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Davao City retailer sets release of own credit card

DAVAO CITY — Homegrown retailing company New City Commercial Center is rolling out next month its credit card, NCCC Credit Card, its partnership with Metropolitan Bank & Trust Co.

In a statement over the weekend, the retailer said its representatives, those of the bank and the solutions provider GHL Systems Philippines, Inc., signed the agreement in June for the release of the credit card.

It said the card will “provide its customers more payment options” and it will replace its NCCC Kanegosyo Rewards Card used by wholesalers and sari-sari store owners.”

“The regular Rewards card holders may also avail of the credit card,” it added even as it pointed out that the same card can be used in other merchants that are partners of the bank.

For those who will use the card in the company’s stores and other retail shops they will be given a point for spending P20 that can be redeemed with the company.

Its NCCC Rewards Club, its loyalty program that started in 1991, has about 270 members in here, in Tagum City in Davao del Norte and Puerto Princesa City in Palawan.

In May, Lafayette A. Lim, NCCC Group of Companies chief executive officer, said that the conglomerate, which also has a resort and a department store in Palawan, “is looking at ways to tap technology to benefit our customers.”

At that time, the company announced its partnership with TraXion Tech, Inc., to provide credit line to cooperatives and companies that their members and employees, respectively, can use in shopping in its supermarkets and other retail outlets. — Carmelito Q. Francisco

Heart Evangelista expands into jewelry

GREAT JEWELRY matched with great women are matches made in heaven. We can look at the jewelry collections of actress Elizabeth Taylor, for example, and think about the great, noisy, roaring life that she lived.

Actress, socialite, and senatorial spouse Love Marie Ongpauco-Escudero (screen name Heart Evangelista) joins the roster of bejewelled women with a collection done in collaboration with Royal Gem called “The Modern Muse.” The collection, consisting of rings, brooches, necklaces, and bracelets, kick off from Ms. Evangelista’s In Full Bloom exhibition of paintings. Images from the paintings are rendered in gold (printed on gold using a special technique from Italy), and carved as cameos on shells of the Queen Helmet conch, handmade by artisans.

“I feel that the Cameo collection is very unique because the pieces are extremely detailed. So much intricate work was put into creating each Cameo piece. Of course when making the collection, I had to make sure my designs would be timeless because these pieces of jewelry are the kind that you can keep forever,” Ms. Evangelista was quoted as saying in a release.

In an interview with BusinessWorld during the launch in BGC on Sept. 17 she said, “I love women in my paintings. I guess it also describes the emotions that I [went] through at that time. I feel that an image of a woman is relatable. It connects with the client.”

HER PERSONAL COLLECTIONS
Ms. Evangelista is known around the country for her amazing closets filled with designer handbags (even particularly rare ones), a collection of high heels, and of course, her jewelry and accessories. She told BusinessWorld that her favorites include rings from Van Cleef and Arpels, gold chain necklaces, and jewel studs. She also inherited a number of her mother’s pieces, which she mixed with newer pieces. “I love it how vintage pieces are coming back now.”

Ms. Evangelista has been seen at the front row of various fashion week events abroad, and had been featured on Harper’s Bazaar in a Crazy Rich Asians-themed shoot and story. She does however, have a secret: on her trips, well-documented on social media, she says, “When I travel, I usually bring all my fake jewelry.” She mixes costume pieces with real ones, and the costume jewelry are usually lookalikes of real pieces that she already owns.

In terms of investment, she says, “You don’t have to buy big diamonds. It’s really all about what connects with you.” — Joseph L. Garcia

How PSEi member stocks performed — September 20, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, September 20, 2019.

 

For the Filipino people’s health, we say ‘Never Again’

September 21, 1972 was a day of infamy. It was the day that Ferdinand Marcos declared martial law and made himself a dictator. Thousands were jailed, tortured, or killed by Marcos and his military. He destroyed the Philippine’s political institutions, and he devastated the Philippine economy through massive corruption, profligacy, and unsound policies.

Up until now, 47 years since the declaration of martial law, we continue to be haunted by Marcos — and his family.

There is Bongbong Marcos, Ferdinand’s son, who is attempting to steal the Vice Presidency and who is dreaming to become the next Philippine president.

And there is Imee Marcos who is as politically ambitious as her brother Bongbong.

Lately, Imee has been more visible than Bongbong in public. As a newly elected Senator, she talks a lot, but what she says is bad for the Filipino people.

Let me illustrate. Senator Imee has played the role of spoiler. She wants to block an important tax and health reform — the passage of higher taxes on e-cigarettes (e-cigs) and heated tobacco products (HTPs).

During a hearing of the Senate Committee on Ways and Means regarding the proposal to increase the excise taxes on e-cigs and HTPs, she energetically criticized the measure. She cited the following reasons: 1.) that the measure is unfair; 2.) that current laws are already sufficient in addressing youth consumption in some cases; and 3.) that the new taxes are difficult to administer.

This writer sees these as rather moot because these points raised by Senator Imee had been addressed sufficiently by the proponents of the health tax during the hearing, and even in past discussions on excise taxes. But let me still answer her: It is never unfair to continuously increase taxes on harmful products such as alcohol and e-cigs. These products that bring death and disease must be made inaccessible and unaffordable, especially to the poor and to the young. The public should be made aware that at present, one out of five e-cigarette users is aged 10 to 19 years old according to the National Nutrition Survey of 2018. This is three times worse than the case of traditional cigarettes with only one out of 20 users are in the said age group. Hence, our proposal is that the tax on e-cigs and HTPs must be at least equal to that of traditional tobacco to prevent the youth from starting this addicting habit.

Taxing e-cigs and HTPs at a high rate not only prevents the young and the poor from using them, but the revenue from such is a source of needed funding for the implementation of the Universal Health Care Law.

Senator Imee’s claim that these taxes are difficult to administer shows her ignorance of tax design. The proposed tax rates are specific and unitary, which result in simplicity and ease of administration.

Then again, we are not surprised that Senator Imee is blocking the reform. One might say that she is anti-tobacco tax because she hails from the tobacco-growing of Ilocos Norte, and she professes to side with the tobacco farmers. But she has been charged with misusing or misappropriating earmarked funds from tobacco taxes that should have otherwise gone to improve the wellbeing of the tobacco farmers. Like father, like daughter.

Being pro-tobacco (which means being anti-health) runs in the Marcos family.

In 2012, her younger brother, then-senator Bongbong, likewise opposed the sin taxes. He was even caught on camera having a caucus with a representative of the tobacco industry during the debates on the sin tax law.

Despite the opposition from Senator Imee, we are confident that this tax and health reform will pass soon. Unlike Senator Imee and her brother Bongbong, we do not want an increase in the number of young Filipinos who will be at risk because of early exposure to harmful products.

To be honest and transparent, my advocacy is not limited to securing health and tax reforms. Being an Iskolar ng Bayan from the University of the Philippines, a former chairperson of the University Student Council in Diliman, and a progressive, I remain involved in fighting tyranny and oppression. In this regard, I am thankful to all those who fought the Marcos dictatorship, especially those who sacrificed their lives. Their struggle has reaped the benefits of democracy, including the benefit of being able to express ourselves freely at present. To give honor to those who resisted the dictatorship, we must use the democratic rights that we have recovered to continue the struggle against the tyranny and greed that Imee, Bongbong and their family represent.

Hence, I use this platform now to fight for Filipino’s health and resist another attempt by the Marcoses to ruin the lives of Filipino people. On their attempt to harm our people’s lives, I dare say: Never again!

 

Arjay Mercado, a former student leader and alumnus of the University of the Philippines School of Economics, heads the sin tax team of Action for Economic Reforms.

Finding our balance in modernizing our rice industry

Public support is shifting from rice consumers in 2018 to rice farmers this year. Last year, the country’s inflation rate breached Central Bank’s upper band. Analysts blamed that on rice price inflation, which carries among the largest weight in the consumer’s price index.

Policy makers in both executive and legislative branches reached the consensus that it was the decision — or lack of it — on the timing of importing rice by the National Food Authority (NFA) that caused it. The punishment was swift. In less than a year, Congress came up with the rice tariffication law getting rid of the NFA’s monopoly in rice imports and other regulations, ending the agency’s privileged status of being both a referee and player in the local rice market.

The rice tariffication law is a landmark reform. For decades, many had attempted to revisit the 1972 charter of the NFA to get rid of the NFA’s import monopoly. They all failed. It was that single event in 2018, the high price of rice, which brought us rice import liberalization.

It was a big surprise indeed since price spirals are commonplace in the local rice markets. Sometimes they are due to the world market, but most of the times are traceable to the NFA, in whom Presidential Decree No. 4 of the late President Ferdinand Marcos entrusted all our rice security.

Last year’s price surge could have passed as one among the many. It is interesting to note that the 13% year-to-year price increase in 2018 was one of many. It ranked 13th place in the order of price increases from 1970. The highest was a 47% increase of rice prices in 1984. The 2008 rice price crisis in the world market pushed up rice prices by 30%. But 2018 turned out to be memorable, because the spiral gave us the rice import liberalization law that some of us, including myself had advocated.

Not all of us wanted the rice import liberalization and the stripping of the NFA’s regulatory functions. Those who opposed the reforms might themselves have been caught by surprise at the swiftness by which the law was whisked through Congress. But when it passed, they were still hoping the President would veto it, but he respected the wisdom of our legislators and his Cabinet, with the exception of former Agriculture Secretary Emmanuel Piñol.

KEEPING RICE IMPORT MARKETS CONTESTABLE
Rice importers were all ready to import rice, which they prepared for even before the IRR was issued. In the first half of 2019, rice imports swelled to nearly 2 million metric tons.

But somehow that did not do very well. We all expected rice prices to go down to below P30 a kilo given the current level of world prices. However, the price of well milled rice got stuck at P36 a kilo, and some of us have urged the government to go after the rice cartel which is blamed for not passing most of the benefits of the reforms to rice consumers.

There are simpler explanations, other than the cartel, for the observed prices in the first half of 2019. One is a quality upgrade of imported rice. If importers are out there to maximize their profits, they would likely first buy the more expensive, better quality rice varieties, which would be attractive to households in highly urbanized cities. Indeed, I talked to an NFA official who confirmed that they were having a hard time selling their own stocks in the market because imported rice had fewer “brokens” to say the least.

But more importantly, we may be looking at a rice market in the process of finding its equilibrium under the new rules. In a major reform like rice import liberalization, the big traders may be the first ones to enter and thus get the larger shares of the rice import business. Because of the large quantities they hold, their release and price decisions influence rice prices, and there is no longer an NFA to offset that. In economics, we call this market oligopolistic.

But for as long as the rice import business is open to us all, its profits attract new importers, and that process goes on until the above-normal profits are brought down to competitive levels. And that would then be the time that rice consumers start to enjoy rice at less than P30 a kilo.

Notwithstanding our disappointment, it is interesting to note that the decline of rice prices in the first half of 2019 relative to its 2018 average is the largest — 2.6% — since 1970. Indeed, annual prices fell in only eight of nearly 50 years.

But if prices remain stuck at levels significantly higher than what the 35% tariff rate implies, it may be time for the Philippine Competition Commission to compute rice import concentration ratios to check if the import business remains as strongly contestable as the rice tariffication law envisioned it to be. That inquiry should include those who continue to regulate the rice import business with the sanitary and phyto-sanitary import licenses for regulatory capture.

SAFEGUARDS AND NFA PALAY PROCUREMENT
Falling palay prices apparently kicked public’s support from rice consumers to the rice farmers in 2019. The decline of farm gate prices of palay in the first six months of 2019 was unprecedentedly sharp. If one measured the fall from its average price in 2018 to its lowest monthly level in 2019, that would be 22%. Its near second occurred in 2015, when prices fell by 19% from its average in 2014 to its lowest monthly in 2015.

Three percentage points worse, yet the intensity of the debate on the appropriateness of its cause is beyond measure. We hear muted calls of reversing the rice tariffication law, and Congress seems, for now, to prefer to give more time for the law to succeed.

The clearer message of concerned stakeholders to the government is to help rice farmers who are hurting from low palay prices. They apparently appreciate the importance of keeping rice prices low for the country’s rice consumers, many of whom are likewise as poor as the farmers. About 20% of household expenditures of the poor is just on rice. Asking Congress to repeal the rice tariffication law without a good solution to keep rice prices low and predictable is unacceptable, even to many who are unhappy about the law.

There are three safeguards in the law to protect rice farmers. One is the tariff rate of 35% if we are importing rice from ASEAN. If one is importing from India or countries outside of ASEAN, he or she pays 180%. No one is likely to do that in commercial quantities.

Two, this can be raised by up to 25% with the special safeguards law, which is all within the power of the Agriculture Secretary. There are two versions of it depending on the trigger mechanism used, the volume and price triggers. It is easier to invoke the volume safeguards, but it may also be lifted at the end of the calendar year.

But that works well for us? It is very likely that the volume trigger is breached by the third quarter of the year. Private traders would have completed their importation in the first half of the year, so that by the time of the main harvest in the last quarter, import tariffs will be higher to discourage rice imports.

Three, the NFA can still procure rice from the local markets for buffer stocking. The relatively deep fall of palay prices indicates that traders and rice millers are not buying locally temporarily. They may first be assessing how the import liberalization would play out. Like the rice market, the palay market is in the process of finding its equilibrium under the new rules. Withdrawal of commercial rice traders and millers from the local palay market may be significant as to bring down palay prices sharply.

I support the contingent measure of stabilizing the farmgate price of palay for this main harvest season, or for any other time when the low palay markets show some instability affecting incomes of rice farmers.

Two measures in support of procurement are in order. One, the NFA Council instructs the NFA to buy at an official farmgate price, calibrated to provide incentives to plant rice to rice farmers. I believe this is done. The NFA Council had decided the procurement price to be at P19 a kilo. Two, the national government gives the NFA a bigger budget for palay procurement to prop up demand of palay in the main harvest.

Historically, procurement has been about two to three percent of local production. But there were years when this reached 6% as in 1990. The higher this volume, the faster the NFA can arrest the free fall of palay prices in the main season.

Aside from cost consideration, we may also have to ask about the absorptive capability of the NFA. The NFA is limited by its logistics capacity. I talked to an NFA official who confirmed that they may go into leasing private sector warehouses to absorb more procurement, and that entails a cost to the national government.

We may start with a 5% procurement rate. This shift in demand for palay can benefit other farmers with a more stable palay price.

It is a contingent measure for when the private sector is finding its bearings following a fundamental change in the rules of the industry at a time just before the main planting season.

Conditional cash transfers to rice farmers could have been another way to help rice farmers. However, without the proper identification of rice farmers, and rules to ensure its integrity, NFA procurement is the less costly measure to mitigate the fall of rice farm incomes. In procurement, identification of intended beneficiaries is built into the program.

CREATIVE WAYS OF USING RCEF
We look forward to Secretary William Dar putting in place out-of-the-box ideas in the use of RCEF or the rice competitiveness enhancement fund. RCEF, which can accumulate at least P10 billion a year, is expected to give the rice farmers the opportunity to retool and make rice farming in the country more productive. With the fund, adjustment costs of rice farmers can be lowered, resulting in fewer farmers exiting the industry — giving meaning to the phrase “inclusive trade reform.” An ingenious way of using RCEF is key to modernizing the rice industry, and raise rice farm incomes.

 

Ramon L. Clarete is a professor at the University of the Philippines School of Economics.

Demonizing the demon

The small Vauxhall sedan had the EDSA highway practically all to itself, Mang Maldo, the family driver, repeatedly gushed to “Ma’am,” the grandma, and to the daughter, the young mother who held Ma’am’s precious baby grandchild in her arms. Why was it so eerily quiet?

In the stillness of EDSA, the car radio came on with the cold, steely answer to the chilling question. Though announced two days later, President Ferdinand Marcos had declared martial law in the country through Presidential Proclamation 1081, dated and signed Sept. 21, 1972. On the rear-view mirror, Mang Maldo saw olive-drab military six-by-six trucks unloading armed soldiers and rolled barbed wire where the car had just passed.

Martial law came like a rending rifle-butt hit on the gut of the Filipino. No one, or maybe hardly anyone, had advance information hat this would happen. But of course! A power-grab has to be swift and total, final. And the Filipino people cowered and slunk into the safety of acquiescence, justifying acceptance in the singing of the propagandist hymn of the glorified “Ang Bagong Lipunan” (the New Society).

It took 11 years for the common tao (folk) to awaken against martial law, when oppositionist Senator Benigno Aquino was killed going down the stairs to the tarmac from the airplane that brought him home on Aug. 21, 1983 from US exile. The utter deviousness of the obvious double-cross irreconcilably broke the trust of the Filipino for Marcos and his dictatorship. Yet the whisperers against the “Conjugal dictatorship” of the Marcoses were careful not to rouse the demon lest it lashed and tore at anyone and everyone in the fury of arrogant power.

It was the youth that squarely faced the demonic dragon and openly protested against the dictatorship. The young mother in the middle-class car on the silent EDSA when martial law was proclaimed was studying at the University of the Philippines (UP) then, and she experienced students being called out of their classrooms by student activist-leaders to assemble in front of Palma Hall to rally against Marcos. They organized early evening teach-ins at the Sunken Garden to understand and be impassioned over the rights lost by the trashing of the democratic Constitution. Sometimes the UP students joined other young activists from the other schools in Manila.

Parents and older adults perhaps quietly admired the fervor of the youth and eventually let go of their hedges to keep the understandably more certain status quo for day-to-day survival. The overbearing mundane responsibility to provide for, and protect the younger generation superseded noble but nebulous rights and freedoms — but the youth themselves had more clearly seen how the future of their generation and future generations was more urgent than the present compromises for mere survival.

And so the faux lifting of martial law and a rigged re-election were the last attempted compromises offered by Marcos to keep himself in power. But no more was the symbolic EDSA silent and accepting. On Feb. 25, 1986, the EDSA People Power Revolution ousted Ferdinand Marcos, dictator for 14 years.

In the exhilaration and exuberance of the restoration of freedom and democracy, a revolutionary government was formed, installing the “real winner” of Marcos’ February snap elections, Corazon Cojuangco Aquino, widow of the slain Senator Benigno Aquino, Jr., as president. The 1987 Constitution was installed which strengthened democratic political and human rights of Filipinos, highlighting that never again should martial law be imposed beyond a limit of six months as approved by Congress, and only upon actual invasion or rebellion, not merely imminent danger thereof as specified in Article VII, Section 18.

Are Filipinos living happily ever after EDSA I? One can tell from the stillness of the EDSA highway that Filipinos are perversely content with their present condition. It is quiet on EDSA — no blowing of horns, only the lowest-gear purring of engines idling and then moving inch by inch on the laborious two-hour, 10-kilometer route from Cubao to Makati. A huge parking lot, EDSA is, everyone accepts with misplaced humor. And that demonstrates the Filipino trait of adaptability and compromise.

But adaptability and compromise are unpardonable when principles of liberty, equality, and Life itself are exchanged for personal “peace” — “para wala na lang gulo” (just so there will be no trouble). The Marcoses are back in power, according to the May 24, 2018 report of Interaksyon: Imee Marcos, Ferdinand and Imelda’s eldest, is Senator; Imelda is Ilocos Norte’s 2nd District representative; Matthew Marcos-Manotoc, Imee’s son, is a senior board member in the 2nd District of Ilocos Norte’s Sangguniang Panlalawigan; and Ferdinand “Bongbong” Marcos, former Senator, is still contesting his claimed win for Vice-President in the 2016 elections.

And the Filipino people have elected Rodrigo Duterte, an unabashed Marcos admirer-supporter as President, and through him have other Marcos die-hards been appointed and/or given high positions in government. It exacerbates the tragedy even more that former EDSA activists who helped oust Marcos are now shamelessly pro-Duterte, pro-Marcos, and showing themselves inclined to justifying continued martial law, partially or totally, over the country.

Except for a few EDSA Revolution stragglers called “Dilawan” (“Yellow,” as in former President Benigno “PNoy” Aquino III’s Liberal Party color), some “Reds” or communist/communist-inclined political voices, and some “Whites” (civil society rights advocates not directly aligned to Yellow or Red) — the general public is quiet and accepting. Survey outfits whose results are presented in the media have convinced the public that the present governance is popular and trusted above any other president since EDSA I, including the democracy icon, Corazon Aquino herself.

But in at least the last two anniversaries of EDSA I, the youth have loudly declared themselves not laid-back like most of their elders about the suspected creeping dictatorship of a strongman president. Though many have wrung their hands and fretted about the revisionism of Philippine history by the new slants to glorify Marcos’ martial law and the omission of mentions of the violence and atrocities in that dark age of his dictatorship, the energetic and passionate youth are the ones who come in throngs to rally at each angry remembrance of Marcos’ declaration of martial law.

The inaction on the revisionism of history was frontally addressed by the announcement on national television on Monday last week by the University of the Philippines (UP) that it will be offering a subject on martial law starting January 2020: Philippine Studies 21: Wika, Panitikan, at Kultura sa Ilalim ng Batas Militar (Language, Literature, and Culture under Martial Law). Last year, on Sept. 21, UP marked the first UP Day of Remembrance for martial law victims with the signing of a memorandum of understanding (MoU) with the Human Rights Violations Victims’ Memorial Commission (HRVVMC), formalizing institutional partnership in establishing the Human Rights Violations Victims’ Memorial now being built in UP Diliman, for completion in 2020.

Anti-martial law activist Judy Taguiwalo, in her UP Day of Remembrance proclamation speech last year, spoke about 3,257 killed, 35,000 tortured, 1,838 disappeared, and 70,000 imprisoned during the Marcos regime. The Bantayog ng mga Bayani Foundation has thus far listed 85 martyrs of the Marcos regime from UP.

Senator Imee Marcos obviously hurts at the continued demonizing of the Marcoses. In a television interview cited by Rappler on Sept. 18, she said, “The problem with academic freedom is that it’s the freedom of only one side, and not the other side.”

“Demonizing the demon” is the rightful fight for freedoms and rights by the youth who cannot rely on complacent compromises engaged by older generations.

 

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

ahcylagan@yahoo.com

Free money for everyone won’t solve our problems

FREEPIK

By Satyajit Das

THE WORLD ECONOMY is turning toward a depressingly familiar cycle of lower rates, renewed quantitative easing and more fiscal stimulus. The return to a persistent semi-slump in advanced economies is likely to increase interest in universal basic income, or UBI — an idea supported by Democratic presidential contender Andrew Yang and business figures from Facebook Inc.’s Mark Zuckerberg to Tesla Inc.’s Elon Musk. If adopted, this radical prescription is unlikely to prove a magic bullet.

Advocates argue that guaranteeing every individual a flat-rate payment irrespective of circumstances will help to address the poverty traps inherent in traditional welfare systems, the declining share of income going to labor, and increasing threats to employment from automation. Yang, a tech entrepreneur and an outsider for the Democratic nomination, proposes giving $1,000 a month in cash to every American and has made the plan a key talking point in candidate debates.

The concept isn’t new. It was first suggested by Sir Thomas More in his 16th century work Utopia, and was championed by free-market economists such as Friedrich Hayek and Milton Friedman in the 20th century. In a national referendum in 2016, Switzerland rejected a proposal to establish a universal basic income.

The case for UBI is that it can increase the efficiency of welfare systems by minimizing bureaucracy, the administrative costs of delivery, and drainage of resources through political exploitation or benefit fraud. Trials in Finland, Canada, and India have been inconclusive, showing psychological improvements among recipients but limited success in achieving economic or social objectives.

Critics point to the financial constraints of funding such programs. In the US, $1,000 per month per person would equate to a total cost of around $4 trillion per year, approximately the size of the 2018 federal budget. The Organization for Economic Co-operation and Development found that income tax would have to increase by almost 30% to fund a modest UBI.

The key to the proposal’s renewed political appeal is how it could neutralize rising criticism of QE, which has disproportionately benefited the wealthy by driving up the prices of financial assets. UBI funded by new rounds of central bank purchases of government bonds — branded as “QE for the people” — may be a more palatable way to return to monetary stimulus.

UBI would allow for the introduction by stealth of “helicopter money,” a controversial proposal for central banks to print money and distribute it to consumers to boost growth and inflation. The idea covers a wide range of policies including the permanent monetization of budget deficits and direct transfers to households financed with base money.

Friedman outlined the concept in his 1969 parable of dropping money from a helicopter. If everyone is convinced that this is a unique, non-repeatable event, then it is assumed they will spend the money, increasing economic activity. The concept generated revived interest in recent years as a means of preventing deflation.

There’s a telling link between universal basic income and modern monetary theory (MMT), an unconventional economic approach that’s been gaining ground with politicians. MMT, loosely, argues that a state cannot go bankrupt where it can print its currency — a version of the argument that deficits don’t matter. Under MMT, governments should borrow and spend when demand is inadequate to move the economy to full employment. It provides theoretical cover for governments to issue debt to central banks in greater amounts than hitherto contemplated. This can then finance spending programs — such as a universal basic income — to maintain economic activity.

Whether a guaranteed minimum income can produce economic recovery is questionable, though. It’s a repackaging of existing approaches that have had limited effectiveness. There’s little new in central banks financing governments via QE or fiscal stimulus, including welfare spending. It doesn’t address key structural issues such as excessive debt, imbalances, wage levels and demographics. Adoption of such an approach would also mean the economy becomes dependent on government intervention to sustain activity.

A universal basic income financed by helicopter money may perversely increase uncertainty. Ordinary people may react to unlimited money printing by shutting their wallets and hoarding. Australia’s recent “cash back” program, which provided up to A$1,080 ($740) to taxpayers earning less than A$126,000, doesn’t appear to have offset pessimism about the outlook.

That’s unlikely to deter more countries from embracing such solutions. The reality is that existing policy is increasingly constrained. Significant debt restructuring and writedowns as well as acceptance of lower growth and stagnant or diminishing living standards is unacceptable. Policymakers will be desperate to show that there are more tools to stave off loss of confidence in their powers.

Friedman believed that policies should be judged by results, not intentions. Unfortunately, the continued lure of a painless and easy solution to economic problems dictates that universal basic income will remain on the political agenda.

 

BLOOMBERG OPINION

The world’s oil security blanket has been torched

By Julian Lee

THE REAL IMPACT of the attack on Saudi oil installations last weekend goes well beyond the temporary loss of 5% of global oil production: It strikes at the heart of the mechanism that’s guaranteed the security of the world’s crude supply for most of the past 50 years.

Ever since the western oil majors lost control of output in the Middle East, Saudi Arabia’s willingness to maintain idle production capacity has been the world’s safety valve to offset its dependence on the volatile region. When there was conflict and blockages elsewhere, Riyadh could always turn on the taps and serve the international market. But its new vulnerability requires a complete rethink of how we view and perhaps pay for the future security of supplies.

Some 25 pilotless aircraft and cruise missiles of Iranian origin were used to strike the two sites, the Saudi Defense Ministry said at a press briefing four days after the attacks. The extent of Iran’s involvement remains unclear. It may have taken a direct role or it may have supplied the Houthi rebels in Yemen with hardware. That second possibility is almost more troubling because it puts the power to wreak havoc into the hands of anybody able to fly a drone.

If the attack was indeed launched from Iran, that raises very serious questions about the ability of Saudi Arabia’s expensive air defense systems (or the people using them) to defend the most important oil installation on the planet. The failure to detect 25 incoming threats travelling 280 miles from the direction of your sworn enemy would be a major failure. Missing them from an unexpected direction would be easier to understand, although no less devastating.

The damage to infrastructure will be repaired. The Khurais field resumed 30% of its output within 24 hours, pumping about 360,000 barrels a day, and the Abqaiq plant was processing 2 million barrels a day by Tuesday, down from 4.5 million before the strikes. The kingdom’s production capacity will be restored to 11 million barrels a day by the end of the month and in full by the end of November, according to the new energy minister Abdulaziz bin Salman. Some independent analysts see it taking longer. Energy consultants FGE said the Saudi plans were optimistic, while Rystad Energy said repairs at Abqaiq may only be completed “as we approach the end of the year.”

The disruption will be offset initially by increased production from Saudi fields that don’t rely on Abqaiq or Khurais for processing, by drawing on the kingdom’s own reserves at home and overseas, and through increased production from other countries. Emergency stockpiles in oil-consuming countries may be tapped if necessary, although the International Energy Agency doesn’t believe they will be needed.

But Saudi Arabia’s 12 million barrels a day of maximum sustainable capacity has just lost its effectiveness as the world’s hydrocarbon security blanket.

Strategic stockpiles held by oil-consuming countries have only ever been a sticking plaster, designed to get us through a short supply interruption while Saudi Arabia boosts output. But the attack has, at a stroke, taken out much of that spare capacity along with current supplies.

What the world needs now is an outbreak of peace, or at least “live and let live,” in the Middle East. Unfortunately that seems as unlikely as ever. Demonizing Iran or any other country won’t reduce tensions even if it’s a natural reaction to the strikes.

In the absence of political calm, clearly there needs to be an extensive upgrade to the protection of key assets — although that might not thwart a repeat attack.

Holding all of the world’s spare production capacity in one place has always been a risk. A broader system of allocating and paying for an output buffer across different geographies may be desirable, even for the US, which remains a net importer of oil. With international institutions losing their luster, however, I don’t hold out much hope.

 

BLOOMBERG OPINION

Mining taxes eyed for sovereign wealth fund

By Arjay L. Balinbin
Reporter

REPRESENTATIVE Jose Ma. Clemente S. Salceda, the Ways and Means committee chair from Albay’s second district, said he will push for a mining tax that sets aside 30% of the government revenue generated from the industry to help set up a sovereign wealth fund.

“I can assure you that (sovereign wealth fund) will be a key feature of the law,” he told BusinessWorld in a phone interview Friday.

Congress is currently considering legislation reforming the mining tax regime, and Mr. Salceda said his position is to share out mining taxes on a 70-30 basis, with 70% funding the spending by the national and local governments and the remainder going into the fund.

He also proposes an auction system for mining tenements, instead of the current “first-come, first-served” basis.

“I prefer 70% (of fund) current needs and 30% set aside for the future, (for the) sovereign wealth fund,” he said, adding that the remaining issue is the split between national and local governments of the 70% component.

“Kasi yung ginto pag nawala, wala na, diba? Pero hindi naman lahat ng iyan ay atin lang, sa mga future Filipinos din ‘yun diba? So kailangan, lahat makinabang doon sa isang non-repeated source ng wealth of the nation. Ito para sa national, kasi ‘yung natural resources should be for everyone (When we deplete our gold reserves, they’re gone forever. But the gold is not entirely ours, it also belongs to future Filipinos. Everyone must benefit from depletable resources)” he said.

He said the grant of new mining tenements should be via “auction by the MGB (Mines and Geosciences Bureau), but the approval of the mining projects will be under an institutionalized MICC (Mining Industry Coordinating Council) with representatives from private sector and local community.”

He said the current “first-come, first-served” system does not adequately unlock the value of resources because there is no competition.

The basis for the auction could be “how much taxes are you willing to pay? How much share are you willing to give to the government?” he said.

Mr. Salceda said the proposed measure should be approved by Congress “before the end of the year.”

The Finance department has said the mining tax reform is part of the government’s comprehensive tax reform program although President Rodrigo R. Duterte did not mention it in his fourth State of the Nation Address on July 22.

Mr. Duterte has asked Congress to approve the remaining tax reform packages, starting with the proposal to reduce the corporate income tax rate to 20% by 2029 from 30% currently and rationalize fiscal incentives by making them more time-bound and performance-based. He also cited proposals to increase excise tax rates for alcohol products and e-cigarettes, centralize real property valuation and assessment, and simplify the tax structure for financial investment instruments.

The proposed tax reform for mineral products nearly made it out of the 17th Congress that ended in June, as the Senate adopted House Bill No. 8400 with minor amendments. The bill reduced the royalty on large-scale mining within mineral reserves to 3% of gross output from 5% currently and introduced a 1-5% margin-based royalty on those outside mineral reserves.

Senate President Vicente C. Sotto III and Majority Leader Juan Miguel F. Zubiri have each filed bills increasing the government’s revenue share from mineral products; while three bills have been filed in the House of Representatives.

If enacted, these will be levied on top of other taxes, such as the corporate income tax, the excise tax which Republic Act No. 10963 doubled to 4%, royalty to indigenous people and local business tax, among others.

Price-controlled drug list expected after issuance of health care IRR

By Gillian M. Cortez
Reporter

THE PRICE ceilings on patented medicines will be released soon after the issuance of the Universal Health Care (UHC) Law Implementing Rules and Regulations next month.

Pharmaceutical Division head Anna Melissa S. Guerrero of the Department of Health (DoH) told BusinessWorld that medicines covered by the Maximum Retail Price (MRP) scheme will be released within the year.

She said such drugs are typically those that have no competition in the market. Further public hearings will be held before a list is finalized.

The DoH hopes to include drugs that address the country’s top 40 health problems in the MRP scheme.

“Priority for the DoH is the UHC act but at the last public hearing, we only published 63 medicines which we said is subject to change. There may be additional drugs,” she said.

Health Secretary Francisco T. Duque III said last week that the DoH will be issuing the implementing rules and regulations (IRR) of the UHC Law on Oct. 10, over seven months since the law was signed by President Rodrigo R. Duterte in February. Under the law, the DoH was given 180 days or six months to complete the IRR.

In August, the Drug Price Advisory Council (DPAC) convened for its first public hearing regarding the MRP of selected medicines. The council was formed under the IRR of Republic Act No. (RA) 9502, or the Universally Accessible Cheaper and Quality Medicines Act of 2008. The DPAC is tasked to determine which medicines will be covered under the MRP.

The council will send its recommendation to the Health Secretary, who will then submit the list to Malacañang.

Ms. Guerrero said there is a need for patented medicine prices to fall in time for the first year of implementation of the UHC Law. She added that domestic prices are more expensive compared to other Asian countries.

“The purpose of the DoH is that the cheaper medicines act was put there so we can make it accessible and affordable. From what we see it, mas mataas ang presyo dito (prices are still higher here). You’re selling the same drug in different countries and what we want is the same ang presyo (similar pricing),” Ms. Guerrero said.

In chance remarks to reporters, Mr. Duque noted that the list could exceed 100, saying “There is now an effort to put together at least 120 molecules or 120 drugs and medicines for the maximum retail price list which means the prices of these drugs… will be reduced by different rates.”

He said price orders could be authorized by the issuance of an executive order (EO).

Legislator seeks probe of gaming operators not registered as companies

A LEGISLATOR on Sunday called for an investigation into unregistered Philippine Offshore Gaming Operators (POGOs) and to look into their ultimate ownership.

Representative Robert Ace S. Barbers of Surigao del Norte’s second district claimed that he has received reports that 46 out of the 58 POGO firms licensed by the Philippine Amusement and Gaming Corp. (PAGCOR) are unregistered corporations.

“I may not be too accurate but I am certain that most if not all of the 46 POGOs have no legal personality because their names are not found in the business/company name registry in the Philippines or abroad,” Mr. Barbers said.

He urged the Philippine National Police, the Drug Enforcement Agency, and the National Bureau of Investigation to “dig deeper” into the people behind POGOs and physical casinos licensed by PAGCOR.

Mr. Barbers also said that PAGCOR should exercise caution in granting licenses to POGOs.

“In short, our authorities should determine the beneficial owners and workers of these POGO firms. Are they of good repute and are not associated with persons with questionable reputations, character, honesty and integrity?,” he said.

POGOs have been receiving licenses since 2016, and the industry employs about 138,000 workers, most of them from China.

The Department of Finance recently warned of a crackdown on POGOs found to be evading taxes owed by their foreign workers.

BusinessWorld asked PAGCOR to comment, but it had not replied at deadline time. — Vince Angelo C. Ferreras

House to question Senate’s proposed tax on vaping devices, prefers to tax refills

REPRESENTATIVE Jose Ma. Clemente S. Salceda, the Ways and Means committee chair from Albay’s second district, rejected the Senate’s proposal to impose a 20% excise tax on e-cigarette devices, saying that he prefers to tax consumption.

“You tax the consumption… Kung di nabibili ‘yung device, minahalan mo ‘yung device, makikihiram… baka maka transfer ka pa ng sakit (If the device is taxed, it will become more expensive, and might encourage the borrowing of devices, which might be a risk for disease transfer)” Mr. Salceda said in a chance interview at the Palace last week.

Senator Emmanuel D. Pacquiao’s Senate Bill No. 987 will increase rates to P45 per pack of heated tobacco products and per milliliter of vapor products beginning in 2020. This is to increase by P5 per year until it reaches P60 in 2023; and by 5% every year thereafter.

The proposal will also impose a 20% excise tax on e-cigarette devices based on the wholesale price or the value of importation.

Finance Undersecretary Karl Kendrick T. Chua has said the Senate’s version of the e-cigarette tax could generate P3.2 billion in the first year of implementation, much higher than the equivalent House bill’s projection of P1.2 billion.

House Bill 1026, which also provides for higher taxes on alcoholic beverages, received third and final reading approval in that chamber on Aug. 20.

Revenue from the measure will help fill the P62-billion funding gap for Republic Act No. 11223, or the Universal Health Care (UHC) Act, due to roll out in 2020.

The tax law, which will become RA No. 11346 if passed, will gradually increase excise tax on tobacco products to P60 per pack by 2023 from P35 currently. The same law introduced the following rates on vapor products: P10 on 10 milliliter vapor products, P20 on 20 ml, P30 on 30 ml, P40 on 40 ml, P50 on 50 ml and so on.

The Philippine e-cigarette Industry Association (PECIA) and the Vapers Philippines (Vapers PH) said in August that taxing e-cigarette and vapor products on par with regular cigarettes will not curb tobacco use and will discourage use of their “less harmful alternatives” if they were taxed at the same rate.

They urged legislators to consider studies which found that e-cigarettes and vapor products are a “significantly less harmful alternative.”

“Heavy taxes on reduced-risk products will only result in smokers sticking it out with conventional cigarettes instead of switching to less harmful nicotine products,” Vapors PH said.

PECIA also pushed for a public consultation on proposed tax legislation which they said will be a venue to discuss other measures to reduce tobacco use. — Arjay L. Balinbin

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