescribed by the BoC for prior disclosure, stating the errors in goods declaration and tendering the payment of deficiency duties, taxes and penalties, if applicable.
However, it should be noted that the following are not qualified for the PDP:

• Goods declarations which are the subject of pending cases with any other Customs office;

• Those which are covered by cases already filed and pending in courts; and

• Those involving fraud.

BENEFITS OF THE PDP
An importer who has not yet received an ANL and applies for a PDP, will only be subject to payment of the deficiency duties and taxes plus 20% interest per year.
On the other hand, an importer who has already received an ANL but applies for a PDP, will be subject to payment of deficiency duties and taxes plus a reduced penalty of 10% of the basic deficiency and 20% interest per year. The importer has 90 calendar days from the receipt of the ANL to avail of the PDP option. A PDP application may be amended if there are any adjustments to the original application or new issues discovered that need to be disclosed. The amendment should be made within 30 days from the filing of the PDP application.
The above penalties are in lieu of the 125% and 600% penalty in case of negligence and fraud, respectively.
Importers may also avail of the PDP for the following without penalty and interest:

• Dutiable royalty payments;

• Other proceeds of any subsequent resale, disposal, or use of the imported goods that accrues directly or indirectly to the seller; or

• Any subsequent adjustment to the price paid or payable.

For the above, the PDP application should be filed within 30 calendar days from the date of payment or accrual of subsequent proceeds to the seller or from the date of the adjustment to the price paid or payable is made.
VERIFICATION AND PROCESSING OF PDP APPLICATIONS
The post clearance audit group (PCAG) will verify the completeness of the PDP application form, including payment and other supporting documents.
If the importer fails to provide the necessary documents, the PCAG may decline or disapprove the application.
If the PDP application is accepted, the PCAG will verify and process the application within a period of 90 calendar days from the submission of complete PDP documents.
As part of the process, the PCAG will verify the accuracy of the deficiency duties and tax computations. It will also determine if all errors have been disclosed. If there is a finding of fraud or other material inaccuracies, mistakes or errors in the goods declaration, the PCAG will recommend to the BoC Commissioner that a formal and full audit be conducted. This also holds in case of outright violations committed that are not the subject of the disclosure, but which have an adverse impact on government revenues.
APPLICATION OF TENDER OF PAYMENT
The BoC will accept tender of payment in all cases. This payment will be applied to the deficiencies in duties and taxes, including penalties, interest, fines, or surcharges as voluntarily disclosed, regardless of the approval or denial of the PDP application.
Importers who avail of the PDP may also want to request a waiver of penalties but CAO 1-2019 provides that any such request for a waiver of penalties, interest, fines, or surcharges, will be subject to the final approval of the Secretary of Finance.
THE PDP AS A WISER OPTION
The PDP should enable government to generate additional customs revenues with the least administrative cost to both parties.
Given the penalties that may be imposed during a customs audit, combined with the penalties for administrative and criminal offenses, we cannot overemphasize the importance of being prepared for a customs audit. It will be highly advantageous for importers to review and know their probable exposure and risk areas to a potential deficiency duty assessment. This will aid them in determining whether or not a PDP would be the road to take. In addition, importers who are aware of their exposure and risk areas, will be able to better implement corrective measures to strengthen their compliance with existing BoC rules and regulations.
So is the PDP the wiser option for an importer? It does seem that the PDP is still worth considering even as you compare this with the previous voluntary disclosure program of the BoC wherein no penalty and/or interest were imposed on voluntary disclosures. Given the resources involved in undergoing a full audit, the stiff penalties imposed, and other economic variables that affect business operations, availing of the PDP may eventually end up as a wise option and a smart business move.
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 authors and do not necessarily represent the views of SGV & Co.
 
Lucil Q. Vicerra is a Tax Principal for Indirect Tax Services — Global Trade & Customs at SGV & Co.

The main trends in the world today

What are the main trends in the world today? What are the geopolitical forces driving change and impacting societies? What will shape the future?
In my mind, irrespective of the specific events that will happen in the future, these are the main trends or fundamental forces driving change :
1. THE US-CHINA RIVALRY
It’s official. The US considers China its strategic rival. The trade war that US President Donald Trump unleashed against China is but the opening salvo of what is probably going to be a long geopolitical clash between these two competing states.
It’s going to be similar to the Cold War between the Soviet Union and the US, but also different. It will be similar in the sense that this rivalry, as did the Cold War, will affect global and local politics. We have already seen how this rivalry affects Philippine foreign and economic policy. The return of the Balingiga bells, for example, can’t be considered as an act of wanton generosity by the US but as a deposit of goodwill to try to woo the Philippines back from its warming relations with China and cooling relations with the US under President Duterte.
The rivalry between China and the US will also be different from the Cold War because the nature of the conflict is different. For one thing, the Cold War was primarily ideological: communism vs. capitalism. For another, the Cold War was between two vastly different economic systems. However, today, both China and the US may be considered “frenemies,” both friends and enemies. Their economies are tied together. Witness how China’s economic slowdown has greatly affected the stock of Apple, which considers China its second-largest market for its iPhones.
While US President Trump may have unleashed a trade war with China, there is widespread bipartisan support in Washington for containing China. The Transpacific Partnership, which was initiated under President Obama, was actually meant to isolate and contain China, but US President Donald Trump dumped the idea and opted for a frontal trade war instead.
Witness, too, how the Republicans and the Democrats came together with a $113-million investment program that will invest in new technology, energy, and infrastructure projects in Asia as a counter-strategy to China’s “Belt and Road Initiative.” Republicans, usually adverse to foreign aid, also joined with Democrats to create a new foreign aid agency, the US International Finance Development Corporation, which will give financial support to US private companies doing business in developing countries. The intent is to provide countries like the Philippines an alternative to China financing under the latter’s “Belt and Road” initiative. The new Cold War between China and the US will last beyond the Trump Republican administration.
Analysts are saying that a “hot war” between the US and China may be inevitable, following the concept of the Thucydides Trap, first elaborated on by Harvard professor Graham Allison. The Thucydides Trap refers to an inevitable war between a prevailing power and a rising one, described by the ancient Greek historian, Thucydides: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.” Historians claim that of 16 instances of a prevailing power being threatened by a rising one, 12 have ended in war. (E.g. Carthage vs. Rome, Spain vs. England, Russia vs Japan, etc.)
Because of its strategic location, the Philippines is in the frontlines of the rivalry between China and the US. We can either exploit the rivalry or be collateral damage. In either case, the US-China rivalry is a main trend we cannot ignore.
2. DEMOGRAPHIC DECLINE
The saying “demography is destiny” is trite but true. There’s no escaping demographic forces. Singapore and China, which had implemented successful birth control programs, are now trying to move from population control in the opposite direction and failing. China, South Korea, Japan, and even Thailand, yes Thailand, are aging fast. This demographic decline will affect their respective economies.
world main trends
Japan, for example, where the population is shrinking (Japan’s population is foreseen to shrink from 127 million today to 85 million by the end of the century, and where the average age is 47, is being forced to revise its immigration policies if its xenophobic society wants to maintain its standard of living. Despite misgivings from the Japanese public, Prime Minister Abe recently liberalized its immigration policy, allowing for legal immigration and issuance of working visas in certain industries. Japan’s immediate problem is that industries cannot expand due to dearth of labor. Furthermore, Japanese agriculture is also suffering because the average age of Japanese farmers is 67 and six out of ten farmers are over the age of 65. Japanese agricultural policy will have to change as it has in “socialist” China, which has allowed land consolidation to increase efficiency and to solve the aging of its farming population.
Likewise, our ASEAN neighbor, Thailand, faces a huge problem, which would make it unlikely to escape the “middle income” trap. The average age of its population is 37.8 years (compared to the Philippines’ 23) and its working age population will shrink by 10% in 2040. Its population control program was too successful. Thailand will not only face the loss of labor-intensive industries but will also face the burden of financing its social security before it has become an advanced economy.
Therefore, because of the demographic winter in many countries, migration cannot be stopped. With migration, however, many societies will be disrupted with the arrival of new peoples bringing in their own values, culture, and traditions.
3. TECHNOLOGICAL DISRUPTION
Technological disruption is accelerating and will affect almost all industries and touch every aspect of daily life. Disruption will be severe because even established companies employing thousands of workers will see their business models disappear. GM and Ford, for example, will have to find a new business model other than selling cars if self-driving electric vehicles make it more attractive for commuters to just book rides rather than own cars. Those who make a living out of driving, such as truck drivers and delivery men, will find themselves useless to employers.
No industry is safe. Blockchain technology, for example, will disrupt and reorder the banking and insurance industry. Artificial intelligence will challenge the financial consultancy industry. Logistics, hotels and restaurants, retail, transportation, and telecommunications, to name a few, will be disrupted.
However, this broad-based technological disruption will also cause mass anxiety and political disruption. For example, economists Daron Acemoglu and Pascaul Restrepo in a paper on “Robots and Jobs: Evidence from US Labor Markets,” showed that the US Midwest and portions of the South that went for Trump had a far higher ratio of robots to population. Automation disproportionately affected blue collar white male workers in those counties, exactly the demographic which also disproportionately went for Trump.
Acemoglu and Restrepo only looked at industrial automation. Imagine what will happen when new, disruptive technologies like self-driving vehicles, artificial intelligence, and Internet of Things (IoT) are applied beyond factories to society at large. Or, imagine what will happen if artificial intelligence takes away even white collar jobs like those of financial advisers, lawyers, and accountants.
As a result of growing mass anxiety, we are already seeing that populism and autocrats offering simplistic solutions are on the rise. Disruptive politics is bound to strengthen and challenge the existing order.
In sum, the US-China rivalry, the Demographic Decline, and Technological Disruption are the main trends in the world today. These are the macro, irresistible forces that will shape our future.
 
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.
idea.introspectiv@gmail.com
www.idea.org.ph

Don’t throw the baby out with the bath water

The House of Representatives has reconsidered. Instead of lowering the age of criminality for children down to nine years old as originally proposed by then-Speaker of the House Pantaleon Alvarez in November 2016, the lawmakers approved on second reading last week the substitute bill lowering the minimum age of social responsibility of child offenders to 12 years old from the current 15 years old under Republic Act 9344 as amended by RA 10630 (CNN Philippines, Jan. 24, 2019).
Two years that the bill slept in Congress, and lawmakers only spent two days debating on the bill (amidst passionate social protests) before suddenly approving the bill “at reduced rate,” like in a store’s end-of-season bargain sale. The bill would be taken up for approval on third and final reading in at least three session days.
Speaker Gloria Arroyo said she supports the passage of the measure “because the President wants it” (Ibid.). “Duterte won the May (2016) elections largely because of a vow to kill tens of thousands of drug dealers, also promising on the campaign trail to close a loophole in the juvenile justice system that he said allowed traffickers to use minors as narcotic couriers,” one news agency said (Agence France-Press [AFP] Nov. 21, 2016). The United Nations (UN) children’s agency UNICEF reminded all in a position paper sent through AFP that “Manila is a state party to the UN Convention on the Rights of the Child, which says criminal responsibility below the age of 12 is not acceptable…Jail is no place for a child. It is alarming for children to be institutionalized (sent to a penal institution). It will be retrogression on the part of the Philippine Government (Ibid.).
The “Juvenile Justice and Welfare Act of 2006” — RA No. 9344 set the minimum age for criminal liability at 15 years old in the Philippines, which for 70 years was set at nine years old under the Revised Penal Code (Accralaw.com Aug. 22, 2016). In 2013, RA No. 9344 was amended by RA No. 10630 to penalize, among others, the exploitation of children for the commission of crimes (Ibid.). “Any person who, in the commission of a crime, makes use, takes advantage of, or profits from the use of children, including any person who abuses his/her authority over the child or who, with abuse of confidence, takes advantage of the vulnerabilities of the child and shall induce, threaten or instigate the commission of the crime, shall be imposed the penalty prescribed by law for the crime committed in its maximum period.” (Section 20-C, RA No. 10630).
Those proponents of lowering the age for juvenile criminal liability say that sometimes children used by adults to help commit crimes carry birth certificates to show that they are under 15 years of age — and these children gleefully go scot-free. (The real criminal has planned well to go scot-free himself, ahead of the child.) Yes, it will perhaps be less efficient for the adult criminal to use a nine- or 12-year-old even with a ready birth certificate to show the police, hence the shaky logic of lowering the age of child criminality to “lessen” their exploitation.
“Such a move as lowering the age of criminality has never resulted in lower crime rates. The Philippine experience and the experience of other countries attest to this fact,” then-Secretary of Social Welfare Judy Taguiwalo wrote to a subpanel of the House Committee on Justice and Correctional Reforms that opened deliberations on the House bills on the age of child criminality (ABS-CBN News, Nov. 16 2016). Making the change would likewise result in more children being detained and the government subsequently incurring additional expenditure, she said (Ibid.).
Lowering the age of criminal liability is also “anti-poor” as available data shows that a greater majority of children in conflict with the law come from lower income families, said Taguiwalo. But more importantly, this “violates the fundamental principles of social protection of children as provided for by the law and by international treaties and internationally accepted standards and principles.” There is a need to distinguish between making them responsible for their actions and criminalizing them. RA 9344 makes children responsible without making them criminal and holds children accountable in entirely non-punitive, welfare based and education oriented measures,” she said (Ibid.).
Taguiwalo said a mouthful. She was thereafter not confirmed by the Commission on Appointments, reportedly for her opposition to the pork barrel system, the tax reform package, and her adverse comments on the lowering of the age of criminality (The Philippine Star, Aug. 16, 2017).
The UNICEF said neurobiology studies show that children don’t reach brain maturity until 16 years old. As such, reasoning and impulse of children younger than 16 years old are easily affected by their social environment. What could also add to the mental and emotional damage of children is when they are exposed to violence, particularly if they are from dysfunctional families (ABS-CBN News, Jul. 22, 2016).
The UN organization stressed that lowering the age of criminal responsibility could even have “long-lasting damaging effects on their cognitive, psychosocial, and neurological health; harming their overall development. (This) further stigmatizes them as criminals and creates an environment that triggers repeat offense, often extending to adulthood. Children, especially the most marginalized and at risk, must be treated with a sense of dignity and self-worth,” the organization said (Ibid.).
At the Senate, the most vocal oppositionist to any lowering of the age of criminality is Sen. Risa Hontiveros. “There is no sense debating and choosing whether the minimum age of criminal responsibility should be pegged at 12 or 9 years old. There is really no difference. Can a 12-year-old compared to a nine-year-old get married, get a driver’s license, participate in elections, buy alcohol and watch R-16/18 films? The obvious answer is no,” she said.
Hontiveros said that instead of thinking about at what age children should be considered as criminals, the government should focus on improving programs that would ensure they would stay out of conflict with the law (Philstar, Jan. 24, 2019).
“We already have laws and we have centers and intervention programs for the existing law and there are psychologists and social workers working to rehabilitate these people (children),” Clinical psychologist and National Social Scientist Lourdes “Honey” Carandang said on a TV interview (CNN Philippines Jan. 24, 2019). “The right thing to do is to do something about the syndicates who are committing the crime and not punish the children who are the victims of these syndicates. That is the most radical and real solution,” she said (Ibid.).
Indeed, our law enforcers should do their jobs right, and yes, catch the big criminals, not the little operators on the ground — as local and world human rights watchers judge the intensive conduct of the anti-drug and crime war waged in our country now. Respect human rights and human life. The end does not justify the means in anyone’s obsession to deliver on election promises.
Almost literally: Don’t throw the baby out with the bathwater!
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com

The Justice System, Democracy, & Chel Diokno

A strong democracy is one where the executive, legislative and judicial branches of government share equal powers, with each branch counter-balancing the other.
This system of check and balance is crucial to prevent any single branch from being the dominant dictator of policy. It ensures that the rights of the citizenry are respected and that the greater good for the greater majority reigns supreme in all facets of policy formulation.
What has become of our democratic institutions 32 years after our bloodless revolution? To say it is unhealthy is an understatement. These days, powers have become acutely imbalanced in favor of the executive branch and the mechanism of check and balance is practically non-existent.
The weakest link is the judiciary. The judiciary has lost its independence and is now reduced to being a lackey to the whims and wishes of the of the executive branch.
Congress has been cowered into submission as well. The specter of being starved of privileges and deprived of pork barrel funds were enough to turn the supermajority of congressmen into a rubber stamping machine of Malacañang.
This leaves us with the senate. The senate is the lone institution with a semblance of independence. It is the legislative body we can rely on to look after the public interest even if it defies the wishes of the executive branch.
Having a strong senate is vital especially now that we are confronted with issues that could forever change the fate of the nation. Among these perilous issues are China’s creeping invasion, the shift to a federal form of government, managing terrorist threats from within and outside and realigning our foreign policy, among many others.
Hence, we need to select our next cast of senators wisely. The senate must have a strong opposition so that laws may be vetted without bias, so inquiries may be conducted with objectivity and that painful reforms may be implemented even if it ruffles feathers of the powers that be. More importantly, only with a strong opposition can ill-advised policies of Malacañang be blocked.
One such person who I am convinced will be good for the senate is Atty. Chel Diokno. Chel is not yet a household name, but deserves to be. Chel is the son of former senator and true statesman, Pepe Diokno. He obtained a degree in Philosophy from the University of the Philippines before studying Law at the Northern Illinois University where he graduated magna cum laude. He was also the founding dean of De La Salle University’s College of Law.
What Chel brings to the table is a profound understanding of the law, a deep respect for democracy and a commitment to defend it at all costs. He is also intent to reform the justice system and rid it of its many defects.
A BROKEN JUSTICE SYSTEM
Over lunch, Chel told me that should he make it to the Senate, his priority would be to champion reforms in the justice system. The justice system is broken, Chel opined, such that it now exists to serve the agenda of the ruling party. He went further to explain in detail.
Why are judges of the Supreme Court, Sandiganbayan and Obudsman so emboldened to bend rules, make exceptions and interpret the law in a manner that suits the agenda of the President?
At the heart of the problem is the politicized manner by which judges are appointed.
See, in theory, the Judicial and Bar Council (JBC) should be the body that recommends appointees for vacancies that may arise in the Supreme Court and other lower courts. They do so by making a short list of the best, brightest and most qualified. The President is supposed to choose from among those in the JBC’s short list.
The situation in real life is quite the opposite. It is in fact the office of the President who endorses its chosen judges to the JBC and the latter simply goes through the formality of the appointment. In fact, even members of the JBC are appointees of Malacañang.
Having the President’s hand over the selection of judges makes them beholden to his office. They lose their independence on the back of a debt of gratitude.
As far as corruption in the courts are concerned, we all know about judges accepting bribes in exchange for a favorable decision. Why are they so blatant, if not fearless about it?
The 1993 case Maceda vs. Vasquez provided the precedent whereby the Ombudsman was deemed barred from investigating decisions made by judges unless the Supreme Court first conducts its own Administrative Investigation. In other words, without the imprimatur of the Supreme Court, judges cannot be questioned on their decisions. Neither can the Ombudsman conduct lifestyle checks on judges suspected of bartering decisions for cash and favor.
Judges have become virtually accountable to no one, and here lies the problem. The solution, says Chel, is to amend the laws governing the powers of the Ombudsman. This requires an act of law.
The slow pace of case resolutions and the every growing backlog of cases is yet another problem. Every year, some 1.6 million cases are filed of which less than two-thirds are resolved. For the judiciary to cope with the sheer number of new cases filed, each judge would have to handle an annual load of 644 cases and bring three cases to rest each working day. We all know this is humanly impossible. So unless something is done, the case backlog will grow exponentially each year and the wheels of justice will turn even more slowly than it does today.
The solution, says Chel, is to separate all cases relating to business and commerce. These cases should be heard not by regular courts but by an arbitration panel that falls under the preview of the Department of Justice. Sitting in the panel should be legal experts (not necessarily judges), representatives of industry associations, accountants and respected businessmen.
By removing commercial cases from the dockets of the courts and channeling them to a faster arbitration panel, the massive congestion of our courts can be eased.
Even our Witness Protection Law needs reforms. As it stands today, no one in his right mind would volunteer to be state witness. This is because the state cannot guarantee when a case will be heard, let alone resolved. In the meantime, state witnesses remain in police custody while waiting for the hearing which could last years. The witness, in effect, becomes the prisoner.
Chel believes that the Witness Protection Law should be amended whereby it guarantees that the case will be heard within a period of six months.
COLLAPSE OF OUR DEMOCRATIC INSTITUTIONS
One issue that keeps Chel awake at night is the collapse of our democratic institutions. Its demise is not by accident but by a systematic attack by Malacañang. Evidently, the objective is to eliminate the check and balance mechanism that the three branches of government provide and instead, have the judiciary and legislature bend to the executive’s agenda.
After the ouster of Chief Justice Lourdes Sereno, Malacañang has had the judiciary under its thumb. Congress was bought with pork barrel. In the senate, opposing voices are bullied into either submission or imprisonment. The cases Leila de Lima and Antonio Trillianes show the scheme at work.
A systematic attack on the owners of such media agencies like Rappler and Inquirer brought about a chilling effect on media outlets that oppose the administration.
Our democratic system is going through a slow death in favor authoritarianism. If Malacañang had its way, the President would act as judge, jury and executioner of all facets of law.
This would not be a bad thing if the President had a clear plan on what to do with absolute power. Unfortunately, apart from his war on drugs and infrastructure development, No one has heard of a plan on how absolute power will be used to catapult the country into first world status. Neither has there been a statement of intent to use the executive branch’ enormous power to solve the many problems of the country. The absence of a national vision, ambition or development plan is a source of great frustration to many. Alas, a Lee Kwan Yew or Mahathir Mohamad Mr. Dutrerte is not. It seems he wants absolute power for absolute power’s sake. This is why we cannot readily concede to giving Malacañang absolute power.
What is at stake is our basic freedoms and our democratic way of life. We need brave, principled men to stand up for what is right and protect the liberties our parents paid dearly for us to enjoy. Chel Diokno is not a household name but everyone should know that he is one man capable and ready to defend our democratic institutions.
 
Andrew J. Masigan is an economist.

1...10,15810,15910,160...12,964Page 10,159 of 12,964
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube