Ports beating revenue targets due to fuel marking program

July 10, 2019 | 9:46 pm

THE Department of Finance (DoF) said the fuel marking program is producing higher revenue at certain ports of entry, thereby helping counter the expected increase in smuggling by parties seeking to evade higher excise taxes for fuel under the tax reform law.

“We anticipated the potential increase in smuggling and therefore initiated the fuel marking program under the TRAIN (Tax Reform for Acceleration and Inclusion) law. Fuel marking is designed to help address this issue. In fact, after the previous announcement that implementation of the Fuel Marking Program would start this quarter, we noted a steady increase in collections among the ports where petroleum products are regularly imported. This is a strong indicator of increased compliance,” Finance Secretary Carlos G. Dominguez III told reporters in a Viber message Wednesday.

The fuel marking program introduces a special dye into tax-paid fuel. The absence of the dye will be considered prima facie evidence that the fuel shipment is not compliant.

“A good example is the collections of the Port of Limay (Bataan) for June 2019, which was P3.6 billion above target. This is higher than the excess collection in May 2019 by P1.1 billion. The ports of Subic and Cagayan de Oro likewise exceeded their targets,” Mr. Dominguez added.

The Fuel Marking Program, which authorizes the Bureau of Customs (BoC) and the Bureau of Internal Revenue (BIR) to collect fuel marking fees from petroleum products, is expected to add P5 billion to government revenue this year.

The BIR is in charge of collecting excise from domestically refined petroleum products, while the BoC will look after the proper taxation of imported fuel products.

The fuel marking provider, meanwhile, supplies the marker and associated equipment and carries out confirmation tests that a fuel shipment has been properly marked.

“The person, entity or taxpayer who owns or imports the product or to whom it is consigned, or whoever brings the same into the Philippines, or manufacturers and/or refines the same shall cause and accommodate the marking thereof with the official fuel marker,” according to a Joint Circular No. 001.20019 published on July 5. — Reicelene Joy N. Ignacio

Manila cleanup to boost city’s status as Southeast Asian ‘shopping paradise’ — DoT

July 10, 2019 | 9:45 pm

THE Department of Tourism (DoT) said Wednesday that the street cleanup and crackdown on illegal vendors in the city of Manila, initiated by Mayor Francisco Moreno Domagoso, is expected to boost the city’s status as a “shopping paradise” for Southeast Asian visitors.

In an economic briefing at the Palace on Wednesday morning, DoT Assistant Secretary Roberto P. Alabado, who represented Secretary Bernadette Romulo-Puyat, noted that Manila has always been a premiere tourist destination.

“When tourists come here, immediately upon landing, they come to certain sites here in Manila. They go to Intramuros, they go to Luneta, Rizal Park, Binondo. Some even, especially Asians, go to Divisoria. These are areas where it’s simply a shopping paradise for some of our SEA (Southeast Asian) tourists,” he said.

He said the efforts of the newly-elected Manila Mayor “are very much appreciated” in making those areas “more accessible” to tourists because the Tourism department is aiming to provide visitors with “more diverse tourist offerings” in Manila.

“So just imagine if our tourists can walk around the streets of Manila and at the same time enjoy the food in Binondo, enjoy the shopping in Divisoria, in a more organized manner,” Mr. Alabado added.

As for the relocation of street vendors, Mr. Alabado said Ms. Puyat has ordered the Tourism department’s regional office in the National Capital Region to “work closely” with the Mayor’s office to “coordinate their efforts.”

“This is a local thing, the relocation of our street vendors, but as we have always said, the more tourists that we can provide access to Divisoria, to Binondo and Intramuros, the more economic activities that can be spurred from those local destinations,” he added.

“We will be having our coordination meetings with the Office of the Mayor of Manila and we will be updating you on this in the future,” he also said. — Arjay L. Balinbin

DoT touts parts of Mindanao considered safe for tourism

July 10, 2019 | 9:45 pm

THE Department of Tourism (DoT) said Wednesday it is working to reverse the public perception of Mindanao as a place to be avoided, after President Rodrigo R. Duterte called his home island “lawless” and “violent” last month.

DoT Assistant Secretary Roberto P. Alabado told reporters in a chance interview at the Palace, after an economic briefing, that the DoT is “doubling” its efforts to tell Mindanao’s “real story” from people on the ground.

Efforts have been “doubled because we are working on a perception problem. That’s why we are here to show you what the real story is,” he said.

He added, “We are in a situation where we want to change perceptions by saying what is on the ground.”

Mr. Duterte, in one of his speeches at the Palace last month, said that incidents of “lawlessness” and “violence” in Mindanao have not stopped.

“That’s the problem of Mindanao. Far and wide in between the years, we had so many troubles. Lawless violence, it’s still there…. Mindanao really seems to be a dangerous place still to go around,” the President noted.

He added, “And that is why (we cannot tell tourists) that everything is all right there and you can go around and you will not be waylaid, delikado ang Mindanao (Mindanao is dangerous).”

Asked to reconcile the President’s remarks and the DoT’s efforts, Mr. Alabado said: “There are some safe places… There are places in Mindanao where the advisories are better… In terms of security, we will abide by the directives of the President (for the more dangerous areas).”

He added that the domestic tourism in Mindanao is “very good,” noting that in Davao City alone, hotels are “always fully-booked.”

“So that is a good indicator that business and tourists are going to Davao in Mindanao,” he noted.

“Pagdating sa pronouncements ni Presidente (when it comes to the President’s pronouncements), we always abide, he’s the President, we are just an agency helping him in the area of tourism,” he added. — Arjay L. Balinbin

Rails for MRT-3 rehabilitation arrive months ahead of schedule

July 10, 2019 | 9:44 pm

THE government said it took delivery of new train parts for the rehabilitation of the Metro Rail Transit Line 3 (MRT-3) this week.

The Department of Transportation (DoTr) said in a statement Wednesday it received 4,053 new rails of 18-meter length from Japan Tuesday night, which will be used to replace older rails on the elevated commuter line, which runs along the capital’s main artery EDSA.

DoTr Undersecretary for Railways Timothy John R. Batan said the new rails are expected to reduce disruptions to MRT-3’s daily operations.

“[Y]ung kasalukuyang degraded state ng ating mga riles ang nagiging dahilan kaya nagiging matagtag ang takbo ng MRT-3. (The degraded state of the rails are the reason behind the rough ride on MRT-3) At ’yang tagtag na ’yan ay isa sa pinakamalaking root causes kung bakit tayo nagkakaroon ng aberya (The rough ride is one of the biggest reasons behind many issues disrupting the MRT-3),” he said in the statement.

The rails arrived “two to three months ahead of schedule,” putting the rail rehabilitation on track for completion by July 2021, Transportation Secretary Arthur P. Tugade said.

“We are happy that the rails we procured arrived much earlier than scheduled… Ebidensya po ito na ang MRT-3 Rehabilitation Project… ay hindi drawing (This is evidence that the MRT-3 Rehabilitation Project…is not just a paper plan),” he was quoted as saying in the statement.

More parts are scheduled to arrive in October, and if the schedule is followed, the replacement of the tracks may begin by November during non-operating hours of the MRT-3. The replacement works are set for completion by February 2021.

The government turned over in May the rehabilitation and maintenance of the MRT-3 to Japanese partners Sumitomo Corp. and Mitsubishi Heavy Industries, Ltd. (Sumitomo-MHI), together with TES Philippines, Inc. (TESP).

The P16.985-billion rehabilitation is funded by an agreement signed last year between the governments of the Philippines and Japan.

Once works are completed, operational trains at the MRT-3 are expected to increase to 20 from the current 15, with speeds increasing to 60 kilometers per hour (kph) from the current 30 kph. — Denise A. Valdez

Israel signs P44-B loan agreement to support solar irrigation

July 10, 2019 | 9:44 pm

THE Agriculture department said Israel has agreed to assist the Philippines in a project that intends to promote the use of solar-powered irrigation.

In a social media post Wednesday, Agriculture Secretary Emmanuel F. Piñol said both sides signed the Implementing Agreement on Agricultural Cooperation Tuesday, with Israel represented by Ambassador to the Philippines Rafael Harpaz.

The agreement covers the funding of the Solar-Powered Irrigation System (SPIS) program through a long-term loan of P44 billion provided by Israel. The funding plan calls for repayment within 10 years and a grace period of two years. The total cost of the project is P50.5 billion, including counterpart funding of P6.6 billion.

The project will establish a network of 6,200 SPIS stations, which will irrigate 500,000 hectares of rice farms and other high-value crops over the next three years.

Israel’s LR Group, among others, has expressed interest in setting up the system in the Philippines.

The individual solar power stations are connected in a network that will allow the Department of Agriculture (DA) to monitor each irrigation area. The system will also introduce “fertigation,” under which the irrigation water will be mixed with fertilizer and other farm inputs.

Israel has donated two prototypes, with one set up in a five-hectare farm, and the other in a 100-hectare farm. These are expected to be operational by the end of July.

In May, the DA agreed to fast-track the project to protect the farmers from the next El Niño. According to the latest updates, crop damage from the dry spell was estimated at P7.96 billion on lost volume of 447,889 metric tons.

The Philippines has about 3.9 million hectares of farmland, with only 1.2 million effectively irrigated. — Vincent Mariel P. Galang

Policy rate cut to precede action on RRR in 2nd half — Diokno

July 10, 2019 | 9:43 pm

THE Bangko Sentral ng Pilipinas (BSP) is likely to cut policy rates in the second half before moving to reduce the reserve requirement ratio (RRR), the central bank’s Governor Benjamin E. Diokno said.

Asked if a 200 basis point (bp) cut is possible before the end of the year, Mr. Diokno told reporters, “Of course.”

“Palagay ko mauuna yung interest rate cut bago mag reserve requirement (I think the interest rate cut will come before a cut in the reserve requirement),” he added.

On May 9, the BSP Monetary Board reduced overnight borrowing, lending and deposit rates by 25 basis points to 4.5%, 5%, and 4% respectively, after a major tightening last year due to a spike in inflation. The RRR meanwhile, is set to fall to 16% this year from 18%.

The BSP has also cut reserve requirement ratio (RRR) by 100 bps on May 31, followed by another 50 bps in June to 16.5% and 6.5%, respectively.

Another 50-bp reduction will be implemented on July 26 to finally bring the RRR of big banks to 16% and thrift banks to 6%, which completes the phased cuts the BSP announced in May.

Mr. Diokno said the Philippines foreign direct investment (FDI) is growing, but the central bank is still waiting for “important metrics” such as second quarter gross domestic product (GDP) growth and inflation rates in July and August before coming up with a decision in monetary policy.

“Yung (the) FDI, look at the data. Globally, it is declining. Yung sa atin (Our FDI), is increasing. That’s showing confidence. With the recent developments, baka tumaas pa iyan (FDI could go higher),” Mr. Diokno said. He was referring to the sovereign credit rating upgrade, declining inflation, and record satisfaction ratings of President Rodrigo R. Duterte.

According to BSP data, FDI net inflows totaled $961 million in April, up from $586 million in March. However, the April total is down 11.8% year-on-year.

In his speech during the 2019 Awards Ceremony and Appreciation Lunch for BSP Stakeholders, Mr. Diokno said FDI in the first quarter totaled $1.9 billion, while foreign portfolio investment registered a net inflow of $2.5 billion, from a net outflow of $130 million a year earlier.

He also said that external debt remains manageable at $80.4 billion at the end of March, against $79 billion in the preceding quarter.

“From this position of strength, the BSP remains committed to continually upholding the highest standard of excellence in crafting policies to maintain price stability, promote a strong financial system and foster a safe and efficient payments and settlements system,” Mr. Diokno said.

“The ability of the BSP to deliver on its mandates depends significantly not only on its commitment but also on its credibility supported by its dynamic engagement with its stakeholders… But without credibility, central banks resort to more traditional, aggressive and often costly actions to achieve the same result. Thus, by establishing and maintaining consistent engagement with our partners, the BSP is able to capture the sentiment of its stakeholders, which helps us formulate and calibrate effective monetary policies,” he added. — Reicelene Joy N. Ignacio

Draft rules for Corporation Code up for comment

July 10, 2019 | 9:43 pm

THE Securities and Exchange Commission (SEC) is soliciting comment on implementing rules for amendments to the Corporation Code, which was overhauled recently to allow fewer incorporators to found companies, as well as the registration of foreign corporations.

The draft memorandum circular on the number and qualifications of incorporators was published Tuesday on the SEC website, with comment accepted from stakeholders until July 17.

The new rules allow for domestic corporation to be formed by at least two but not more than 15 persons. They also permit the registration of One-Person Corporations, which will be covered by separate guidelines.

The Corporation Code of the Philippines, or Batas Pambansa Blg. 68, previously required a minimum of five and a maximum of 15 natural persons to form a corporation.

Incorporators are required to own at least one share of a company’s capital stock, and may be natural persons, SEC-registered partnerships, SEC-registered domestic corporations or associations in good standing, or foreign corporations.

“The inclusion of foreign nationals in the articles of incorporation shall be subject to the applicable constitutional, statutory, and regulatory restrictions, as well as conditions, with respect to foreign participation in certain investment areas or activities,” it said in the draft guidelines.

Foreign corporations will be asked to include in their application a board resolution authenticated by a Philippine Consulate indicating the approval of the foreign corporation’s investment in the company.

For SEC-registered partnerships, the SEC wants to require applicants to submit a Partners’ Affidavit on top of the application for registration.

Domestic corporations or associations will also be required to secure the approval of the majority of the board and ratified by two-thirds of the stockholders to incorporate.

For banks and quasi-bank institutions, pre-need, insurance and trust companies, nonstock savings and loan associations, pawnshops and other financial intermediaries, the SEC draft rules require their articles of incorporation to be “accompanied by a favorable recommendation of the appropriate government agency to the effect that the Articles of Incorporation are in accordance with law.”

The release of the proposed guidelines follow the passage of the Revised Corporation Code or Republic Act No. 11232 in February. It sought to allow one-person corporations and perpetual corporate terms, among other features.

The SEC said outstanding applications for registration compliant with the new provisions of the Revised Corporation Code will be processed manually by the Commission’s Company Registration and Monitoring Department and Extension Offices. — Denise A. Valdez

Pag-IBIG, no more?

July 10, 2019 | 9:41 pm

“No more to Pag-IBIG!” is the message of Circular No. 421 released in January by the Home Development Mutual Fund (HDMF), also known as Pag-IBIG. The Circular highlighted three points concerning foreign nationals who are working or assigned to work in the Philippines.

First, employers should no longer withhold and remit the Pag-IBIG contributions of their foreign employees to the HDMF. Second, contributions made by the foreign national and his/her employer to the HDMF, including accrued dividends, can be refunded by filing an application for claims. Last, the mandatory enrollment of foreign nationals with Pag-IBIG, due to their compulsory membership with the Social Security System (SSS), is now repealed. Thus, foreign nationals working in the Philippine are no longer required to be registered with Pag-IBIG.

Since the content of the Circular is quite general, I inquired with some Pag-IBIG officials who participated in drafting the Circular in order to understand the rationale behind the issuance and the procedures for refunding the contributions.

RATIONALE BEHIND THE ISSUANCE
Due to the short and temporary tenure of their stay in the Philippines, foreign nationals shall no longer be mandatorily covered by the agency. This conclusion was developed after a series of studies and deliberations within the agency, which stemmed from the various inquiries they have received from employers regarding the Pag-IBIG coverage of foreign nationals.

FOREIGN NATIONALS COVERED BY THE CIRCULAR
Circular No. 421 applies to foreign nationals living and working in the Philippines; and those who have already left the country, for the purpose of claiming a refund for the contributions that they had previously made to the agency.

However, those who are considered naturalized Filipino citizens are not covered by the Circular, and thus, are still covered by the mandatory registration with Pag-IBIG.

COVERAGE OF THE REFUND AND EFFECTIVITY OF THE CIRCULAR
The refund will cover all contributions made by the foreign national and shall be considered a withdrawal of the employee and employer’s contributions, including accrued dividends.

The circular took effect on Feb. 1, after its publication in People’s Journal. The agency expects that contributions should have ceased by then. Nevertheless, if employers still remit contributions from February onwards, all such contributions made shall be included in the refund claim.

PROCEDURE FOR WITHDRAWING THE CONTRIBUTIONS

i. Documentary requirements

The documents needed to claim a refund of the contributions are the same as a claim for provident fund benefit with the agency. These are: a) HDMF Downloadable Form: Application for Provident Benefits (APB) Claim (under Reason for Claim, the applicant should choose Others and indicate Foreign national refund); b) Two valid IDs of the expatriate employee; and c) a Notarized Special Power of Attorney if filed through an authorized representative, along with two valid IDs of the representative.

While the above documents are the general requirements, employers or foreign nationals are advised to inquire about any additional documents their respective Pag-IBIG branches may need for the processing of their claims.

As a general rule, any document executed outside the Philippines by foreign nationals must be authenticated by the Philippine Consulate in the country where they are located. On the other hand, documents executed in Apostille-contracting countries and territories (under the Apostille Convention) do not need to be authenticated by the Philippine Embassy or General Consulate after Apostillization by the relevant foreign government agency.

ii. Timeline of processing the claim

If the foreign national has only one employer, Pag-IBIG will process the claim within three to five working days.

In the case of multiple employers, the processing will take at least 20 working days since Pag-IBIG needs to consolidate all contributions made from the various branches and validate the accuracy of such information. To facilitate data validation, the individual must accurately list down the names of all his or her employers and the periods of employment.

iii. Manner of payment/refund

A refund will be made through the issuance of a check in the name of the foreign national. If the check is to be encashed through a representative, a separate SPA is needed. Since the check will be under Land Bank of the Philippines, it is advisable for the individual to verify with their respective LANDBANK branches if there are other requirements and procedures for their representatives to encash the check.

VOLUNTARY CONTRIBUTIONS FOR FOREIGN NATIONALS
If a foreign national decides to enroll as a member despite the issuance of the Circular, he/she may do so subject to the review and approval of the Agency.

Alternatively, foreign nationals may consider the agency’s MP2 savings program, which is a voluntary savings platform for members who wish to save more and earn higher dividends. Interested individuals may inquire directly with the agency or access the Pag-IBIG website for details.

ISSUANCE OF IMPLEMENTING RULES AND REGULATIONS (IRR)
Because the agency is currently finalizing its internal business rules for branch processing of claims and updating its systems for this purpose, the formulation of the IRR remains under discussion and for consideration. In the meantime, the agency will be releasing a memorandum directed to the employers as guidelines for the Circular.

However, even while the IRR is pending release, the agency is accepting applications for refund claims.

TAXATION OF THE REFUND
Since the refund represents a withdrawal of contributions from the agency, like in the case of retiring employees or those individuals who will permanently depart from the Philippines, the withdrawn contribution is considered a mere return of capital, hence is a non-taxable payment to the foreign national.

Considering the costs (such as delivery charges for transport of requirements) and additional documents required to be submitted (such as Consular Authentication Certificate, SPA, etc.) by foreign nationals who have already left the country, it would be judicious for the company and the foreign nationals to balance the objectives of the circular against its impact on refund claims. Transaction costs may outweigh the refundable sum since the contribution only amounts to P200 per month, comprising both the employer and employee’s shares. Nevertheless, Pag-IBIG’s new policy remains a spark of good news for its foreign national members who can now expect a windfall from their hard-earned contributions.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Edmund James Opinio is a consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 845-2728

edmund.james.opinio@pwc.com

Private airports and government airport authorities

July 10, 2019 | 9:25 pm

As argued in previous columns, I advocate integrated Public–Private Partnership (PPP) — construction then Operations and Maintenance (O&M) all done and financed by one private entity — and not hybrid PPP — construction via foreign loan or national budget, O&M by local private entity. I like the development in some provincial airports that become bigger, more modern international airports, privately owned and managed, and helping attract more foreign tourism, investments and commerce.

I saw a paper, “Airport ownership, economic regulation and financial performance” (2016) by the Airports Council International (ACI). (See Table.)

ACI made four policy recommendations:

• No “one size fits all” approach to airport ownership;

• Create economic incentives and guarantee consistency in regulatory frameworks;

• Evidence-based policy making, and

• Fostering entrepreneurship and value creation.

Good. Private ownership and management of airports is consistent with attracting more private investors and traders, local and foreign.

Among the big, modern and privately owned airports in the Philippines are the Mactan-Cebu International Airport (MCIA) and, soon, the Davao or Francisco Bangoy International Airport (FBIA).

There are just some twists here. While the international airport is privately owned for 25 or 30 years or longer (after which it will be government-owned), there are government agencies that will “control, supervise, construct, maintain, operate and provide such facilities or services…”

These agencies are the Civil Aviation Authority of the Philippines (CAAP) for other provincial airports, the MCIA Authority (MCIAA, RA 6958 enacted in July 1990) and, soon, the Davao International Airport Authority (DIAA) under SB 2168 and waiting for President Rodrigo R. Duterte’s signature to become a law.

This seems confusing because the private owners of the new international airports are supposed to have overall control and management of the passenger terminals, the runway and plane taxi bay, etc. But there are government agencies that, on top of the functions quoted above, have the power to:

“Acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable… levy and collect dues, charges, fees or assessments for the use of airport premises, works, appliances, facilities or concessions, or for any service provided by the Authority…”

The implementing rules and regulations (IRR) of such laws can be complicated but must clearly delineate where a government agency, its national and local bureaucracies, can or cannot intervene, in facilities and structures that were entirely built and funded by the private sector.

While the private sector has the incentives to develop modern international airports that they will operate for two to three decades or more, local and national bureaucracies do not have similar incentives as their outlook is short-term, dependent on their appointment for six years or less by the administration in power.

Let us hope that more investors, local and foreign, will expand current small provincial airports into big and modern international airports. More accommodating, more visitors-friendly international airports are often the gateway to more foreign tourism, trade and investments into the country.

So we wish for more modern, privately owned international airports and less-interventionist airport authorities and other government agencies, local and national. We expand the wish-list to include more budget terminals charging lower terminal fees, alongside main terminals by private contractors and airport owners; more airlines competition via the amendment and liberalization of the Public Service Act; and, abolition of the travel tax. The Philippines seems to be the only country in East Asia that penalizes its own citizens for travelling abroad.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

Why buck what works?

July 10, 2019 | 9:23 pm

In some cases, people get away with doing questionable things because they cannot be made accountable for them. And knowing that they can get away with it, they wreak havoc with impunity. They are emboldened by the fact that, at the end of the day, the rewards for their misdeed far outweigh the potential risks or penalties — if there will be any at all.

It is thus easy enough for a supposed farmers’ group, for instance, to make public their accusation that imported rice are being smuggled into the country — or being undervalued to avoid higher taxes — without presenting any evidence or proof. In the same manner, it is fairly easy for media to spread the story. It is, after all, a scandal.

But, if, eventually, the accusation is proved to be false, will the accusers bother to apologize? Will they take time to explain why they made the accusation in the first place and elaborate on their agenda? Will media also publicize their apology and agenda? Will media bother to promote fair play by admitting that it, too made a mistake in spreading the accusation?

The Federation of Free Farmers (FFF) is alleging that rice importers have connived with suppliers abroad to undervalue rice imports, which have since been liberalized or allowed in commercial quantities as long as proper tariffs are paid. By undervaluing importations, the FFF claims that rice importers had so far shortchanged the government of about P5 billion. The allegation also insinuates corruption.

This matters to the FFF as only tariffs in excess of P10 billion per year go to assistance programs for rice farmers affected by rice imports. Of course, lower tariff collection imperils whatever funding is supposed to go to these programs. Undervaluation also artificially lowers the price of imported rice, which in effect also depresses farm gate prices or the buying price for local rice.

However, their only evidence to prove smuggling is their own computation of tariffs that should have been collected, based on data from their sources abroad — which, they claim, do not match government data. Other than this, there has been no documentary or other factual evidence to show that undervaluation — thus smuggling — and under-collection has been going on.

Frankly, there is no doubt in my mind that there is some smuggling going on, in one form or the other. But this is simply on the notion that smuggling occurs, whether for rice or other commodities. This, I consider, is a fact of life in this part of the world. But to the extent that it is rampant as far as rice is concerned? I need proof — and not just statements — to believe that.

Beyond the smuggling allegation, my greater concern is what has happened to the rice supply, and prices, as well as inflation since rice importation was deregulated. There are far more local consumers than local rice farmers, who are consumers themselves, and using tariffs to replace quantity restrictions for imported rice has more to do with feeding them than agriculture.

If importers undervalued imported rice — declared acquisition cost at lower than actual with the connivance of exporters or foreign suppliers — just so they can save on tariffs, then wouldn’t they lose money? Importers would be forced to pass off imported rice to traders, and consumers, at below cost, too. Does this make sense? Won’t they aim to maximize and not minimize profits?

As a consumer, frankly, I prefer cheap over expensive rice. And if undervaluation makes my rice cheaper, I would prefer to get a “direct” benefit from the situation — lower rice prices — rather than the “indirect” benefit of tariffs and taxes being used to finance welfare and farmer assistance programs. Yes, this is the selfish way of looking at things. But, by going the “indirect” way, there is always the risk that tariffs will just end up in the pockets of the corrupt.

Of course, this is not to say that we should condone smuggling. Right is right, and wrong is wrong. If importers are smuggling and/or undervaluing importations, then they should be investigated and prosecuted. However, proper investigation requires evidence and proof. In the case of the FFF, they are simply teasing authorities and the public. Why end at public allegations? Why not produce evidence, or, better yet, file cases against the importers?

Moving on to what is factual as opposed to what is simply alleged, allow me to share a July 9 Bloomberg report on the rice situation: “Philippine rice prices have retreated from last year’s record highs after the Southeast Asian nation scrapped import quotas for the first time in nearly a quarter-century. The staple grain retailed for P38.65 ($0.75) per kilogram last month, down 15% from its peak in September 2018 when typhoons and pests decimated local harvests and forced government to look abroad for supply. June inflation fell to its slowest pace in two years as a result, boosting odds the Bangko Sentral ng Pilipinas could further slash the interest rates it hiked during the height of the rice shortage last year.”

If the FFF agenda is to again demonize the transition to rice tariffs, then that might find resonance with rice farmers opposed to it. But, in my opinion, it gains little traction with the general public, the consumers, who, like the farmers, struggled with low supply and high rice prices last year.

The aim is to improve the rice supply, from whatever source. Ensuring a stable supply to meet demand will also stabilize prices. Food security trumps hunger, and makes poverty a bit more bearable. To be honest, I can live with some undervaluation and lower tariff collection. I may even tolerate some corruption. As long as rice remains available and affordable.

Marvin Tort is a former managing editor of Businessworld, and a former chairman of the Philippines Press Council.

matort@yahoo.com

Taking a stand for marginalized employees

July 10, 2019 | 9:22 pm

I moved to the Philippines 12 years ago to start a business. The skilled labor and high level of English proficiency made it a natural choice among its neighbors in the region. The friendly people, beautiful islands, live bands, and incredible nightlife didn’t hurt either! As my business progressed from start-up to operations, I realized that I had so many questions about why employees behave the way that they do in an organization.

I decided to pursue doctoral studies so that I could learn how to answer questions that no one seemed to know the answers to. I had met graduates of De La Salle University in Chamber of Commerce meetings and industry events, many of whom stood out because of their sense of integrity and professional accomplishments. After listening to their experiences and hearing about the value that a Lasallian education created in their lives, I was persuaded to apply and commence the decade-long journey that I just completed two weeks ago.

Graduate students learn how to conduct research using rigorous methods in pursuit of answers to questions and solutions to problems. In doing so, we create new knowledge that addresses real workplace problems, points of contention in industry, and societal issues. Part of what makes a Lasallian graduate business education unique is the emphasis that is placed on conducting business in a way that is ethically sound, environmentally sustainable, and socially responsible. While companies need to create value for their shareholders to survive in the long run, I learned that it is possible to achieve this while simultaneously caring for our customers, employees, and the communities that we live in. Our drive to make a positive impact in the lives of these stakeholders is fueled by our sense of purpose.

One of the causes that I have taken to heart since moving to the Philippines is the growing number of new HIV positive diagnoses among young people. The Philippines currently has the fastest-growing epidemic in the Asia-Pacific region, with 36 Filipinos being newly diagnosed each day. Approximately 80% of those being diagnosed are between the ages of 15 and 34 — in the prime of their lives. During a time when they should be focusing on their education and careers, these individuals are faced with a stigmatized, lifelong condition that affects their health, interpersonal relationships, and work productivity. What hasn’t been understood until now are the consequences that being HIV positive has on a person’s career. How does the stigma associated with having HIV affect an employee’s job performance? Does it hinder their opportunity to be promoted and to find satisfaction in their work? These are examples of some of the questions that I set out to answer so that I could help employers better understand how to create safe and inclusive work environments for people living with HIV.

My research brought me half-way around the globe to meet with scholars, attend academic conferences, and collaborate with NGOs. I was amazed by the level of support, encouragement, and interest coming from business leaders, researchers, and philanthropists from around the world. It made me realize that when you are genuinely passionate about something, and your heart is invested in making a difference, your desire to help becomes contagious.

One important lesson that I would like to share about stigma is that while it is often silent and invisible, it hurts so many people deep down to their core. People all around us come from different walks of life and have different stories to tell. One of our most significant challenges and responsibilities as managers is the reality that we have the power to touch people’s lives in a way that can be very impactful. The time that I spent at De La Salle University helped me develop a deep appreciation of the positive impact that businesses can have on the lives of others. Being socially responsible need not come at a high financial cost. It requires heart, dedication, and a commitment to bringing out the best in people.

I encourage each of my fellow graduates to stand up for a coworker whom they know is being marginalized. Our differences bring unique perspectives to the workplace, and by embracing diversity, we enable our colleagues to be the best version of themselves. After all, what is money without humanity? I assure you that a simple act of kindness and compassion can touch a person’s life in more positive ways than one.

Dr. Anthony Decoste is President & CEO of Global Virtuoso, Chairman of the Board of Trustees of Sustained Health Initiatives of the Philippines, and a volunteer HIV counselor. This article is an abbreviated version of the response that he delivered to the Graduate students during the College of Business Graduate Studies Recognition Rites on June 22.

anthony_decoste@dlsu.edu.ph

That giant asteroid of gold won’t make us richer

July 10, 2019 | 9:22 pm

By Noah Smith

REJOICE, people of Earth! News outlets are reporting that NASA is planning to visit an asteroid made of gold and other precious metals! At current prices, the minerals contained in asteroid 16 Psyche are said to be worth $700 quintillion — enough to give everyone on the planet $93 billion. We’re all going to be richer than Jeff Bezos!

OK, now for the bad news: This isn’t going to happen. Yes, 16 Psyche and other asteroids will probably be mined for their metals. But once those metals start hitting the market in large quantities, they’re unlikely to be precious for much longer. As any introductory economics student knows, price is a function of relative scarcity — flood the market with gold, and it will go from being a rarity to being a common decoration. Supply goes up, price goes down.

But in fact, there’s a more fundamental reason why a giant golden asteroid wouldn’t make the world fabulously rich. It’s because wealth mostly doesn’t come from big hunks of metal. It comes from the ability to create things that satisfy human desires.

A steel factory represents real wealth, because you can use it to make parts for cars, buildings, and so on. A house does too, because you can live in it or rent it out. The skills and knowledge in your head are also a form of wealth, even though they’re not counted in the official statistics. Even a sandwich is wealth, at least until it goes bad.

But a giant asteroid full of gold only adds a little to real wealth. The metal would have various industrial applications and make nice jewelry and dental fillings, but it wouldn’t spark a new industrial revolution, or dramatically bring down the cost of goods and services, or in general make human life much better or more comfortable. Gold doesn’t command high prices just because it’s rare — plenty of rare things have little to no market value. It’s because it’s rare relative to people’s demand for it. And because a golden asteroid wouldn’t increase the world’s total demand for gold, there’s no way it could create quadrillions of dollars of new real wealth.

Something a bit like a golden asteroid happened once before. In about 1500, Spain conquered South and Central America and discovered large deposits of gold and silver. It then shipped these metals back to Europe and used them to pay for government expenditures (mostly wars). Because gold and silver were used for money at that time, a drop in the value of gold and silver meant a drop in the value of money — in other words, inflation.

Gold no longer is used as money, nor is the value of modern money pegged to the value of gold or any other metal. Thus, the arrival of a giant golden asteroid would probably not cause consumer prices to go up, and would instead simply cause gold prices to crash to almost zero.

So a giant asteroid wouldn’t make us all billionaires. But whatever space-mining company managed to claim the space rock would still probably be able to make a substantial fortune for itself. It would have to follow the playbook of the diamond company De Beers.

Diamonds used to be exceedingly rare, until large deposits were discovered in the 1800s in South Africa. The British businessman and colonial government official Cecil Rhodes consolidated all South African diamond mining under the De Beers company, an effective monopoly which later was controlled by the Oppenheimer family. Over the years, De Beers managed to defend this monopoly against challenges from various upstarts, by hoarding diamonds when prices were low and flooding the market to destroy competitors.

A monopoly allows a company to limit supply to keep prices high. But De Beers needed more than that in order to prevent diamonds from eventually becoming commoditized — and so it turned to marketing, launching one of the most effective advertising campaigns ever with the slogan, “A Diamond Is Forever.” This convinced couples all around the world that diamond engagement rings were an indispensable symbol of marital commitment. That symbolism represents real value.

Owners of a golden asteroid could conceivably try to pull a similar trick, launching advertising campaigns to get people to start using gold for more things — building materials, perhaps, or clothing. But it seems unlikely that they could persuade the world to pay a premium for the sheer volume of gold coming from an asteroid like 16 Psyche — especially if a rival company showed up with another golden space rock.

The impossibility of extracting untold riches from 16 Psyche teaches two important lessons about how wealth really works. First, it shows that a great deal of wealth exists only on paper — when you try to sell your assets, the price goes down. Liquidity — the ability to sell an asset for cash — is an important factor that tends to be forgotten when calculating net worth.

And second, this example shows that real wealth doesn’t actually come from golden hoards. It comes from the productive activities of human beings creating things that other human beings desire. De Beers’ fabulous fortunes ultimately came not from its control over a certain type of dazzling rock, but from its ability to convince the world that this rock could be used to communicate love and devotion.

If you want to get rich, don’t think about how to seize scarce resources. Think about how to use resources in an innovative way to make something people truly want or need.

BLOOMBERG OPINION

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