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Understanding rice tariffication

We are firm in defending and asserting the rice tariffication reform despite the current transitional problems that it faces in its implementation. The reform will benefit both Filipino rice farmers and Filipino consumers.

First, we present a historical background.

The Philippines, being a member of the World Trade Organization (WTO) since 1995, has to comply with its rules that entail the elimination of trade barriers, nevertheless, the Philippines was granted an exemption from the removal of its quotas on rice importation. This exemption was originally meant to expire in 2004, but was extended until 2014, and further stretched till the passage of the Rice Tariffication Law in early 2019.

The long regime of quantitative restrictions, ostensibly to protect farmers, had severe costs. For one thing, the protection meant that the Philippines had to compromise other sensitive economic sectors by opening them up to more competition. For another thing, quantitative restrictions bred massive corruption, created an ineffective and incompetent import monopoly, and imposed a disincentive on farmers, beset with inefficiencies, to shape up. The government became lax and felt no pressing need to enhance our farmers’ productivity since it relied on the import quota to shield farmers from competition.

Because of the failure of agricultural modernization due to poor institutions and weak policies, including the short-sighted quantitative restrictions on rice, the country’s agricultural production has stagnated. In terms of efficiency and productivity, the Philippines has lagged behind its ASEAN counterparts such as Vietnam and Thailand. Our farmers incur higher costs of production and hence could not compete with the more efficient rice-producing farmers from Vietnam or Thailand. The ultimate effect has been the deterioration of the well-being of our farmers.

Worse, those who suffered the economic burden of the quantitative restrictions were the whole Filipino population (for we are all consumers including the farmers themselves who in the main are net consumers).

A consequence of the import quota was higher food prices. Higher rice prices heavily contributed to over-all inflation. This was most pronounced in the inflation spike in 2018. The main culprit was the surge in rice prices, resulting from the mismanagement of imports that resulted in a rice shortage. Rice makes up for about 10% of the consumer basket. For the poorest Filipinos, rice accounts for about 23% of its total consumption spending.

But the unusual rise in inflation in 2018, which many critics mistakenly blamed on the effects of the comprehensive tax reform package, became an opportunity to introduce a hard reform. The higher-than expected inflation was triggered principally by the unwarranted spike in rice prices, resulting from the mismanagement of imports to meet supply. This forced the hand of government to remove the quantitative restrictions and shift to the tariffication of rice imports.

Tariffication is still a form of protection. The high tariff (35% of declared value) drives up the price of imports and the revenue derived from the tariff is earmarked to benefit farmers. The Rice Tariffication Law’s also provides funding of P10 billion to provide seeds, mechanization, technical assistance, and credit. Any amount above P10 billion that can be generated from the tariff can be used for cash transfers and other forms of financial assistance to the farmers.

In other words, the law still maintains a significant degree of trade protection, but it does not impose the supply bottlenecks and institutional monopolies. Moreover, it has created a significant budget to enhance the productivity and well-being of rice farmers.

What was supposed to be a limited period of quantitative restrictions had a short-term objective of giving time for local rice producers to become more efficient and productive. But after a generation of an import-quota regime, the intended goal of making our rice industry competitive and improving rice farmers’s income has not been realized.

Rice tariffication is thus a most significant reform. However, because the country’s reliance on the quantitative restrictions lasted so long, the farmers face hard adjustments in the early implementation of the reform, the so-called transition pains.

Imports have significantly increased. The country is projected to import about 2.4 million metric tons of rice in 2019. The retail prices of rice have fallen greatly, relative to 2018 prices, and prices are anticipated to go down further. This is good for the consumers, but rice farmers face an enormous challenge.

Two problems have arisen. First, retail prices have not fallen as much as farm-gate prices have. This suggests a role for the Department of Trade and Industry and Philippine Competition Commission to investigate whether there is market power at the wholesale/trader segment. Consumers have not yet realized the full gains of the reform.

PHILIPPINES STAR/MICHAEL VARCAS

Second, the price drop in farm-gate prices has now reached at- or below-cost levels for many rice farmers, and this certainly threatens their livelihood. The Rice Competitiveness Enhancement Program (RCEP) provisions for seeds and mechanization, among others, will benefit farmers by reducing their production costs, increasing their farm yields, and ultimately raising incomes. However, these gains are expected to be realized in the medium term. But the short term is very critical.

Here, we present a proposal to address the immediate problems.

The cash transfer, similar to the 4Ps, with the sole condition being that the beneficiary is a rice farmer, is absolutely necessary. The transfer should give the farmers income relief while the Rice Competitiveness Enhancement Program is still being rolled out. Cash transfers, together with the zero-interest loans that the Department of Agriculture (DA) has introduced, have an immediate, tangible, and direct impact on the farmers.

We estimate that of the two million rice farmers, about 600,000 to 700,000 are vulnerable (are impoverished or at risk of poverty). A cash transfer of P5,000 per farmer per year would cost about P3 billion to P3.5 billion, excluding administrative costs. But we can go farther than that by providing cash transfers to all farmers owning rice land of two hectares and below. They constitute 1.7 million farmers of the Philippine total of two million rice farmers. After all, all small rice farmers need the support to adjusting to the new policy regime.

There is enough fiscal space for a cash transfer of P5,000 for a cropping season (the amount is based on a study done by the Philippine Institute for Development Studies or PIDS) to be given to the 1.7 million rice farmers. This amount per farmer perhaps is quite generous, especially given that there will be other interventions for rice farmers. Hence, the amount can still be reduced reasonably. Be that as it may, the total amount for such unconditional transfer to cover 1.7 million farmers is P8.5 billion. This is a small price to pay for the reform.

The Department of Social Welfare and Development (DSWD) is in the best position to do the transfers. It has the experience and lessons, the logistics and the infrastructure.

The next question is where to get the P8.5 billion. The revenue from tariffication is projected to reach P15 billion, thus freeing P5 billion for cash transfers. Perhaps the remaining P3.5 billion (excluding the administrative costs) can be obtained from the government’s unprogrammed funds?

Simultaneous with this, funds for seeds, credit, and mechanization should be disbursed soonest. Planting season has begun.

Admittedly, the law’s current formulation is rigid. While financial assistance can be funded, it is conditioned on tariff collections exceeding P10 billion. As it stands, collections are projected to reach P15 billion and Congress ought to consider advancing these funds towards the rice farmers in need.

Another task is to update the existing registry and targeting systems such as the DA’s Registry System for Basic Sectors in Agriculture or RSBSA and the DSWD’s Listahanan.

We also welcome the DA’s introduction of no-interest loans amounting to P15,000 for every farmer and payable in eight years. It is a form of cash transfer. Farmers can repay these loans, given the long period of repayment and given a well-designed system of monitoring and enforcement.

On top of this, the National Food Authority (NFA) should aggressively buy rice from local producers, especially in the areas with depressed prices. Such buying can influence higher prices towards alleviating the impact on farmers of low palay prices. The NFA, too, must be quick in disposing older stock, even at a cheap price to supplement their aggressive buying. This will not only result in freeing space for NFA to buy more local rice, but will also benefit consumers through lower prices of rice. Local government units and other government agencies must likewise be involved in buying local rice for their constituents to contribute to the over-all effort.

Rice tariffication is ultimately to the benefit of the whole people, but we must act quickly to safeguard the welfare of Filipino rice farmers.

 

Laurence Go, Jessica Reyes Cantos, AJ Montesa, and Filomeno Sta. Ana III are all members of Action for Economics Reforms’s rice policy team.

Middle-class legislation and its discontents

The recent alarm over falling rice prices after import-quotas were replaced by tariffs points up a larger problem that will increasingly confront Philippine society — the conflict between the interests of a growing middle class and poorer minorities. On the one hand, the historic measure produced its intended effect: it has lowered rice prices, bringing relief to the large, mostly urban rice-consuming public. (After the avoidable fiasco of 2018, inflation is now a record low of 1.7%.) On the other hand, the same measure has wreaked havoc on the livelihood of rice farmers and landless farm workers, who count as some of the poorest Filipinos. To be sure, the government purports to ameliorate the damage. But the one-time loan it offers to rice farmers is obviously not enough to facilitate the permanent shift — in crops, technologies, mindsets, and occupations — that the new trade-regime imposes.

Still, the rice issue is only the latest in a lengthening series of instances where middle- and upper-class interests are enhanced while those of a less numerous, less privileged minority are demoted or ignored. The tax reform under TRAIN, for example, provided relief (surely well-justified) to middle-class income earners by lowering income tax rates. But the lost revenues were recouped through indirect taxes (e.g., on petroleum, sugary drinks) that penalized the poor, many of whom do not earn compensation incomes (farmers and fisherfolk, for example).

The law providing free tuition in state universities is another case in point. It alleviates the burden for middle class families for whom college education is a real option — but does nothing for the majority of the poor and vulnerable for whom even completing high school is a major hurdle. The same is true of the recent measure providing free MRT rides to students: it benefits mostly commuting urban college students and does nothing for elementary and high school pupils who attend local schools in their communities. It is even more irrelevant to those pupils in the hinterlands who must walk kilometers daily to go to school. Other examples of measures that similarly favor the nonpoor include the successive salary increases given to government employees, the various benefits given to police and enlisted men — and, yes, even the senior citizens’ discounts on medicines (whose benefits we enjoy with a guilty conscience, knowing their regressive incidence).

Then finally, of course, there is Duterte’s deadly war on drugs — which is noticeably applauded by a middle class that demands law and order by any means, notwithstanding the mounting body count of mostly poor drug addicts and the collateral casualties among their family members and communities.

By contrast, the same solicitousness and generosity is nowhere to be seen when it comes to the marginalized — the laylayan. Consider for example the casual insensitivity when it comes to the rehabilitation of a ravaged Marawi: “I don’t think that I should be spending for their buildings… Hindi ako maggagasta ng ano. Maraming pera ang mga tao diyan… Kasali na ’yung shabu.” (I will not spend. The people there have alot of money… Included there is shabu.) Or again, take the inadequate compensatory amounts to relieve the TRAIN law’s effects. Or even the laughable one-off loan of P15,000 the government offers to offset the impact of rice-tariffication especially among small farmers.

None of this is surprising, however, if we consider the elephant in the room: the Philippines will soon be (if it is not already) a mainly middle-class society where the poor are in the minority. The Human Development Network estimates there were more households (36%) that were middle-class or better in 2015 compared to households that were considered poor (32%). (The balance were considered nonpoor although “vulnerable”). Official statistics are even kinder, if not necessarily more credible, with only 16% of families considered poor in the first semester of 2018.

Make no mistake: measures that benefit mainly the middle classes are by no means wrong. Just like the poor, the middle classes deserve all they can get from their government. From the viewpoint of politics, their growing numerical superiority may simply reflect the idea that policy should follow that maxim of the “never to be forgotten Hutcheson” (Adam Smith’s old teacher): “[T]hat action is best, which procures the greatest happiness for the greatest numbers.” Who then can blame a hedonic democracy if it should choose to provide for its most numerous citizens?

There is also an argument for efficiency from old-style welfare economics. Known as the “Compensation Principle” and credited to V. Pareto, it says that regardless of the numbers involved, a policy is desirable and should be undertaken if the potential winners from it can compensate the losers. If rice buyers benefit so much from tariffication that they can afford to pay off rice producers to make them “whole,” then tariffication should definitely be on the agenda. Around the 1950s, however, a weaker (some say more cynical) version of this principle was suggested by J.R. Hicks and N. Kaldor and has become an implicit guide to many policy-makers: if the gainers from a policy could hypothetically compensate the losers from it, then the policy should be implemented anyway, even if no compensation is actually made. That is, economists should worry about the size of the efficiency gains, not their distribution.

Hence, if Marawi’s destruction yielded benefits to the majority that were substantial enough to compensate its residents for their grief and pain, then indeed its devastation was justified. And when the time subsequently came to compensate the Maranaos for their losses and suffering, well, maybe… or then maybe not. Either way unleashing hell was justified. Under the same principle, we would be justified in ignoring the Agtas’ objections to the Kaliwa Dam, or the environmental concerns of communities affected by mining. And if compensation for the effects of rice tariffication or indirect taxes under TRAIN was inadequate, well then, tough luck. Mabuti nga meron, e. As for tokhang, well, there’s this benefit to the majority… you see where all this is headed. It allows one to do almost anything — always in the name of a majority, of course.

In the past, unbridled ethical abuse of that principle was held in check by a combination of politics, law, solidarity, and religion. Where the affected poor were a significant number, actual and full compensation (as Pareto himself demanded) would be enforced through a political process. Even absent the numbers, the law might still protect minorities from the tyranny of the majority through rights and claims enforced by the courts. Or then again solidarity and a sense of social justice, often fostered by religion or social ideology, would cause the majority to look beyond their plates and empathize with the less fortunate.

But many of these old forces are weaker now, and not just because of Duterte. The poor are in the minority. Rights are under attack; the law is perverted and weaponized. Grand ideologies are out of fashion. Religion is on its back foot.

In this brave new world, the middle classes — the new majority — must stand alone and confront themselves in the mirror. Will they remain the timid and self-satisfied creatures of Hobbiton? Or are they up to defining a new and just future not only for themselves but the whole country and society?

 

Emmanuel S. de Dios is a professor emeritus at the University of the Philippines.

Export or fall deeper into debt

The country can fall into a debt crisis if exports don’t pick up. Here’s why…

Last week, the Department of Budget and Management (DBM) reported that the national debt will top $151 billion by the end of 2019, and $167.3 billion by the end of 2020. This is due to massive borrowing to fund the government’s infrastructure program.

Government authorities say that acquiring more debt is a necessary evil given our need to fill the infrastructure gap. The hope is that when these infrastructure projects are completed, better roads, bridges and ports will translate into a spike in economic activity and, inevitably, more revenues for government. These revenues are what will repay the loans.

At this point, Government is not worried about its rising debt load. They say that a 41% debt-to-GDP ratio is still within manageable levels. Besides, tax revenues have been rising steadily. On the back of the TRAIN law, collections of the Bureau of Internal Revenue rose by 10.6% while collections from the Bureau of Customs rose by 8.5%. Further, non-tax revenues grew by 6.9% due to higher dividends from government-owned and -controlled corporations and profits from PAGCOR. Government expects even more tax revenues to flow in once the CITIRA Law (the second tranche of the tax reform program) is passed.

With tax revenues on the rise, government is confident that it will continue to maintain a healthy balance between debt and revenues. This is true… for now. But I worry about our current account deficit.

For those unaware, a country’s current account is the surplus (or deficit) after taking into consideration trade in goods, trade in services, investment incomes, OFW remittances, and travel receipts. From a surplus of $601 million in 2015, it swung into deficit territory in 2017, clocking in at negative $2.52 billion and worsening to negative $7.9 billion in 2018. The Bangko Sentral ng Pilipinas sees the deficit widening to negative $10.1 billion this year.

Deficits will have to be filled by debt. So unless we reduce the deficit, or, better yet, turn it into a surplus, the country’s debt load will continue to rise.

The problem lies in our trade deficit (exports, minus imports). The gap is so wide that foreign direct investments, OFW remittances, and tourism revenues can no longer cover for it.

In 2018, merchandise exports dropped 1.8% to $67.488 billion from $68.713 billion in 2017. This occurred while imports grew by a whopping 13.4% from $96.093 billion to $108.928 billion. This resulted in a trade deficit of $27.38 billion and $41.44 billion, for 2017 and 2018, respectively.

The good news is that we have an astute Secretary of Trade and Industry who is well aware of the problem. Last year, Secretary Mon Lopez crafted a plan to accelerate exports of both goods and services so as to minimize the trade deficit. The plan, dubbed the Philippine Export Development Plan 2018-2022, was completed last June. It was ratified by President Duterte.

At the heart of the plan is to accelerate exports to between $122 billion and $130 billion by 2022 on the back of three action points.

The first is to improve the overall climate for export industries. This will be done by removing regulatory impediments for exporters, by raising productivity and competitiveness, by improving benchmarks of quality for export goods, by improving access to export finance, and, by enhancing exporter’s innovative capacities.

The second is by exploiting opportunities from trade agreements. The Philippines enjoys preferential export access and special tariff terms with certain countries by virtue of trade agreements in which we are a signatory. Among them are the ASEAN Economic Community, the Asia-Pacific Economic Cooperation (APEC), the European Free Trade Association and its General System of Preference-Plus status, among others. The Department of Trade and Industry (DTI) recognizes that the country has not maximized its preferential export rights to many markets, thus, Secretary Lopez’ plan lays out the ways and means to do so.

The third is to develop a new set of export winners. Products identified as having good export potentials are electronics, processed food, fresh vegetables and beverages. Surprisingly, footwear, textiles, yarns, fabrics, and garments were products that waned in the 1990s but are now showing signs of a comeback.

In terms of services, the IT-BPO sector is still seen to generate the lion’s share of export revenues. However, tourism-related services (e.g. services provided by hotels, restaurants, travel agencies, tour operators, etc.) is growing at twice the pace of IT-BPOs. This is a category to watch out for. Financial services, construction services, and product assembly services are also showing healthy upticks.

In addition, the DTI finds it necessary to create a robust atmosphere for start-ups and venture capitalists. Start-ups are trailblazers of innovation. They lead in design enhancements and are agile enough to adjust their internal processes to gain a competitive edge.

All these taken into consideration, it will still take much more to turbo-charge our export industries. The prohibitive provisions of the constitution relating to foreign investment, expensive power cost, difficulty in doing business, and government’s lack of spending on research and development (R&D) are some of the reasons why our manufacturing sector has not developed at the same pace as our neighbors.

These impediments need to be sorted out in order for our manufacturing sector to thrive and for us to export more. There is a lot of catching up to do as our export revenues are but a third of Vietnam’s.

To accelerate our industrialization, the DTI recently launched a new industrial plan called the Inclusive Innovation Industrial Strategy, or i3S for short. Its purpose is to develop globally competitive industries, large and small, using innovation as an enabler.

Having identified our new export winners, the goal is to enable our exporters to tap new markets and/or expand market share either through the introduction of new innovative products, new product features, or more competitive pricing.

For industries that produce intermediate parts, the goal is for them to deepen their participation in global supply chains through cost efficiency innovations.

The road is long before our export revenues can cover our current account deficit. The good thing is that the plans have been laid-out to make it happen. Its all about the execution now.

 

Andrew J. Masigan is an economist.

People of the Philippines vs. the GCTA

When a case is titled “People of the Philippines vs. Juan Santos,” it is a criminal case, or a crime against society. When a case is titled “Pedro Reyes vs. Juan Santos,” it is a civil case between two persons.

Republic Act 7659 (An Act to impose the Death Penalty on certain Heinous Crimes, amending for that purpose the Revised Penal Laws as amended, other Special Penal Laws and for other purposes) dated Dec. 13, 1993 focused on “grievous, odious and hateful offenses and which, by reason of their inherent or manifest wickedness, viciousness, atrocity and perversity are repugnant and outrageous to the common standards and norms of decency and morality in a just, civilized and ordered society.”

“Heinous Crimes” evokes three shocking and abominable rape-slay cases: that of the Chiong sisters, Marijoy and Jacqueline, raped and killed in Cebu, on June 16, 1997; that of Mary Eileen Sarmenta, raped and killed, and Allan Gomez, killed, in Laguna on June 28, 1993; and that of Carmela Vizconde, raped and killed, and her mother Estrellita, killed, on June 30, 1991 in Parañaque. And the “people of the Philippines” trembled in fear and hate for the heinous crimes. Raping and killing can only be done by a satanic mind.

Yet Satan laughed his hellish triumph once more when news started circulating into a tempest in media that former Calauan, Laguna Mayor Antonio Sanchez, convicted for the Sarmenta-Gomez rape-slay case and sentenced to seven simultaneous life sentences, could be released soon after having served 25 years, with 15 years remaining under the 40-year maximum incarceration in law. He was availing of the shortened service of sentence for good behavior under the Good Conduct Time Allowance (GCTA).

The little-known GCTA was an embryo in the Revised Penal Code of December 1930, Chapter 2 which already talked of “partial extinction of criminal liability,” including conditional pardon, commutation of sentence, and good conduct allowances. A Rappler timeline (as of Aug. 27) of the present tremulous interest in the GCTA and Sanchez’s possible early release under it showed that specific legislation for good conduct allowances started with Senate Bill 3064 (2012) and House Bill 419 (2013), ending with Republic Act 10592 or the Good Conduct Time Allowance (GCTA) law signed by Benigno Aquino III on May 29, 2013. The GCTA amended several articles under the Revised Penal Code, including Article 97, which lays out the allowance for good conduct for persons deprived of liberty (PDLs).

The Senate Blue Ribbon Committee chaired by Senator Richard Gordon painstakingly ferreted out the circumstances and details of the memorandum order releasing Sanchez, signed by Bureau of Corrections (BuCor) Director General Nicanor Faeldon. Senate Minority Leader Franklin Drilon, the justice secretary at the time Sanchez was convicted, clarified Mr. Faeldon’s claim that “(he) was just following procedures” under the IRR for RA 10592. Mr. Drilon cited that the IRR, penned by then-justice secretary Leila de Lima and Interior Secretary Mar Roxas, provided for a prospective application of the GCTA law, which was later finally judged on June 25, 2019 by the Supreme Court to allow retroactive application.

Mr. Faeldon still had a problem, Mr. Drilon showed, because he acted beyond his authority to release Sanchez, or any other prisoner or detainee without the clearance of the Secretary of Justice. Justice Secretary Menardo Guevarra, who according to the Rappler timeline told reporters on Aug. 20 that Sanchez “may actually be released,” and, in another instance, “is very likely for release,” turned around two days later and said those charged with heinous crimes are not eligible for credit of preventive imprisonment, then they are also not supposed to benefit from the GCTA. “It’s been a tough process of interpreting the wordings of a law that has certain ambiguities in its provisions. In the end, however, it is the spirit and the intention of the law that guided us in taking a position,” Mr. Guevarra was quoted as saying by Rappler.

Mr. Drilon, in an interview with Karen Davila on ANC on Sept. 6, talked about delicadeza and propriety in the interpretation of the law. Commenting on Presidential Spokesman and Chief Presidential Legal Counsel Salvador Panelo’s “referral letter” to the Bureau of Corrections to “look into” the petition of Sanchez’ wife for the early release of Sanchez, Mr. Drilon said: “First, it is on the letterhead of Malacañang; second, Panelo was one of the defense lawyers of Sanchez. The letter should have been signed by someone else. There is the perception of pressure, by dint of the position of Panelo. Perception is very important in government.”

Mr. Panelo said on Sept. 3 that he will file libel charges against Inquirer.net and Rappler for calling his pro-forma “referral letter” for the Sanchez plea for clemency (not the GCTA) a “recommendation.” Inquirer.net publicly apologized, but the apology was rejected by Mr. Panelo, as reported by ABS-CBN News on Sept. 6.

But just as Mr. Panelo might have leapfrogged out of hot water, the heat was on Mr. Faeldon, who was questioned about the loose mechanics of release, specially the quantification and recording of good behavior points and the demerits of bad conduct. CNN Philippines reported on Sept. 4 that President Rodrigo Duterte said he called Mr. Faeldon to stop further releases, but Mr. Faeldon instead “tried to justify” the computations of the inmates’ good conduct time allowance.

“I was trying to provide the fire extinguisher so that the people would no longer have any doubts. No releases. If he said that, then this would all be over… The problem is, the following day, he came up with his statement, with his own computation,” Mr. Duterte said, according to CNN. And Mr. Faeldon was fired right then and there.

Yolanda Camilon, the common-law wife of a minimum security inmate at the New Bilibid Prison in Muntinlupa, surfaced late Thursday to give a first-hand account of an alleged racket involving ranking Bureau of Corrections officials, Philstar Global reported on Sept. 5. “GCTA for sale: So far, we have discovered and will pursue to validate (gather evidence as well) a price range of P50K to P1.5M per prisoner. At least 8 are known to have paid up to P100K each. It is also well organized. Let’s see where it leads us,” Senator Panfilo Lacson declared in his Twitter account.

According to Mr. Drilon in the aforementioned ANC interview, of the 20,000 prisoners released through the GCTA, 1,914 had been charged with heinous crimes. Mr. Duterte publicly asked those released prisoners to report to the police in their area for re-evaluation of their discharge. Philippine National Police Chief General Oscar Albayalde said on Friday that 25 heinous crime convicts released under the GCTA Law have surrendered to various police stations, a PNA report bared on Sept. 7.

For two weeks now, people have stopped what they are doing to watch the Senate hearings on the proposed GCTA law. To the lawmakers: please consider that those amendments to tighten and improve measures under restorative justice must first protect “people of the Philippines,” the common good, over and above the personal rights of prisoners who have compromised their liberties by willful commission of crimes against the people.

Consider our common rights to life, liberty, and the pursuit of happiness in assurances under the law that we will be safe and secure, without the feared threat of re-established power and influence of recidivist criminals freed under the corrupted GCTA.

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

Maoist leaders ordered arrested for 80s murder

A MANILA trial court has ordered the arrest of Communist Party of the Philippines (CPP) founder Jose Maria “Joma” Sison, his wife and 36 other members of the organization for murder.

In an arrest warrant dated Aug. 28, Judge Thelma Bunyi-Medina did not recommend bail. The communist leaders were charged for the murder of 15 people in the so-called Inopacan massacre more than three decades ago.

Also ordered arrested were National Democratic Front of the Philippines senior adviser Luis Jalandoni, communist leaders Rodolfo Salas and Leo Velasco as well as Mr. Sison’s wife Juliet.

The case stemmed from the purges in Leyte at the height of the communist insurgency in the 1980s. They were charged with murder after skeletons of alleged victims were discovered in a mass grave in Leyte province in central Philippines.

In a social media post, Mr. Sison said the list of accused was “utterly stupid and obviously fabricated.”

“It includes the names of those in prison at the time of the alleged massacre. It also includes those who are already dead for various health reasons,” said Mr. Sison, who is in self-exile in The Netherlands.

Mr. Sison noted that at the time of the supposed massacre, he was under detention by the late dictator Ferdinand E. Marcos.

He also said news of the charges was meant to take away the public’s attention from the release of about 2,000 prisoners convicted of heinous crimes.

Mr. Sison was “welcome to come home” to face the charges. “Mr. Sison should unchain himself from his exile and face the music. His illusive if not illusory dream of wresting political power from the present dispensation should give way to a principled and courageous stand to face trial.” — Vann Marlo M. Villegas

Duterte calls fired prison chief a ‘good man’

PRESIDENT Rodrigo R. Duterte on Friday said he still believed in his former prison chief, whom he fired early this week over the illegal release of felons convicted of heinous crimes for good conduct.

“Faeldon is a good man,” the president in a speech delivered in the Visayan language in Naga City.

Mr. Duterte recalled how Mr. Faeldon when he was still Bureau of Customs head reported to him about a Cebu-based businessman who kept cigarettes with fake tax stamps in three warehouses.

“We earned P37 billion because of that report by Faeldon,” the president said.

He was referring to the warehouses of Mighty Corp. that authorities raided in 2017. The cigarette company later paid the taxes.

Mr. Faeldon headed the Bureau of Customs but was forced to resign at the height of a controversy involving the shipment of billions of pesos worth of crystal meth from China. He was reappointed to the Office of Civil Defense before heading the BuCor in 2018.

Meanwhile, Justice Secretary Menardo I. Guevarra appointed a Bureau of Corrections (BuCor) official to temporarily head the agency after President Rodrigo Duterte fired Nicanor E. Faeldon.

BuCor Assistant Secretary Melvin Ramon G. Buenafe was appointed officer-in-charge, according to a copy of a department order.

Mr. Guevarra also created a committee headed by Justice Undersecretary Deo L. Marco, with Assistant Secretaries Neal V. Bainto and George Ortha II mandated that will supervise the bureau pending the appointment of new director general.

Mr. Duterte on Wednesday sacked Mr. Faeldon over the illegal release of almost 2,000 felons convicted of heinous crimes.

Also yesterday, Mr. Guevarra said his office would investigate corruption at the bureau after reports that parole grants have become for sale.

“That will be part of the investigation,” the Justice chief said. His office is already reviewing the processes being followed for convicts’ early release for good conduct, he told reporters.

“I do not have the facts before me but I tend to believe that is a very real possibility,” Mr Guevarra said.

During a Senate hearing on Thursday, a witness accused some prison officials of selling parole to families of convicts. — Vann Marlo M. Villegas

DoJ to finish hearing sedition complaint vs VP

GOVERNMENT prosecutors are about to finish hearing the sedition complaint against Vice President Maria Leonor G. Robredo and 35 others and will soon submit the case for decision.

Prosecutors on Friday said they have set a deadline for Sept. 11 for all counter-affidavits, after which the case will be submitted for resolution.

Police in July filed inciting to sedition, cyberlibel, libel, estafa, harboring a criminal and obstruction of justice against the officials accused of circulating a video linking President Rodrigo R. Duterte and his family to the illegal drug trade.

Meanwhile, two former opposition senatorial candidates and an ex-spokesman of the Supreme Court filed a countersuit against Peter Joemel Advincula, the self-confessed drug dealer who appeared in the videos.

Lawyers Jose Manuel I. Diokno, Lorenzo R. Tañada III and Theodore O. Te said the sedition allegations against them were “deliberate fabrications.”

Human Rights Watch has called on authorities to drop the “preposterous complaint,” calling it an attempt to harass and silence critics of the government’s bloody war on drugs.

A conviction for incitement to sedition carries a maximum penalty of six years in jail. — Vann Marlo M. Villegas

CoA probing P20M insurance claims from dead

STATE auditors are investigating about 2,000 claims worth more than P20 million made by supposedly dead members of the Philippine Health Insurance Corp. (PhilHealth) this year.

“The immediate conclusion would be they were fraudulent claims,” Commission on Audit Chairman Michael G. Aguinaldo told a Senate hearing on Thursday night. “You can’t come to this conclusion immediately because these treatments could be right before the person died,” he added.

Investigators also need to know when the supposed expense was incurred, Mr. Aguinaldo said.

CoA data show that 1,708 claims were made by 961 PhilHealth members from Jan. 3 to June 29 this year.

Valid claims can be made by the dependents of dead PhilHealth members, PhilHealth Senior Vice President Rodolfo B. Del Rosario, Jr. told senators. — Gillian M. Cortez

Budget delay’s impact hounds infrastructure spending into July

LATE ENACTMENT of this year’s national budget continued to weigh on infrastructure spending in July, the Budget department reported on Friday, even as it noted that a month-on-month surge showed “that disbursements are starting to normalize and accelerate in the second half…”

Infrastructure and other capital outlays surged by 73.1% to P75.2 billion in July from June’s P43.5 billion, but was still 11% smaller than the P84.5 billion disbursed in July last year.

July disbursements for these items brought year-to-date spending to P386.6 billion, still 11.6% smaller than the P437.2 billion spent in last year’s first seven months.

An excerpt from the department’s report blamed “the lingering effect of the delayed approval of the 2019 budget and the [45-day public works] election ban [ahead of the May 13 midterm polls].”

“The contraction recorded mostly from lower DPWH (Department of Public Works and Highways) disbursement, however, was moderated by growth posted in the Judiciary for construction, repair and rehabilitation of courts of justice, and in the Department of National Defense for the advance payment made in connection with the purchase of military equipment under the Armed Forces of the Philippines modernization program,” the report explained.

The department said it expected improvement in succeeding months, since “[t]he implementation of new programs and projects of the DPWH and the Department of Transportation are currently under way”.

“Based on the revised disbursement program submissions of said departments, spending by the two main infrastructure agencies is heavily concentrated in the second semester,” the report read.

“This, along with the allotment releases in August, can therefore propel government spending in the second semester with the completion and/or partial completion of infrastructure works and corresponding progress billings.”

Sought for comment, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, Inc., described July’s smaller-than-planned infrastructure spending as a “missed opportunity” even as the month-on-month spike showed the government’s “catch-up plan” is well under way.

For Mr. Asuncion, the government “will be able to increase spending, but may come up short of the plan to spend everything of what was planned for 2019”.

For Michael L. Ricafort, economist at Rizal Commercial Banking Corp., “underspending” could lead to “some slowdown in the broader economic/GDP growth” should it persist this quarter.

The government operated on a reenacted 2018 budget until mid-April when President Rodrigo R. Duterte signed the P3.662-trillion budget for 2019. Economic managers have blamed the late budget enactment, which left new projects unfunded in the first three-and-a-half months, for the disappointing 5.5% gross domestic product (GDP) expansion last semester. The economy now has to expand by at least 6.4% in the second semester to meet the lower end of 6-7% target this year.

Mr. Ricafort said GDP growth could “pick up” this semester and next year “due to the spill-over government spending, especially on infrastructure into 2020 (from 2019)”.

“The sharp decline in both inflation and interest rates would also help spur greater demand for loans/financing, including those for financing various infrastructure projects especially the big-ticket infrastructure projects under the ‘Build Build Build’ program, as well as those for their contractors and other suppliers that are part of their supply chain,” he said in an e-mail.

“The government’s preference for using official development assistance loans — which are cheaper and with longer tenors (with grace period) and could be much faster to implement by the government once approved (with less parties/partners do deal with) — would also help in speeding up the deployment and completion of the major/biggest infrastructure projects, especially those under the ‘Build Build Build’ program.” — Beatrice M. Laforga

Farmers call for limits to rice imports, hike in NFA buffer stock

A FARMERS’ association pressed the government to regulate rice imports more closely to allow domestic farmers and traders to dispose of their inventory particularly during the current harvest, and called for an increase in the National Food Autority’s buffer stock minimum to support the market.

“Government must focus on the supply side, because that is where the problem is coming from. It must find a way to manage the inflow of imports until the supply glut disappears and farmers and traders are able to unload their stocks,” Federation of Free Farmers (FFF) National Manager Raul Q. Montemayor said in a statement.

Farmers are currently bringing in their crops amid a shortage of storage space in key rice-growing areas. Meanwhile, traders are still holding significant inventories from the last harvest because they purchased domestic rice at relatively high prices that cannot compete with cheaper imports, and are unwilling to sell at a loss.

The resulting softening of the market for palay, or unmilled rice, has depressed farmer incomes with reports emerging that traders are paying as little as P7 per kilogram.

FFF proposed the implementation of other measures like special safeguard duties, as well as trade remedies like anti-dumping measures, which would allow the government to temporarily impose additional duties on rice imports, making them more expensive.

According to the Bureau of Customs (BoC), 2.4 million tons of have arrived to the Philippines as of July since the enactment of the Rice Tariffication Law, which opened up the import market to private traders who must pay tariffs on their shipments starting at 35% for Southeast Asian Rrce.

The imports are equivalent to 17% of the Philippines’ annual consumption.

“We actually need to import only 10% of our needs because we can produce 90%, so there is already an excess supply of 7% in the market and this glut will become worse if more imports come in and coincide with the main harvest,” Mr. Montemayor said.

The Philippine Statistics Authority (PSA) estimates that the average price of palay was P17.62 per kilo in the second week of August.

The National Food Authority (NFA) has been limited by the law to procuring rice only from domestic farmers, but Mr. Montemayor said that this is not enough while farmers are exposed to competition from imports.

He noted that the P7-billion budget of the NFA can only purchase about 412,000 metric tons (MT) at P17 per kilo, which is only 2% of the country’s annual rice output. If it were to absorb 10% of output, the agency would need P35 billion.

The government also plans to increase the country’s buffer stock to 90 days as another way to boost the procurement of domestic rice.

“If they want NFA to have a buffer stock equivalent to 90 days, they will need to invest around P80 billion. Where will they get that money, and where will NFA and the LGUs [local government units] store that palay?,” Mr. Montemayor said.

LGUs have recently been roped in by the Department of Agriculture (DA) to participate in direct palay purchasing, milling and marketing at “reasonable” prices to help provide a floor to the market for farmers.

“In 2018, farmers were enjoying very good prices above P20 per kilo even without NFA having to buy a single kilo of palay. Why, because there was a tight supply of rice in the market and the NFA ran out of stocks to control the market. This shows that palay prices can be influenced through proper demand and supply management without government having to directly intervene in the market,” he said. — Vincent Mariel P. Galang

Price growth seen easing until Oct. before returning to 2% level by yearend

PRICE increases are expected to lose momentum until October before a recovery in headline inflation to around the 2% level in December, according to an economic bulletin issued by the Department of Finance (DoF).

“If the MoM (month-on-month) price increase is kept to at most 0.2%, year-on-year price change will continue its decline until October before reverting to the 2% level starting December,” the DoF said in the statement released Friday.

The DoF also noted that core inflation, which strips out volatile items like fuel, is also easing.

“Core inflation eased to 2.9% for the month while the overall CPI (Consumer Price Index) increased by 0.17% month-on-month in August, less than the 0.25% MoM increase in July,” it said.

The Philippine Statistics Authority (PSA) reported on Thursday that August headline inflation slowed to 1.7% in August from 2.4% in July and 6.4% a year earlier.

Last month’s inflation was slightly lower than the 1.8% median estimate in BusinessWorld’s poll of 12 economists late last week. It also was also at the midpoint of a 1.3-2.1% range estimated by the central bank.

In the eight months to August, inflation is averaging 3%, at the midpoint of the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range for 2019 but still higher than the the central bank’s 2.6% forecast for the entire year.

“The decline in inflation is traced to the lower rate of increase in the prices of both food and non-food items. Rice price, in particular, clocked its largest year-on-year decline of 5.2%,” it said.

Growth in the food index has slowed to as much as 0.3% from July’s 1.7% and 8.2% a year earlier.

Following the release of data, National Economic and Development Authority (NEDA) said the Rice Tarrification Law brought down the domestic retail and wholesale price of rice by 10-13%. The law “continues to help increase [the] rice supply,” NEDA Undersecretary Rosemarie G. Edillon said.

The law allowed more liberal imports of rice by private entities sho had to pay an import tariff of 35% on grain sourced from Southeast Asia. — Beatrice M. Laforga

NPC initiates proceedings against 3 online lending firms

THE National Privacy Commission (NPC) has found three online lending firms to have violated the privacy of persons who were allegedly shamed publicly, including maliciously disclosing the private information of borrowers.

“The investigation determined that their business practice specifically targets the privacy of persons, practically making a profit out of people’s fear of losing face and dignity. These unethical practices simply have no place in a civilized society and must stop,” Privacy Commissioner Raymund E. Liboro said in a press conference on Friday to release the outcome of the agency’s probe.

He said the operators of the lending applications could face imprisonment of up to seven years and fines of up to P5 million for violating the Data Privacy Act of 2012.

The lending firms were identified as Fast Cash Global Lending, Inc., Unipeso Lending Co., Inc., and Fynamics Lending, Inc. The commission’s fact-finding reports recommended the criminal prosecution of the firms’ board members for violating provisions of the privacy law.

Ivy D. Patdu, deputy privacy commissioner, said NPC had ordered executives behind the lending apps to respond within 10 days of their receipt of the agency’s order to file an answer to explain the allegations in the commission’s reports.

She said if the respondents fail to answer without justification, the commission would make its final decision based on available evidence and information contained in the reports.

Mr. Liboro said aside from criminal prosecution, the fact-finding team also recommended issuing a temporary or permanent ban on the processing of personal data by the lending firms “as urgently required by public interest” as well as the issuance of compliance orders against them.

He said NPC received a total of 921 complaints about the same offenses, namely: use of contact list or phone directory without consent or authority; disclosure of unwarranted or false information to other persons; use of personal information for harassment and threatening communications; and unduly intrusive personal data processing.

The complains prompted the commission to create a taskforce to probe the lending firms. The three lenders mentioned accounted for 61% of the complaints, he said.

Fast Cash Global operates the Fast Cash online app; Unipeso operates the Cashlending app; and Fynamics operates PondoPeso.

The NPC officials noted that the firms are registered with the Securities and Exchange Commission (SEC).

Mr. Liboro said the privacy law, which is meant to protect the private information of individuals, ensures that they are not harmed with illegal or unauthorized use of their personal details.

He cautioned online users against the downloading of online lending applications, and to carefully read the terms and conditions as these might include “dangerous permissions” such as access to a person’s live location, phone books and social media account, or even camera control. — Victor V. Saulon

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