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DTI, DENR to review regulation of steelmakers

THE Trade and Environment departments said they will seek to harmonize environmental rules to ensure the steel industry is adequately regulated with the introduction of new production methods.

In a statement, the Department of Trade and Industry (DTI) and the Department of Environment and Natural Resources (DENR) said they will review environmental standards particularly in the context of new steel production technology using induction furnaces, which are thought to be more harmful to the environment.

“What we need in the country are modern, environmentally friendly technologies that will consistently produce quality products,” Trade Secretary Ramon M. Lopez said.

“This collaboration with DENR will help us in promoting industrial capacity building with the use of advanced technology in steelmaking while protecting our environment. This is also a testament that as we drive economic growth, we encourage responsible businesses in the country,” he added.

China a leading steel producer, phased out inductive furnaces in 2017.

The technical working group (TWG) will harmonize policy to ensure that steel production is compliant.

The TWG will look into possibly regulating the use of secondhand equipment, as well as make adjustments to the environmental compliance certificate process for industries like steelmaking and cement. It will also review a possible increase in penalties imposed on violators. — Vincent Mariel P. Galang

DBM sees gov’t debt breaching P8 trillion in 2020

GOVERNMENT debt is projected to breach the P8-trillion mark next year, the Department of Budget and Management (DBM) said.

DBM estimated that outstanding debt in 2020 will total P8.768 trillion, up 11.64% from the estimated level at the end of 2019. At the end of 2018, debt was P7.118 trillion.

The bulk of the 2020 outstanding debt will be owed to domestic creditors, equivalent to P5.773 trillion, while P2.995 trillion will be sourced from overseas.

The government is planning to borrow an additional P1.845 trillion and make principal payments of P1.135 trillion to finish this year with P7.854 trillion in debt.

This will be offset by the principal payments to be made next year amounting to P1.014 trillion.

Finance Undersecretary Gil S. Beltran, the department’s chief economist, said the ratio of debt to gross domestic product (GDP) remains “very low” and that the economic team remains “very careful” in tracking borrowing.

“Right now, (debt ratio is at) 41.9%, Magiging (it will be) 39%, so it’s going down. No worries about debt because we are very careful. Even with a 3.2% (of GDP) deficit to 2022, 39% pa rin ’yung debt ratio (the debt ratio will remain at 39%),” Mr. Beltran told the reporters last week.

According to the Development Budget Coordinating Committee’s fiscal program, the government’s debt-to-GDP ratio target is 41.4% this year and next year, and 38.6% by 2022.

The Bureau of the Treasury said outstanding government debt was P7.804 trillion at the end of July, up 10.8% year on year.

It fell 0.8% against the P7.869 trillion posted in the first half due to the appreciation of the peso and payments made on domestic debt.

Of the outstanding debt, 67.3% or P5.251 trillion was owed to domestic creditors while 32.7% was provided by foreign creditors.

This year, the DBCC has targeted a borrowing mix of 73:23 in favor of domestic sources, while maintaining a 75:25 ratio for next year up to 2022.

Favoring domestic borrowing will decrease the government exposure to foreign exchange volatility and risks.

“Walang problema sa (There is no problem with (debt because we are financing very good projects. If you borrow and use the proceeds to have a feast, you should start worrying,” Mr. Beltran added. — Beatrice M. Laforga

Short-term pain, long-term gain: Indonesia could plug nickel pig iron gap

SINGAPORE — Indonesia may be able to plug an expected shortfall in nickel pig iron (NPI) supplies caused by its nickel ore export ban starting next year by boosting its own capacity to produce the semi-finished metal used to make stainless steel.

China, the world’s biggest nickel user, has traditionally imported nickel ore from Indonesia, the world’s biggest ore producer, to produce NPI to make stainless steel. But that supply chain will be disrupted by the ore export ban set to start on Jan. 1, part of Indonesia’s push to develop a higher-value domestic metal processing industry.

Indonesia accounted for 26% of global nickel ore supplies last year, according to the International Nickel Study Group (INSG), but since 2016 has ramped up production of NPI, an intermediate product containing around 10% nickel used by stainless steel mills.

The increase in NPI production has mostly come from Chinese companies operating in Indonesia.

From nearly zero in 2014, Indonesia’s NPI output climbed to 261,000 tons a year in 2018, according to data from Australia’s Macquarie Group Ltd.

That could climb to as much as 530,000 tons in 2020, according to estimates from Chinese trading firm Grand Flow Resources.

“It is estimated that the annual increase of nickel metal content in NPI will be 130,000 tons a year. The high-speed expansion will extend from 2020 to 2021,” said Wang Chongfeng, an analyst at Grand Flow Resources.

Energy and minerals consultants Wood Mackenzie forecast that by 2021, Indonesian NPI output will surpass China’s, which is estimated at 570,000 tons this year.

“It is possible some, and ultimately all, of the lost NPI production in China could be offset by NPI production increase in Indonesia — but this will take some time,” said analyst Linda Zhang of Wood Mackenzie.

The expected disruption of ore supply and the resulting curtailment of Chinese NPI output has caused nickel prices to surge.

London nickel rose to a five-year high on Monday and has leaped over 70% this year, while Shanghai nickel hit a record as markets feared the stainless steel industry, which consumes 70% of global nickel output, will lack supplies.

Indonesia in 2018 produced 289,868 tons of primary nickel, which includes NPI and other nickel products, a 42% surge from a year earlier, but consumed a lot of that extra tonnage itself, utilizing 165,000 tons in 2018, INSG data showed.

That additional metal processing is also leading to higher output of stainless steel from Indonesia, exports of which rose sharply in 2018 and are expected to continue climbing.

STOCKPILING
With metal stocks for delivery on the London and Shanghai exchanges being tight, stockpiling by Chinese NPI producers could underpin market sentiment for the coming months, but “time is limited,” said Xu Aidong, Antaike’s chief nickel analyst.

The extent of any enduring supply shortage depends on how quickly other ore exporters crank up output and shipments in response to the elevated prices.

Philippine nickel miners are expected to boost ore production next year, but may still not be able to fill up the supply gap.

“There’s a decent chance that… the Philippines ramps up a little bit more but not huge amount. We’re talking maybe 50,000 tons,” said BMO’s commodities research director Colin Hamilton.

Analysts said the Philippines faced the challenge of the approaching rainy season, stricter emissions controls coming into effect, and limited new mine capacity.

Other ore producers in Australia, Canada, Russia and New Caledonia are also expected to attempt to raise output, but face similar constraints.

“Ore from Indonesia could not be readily be replaced from Philippines or any other ore exporting country, and the only possible outcome is a decline in NPI production in China,” said Wood Mackenzie’s Ms. Zhang. — Reuters

The strange lure of free-market economics

By Edward Hadas

LONDON — What is it about “free markets”? The phrase creates a frisson of excitement among a certain group of people. In The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society, Binyamin Appelbaum describes what happened when these intellectual fanatics were given the power to act on their ideas. It is not a happy tale.

Like most foolish notions about human society, the basic belief in free markets is simple, appealing, and deeply wrong. It’s simple to think that all will be well if governments just leave competitive markets alone. It’s also appealing: There’s no need to plan or judge if price signals provided by the self-regulating market do all the economic work. And it’s wrong: Neither human nature nor the modern economy works the way these economists assume. Appelbaum’s narrative provides ample evidence of that.

The book is filled with lively accounts of personalities, ideas and events. It starts with Milton Friedman, widely regarded as the intellectual godfather of the free-market cult. Appelbaum, who writes about economics for the New York Times, lingers on how the Nobel laureate inspired the US military to replace compulsory conscription with better-paid soldiers. The innovation helped limit domestic opposition to a series of long wars with dubious purpose, because fewer children of the opinion-forming elite entered the armed forces.

Friedman’s simplistic monetarism had a brief triumph in the late 1970s. The goal was to find a mechanical process which would take active government out of the financial system. It coincided with a sharp drop in persistent inflation. Eventually, however, the approach failed totally. Free-market monetarists underestimated the complexity of inflationary behavior, the tendency of financial institutions to lend foolishly and the value of additional government spending when unemployment is high.

Undaunted, the free-market crew moved on to lowering tax rates, especially for rich people. Though these policies have not failed spectacularly, they have not delivered anything like the promised increase in entrepreneurial activity. As might be expected from an idea promoted by people who value individuals over the common good, lower taxes for high earners have led to increased economic inequality and social divisions.

The anti-government ideologues were basically thwarted in their campaign against helpful government regulations, which they demonized as “red tape.” Appelbaum’s account focuses on the few successes of the Friedman-inspired effort. He could have paid more attention to the areas where regulation has expanded. In the United States these include environmental standards, working conditions, food labelling and product safety. The American government today has much more to say about healthcare and education than in the past.

Free-marketers may fume. However, politicians know that when there is a problem in the economy or in society, most voters now expect the government to address it.

Appelbaum gets back on track by recounting another massive free-market policy error: financial liberalization. The true believers predicted that free markets in currencies and an end to restrictions on cross-border movements of money would lead to stable exchange rates and economically helpful flows of money. The actual results have been volatility, speculation, and periodic financial crises.

Although the book mostly focuses on the United States, Appelbaum also looks at the poor overseas record of the “Chicago Boys,” the free-market economists trained at the University of Chicago. In Chile their destructive policies were rescued by a speculative boom in copper prices. In Iceland, the economy was turned into something like a mid-sized hedge fund, with disastrous results.

It is easy and right to mock free-market ideology. After all, a complex economy cannot regulate itself, people cannot be trusted to behave rationally or honestly, and most of us, whether regular employees or chief executives, will often choose to cooperate rather than compete.

The Economists’ Hour does the demolition job well, although it focuses more on political and personal dramas than on the battles of ideas. Appelbaum’s tentative prediction is that the “hour” of the anti-government school of economics is now over and the time for more activist governments is at hand.

There are, though, two quite different reasons to be cautious about expecting a major change. First, by downplaying the many areas of government expansion, Appelbaum exaggerates the practical impact of free-market thinking. If governments become more intrusive, that may in fact be evidence of continuity rather than a big intellectual shift.

Second, professional economists themselves have not changed much. They mostly still have an exaggerated trust in the mechanics of supply and demand, and struggle to incorporate the impact of society, institutions, and cultures. They also still systematically underestimate the prevalence and success of centralised planning and extensive welfare states. Faced with such a large intellectual blind spot, it will take some time to stop giving bad advice.

Of course, the fanatics will never give up. Like the Marxists of old, they can always find an excuse for past failures. The rest of the world, though, can learn from Appelbaum’s account.

 

REUTERS BREAKINGVIEWS

The enabling strategy

In the playbook of democratic governance, government and its institutions perform the role of an enabler that provides the necessary legal and regulatory environment for the delivery of better and affordable public services.

While the political stiffness rendered by centralized services has made government programs inept amidst growing and dynamic consumer demands, the political tide of democratization in the past two decades compels governance to be more flexible and adaptable to the changing times.

In this age of privatization, national agencies are working hand-in-hand with the private sector to meet and satisfy consumer demands. Through the public-private partnership (PPP) scheme, the quality of public services continues to be retooled and upgraded to meet the expanding demands of the population.

Policy experts, infrastructure planners and even consumer groups support the expansion of PPP because public services could be delivered in a better, more efficient and impartial manner. The government benefits by harnessing the expertise, capital and nimbleness of qualified private enterprises in meeting objectives and addressing complex challenges. The performance of PPP and privatization models have been globally proven in the most successful economies and continue to be an essential element in accelerating growth in developing nations.

However, we may again be shooting ourselves in the foot.

Widely reported is the recent ruling announced by Supreme Court (SC) involving the Metropolitan Waterworks and Sewerage System (MWSS) and its two water concessionaires said to be “jointly and severally liable” for P1.8 billion in penalties plus tens of thousands for every day of delay in violation of Section 8 of the Philippine Clean Water Act.

This ruling will force Manila Water and Maynilad to finish their sewerage projects within five years instead of an earlier order (G.R. Nos. 171947-48), in February 2011, also by the high court, setting a 2037 deadline because of engineering, bureaucratic and practical realities on the ground that makes it impossible to implement a five year deadline unless the government does another Boracay shutdown in Metro-Manila. The concessionaires are already implementing this order with billions already invested in compliance with the specified timeline.

Independent consumer advocacy group, CitizenWatch in their recent statement describes the SC’s confusing order as, “another case of the country’s unstable policy environment.”

According to their estimates, last month’s SC decision will penalize consumers with water rates that will likely spike to around P16 per cubic meter! This will heavily burden millions of poor consumers and will not fit well with the government’s populist style of policy making.

To compute, the per cubic rate of Manila Water may hit around P59 from P39 while Maynilad’s will rise to P65 from P49. Bad news for everybody.

This unnecessary disruption will be red flagged by potential investors as yet another manifestation of the country’s volatile policy environment and another blow to our competitiveness, scaring away badly needed investments to create quality jobs for our people.

Just thinking of the long drawn out bureaucratic delays such as design and approval of plans, identifying affected properties, finding land for the sewerage treatment facilities, right of way cases, scores of permits, traffic rerouting schemes, construction delays from weather and force majeure, corruption, accidents, and unanticipated screw-ups that have frustrated all administrations, including President Duterte’s shows the wisdom of the Supreme Court’s 2011 decision to give a 2037 deadline to complete the waste water treatment facilities.

Part of the 2011 order is a host of directives to government agencies and LGUs critical on building the integrated sewerage system for the metropolis. These are a compendium of data, plans, and reports, all essential to design, construction and operations.

Directives and deadlines were given to the Metropolitan Manila Development Authority, Department of Environment and Natural Resources, Department of Health, Department of Budget and Management, Department of Education, Philippine National Police Maritime Group, Department of Agriculture, Department of the Interior and Local Government, MWSS, Local Water Utilities Administration, Philippine Ports Authority, and Philippine Coast Guard. Question is, were all these directives complied with? Has real estate been acquired or reserved for the sewerage treatment facilities? Billions of pesos of available resources and manpower will be stuck in costly standstills, like EDSA’s daily traffic jams, without all these prerequisites.

While there is no debate on the urgency of cleaning up our waterways, we must put this complex problem in the proper context where building state-of-the-art water treatment facilities is just a part of a societal crisis that will need the participation of every citizen and visitor of Mega-Manila. Come to think of it, MWSS was right in prioritizing the 24-hour supply of clean water to all its consumers. The water crisis of the 1990s was a distribution problem, while the dry faucets we experienced last January was a supply problem. Now we have the upgraded water system with private funded resources for expansion, but we don’t have enough fresh water. I believe this should be the top priority and the responsibility is with government, and, yes, the fastest and most efficient strategy is through Public Private Partnerships.

 

Prof. Victor Andres “Dindo” C. Manhit is President of Stratbase ADR Institute

The hazards of misreading the news

When I read the post in social media that Senator-boxer Manny Pacquiao had proposed crucifixion as a method of imposing the death penalty, my automatic response was to suggest, “Crucify him!”

I’m afraid I got carried away by someone else’s misinterpretation of Pacquiao’s proposal. As an aggressive proponent of the reimposition of the death penalty, Pacquiao appeared to have applied his superficial comprehension of scripture by referring to the crucifixion of Jesus Christ as a rationale for the death penalty.

The reference to Jesus’ death on the cross, although irrelevant to the rationale for reimposing the death penalty, was apparently used by Pacquiao while actually expressing a preference for death by firing squad.

Pacquiao could have used Jose Rizal as a point of reference but he seemed to think he understood the Bible better than Philippine history. However, this piece is not about my position on the death penalty (about which I do have some thoughts) but, rather, about the hazards of misreading or misunderstanding the news and the importance of getting your brain in gear before you click away on your laptop.

Typically, I immediately did extensive research on stupid laws passed by legislatures around the world, as well as dumb bills passed by dumbbells in the Philippine Congress. What came to mind was the bill purportedly filed by a congressman that would “outlaw typhoons.”

I was poised to rank Pacquiao’s reported Crucifixion Bill next to the Outlawing Typhoons Bill on the list of idiotic legislation filed by our lawmakers. Fortunately, I found a BusinessWorld column written by my friend Oscar Lagman pointing out that Catanduanes Congressman Francisco Perfecto did not actually propose “outlawing typhoons.” He, in fact, proposed government action to mitigate the destruction caused by typhoons (which regularly pummelled his province), such as funding for technical equipment and for disaster response training. That made sense.

Unfortunately, an illiterate or mischievous colleague in Congress branded Perfecto’s proposal as the “Bill to Outlaw Typhoons.”

Misinterpreting the news is almost as bad as purposely twisting and distorting it because the result still is the same as US President Donald Trump’s obsession and habitual practice, namely, dispensing “fake news.”

I’m reminded of an incident late 1988 when President Cory Aquino directed then Foreign Affairs Secretary Raul Manglapus to file a protest with the British government because of an alleged slur against Filipina womanhood in a new edition of the Oxford Dictionary.

The whole country was up in arms against both the Oxford University Press and the United Kingdom. Then Makati Mayor Jojo Binay hurled choice invectives at the British and, was reportedly prepared to put on his Rambotito armor to march against Her Majesty’s armed forces.

What triggered the furor was a resolution passed by the Philippine Chamber of Commerce and Industry (PCCI) and presented to President Aquino to the effect that the 1987 edition of the Oxford Dictionary had defined “Filipina” to mean “chamber maid” (in Tagalog, “alila,” or “utusan”). The PCCI resolution called on the Philippine government to “make the necessary action/representation to concerned authorities to delete this definition in the Oxford Dictionary.”

The PCCI’s poor grammar notwithstanding, President Aquino felt compelled to act in defense of her race and gender.

Not being as macho as Mayor Binay, my own attitude was “don’t get mad, get even.” I dashed off a column in which I proposed re-defining “Oxford” to mean a toilet or comfort room. Thus, instead of saying “I’m going to the CR,” one would say, “I’m going to the oxford.” And a little tyke could tell his mama, “I want to o-ox!”

I had other mischievous suggestions that would have made Her Royal Highness blush. But then, I realized that I had not read the allegedly malignant dictionary. As a journalist, I decided that it was necessary for me to check with the sources of the news.

Here’s my account, in a Nov. 16, 1988 column, of what transpired:

“I rang up the PCCI secretariat and asked. A very helpful young man confirmed that the resolution was part of an important document which contained the products of the PCCI’s labors in the just-concluded three-day 14th Philippine Business Conference.

“It was based on a complaint aired by someone who had heard about it from someone from the Department of Labor (DoLE).

“Had the PCCI secretariat seen the dictionary? No. What about the complainant? Neither. And President Aquino? Well, she had read the PCCI resolution but…

“Off I went to the book stores in Makati on the trail of this mysterious Oxford. A lot of Websters got in the way, but I finally found two paperbacks, a 1980 edition of the Oxford American Dictionary and what seemed to be a 1987 edition (“1987” didn’t actually appear but there was a reference to an earlier 1986 edition) of the Oxford Dictionary for Writers and Editors.

“The first had an entry that read: Fil-i-pi-no (fil-i-pee-noh) n. (pl. –nos), a native of the Philippine Islands.

“The second had what I thought I was looking for.

“After filing cabinet was the entry: Filipino/a, Sp. For Philippine Islands; -o(s), native(s) of the islands. And immediately following that was the entry: fille de chambre (Fr. F), Chamber-maid, lady’s maid, filles____; ____ joie, a prostitute.

“Aha! The culprit.

“Set in italics and in lower case, fille de chambre did seem, at first glance, to be a continuation of the definition of ‘Filipina,’ which was set in Roman, capitalized.”

Apparently, the DoLE representative had misread the Oxford Dictionary entries and had raised the red flag with the PCCI which, in turn, passed the resolution that was presented to President Aquino who, in turn, ordered Secretary Manglapus to file a protest with the British government. And no one had even seen the allegedly insulting Oxford Dictionary. It was a classic case of dumb and dumber.

I frantically called up Raul Locsin and asked him to pull out my original column and replace it with what I had uncovered. Mercifully, it was not too late to do so. In the substitute column, I concluded:

“And, oh yes… we should be thankful that fille de joie wasn’t what immediately followed the definition of Filipina. We could have declared war!”

Well, in the case of Pacquiao’s bill, I had obviously forgotten the lesson from that Oxford Dictionary flap. The media environment is even worse now, with social media allowing everyone to reinterpret the news. But that’s no excuse for misreading it and for shooting from the hip.

I still think that Pacquiao overdid it when he used the crucifixion of Jesus Christ to support his advocacy of the death penalty. But I take back what I suggested doing to him. I don’t think he should be crucified.

However, if you ask me, I wouldn’t mind seeing corrupt politicians and drug lords being lined up before a firing squad.

 

Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.

gregmacabenta@hotmail.com

Before you leave

By Tony Samson

MANAGEMENT wants to understand why employees leave, especially when the resignation is voluntary and not forced. (Did you not like the cafeteria food?) The exit interview is designed to draw out the motives behind a departure not reflected in a dry, maybe angry, resignation letter, sometimes just one sentence long. It is supposed to guide management on gaps in its retention policy.

There is a need to discover extraneous reasons for resignations like migration plans to Vancouver or the call of a family business or health problems like ulcers and a high level of bad cholesterol (LDL). Joining a competitor rings different bells and is never disclosed anyway — I’ll just take a break and write my memoir. You’re in it as a villain.

Is there still need to interview targets of a redundancy program? After all, their fingers hanging precariously on the ledge were stomped quite vigorously to allow gravity to do its work — do you feel a light breeze on your hair?

There is still need for a chat to give even the reluctant emigrant a chance to get things off his chest. While not expected to sing the praises of a boss that is checking his soles for any skin bits, the resignee may still offer some useful observations regarding the shuttle service and the location of the lockers. A disgruntled person is expected to dwell on unflattering profiles of at least two layers of management above him — they send text messages even on weekends. There is no need to argue, only to nod and show that one has not fallen asleep.

The exit interview provides an opportunity to explain the reasons for a headcount reduction (including the interviewee’s), without having to resort to a power point presentation on industry disruptions. (Every company is switching to robots.)

Emphasis on the pain of the process softens the emotional blow. (We really wanted a place for a whiner like you in our organization but we already hit our quota.) The small investment in time, though unpleasant and tiring, can reduce, but not eliminate, the bad-mouthing of the company afterwards. (They convinced me on how worthless I was.)

It is important not to go overboard in assuring an outgoing executive of the company’s continuing affection. Phrases to avoid include the following: a.) Let us know what we can do for you; b.) Come back to us when we have an opening; c.) Our doors will always be open to you; and d.) Let’s have lunch sometime. While such expressions of goodwill engender a pleasant atmosphere, the implied assurance to provide help in the future may be taken literally. This will only lead to feelings of betrayal when the endearments are followed up by text messages — my next six months are fully booked for lunch.

It is fine to inquire what the resignee plans to do next. This conversation is not an eagerness to acquire information for future use. It’s just a way of filling up the designated time. Maybe, the interviewer is texting while the interviewee is giving his mental slide presentation on the prospects of mango growing in his province. The texter across him is nodding his head — I’m winding up here. Go ahead and take a shower.

The ideal occasion for an exit interview is when the settlement check is ready to be handed over, especially if this is generous. Whatever pain the unexpected firing has engendered is assuaged by money. (Don’t spend it all on a yacht.)

The tradition of offering consoling words for the record must have come from executions. (Any requests for a last meal?) As in corporate exit interviews, the feeling of being unfairly sentenced is expressed — I’m innocent of the crime. This last appeal is made even as the firing squads are adjusting their safety pins.

Last words are often dramatic and memorable. In Good Friday celebrations, long homilies are devoted to each of the seven phrases. Still, even in that traditional episode of redemption, the final phrase is plain and to-the-point “consumatum est,” it is finished.

Maybe corporate exits should emulate this verbal simplicity for moving on. Since the exit interview, so unpleasant for both sides, just needs to take place, it is best to strip it of melodrama. When asked for any last words, a nonchalant, though not disrespectful, statement will suffice — can I have the check now?

 

Tony Samson is Chairman and CEO, TOUCH xda.

ar.samson@yahoo.com

The hard part of ending inequality is paying for it

By Nir Kaissar

BURIED AMONG the storylines about global trade and political intrigue from the G7 summit last month is perhaps the most noteworthy one of all. Business for Inclusive Growth, or B4IG, a coalition of 34 multinational companies with more than 3 million employees and revenues topping $1 trillion, unveiled an initiative to tackle inequality with help from the Organization for Economic Cooperation and Development.

In its “pledge against inequalities,” the B4IG states what should be obvious to all — that “persistently high and rising inequality risks fracturing societies and undermining economic and business growth.” Its ambitious agenda calls for decent wages, expanding access to basic products and services, and supporting community development programs.

Sound familiar? Days earlier, the Business Roundtable, an association of CEOs of top American companies, abandoned its long-standing principle of putting shareholders first. Instead, it adopted a new “Statement on the Purpose of a Corporation” signed by 181 CEOs committing to “lead their companies for the benefit of all stakeholders,” including customers, employees, suppliers and communities.

Many of the ills cited by B4IG and the Business Roundtable can be traced to one culprit: Too many companies pay their workers less than a living wage, which means they must forgo basic necessities or fall deeper into debt. It’s nakedly unsustainable, and big corporations are beginning to realize that they can’t continue to neglect workers. Jamie Dimon, chairman of the Business Roundtable and CEO of JPMorgan Chase & Co., which is also a member of B4IG, acknowledged in the Business Roundtable’s press release that, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”

It’s not just the long term companies are worried about. Some lawmakers are eager to tackle inequality and have already floated proposals to redistribute income to struggling workers, including higher corporate tax rates, a wealth tax, near-confiscatory marginal tax rates for high earners and taxing unrealized capital gains. The cost of those proposals to companies, executives, and shareholders is likely to be considerably higher than simply paying workers a decent wage. The Business Roundtable and B4IG are no doubt trying to get ahead of lawmakers’ efforts.

But high-minded initiatives like the ones proposed by the Business Roundtable and B4IG aren’t enough without money to pay for them, and I suspect companies won’t easily open their coffers, at least in the US. Executives and shareholders are drunk on years of fat profits — and the generous compensation packages and higher share prices that follow — and they won’t be keen to slow that success. The profit margin for the S&P 500 Index, or income as a percentage of revenue, swelled to 10.2% in 2018, the highest since 1990. The ratio of corporate profits as a percentage of GDP hit the highest on record in 2012, according to the US Bureau of Economic Analysis, and that ratio has remained elevated.

GOOD TIMES
And as profits go, so goes the payoff for the C-suite and shareholders. The CEO-to-worker pay ratio ballooned to 281 in 2017 from 195 in 2009, according to the Economic Policy Institute (EPI), and it projects a comparable ratio for 2018. Shareholders have been richly rewarded, too, as the US stock market has more than quadrupled in value since early 2009.

Another obstacle is that the amount of money required to adequately compensate workers is probably higher than acknowledged. Representative Katie Porter of California confronted Dimon with the gruesome math during a congressional hearing in April, demonstrating that an entry level position at JPMorgan in Irvine, California, that pays $16.50 an hour falls well short of a living wage for a single mother with one child — and that’s 10% more than the $15 minimum wage companies already balk at paying.

HARD KNOCKS
There are other signs that fixing wage inequality is no small task. For example, the median employee compensation at roughly half of the largest 1,000 US companies by market value falls short of a living wage for a family of four. The median household income in the US is roughly 25% less than the amount needed to cover living costs for a family of four in Midwestern cities such as Omaha, Kansas City, Milwaukee, or Cleveland, according to EPI estimates, never mind the more expensive locales on the coasts. And the income Gini index, which measures the degree of income inequality, is at a record high, according to the Census Bureau.

Big corporations seem to realize the extent of the problem and that workers can’t continue laboring for less than a living wage. The bigger question is whether executives and shareholders have the will to open their pocketbooks before the government makes them.

 

BLOOMBERG OPINION

Peso weakens further on concerns over Brexit, fresh US-China tariffs

THE PESO weakened further on Tuesday amid continued US-China trade war woes and fears of a no-deal Brexit. — BW FILE PHOTO

THE PESO extended its losing streak on Tuesday on continued US-China trade war jitters paired with Brexit issues looming anew amid election prospects.

The local unit ended at P52.31 against the greenback on Tuesday, weakening by 20.5 centavos from its P52.105-to-a-dollar close on Monday.

The peso opened Tuesday’s session weaker at P52.23 versus the dollar. Its weakest point for the day was at P52.365, while its best performance was at P52.19 against the greenback.

Dollars traded on Tuesday rose to $1.336 billion from the $1.234 billion that changed hands on Monday.

“We are seeing a risk-off tone. It could also be the Brexit or a combination of all these,” one trader said.

Lawmakers will decide on Tuesday whether to shunt Britain towards a snap election when they vote on the first stage of their plan to block Prime Minister Boris Johnson from pursuing a no-deal Brexit.

Mr. Johnson implicitly warned lawmakers on Monday that he would seek an election if they tied his hands on Brexit, ruling out ever countenancing a further delay to Britain’s departure from the European Union.

That sets up a Brexit showdown between Johnson, who has promised to take Britain out of the European Union on Oct. 31 with or without an agreement, and parliament, where a majority of lawmakers are opposed leaving without a deal.

The resurfacing of US-China trade war jitters also contributed to the peso’s decline, another trader said.

“The initial reaction of the market is for safety net, which includes the dollar,” the trader added.

The United States imposed 15% tariffs on a variety of Chinese goods and China began to impose new duties on a $75 billion target list. US President Donald Trump said both sides would still meet for talks later this month.

Most emerging Asian currencies weakened against a sturdy dollar on Tuesday as investors fretted over the outcome of Sino-US trade talks, while weak economic data sent the Indian rupee tumbling.

Late on Monday, Bloomberg News reported that Chinese and US officials are struggling to agree on a schedule for a round of trade negotiations that were expected this month.

The news sent the Chinese onshore yuan to 7.1825 against the dollar in early trade, its weakest since February, 2008.

Meanwhile, the dollar jumped 0.4% to 99.273 against a basket of six major currencies by 0532 GMT, stepping up pressure on Asian units.

For today, traders said the peso may continue to weaken amid upcoming data from the US, including reports on non-farm payrolls and the manufacturing index, among others.

The first trader sees the peso moving within the P52.20 to P52.50 band versus the dollar, while the second trader expects the local currency to end at around P52.10 to P52.40. — L.W.T. Noble with Reuters

PSE index sinks as US-China trade war heats up

By Arra B. Francia, Senior Reporter

THE MAIN INDEX fell on weak sentiment from US market futures due to the escalation in the US-China trade war.

The benchmark Philippine Stock Exchange index (PSEi) lost 1.43% or 113.82 points to close at 7,804.71 yesterday, extending the previous session’s decline. The broader all-shares index likewise plunged 1.18% or 56.98 points to 4,740.61.

“It was a quiet day for the index until a massive selldown at the close… The selldown could possibly be attributed to US futures being down by 1.0% at the moment as this signals how the US market will move tonight — effectivity of tariffs last Sept. 1 being the cause,” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an e-mail on Tuesday.

Futures on the Dow Jones Industrial Average went down 199 points or 0.84%, while S&P 500 futures also sank 0.7%. Investors may take their cues from the futures indices’ movements once US markets resume trading after the Labor Day holiday.

General sentiment remained cautious after the US increased tariffs on Chinese goods by 15% on Sunday, Sept. 1.

The US and China are reportedly struggling to agree on when they can continue the trade talks, amid the rising tariffs.

Asian markets ended mixed, with Japan’s Nikkei 225 up 0.02% or 4.97 points to 20,625.16. The Hang Seng index tumbled 0.39% or 98.70 points to 25,527.85, while the Shanghai Composite rose 0.21% or 6.05 points to 2,930.15.

Back home, the mining and oil counter was the only bright spot for the market as it jumped 2.48% or 228.93 points to 9,429.40. Mining firms continued to enjoy a boost in sentiment as they expect to benefit from Indonesia’s export ban on its nickel output.

“Investors are currently focusing on mining stocks after Indonesia came out and announced that they would be banning exports two years earlier than the original plan,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in an e-mail.

The rest of the counters went down, led by holding firms which dropped 1.86% or 146.74 points to 7,734.42. Services shed 1.6% or 25.91 points to 1,587.91; property slumped 1.26% or 50.65 points to 3,940.63; industrials retreated 1.05% or 116.74 points to 10,915.64; while financials dipped 0.47% or 8.64 points to 1,794.98.

Some 1.19 billion issues valued at P6.83 billion switched hands, improving from the previous session’s P5.27 billion. Decliners were almost double the advancers, 125 to 67, while 56 names ended flat.

Foreign investors turned net buyers at P104.99 million, compared to Monday’s P665.19 million in net sales.

“The PSEi broke below its support of 7,920 and may now test the next support line at 7,750. The general investor sentiment for our market continues to remain very cautious despite almost hitting 8,000 last week,” AAA Equities’ Mr. Mangun said.

Duterte spokesman ‘referred’ ex-mayor’s plea for parole

PRESIDENT RODRIGO ROA Duterte’s spokesman referred the application of a convicted former mayor for executive clemency, according to the chief of the countrys’ parole board.

Salvador S. Panelo, who is also the president’s chief lawyer, had written a letter dated Feb. 26 referring the plea of former Calauan Mayor Antonio L. Sanchez’s daughter to free her father, Reynaldo G. Bayang, who heads the Board of Pardons and Parole, told senators yesterday.

“We are referring this matter to your good office for your evaluation and whatever appropriate action you may want to undertake under the premises,” according to a copy of the letter.

The board had rejected the ex-politician’s application, Mr. Bayan said at a hearing investigating the early release plan for Mr. Sanchez and thousands of other convicts for good conduct.

Mr. Panelo, who lawyered for Mr. Sanchez in his rape-slay case for which he was sentenced to seven life terms in 1995, yesterday told a briefing he never recommended his release.

The presidential spokesman also said he had met with the ex-mayor’s family about their clemency request at the presidential palace in February, where he promised to “refer the same as we refer all.”

He also did not see anything wrong about dealing with the Sanchez family. “It was 27 years ago. Another thing, I was only one of the lawyers. I was not even the lead counsel,” he said.

In a separate statement, Mr. Panelo said the president has asked the Justice department to study if authorities could rearrest about 2,000 heinous crime convicts released for good conduct.

Of the 22,049 inmates released for good conduct since 2013, 1,914 had been convicted of heinous crimes, according to data from the Bureau of Corrections.

Meanwhile, three senators have filed a bill seeking to repeal the law allowing the early release of a convict for good conduct.

In a joint statement, Senate President Vicente C. Sotto III and Senators Richard J. Gordon and Panfilo M. Lacson said “there’s a logical reason to abandon the grant of good conduct time allowance if the magnitudes of its aftermath are prejudicial for many of the victims and their relatives who are seeking justice.”

About 2,000 inmates convicted of heinous crimes have been released since the start of the decade even if they were not supposed to be covered by the law.

At the hearing yesterday, senators asked Bureau of Corrections Director-General Nicanor E. Faeldon why he approved Mr. Sanchez’s release. The prison chief earlier said he postponed his release pending a review.

Lawmaker learned at the hearing that the Sanchez family had also sought the help of former Laguna Governor Emilio Ramon P. Ejercito III and former Ilocos Norte Rep. Imelda R. Marcos for his early release.

His wife Elvira also admitted meeting with Mr. Faeldon at his office on Aug. 21, a holiday. “We went to his office to clarify the things that we heard about the news that my husband was about to be released,” she told the hearing.

Also yesterday, Party-list Rep. Jericho B. Nograles said officials who approved the release of felons convicted of heinous crimes should be charged criminally and administratively.

For his part, Albay Rep. Edcel C. Lagman said the release of the convicts was a “massive jailbreak.” “Since their improvident release is errant and illegal, they must be reincarcerated as virtual fugitives to serve their full sentences.” — Charmaine A. Tadalan, Vince Angelo C. Ferreras and Arjay L. Balinbin

Court junks lawsuit for protection of disputed shoals

THE Supreme Court has rejected a plea from fishermen and a lawyer’s group to force the government to protect three disputed shoals in the South China Sea.

The high court dismissed the lawsuit without ruling on the merits and after the plaintiffs withdrew from the case, the court’s Public Information Office said in a statement yesterday.

It cited fisherfolk’s affidavits presented by the Office of the Solicitor General (OSG) denying knowledge of the lawsuit.

The Integrated Bar of the Philippines and the fishermen in April asked the court to compel the government to protect the Scarborough Shoal, Second Thomas Shoal and Mischief Reef. The Philippines calls them Ayungin Shoal, Panganiban Reef and Panatag Shoal, respectively.

Named respondents were Environment Secretary Roy A. Cimatu, Agriculture Secretary Emmanuel F. Piñol, Philippine Coast Guard Admiral Elson E. Hermogino and several others. The court held hearings in July.

After talking with some of the fishermen, the lawyer’s group later filed a motion signifying their clients’ withdrawal from the case.

“The counsels were cautioned that they should be ready with the necessary evidence before they seek the issuance of extraordinary writs,” the court said.

The court also said lawyers should communicate with their clients. “Mere difficulty in contacting clients should not be used by the counsels as an excuse to renege on their duties and to disengage from their commitments,” it said. The lawyers “would be dealt with more severely” if they repeat their mistakes, it said.

Scarborough Shoal, which China seized from the Philippines during a standoff in 2012, is also claimed by the Philippines and Taiwan.

Mischief Reef, which China has occupied and controlled since 1995, is also claimed by the Philippines, Taiwan and Vietnam.

The Philippine Navy maintains a presence of less than a dozen navy personnel on a 100-meter-long landing craft that was deliberately run aground at the shoal in 1999 in response to Chinese reclamation of Mischief Reef. — Vann Marlo M. Villegas

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