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Transfer pricing audit issues requiring attention

(Second of two parts)

In the previous article, we discussed the salient points of RAMO No. 1-2019, the Transfer Pricing (TP) Audit Guidelines and the urgent need to have a TP documentation to prepare for the TP audits.

These guidelines also provide the audit procedures to be applied to specific TP issues that are quite common to groups of companies today. These issues relate to intra-group services, intangible assets and interest payment transactions.

Under the RAMO, intra-group services are activities undertaken within a group that provide benefits for one or more other members in the group. Intra-group services may take the form of management, administration, technical, support, purchasing, marketing, distribution and other commercial services provided in connection with the group’s business.

Of the above forms of intra-group services, the most common are the management services for which a parent company or another company within the group charges a management fee, and the “shared services,” which include non-core or other support services that are centralized into and provided by a shared service center within the group.

Under the guidelines, it is not enough that an arm’s-length fee is charged for these services. It is equally important to prove that the other party receiving the service has derived economic benefit from the service. Such benefit is derived by considering whether an independent party in similar circumstances would be willing to pay another independent party for the service or would just perform the services itself.

There are also certain kinds of services that cannot be considered intra-group services because there is no economic benefit to the service recipient. These services include shareholder activities, duplicative services, those that provide incidental benefit, and on-call services. In such a case, such services do not justify a charge to the service recipient.

Thus, the possible risk is a total disallowance or the downward adjustment of the service charge to the service recipient, insofar as it pertains to the excluded services, resulting in deficiency income tax from the additional income arising from a disallowed or lowered service fee.

Given all these considerations, it is, therefore, important to revisit management and shared services agreements and the TP documentation itself. These agreements must be closely examined to ensure that the services described in the agreements fall within the category of intra-group services and not under the exclusions.

The RAMO also provides procedures for identifying intangible assets in the conduct of functions, asset and risk (FAR) analysis of the parties to the related party transaction (RPT). Intangible assets are those that are neither physical nor financial assets. A higher profitability level than the average for the industry is a factor that may establish the existence of an intangible asset. It is not necessary that such intangibles be recorded as an asset in the balance sheet or registered with the Intellectual Property Office. Even costs or expenses incurred in connection with research and development and the marketing of a product may indicate the existence of an intangible asset.

In transfer pricing, the existence of an intangible asset is an indication that the owner is engaged in high-value functions in its transaction with affiliates. In such a case, the owner of such an intangible asset should be compensated with more than a mere routine return for its functions. The owner must be remunerated at a higher return that will allow it to recover the costs incurred for the development of such an intangible asset.

In addition, a company that owns an intangible asset cannot, in most cases, be selected as a comparable for a company that performs routine manufacturing or distribution functions. Thus, as part of the TP documentation, an analysis has to be made on whether a company, by the nature of its functions, owns such intangible assets.

Finally, the RAMO also prescribes audit procedures on intra-group loan transactions. The two areas of focus are the arm’s-length nature of the debt-to-equity ratio and the reasonableness of the interest rate and other expenses for the intra-group loan transaction.

In testing the interest payments, an analysis must be made of the need for the debt and the market conditions at the time the loan is extended. In determining the need for the debt, the level of debt held by the borrower of the affiliate should be considered. The debt-to-equity ratio of the borrower is also benchmarked against the debt and equity of similar companies, although the purpose for determining such ratio is unclear in the regulations.

In other countries or jurisdictions, the debt-to-equity ratio is a factor that is taken into account in determining if a company is thinly capitalized, that is, whether the higher level of related-party debt than equity is intended to take advantage of the interest deductions that comes with financing with debt rather than with equity. Where a company is thinly capitalized, its interest deduction attributable to the higher debt-to-equity ratio may be disallowed.

In the TP documentation covering the interest payments on intra-group loans, it is, therefore, important to establish what is an acceptable debt-to-equity ratio within the industry and to ensure that related-party debt is within the benchmarked ratio.

Given the complexity of TP audits and the preparations being undertaken by the Bureau of Internal Revenue, it is now more vital than ever that companies consider the factors we presented when establishing a pricing policy for intra-group services, intangible assets and interest payment transactions. Companies with foresight will make advance work, prepare TP documentation or revisit an existing one, to be better positioned in managing risks brought on by a TP audit.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Reynante M. Marcelo is a Partner for International Tax and Transaction Services of SGV & Co.

Social inclusion for ASEAN’s long term stability

Economic insecurity bred by inequitable distribution of wealth due to globalization and trade liberalization resulted in rising populist protectionism in many parts of the world. The failure of governments to promptly address the loss of opportunity and the rising inequality has created a political backlash, recently shown by the retreat to protectionism in the US and the Brexit.

Whether this will become a long-term global trend or just a short phase is hard to answer at this point. However, the political developments in those countries and their international spread require particular attention. What has been shown by these developments is how fragile the institutions that promote economic openness are in the movement propelled by nationalist populism, xenophobia and fear-mongering propaganda and campaigns that have taken advantage of the people’s frustrations.

It is crucial that proactive steps are undertaken so that the rising populist protectionism does not spread in other parts of the world, and in particular, the vulnerable emerging economies of ASEAN (Association of Southeast Asian Nations).

ASEAN has come a long way since it intensified its regional economic integration initiatives through the ASEAN Free Trade Area (AFTA) in 1992, followed by the Free Trade Agreements (FTAs) with regional partners, and the ASEAN Economic Community (AEC).

The region has become a more attractive and important trade hub and investment destination, drawing foreign direct investments (FDI) amounting ton$122.8 billion and total trade amounting ton$2.23 trillion in 2018.

However, many people cannot readily see the value of an open trade regime in their daily lives. The region is characterized by high levels of income inequality. In-country income inequality is steep, and extreme poverty, measured in terms of people living below $1.90/day, has not been eliminated even in middle-income Indonesia and the Philippines. Inequality in terms of access to opportunities and even basic public facilities and social services is pronounced.

Economic opportunities remain elusive for many Southeast Asians, particularly the youth, women, ethnic minorities, and persons with disability. To survive, they join the informal sector.

As a result, the informal sector — street hawkers, contractual and service workers, domestic helpers, and the like — has substantially grown. Based on International Labor Organization’s (ILO) figures, 60% of Asia and the Pacific’s workforce depends on informal sector employment. Although not all informal workers are poor, the majority of the poor are in informal sector jobs, which have low-income prospects, and are lacking in security, health and social benefits. In Southeast Asia, 75% of jobs in the five middle-income countries — Vietnam, Indonesia, the Philippines, Thailand, and Malaysia — are generated by the informal sector.

A study conducted by the Economic Research Institute for ASEAN and East Asia (ERIA) in 2017 identified income disparity and social inequality as the top concerns of citizens of ASEAN Member States (AMS), next to corruption plaguing national governments.

High levels of income inequality, as well as lack of opportunities for decent jobs, contribute to pessimism and trust deficit in domestic and international institutions. In the future, this can lead to social instability and fragmentation.

The ASEAN recognizes the need for equitable economic development in building a resilient and open region. Promoting inclusive growth has been part of the ASEAN agenda, as stated in the ASEAN Economic Community 2025 goals.

Several programs have been launched, such as the support for the Micro, Small and Medium-sized enterprises (MSME). However, the successful delivery of such programs depends on individual state performance.

Inevitably, domestic political challenges, inadequate political will, and lack of technical and economic capacity can hurt their successful implementation. The ASEAN needs to build a stronger Regionalism-Welfare framework and strategy that will rapidly facilitate the spread of the benefits of regional economic integration.

To begin with, the ASEAN must strengthen its Secretariat so that it can expand its role beyond policy advocacy, and perform a more active role in pushing policies that will provide wage and health insurance to workers, as well as policies that will help informal sector workers achieve economic security and transition to productive sectors.

The ASEAN can learn lessons from poverty-reduction initiatives of other regions. For example, the Southern African Development Community (SADC), along with international donor partners, signed a Memorandum of Understanding (MoU) with its 12 member states, which stipulates the commitments of SADC and the member state, including details of implementation and how the funds from international donors will be allocated in cross-border poverty reduction and health programs. If ASEAN resources are properly mobilized for social inclusion initiatives, the success rate could be much higher and faster, given its financial resources and human capital.

Innovations in Region-State relationship that will allow binding mechanisms for regional governance on issues concerning social inclusion merit examination. Despite its non-interventionist principle, the ASEAN is no stranger to binding mechanisms. It has implemented several successful binding programs pertaining to regional economic cooperation, such as AFTA (ASEAN Free Trade Area) and the ASEAN Single Window. Those programs can provide the model for collaboration between ASEAN and the member state to come up with well-targeted, regionally monitored social inclusion projects that are integrated into the domestic policy framework of ASEAN Member States.

Furthermore, the ASEAN needs to invest more in soft power strategy to advance and embed its regional economic and social goals. The ASEAN should have a more visible and active role in implementing practical strategies to educate the citizens, and not just the business elites, on how regional economic integration can be useful to them.

A strong and open ASEAN is vital in stabilizing the rapidly changing Asia-Pacific region and is crucial in sustaining the global supply chains that are producing among the most innovative products in the modern world. ASEAN and its allies should invest in a comprehensive strategy that will counter the pessimism and doubt on the benefits of regional economic integration by supporting social inclusion policies that will help member countries improve the economic prospects of its people.

 

Jenny D. Balboa has a Ph.D. in International Relations from the National Graduate Institute for Policy Studies (GRIPS) in Tokyo and is a Lecturer at the Tokyo University of Foreign Studies in Japan. AER collaborates with Filipino scholars from GRIPS.

The real safety net for rice farmers

Let me lay out the following propositions:

1. A number of rice farmers will never be competitive. The difference in average cost of palay between Vietnamese and Thai rice farmers and Filipino rice farmers is P4 to P5 per kilo, a huge gap showing the difference in productivity between Filipino rice farmers and our Asean neighbors.

This huge gap in productivity and average cost reflects differences in irrigation, the use of farm machinery, farming methods, average farm size, etc. A number of Filipino farmers, shielded by protectionist measures from foreign competition for so long, tilling fragmented lands, saddled with debt, exploited by traders, and deprived of critical agricultural extension services by an uncaring government, will never be able to compete.

2. The government is incompetent when it comes to making rice farmers productive, especially in the near-term, when farmers are reeling from the low prices of palay at the farmgate. It is similarly incompetent when it comes to extending a conditional cash transfer program that will provide relief to our suffering rice farmers.

We are talking here of 2.2 million rice farmers who the government must target to give financial assistance to.

I’m not denigrating the competence and integrity of Secretary William Dar who, I believe, is the best man for the job. However, he’s in charge of a bureaucracy that was home to the Napoles scam, the fertilizer scam, and many other scams. It’s simply unbelievable that this same bureaucracy can now deliver money to specific, targeted farmers — all 2.2 million them — efficiently, quickly, and without leakages.

(To see just how inefficient Department of Agriculture [DA] is, consider the study made by development economist Melinda Gayle-Limlengco for Nagoya University, who concluded that despite huge sums being spent, the DA’s regional expenditures had a negligible and insignificant impact on agricultural production.)

We are also talking here of government in general that is incompetent in most respects, whether it’s running the Bureau of Corrections, Customs, the MRT, the Philippine National Railways, the MWSS, the BIR, the LTFRB, or any other program or institution. As I had written before, the Philippine government is a reverse King Midas; whatever it touches turns into manure.

3. Increasing or even doubling the tariff rates is not a safety net. It will incentivize smuggling and increase rice prices for 105 million consumers. It will send confusing signals to rice farmers (How long is the increased tariff rate? Should I plant more or not?) and cannot be sustained without an impact on inflation.

4. It’s not acceptable, either, to go back to a status quo ante. The situation previous to rice tariffication was characterized by the rice importation monopoly of the National Food Authority (NFA). Unsurprisingly, the system only benefited corrupt NFA officials and the rice syndicates, penalized 105 million Filipino rice consumers with high prices, wasted resources subsidizing only a fraction of rice farmers (the NFA’s budget is good only for 3% of the rice output), enabled rice traders to capture most of the rent from rice protection, and caused last year’s consumer price inflation.

Worse, it gave the signal that our rice farmers don’t have to improve, despite the fact that our Asean neighbors are producing rice at almost half the cost. Therefore, when rice tariffication did finally arrive, government and the rice farmers were unprepared for the shock that happened.

5. There is no denying that a number of rice farmers will lose their present livelihood, especially those at the margins (no irrigation, limited access to financing, use traditional methods of farming). No amount in a rice competitiveness fund can sugarcoat this reality.

We can expect these rice farmers to quickly descend into dire poverty or move to cities to seek jobs as informal workers. This migration to cities will cause further squatting in slums, where crime and drug dealing fester. Or, for want of opportunity, they will be recruited by the NPA.

PHILIPPINE STAR/MICHAEL VARCAS

6. Therefore, a number of rice farmers cannot remain rice farmers forever. It would be wrong and foolish for the government to adopt an assistance program that assumes it to be so. We have to accept the reality of migration because that’s what industrialization and progress is all about. Farmers and agricultural workers at the margin move from their low productivity livelihood in the countryside to higher productivity jobs in semi-urban and urban areas.

Migration is not bad and should even be encouraged. The average income of Filipino farmers is only P100,000 a year. That’s much less than what a farmer could make as a worker with benefits (SSS, Philhealth, etc.)

Migration doesn’t necessarily mean migration from the countryside to the city. It could also mean migrating from less-productive work as a rice farmer to a more productive (and therefore higher income) work as a farm worker in an agribusiness farm.

7. If the government cannot provide the safety net, who will? The private sector — but only if the government provides the right policies for the private sector to come in.

What are these safety nets? One is the vigorous expansion of modern agribusiness farms which will take in the displaced rice farmers (and coconut farmers who are presently suffering from historically abysmally low prices) as agricultural workers. Industrializing farming and modernizing agriculture is one of the policy directions of DA Secretary Dar and he’s correct.

However, for this to happen, the government must remove the five-hectare retention limit on farmlands that is mandated by the Comprehensive Agrarian Reform Law. Successful and highly productive farmers aren’t allowed to expand. Imagine if Jollibee had been prohibited from expanding to no more than five stores. It wouldn’t be the world-class fast food chain that is employing thousands of Filipinos today.

The other safety net is the promotion of labor-intensive light manufacturing and cottage industries. Employment in this sector is not only a safety net for displaced farmers or their children, but is also a progression from low-income, low-productivity farming.

Again, I would like to state that internal migration from low-productivity agriculture to higher-productivity manufacturing and cottage industries is a normal and welcome process if the country is to industrialize. That happened in England in the 19th century and in China in the period after 1985 when it started its breakneck speed toward industrialization. Some 200 million people moved from China’s countryside to its urban centers.

However, this process is stopped in the Philippines because of the labor rigidities enshrined in the Labor Code. Instead of displaced farmers and their sons and daughters going into light manufacturing, they go to the cities to find work, if they can, in unstable, low paying service jobs or as illegal vendors. (The service sector accounts for the biggest share of the nation’s employment, mainly from low productivity service work.)

It’s about time to revive former Socio-economic Planning Secretary Gerry Sicat’s idea of labor-friendly economic zones, where labor-intensive light manufacturing can find a welcome home. The idea is to promote labor-employment, either through a temporary suspension of labor security regulations and the high entry level minimum wages (this had been done before successfully in a banana plantation in Central Mindanao) or through government subsidy of employment — a Conditional Cash Transfer (CCT) Program for employment. A CCT for employment is more sustainable than sheer dole outs to rice farmers. Perhaps the tax code could also be changed to encourage employment (150% deductibility of labor-related expenses). The Labor Apprenticeship Law should also be passed to encourage businesses to invest in the training of unskilled workers or displaced farmers looking for work.

Government can also do its part by providing the infrastructure suitable for light manufacturing, perhaps even building and leasing factory buildings and warehouses. Then all the capitalists must do is bring in the machinery. (Think garments, for example, or shoe manufacturing.)

Let’s face it: some rice farmers may become competitive under a regime of rice import liberalization, but a good number will not be. They will be forced to exit farming altogether or shift to other high value crops — if they can. For those who can’t make the transition, the government must provide safety nets for them. However, it’s wishful thinking that the government, through the agricultural bureaucracy, can target and dole out money effectively for 2.2 million rice farmers. Neither is a dole out sustainable or to the long term interest of farmers.

The real safety net is to get agribusiness farms to expand and absorb the displaced farmers. Or, for displaced farmers to find employment in labor-intensive light manufacturing and cottage industries. Anything else will fail and just fool the people.

 

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.

idea.introspectiv@gmail.com

www.idea.org.ph

Why emergency powers are needed to solve traffic

In my hands is a copy of the “Roadmap for Transport Infrastructure Development for Metro Manila and its Surrounding Areas.” Formulated by the Philippine government in cooperation with the Japan International Cooperation Agency (JICA), this roadmap outlines the ways in which Metro Manila traffic can be properly addressed today, all the way to the year 2030.

Within this 160 page roadmap is a plan to maximize existing roads and railways; a rationalization plan for public utility vehicles (PUVs); the infrastructure plan to absorb future growth; a relocation plan for illegal settlers; and a plan for traffic during floods and earthquakes, among others. It even touches upon airports and sea ports as they also affect traffic.

With emergency powers, the Department of Transportation (DOTr) says it can put in place a sufficient number of solutions (all prescribed by this roadmap) to solve the traffic imbroglio in two years. Without it, it could take a decade. The DOTr has been asking the legislature for emergency powers since 2016.

The Lower House had already approved on third reading the bill to give government emergency powers. However, the bill has been in limbo in the Senate. Senator Grace Poe, who chairs the Senate Committee on Public Services, believes that there are already enough laws that allow the DOTr to solve the traffic crisis even without emergency powers. In particular, laws that expedite the acquisition of right of ways (ROWs) and procurement of good and services.

She further asserts that emergency powers should not be take lightly as it can be abused for wanton corruption and to forward Malacañang’s political agenda. According to her, “For you to give something as immense as emergency powers, you have to be sniper accurate, it cannot be a shotgun approach. It’s like giving a loaded gun to a child if they don’t have a plan.” She further opined that “It is not the lack of powers, but the lack of a master plan and more aggressive action from the DOTr that bears emphasizing.”

For its part, the DOTr says it had already submitted its plan to the Senate, both the comprehensive version and the specific projects in which emergency powers will be used. It also submitted a comparative report that highlights how fast certain projects can move with emergency powers and how long it will take without it.

Here are the other reasons why emergency powers are needed, according to the DOTr:

On traffic rules, the local government code empowers Metro Manila’s 17 local government units to implement its own traffic ordinances. These includes how many franchises it awards to jeep and tricycle operators, their routes and pick up points, which roads are restricted to one-way traffic, etc. These traffic ordinances are not coordinated among cities. This is why the traffic system in Metro Manila is disjointed and inconsistent. Exacerbating the situation is that the Metropolitan Manila Development Authority (better known as the MMDA), the Land Transportation Office, Land Transportation Franchising and Regulatory Board, and Highway Patrol each have their mandates which are neither synchronized nor conform to a homogenized masterplan.

Among the provision of emergency powers is to appoint a “traffic czar,” in this case, DOTr Secretary Arthur Tugade. His role is to rationalize the city’s traffic laws, its PUV system, its infrastructure and all other factors that affect traffic. Not only will this eliminate redundancies and disconnections, it will also do away with the bureaucratic delays arising from cross-coordinating between government agencies and LGUs.

The sheer number of buses, their disrespect for traffic rules and the bus depots located on EDSA are major contributors to traffic. As we all know, the LTFRB awards bus franchises to political personalities and members of the military as political favors with little regard on their numbers on the road.

Emergency powers are needed to calibrate the supply and demand of buses in the city. This cannot be done today, not without a flurry of injunctions and temporary restraining orders that bus operators can slap government with. These legal maneuvers are intended to paralyze whatever rationalization program government may have.

On the acquisition of right of ways (ROW), it is said that by virtue of Republic Act 10752, negotiated sales of private property should not take longer than 30 days. If negotiations fail, an expropriation case can follow for which the Writ of Possession of the property will be issued by the courts to government no later than seven days from deposit of 100% of zonal valuation. In principal, it would seem that RA 10752 solves the lengthy delays in the acquisition of ROWs. It is not the case, says the DOTr

See, using the mode of negotiated sale, the law requires that government pay a down-payment of 50% for real property and 75% for improvements before it facilitates a takeover. The balance will only be paid once the title had been transferred to the government. Because of such terms, no property owner is ever willing to transfer their titles without securing full payment. Without fail, the transactions break down and government has no recourse but to invoke the legal process of eminent domain. This could take years. Emergency powers expedites the ROW process to a matter of months, opening the way for the speedy construction of roads, railways, bridges, and depots.

On procurement. The law mandates government agencies to conduct public biddings if it purchases goods or services worth more one million pesos or more. This usually takes a year to do.

Now, its been said that the process can be shortened to three to six months if alternative modes of procurement such as direct contracting, repeat order, or negotiated procurement are utilized. These modes of procurement are permitted by virtue of Republic Act 9184 and Executive Order 34. Again, the DOTr says this is not the case.

While parts of the process can be shortened, negotiated procurement still requires public bidding. Moreover, there are only three situations wherein negotiated procurement under emergency cases may be used. The first two requires a state of calamity, while the third is when immediate action is needed to prevent damage or loss to lives and properties. In short, the DOTr will have to wait for a disaster to happen before it can procure using this mode. Emergency powers solves this.

Further, emergency powers will allow government to relocate informal settlers faster so as to expedite priority infrastructure projects.

The lack of alternative routes causes clogging of major arteries like EDSA. Emergency powers allow government to open roads in private subdivisions for public use. Again, this cannot be done without emergency powers as private subdivisions can take one legal recourse after another to prevent government from appropriating its property.

The DOTr has both the roadmap and political will to solve the traffic crisis. Unfortunately, it is stymied by the many laws and bureaucratic processes that make carrying-out these solutions a grueling task. The DOTr is asking emergency powers because the traffic situation has reached crisis proportions. It can only provide immediate relief if it will be given the powers to do what has to be done. Otherwise, relief will not be immediate.

As always, there are sectors who oppose granting emergency powers to government. Who are they?

The residents of posh villages and subdivisions. The bus operators and the politicians/military men behind them — many of them stand to lose their franchises. Long time government suppliers. Relaxing procurement laws will allow new suppliers to penetrate. They will now have to contend with competition. Corrupt judges. With emergency powers, only the Supreme Court can issue TROs and injunctions. Corrupt judges of lower courts who “sell” their TROs stand to lose their source of creative income.

The DOTr and even the President himself are so exasperated with the delays of the Senate that they are no longer keen on emergency powers. So much time has been wasted that even if the legislature awards government emergency powers today, there will be barely enough time to get the entire package of traffic solutions done. As Mr. Tugade said, his department will simply do the best they can with the existing framework of the law. But with this, the public cannot expect a swift solution to the traffic mess.

One wonders why the Senate will not accede to giving government emergency powers. After all, it has oversight functions and can rescind the powers at the slightest instance of abuse.

When stuck in traffic, lets not forget that we once had the chance to solve it — but the Senate stood in the way.

 

Andrew J. Masigan is an economist.

Not a mindset for killing and brutality

It was Jan. 15, 1973, the day Lim Seng — a Chinese drug lord found to have had in his possession some 34.75 pounds of heroin worth P3 million in September 1972 — was to be executed by firing squad as ordered by newly self-installed martial law president Ferdinand Marcos in his declared Drug War. Some 5,000 curious civilian on-lookers, roped off from the Known Distance Range, and they say another 10,000 at the Fort Bonifacio entrance, waited for the spectacle to start.

At 5:57 a.m., the military policemen strapped Lim to a wooden post with a black strip of cloth tied around his chest and a white band around his ankles. Some 500 meters facing him, the firing squad of eight non-commissioned military sharpshooters readied their M-16 rifles. At exactly 6 a.m., a brief drumroll urged the squad leader’s fateful order: “Handa, sipat, putok!” (Ready, aim, fire!). One solid, unified volley sent seven .30-calibre bullets into his chest and Lim quivered and slumped.

One bullet was a dud — a forced euphemism to evade the personal guilt of those who directly shot Lim who could hope that it might not have been their hand that killed him. But even for the young First Lieutenant who trained and rehearsed the firing squad, there was no denial of that hollow feeling in the gut that he has taken a life that only God can give and take back. “I can’t sleep, Love,” he mumbled as he lay tossing in bed beside his young sleeping wife.

The young officer was eventually assigned to Jolo to fight in Marcos’ offensive against the Muslim insurgents in Mindanao. “I’m OK, don’t worry. Take care of Baby,” he would tersely say to his anxious wife. But he was not OK. When he came home for a two-week furlough after three months of combat duty, he was a different man. He had lost his ready smile and boyish exuberance; his zest for life and adventure. Eyes ringed with controlled tears, he unburdened to his wife what he could not say over the band radio, of soldiers dying like swatted flies in Mindanao. What troubled him even more was the killing he and the soldiers had to do, in the line of duty. But I am a soldier, he would say at the end of each painful outpouring. Killing in war comes from self-defense and survival. In war, if a soldier does not kill, he will be killed.

The young officer was killed in action barely five months after being assigned in Jolo.

The seemingly incongruous examples of a drug lord being executed by firing squad and the killing of Filipinos by brother Filipinos in the war in Mindanao in Marcos’ martial law when it comes to the young officer’s personal moral sensitivity to killing per se may be difficult to understand in today’s creeping revision of history and remembrance. Will there be qualms of conscience in reviving the death penalty in today’s society, the widow of the fallen officer in Jolo asks? Has the perception and expectations of the military and police forces changed? That they, who are responsible for peace and order must respect and protect life, are the ones to destroy it?

But the military changed into a different face, with a different mind and ways, during Marcos’ martial law. Of course it would be different when the military was in charge. Historical accounts of the Lim Seng execution relate that days after Martial Law was declared, elements of the Constabulary Anti-Narcotics Unit (CANU), led by then First Lieutenants Reynaldo Berroya and Saturnino Domingo, along with representatives of the United States Bureau of Narcotics and Dangerous Drugs, caught Lim in possession of drugs and immediately arrested him. Historian Ambeth Ocampo, in his July 13, 2016 column in the Philippine Daily Inquirer, said, “Lim Seng was used in the campaign for law and order that later spiralled into other killings and disappearances that still haunt us decades after martial law.”

Rappler, in a Sept. 22, 2016 analysis, relates that “about 70,000 people were imprisoned and 34,000 tortured, according to Amnesty International, while 3,240 were killed from 1972 to 1981. During this dark chapter of Philippine history, thousands of people were subject to various forms of torture. Prisoners were electrocuted, beaten up, and strangled. They were burned with a flat iron or cigars. Water was poured down their throats, then forced out by beating. Women were stripped naked and raped, various objects forced into their genitals.” Historian Alfred McCoy wrote about Marcos’ elite torture units, whose specialty was psychological torture and humiliation aside from the physical pain. Could the military, the executioner in martial law, ever have been unchanged by this?

The widow asked her late husband’s mistah (former classmate) at the Philippine Military Academy (PMA), “What can you say about the death of Cadet Darwin Dormitorio, 20, last Sept. 18, suspectedly of hazing by his upperclassmen at the Academy?”

“The mission of PMA is to instruct, train and develop cadets so that each graduate shall possess the character, the broad and basic military skills and the education essential to the successful pursuit of a progressive military career,” he said. “If the mission is to develop cadets to become officers, why disable or destroy them? If the intention is to make them tough, why not let them undergo the tougher training given for special military operations, absent the risk of hazing. The difference between the two types of training is the mindset,” he emphasized.

Both agreed that killing and brutality has no place in the PMA, and that hazing must be strictly forbidden and no physical violence allowed. The mistah recalled that when the widow’s husband was a cadet, he was not one of those “favorites” of the seniors in the “fourth-class system” where, for the full freshman year, the “beasts” (as PMAyers call the newbies), are subjected by the “masters” (upperclass) to whimsical requests and “punishments” like push-ups, but never physical violence. Thus was their generation molded to have a deep respect for life and the dignity of others. That was the foundation for the young officer’s subliminal feelings of guilt about the killing of Lim Seng by firing squad, and the tenuous justification of killing for self-defense and survival in violent man-to-man combat in Jolo.

Yet new Senator Ronald “Bato” dela Rosa (PMA Class 1986) has been pushing for the imposition of the death penalty by firing squad against drug lords who continue to engage in the illegal drug trade in President Rodrigo Duterte’s Drug War, the Philippine Star headlined on July 5, 2019. He said the firing squad execution should be done in public, such as the Luneta (Rizal Park) — so that media can cover it. “Wala naman akong ibang campaign promise, ’di ba. Wala akong ibang plataporma noong tumakbo ako kundi bitay, bitay, bitay,” the former police and corrections chief told reporters, according to DZMM Teleradyo on June 26, 2019. (I didn’t have any other campaign promise or platform when I ran other than death penalty, death penalty, death penalty.)

Has violence become the mindset of military and police officers? Then we should not wonder why Cadet Darwin Dormitorio died within the walls of the Philippine Military Academy, his young body beaten to a bloody pulp by some barbaric bullies. Because of command responsibility, and certainly for utter shame and embarrassment, PMA Superintendent Lt. Gen. Ronnie Evangelista and Brig. Gen. Bartolome Bacarro, Commandant of Cadets, resigned last week. Dormitorio’s death is being investigated, and will be judged by both the military and the civilian courts.

Rear Admiral Allan Ferdinand Cusi has been named acting PMA superintendent, and Brig. Gen. Romeo Brawner, acting commandant of cadets, by the newly installed Armed Forces chief Lieutenant General Noel Clement.

The PMA Cavaliers have the serious business of reversing the mindset of killing and brutality, and upholding the noble image of “an officer and a gentleman.”

 

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

ahcylagan@yahoo.com

UN at risk for usurping state functions — Locsin

THE country’s top diplomat said multilateralism is threatened by its own vain attempts to usurp state functions and return the world to the anarchy of the pre-war period preceding the United Nations.

“As we approach the 75th anniversary of the United Nations, predictions are rife of the demise of multilateralism,” Foreign Affairs Secretary Teodoro L. Locsin, Jr. said in a speech at the UN headquarters in New York at the weekend. The speech was uploaded on the UN website.

“One evidence proffered is the democratic election of strong governments that talk tough and brush aside UN demands,” he said.

But Mr. Locsin said the UN should not be used as a platform against member states’ tough approach to crime.

His comments come after a July 11 resolution, introduced by Iceland, that sought to look into the human rights situation in the Philippines in connection with President Rodrigo R. Duterte’s anti-illegal drug campaign that has killed thousands.

The resolution was adopted by the UN Human Rights Council with a vote of 18 in favor and 14 against, with 15 abstentions. Twenty-four other nations that co-sponsored the resolution did not vote.

The Iceland-sponsored resolution drew the ire of Mr. Duterte, who writhes at Western condemnation of his drive that is widely supported by Filipinos.

Mr. Duterte in August ordered all agencies to reject loans and grants from 41 countries that backed a probe of his deadly war on drugs that has killed thousands.

Philippine police have said they have killed more than 6,000 people in illegal drug raids, many of them resisting arrest. Some local nongovernmental organizations and the national Commission on Human Rights have placed the death toll at more than 27,000.

Mr. Locsin argued Mr. Duterte’s tough approach to criminality remained consistent with the Constitution, and any opposition may be questioned by civil society, but not by the UN.

“That may cause dismay among the civil in society; civil society is free to complain. Better yet, they should run for public office to gain legitimacy and be able to do something about it,” he added.

“But the UN is not free to interfere with the state in its defining function of protecting its citizens and stamping out threats.”

Mr. Locsin asked member states not to use the UN as a platform to threaten other nations with accountability on how it addresses crime.

He said he had crafted a memorandum of understanding on oil and gas that China has accepted.

The deal “allows us to move forward without the slightest compromise or diminution of our respective sovereign and international rights,” he said. “But who can tell?”

He said the Code of Conduct in the South China Sea is still under negotiation, assuring the international body that war in the disputed sea was a “totally remote possibility.”

“So the COC is a code of reality: the reality of the proximity of the soon-to-be biggest economy in the world in one place; with a commensurate industrial war-making capacity,” he said.

“But war is a totally remote possibility. All parties have built so much and achieved such material progress that none of us, nor any outside power, will risk losing the richest market in the world.” — Charmaine A. Tadalan

Senate seen to pass 2020 budget on time

THE Senate finance committee expects the P4.1-trillion national budget for next year to be approved on time, amid allegations of various “pork” insertions by congressmen.

Senator Juan Edgardo M. Angara, who heads the committee, said senators would examine the budget bill fast. “But we don’t sacrifice tough scrutiny for speed,” he said in a statement on Sunday.

Mr. Angara said nine sub-committees had been tasked to deliberate on the budget of different government agencies from Monday to Friday and even after Congress goes on month-long break beginning Oct. 4.

This comes after Senator Panfilo M. Lacson alleged that 22 deputy House speakers would be receiving an additional P1.5 billion each in pork funds, while others were to receive P700 million each.

Capiz Rep. Fredenil H. Castro denied the allegation and demanded an apology from the senator.

The enactment of the 2019 national budget was delayed for four months after questions about illegal realignments allegedly made by lawmakers. President Rodrigo R. Duterte only signed the 2019 spending plan on April 15, vetoing about P95 billion of appropriations.

The House of Representatives on Sept. 20 approved on third and final reading the budget bill for next year.

The House then formed a small committee to introduce amendments to the approved budget bill, which Senator Angara said the finance committee had yet to review. — Charmaine A. Tadalan

US bill on Philippine ban illegal — Sotto

A BILL approved by a Senate committee in the United States that will bar Philippine officials involved in the detention of Senator Leila M. De Lima from entering the US is illegal, a senator said.

The proposal fits the meaning of a Bill of Attainder — a legislative act declaring a person guilty of some crime and punishing him, often without a trial — which is prohibited by both the US and Philippine Constitutions, Senate President Vicente C. Sotto III told reporters at the weekend.

“Maybe the legal staff of the two senators should study their Constitution,” Mr. Sotto said, referring to the American senators who made the proposal.

In a social media post, Mr. Sotto noted that under the US Constitution, “no Bill of Attainder or ex post facto law will be passed.”

The 1987 Constitution also says that “No ex post facto law or bill of attainder shall be enacted.”

US Senator Dick Durbin in a Sept. 27 social media post said his proposed amendment with Senator Patrick Leahy to prohibit the entry of Philippine officials behind the “politically motivated imprisonment” of Sen. de Lima had been approved.

The two lawmakers were among the senators who sponsored a resolution calling for Ms. de Lima’s immediate release.

University of the Philippines College of Law professor Jay L. Batongbacal said the US Senate’s move was not a violation of the provision on the Bill of Attainder. “The Bill of Attainder legislatively imposes criminal penalty for offenses without trial,” Mr. Batongbacal said in response to Mr. Sotto’s social media post.

He said the proposed US ban was a form of immigration control, similar to the ban imposed by the Philippines on United Nations representatives seeking to investigate the government’s anti-illegal drug campaign.

Meanwhile, Justice Secretary Menardo I. Guevarra said the two US senators would have to deal with a potential backlash from their own country and abroad.

The justice chief said the views of two US senators do not reflect the sentiment of the entire US Congress.

Senator Christopher T. Go said he would propose to President Rodrigo R. Duterte to ban the US senators from entering the Philippines.

Ms. de Lima, a staunch critic of President Rodrigo R. Duterte’s war on drugs, has been detained since February 2017 after her indictment for allegedly conspiring to commit illegal drug trading inside the national penitentiary when she was the justice secretary. — Charmaine A. Tadalan and Vann Marlo M. Villegas

Memo on Philippine crab signed

THE Philippines and the United States have partnered with the private sector to promote sustainable management of the local alimasag or blue swimming crab in the Visayan Sea.

The partnership will engage local governments, private sector stakeholders and fisherfolk to implement science-based management, reduce overfishing and protect the crab’s ecological habitats.

The Bureau of Fisheries and Aquatic Resources (BFAR), United States Agency for International Development (USAID), Philippine Association of Crab Processors, Inc. signed a memorandum of understanding on Sept. 26.

With the support of USAID, BFAR and its partners will implement a national management plan to attain higher ratings in the Monterey Bay Aquarium’s Seafood Watch.

The program raises public awareness about sustainable seafood issues that helps consumers and businesses choose seafood harvested in a sustainable way.

The blue swimming crab fishery in the Visayan sea accounts for 40% of the catch, providing jobs to 8,000 Filipino fisherfolk.

The P3.7-billion Philippine alimasag’s major market is the US, with demand still expected to grow. Government data showed that production of the crab grew 8.8% to 30,825 metric tons (MT) in 2017. Western Visayas was the top producer, accounting for 10,584.35 MT.

The University of Rhode Island, Monterey Bay Aquarium,, Saravia Blue Crab, Inc. and Thai Union Group were also signatories. — Vincent Mariel P. Galang

Quake hits parts of Mindanao

A MAGNITUDE 6.4 earthquake rocked some areas in Mindanao on Sunday morning, the Philippine Institute of Volcanology and Seismology said in a report.

Authorities have yet report damages in affected localities.

The temblor’s epicenter was spotted 130 kilometers southeast of Jose Abad Santos in Davao Occidental, had tectonic as its origin and depth of focus of 60 kilometers.

The temblor was felt at Intensity 4 in General Santos City and Intensity 3 in South Cotabato, Kidapawan City, Makilala and Magpet North Cotabato, Davao City, Davao del Sur, Panabo City, Davao del Norte, Gingoog City and Magsaysay in Misamis Oriental, and Bukidnon.

The quake was felt at Intensity 2 in Cagayan de Oro City, Balingasag, Jasaan and Villanueva in Misamis Oriental, and Intensity 1 in Kabacan, M’lang and Tulunan in North Cotabato, and in Columbio and Tacurong City in Sultan Kudarat, according to the report. — Carmelito Q. Francisco

Miners urged to allot more for communities

THE Environment department has urged mining companies in the Caraga Region to allot more resources in promoting sustainable and resilient communities.

“I urge the mining sector in this region to keep on investing in its role as a catalyst for economical sustainability and environmentally resilient communities,” Environment Assistant Regional Director Ben Ali Decampong said at a mining symposium in Surigao City last week.

The Caraga Region hosts a chunk of mining companies in the Philippines since it is rich in minerals such as gold, silver, copper, nickel, iron, chromite, iron and limestone.

Of the 50 metallic mines in the Philippines, 25 operate in the region, according to the Mines and Geosciences Bureau,

One of two nickel processing plants and one of two gold processing plants in the country are in Caraga.

At the symposium, the Chamber of Mines in Caraga said mining companies should be more involved in helping promote and develop communities and the economy as a whole. — Vincent Mariel Galang

Organizer eyes bigger Dinagyang Festival

THE organizer of Iloilo’s Dinagyang Festival promises a grander festival this year by featuring more merry-making instead of the usual visual presentations.

“This time we will bring back the core, the spirit of Dinagyang which is really experiential not visual,” said Jobert A. Peñaflorida, president of Iloilo Festivals Foundation, Inc. which is organizing the event.

Dance contestants will perform in an arena where judges will be deployed, instead of the usual theater performance, he said.

The grand champion will take home P5 million worth of prizes. — Emme Rose S. Santiagudo

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