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Japan deals worth P300B expected during Duterte visit

PHILIPPINE and Japanese firms are set to sign over 20 business agreements at the end of the month, according to the Department of Trade and Industry (DTI), which said the deals are worth close to P300 billion ($5.74 billion) and hold the potential to create at least eighty thousand jobs.

The DTI said the deals will be signed during President Rodrigo R. Duterte’s visit to Japan for the Nikkei 25th International Conference on The Future of Asia on May 30 to 31 where he will be accompanied by a government and business delegation.

“Japanese investors remain bullish on the sustained growth momentum under the administration of President Duterte, given its aggressive infrastructure build-up, meaningful investment and financial reforms and demographic advantages,” Trade Secretary Ramon M. Lopez was quoted in a statement Monday.

The investment pledges will focus on infrastructure, manufacturing, electronics, medical devices, business process outsourcing (BPO), power, electricity, transport, automotive, food manufacturing, and marine manpower.

The DTI will also hold a business forum and roundtable discussions with Japanese investors, which will serve as an opportunity for more in-depth business-to-business interactions.

In 2018, Japan was the Philippines’ second-largest trading partner with total trade of $20 billion — $9.5 billion worth of exports to Japan, and $10.5 billion worth of imports from Japan.

The country is the Philippines’ third-largest export market and source of imports.

The Philippine-Japan Economic Partnership Agreement is currently being reviewed, with Manila seeking easier market access for agricultural products.

Meanwhile, Tokyo is requesting lower tariffs on automobile and steel products, among others.

The Philippines also has a multilateral trading agreement with Japan under the Association of Southeast Asian Nations (ASEAN)-Japan Comprehensive Economic Partnership Agreement.

If the Regional Comprehensive Economic Partnership between the 10 ASEAN member-states and six Asia-Pacific states goes ahead, the pact will effectively be the Philippines’ third free trade agreement with Japan. — Janina C. Lim

House passes coconut trust fund bill on third reading

THE House of Representatives approved on third and final reading Monday a refiled bill creating the Coconut Industry Trust Fund, which Malacañang had vetoed.

House Bill 9197 received 159 affirmative votes, five negative votes, and zero abstentions.

The Coconut Farmers and Industry Development Trust Fund Act is the refiled version of the vetoed House Bill 5745, whose counterpart measure is Senate Bill No. 1233. The original legislation sought to put the P100-billion coconut levy assets into a trust fund to be used for coconut farmers and the coconut industry.

According to the new bill, the Presidential Commission on Good Government (PCGG) is required to submit a complete accounting of the Coconut Levy Assets as well as the investments, disbursement, and expenditures relating to the coconut fund.

The measure also requires that the trust fund be maintained for up to 30 years or until the fund is fully utilized. The trust fund will be for the exclusive use of coconut farmers and for the development of the coconut industry.

The Bureau of the Treasury is the designated depository of the trust fund.

The trust fund committee will be under the supervision of the Office of the President.

The committee will be composed of six representatives from the government; three representatives from the coconut farmers’ organizations, one each from Luzon, Visayas, and Mindanao; and two representatives from the coconut industry. — Vince Angelo C. Ferreras

ADB to lend $300M to upgrade PHL high school education

THE Asian Development Bank (ADB) said it will provide P1.5 billion worth of loans to the Philippines to boost the quality of the high school education system, helping over 10 million secondary-level students nationwide.

In a statement Monday, the ADB said it has set aside $300 million (P1.5 billion) in loans “to support the Philippine government’s efforts to achieve inclusive growth by improving access to high-quality secondary education that responds to labor market needs.”

ADB Senior Education Specialist for Southeast Asia Lynette D. Perez said equipping the labor force with “advanced skills and knowledge” is necessary for them to manage the technological changes the Philippines is experiencing as it further experiences propelling growth.

“Continued investments in high-quality education are crucial to attaining the government’s vision of lowering unemployment and poverty rates,” she said.

According to the Philippine Statistics Authority’s (PSA) January 2019 Labor Force Survey, 5.2% of Filipinos are unemployed, down from 5.3% a year earlier year. Despite that, labor force participation was only 60.2%, down from 62.2% in January 2018.

Through the ADB’s Secondary Education Support Program, the ADB said that 10.6 million students who are currently enrolled in the secondary level will benefit. An additional 2.7 million more students who are entering Grade 7 yearly from 2019 to 2023 will also benefit from the program.

Also part of the Secondary Education Support Program’s beneficiaries are the nearly 294,000 public school teachers and others who will be hired until 2023.

“The results-based Secondary Education Support Program will help the government sustain its reforms, particularly in offering the poor greater access to better, affordable education. It will disburse funds to the government based on the achievement of agreed reform targets within a specific period,” ADB said.

The ADB will also give assistance to the Department of Education (DepEd) in improving curricula to keep it in line with the Philippine Development Plan and as well as provide for maintenance of operations and equipment used in schools. — Gillian M. Cortez

Palay farmgate price falls in second week of May

THE AVERAGE farmgate price of palay, or unmilled rice, fell 0.5% week on week during the second week of May to P18.35 per kilogram (kg), the Philippine Statistics Authority (PSA) said.

The PSA said the average wholesale price of well-milled rice fell 0.1% week on week to P39.51. At retail, it fell 0.3% to P43.16.

The average price of regular-milled rice fell both at wholesale and retail. The wholesale price fell 0.5% week on week to P35.82 during the period. At retail, the price fell 0.6% to P38.74.

The farmgate price of yellow corn grain during the same period fell 1.5% week on week to P14.01 per kg. The average wholesale price rose 0.2% to P20.29 and the retail price fell 0.1% to P24.86.

The average farmgate price of white corn grain rose 0.2% week on week to P16.19. The average wholesale price was unchanged at P22.68, and the average retail price was also stable at P29.12, remaining at that level for five weeks straight.

The price of palay has been under pressure in recent months with the implementation of the Rice Tariffication Law, which liberalized the rules for importing rice. The threat of competition from cheap fopreign rice has made traders reluctant to buy domestic rice, weighing on the buying price of palay, the unprocessed form in which it is sold by farmers. — Vincent Mariel P. Galang

Duterte signs Sagip-Saka Law boosting direct procurement of agricultural goods

PRESIDENT Rodrigo R. Duterte signed into law a measure expanding the government’s enterprise development program for farmers and fisherfolk, which goes into the books as Republic Act 11321 or the Sagip Saka Act.

Mr. Duterte signed the measure on April 17. The Palace e-mailed copies of the law to reporters on Monday.

The new law establishes the “Farmers and Fisherfolk Enterprise Development Program,” which refers to the “comprehensive set of objectives, targets, and holistic approach in promoting the establishment of enterprises involving agricultural and fishery products.”

The program will be integrated and be made consistent with the government’s Agriculture and Fisheries Modernization Plan and the Micro, Small, and Medium Enterprises Development Plan.

The law requires the program to adopt a science-based approach in identifying and prioritizing agricultural and fishery products to be covered.

In a statement, Senator Francis N. Pangilinan, the principal author and sponsor of the law, said: “Ang pagsasabatas ng Sagip Saka ay tagumpay ng mga magsasaka at mangingisda, ang mahigit 10 milyong Pilipinong nagpapakain sa atin.” (The law’s enactment is a victory for over 10 million Filipinos who grow our food.”)

“Ano ang nais gawin ng Sagip Saka? Siguruhin na bibili ang gobyerno ng mga produkto ng ating mga magsasaka at mangingisda sa iba’t-ibang programa nito. (We want the government to stand in as a buyer for produce.) Kaya halimbawa, ang mga government feeding program sa ilalim ng nutrition at health programs ay dapat nang bumili ng bigas, gulay, prutas, manok, at kung anu-ano pang mga produktong agrikultural diretso na sa mga magsasaka at mangingisda. (For example, the governmnt feeding programs to improve the people’s nutrition must buy rice, vegetables, fruits, chicken and other produce direct from farmers and fisherfolk.) Bale, inaalis na ang mga middlemen na siyang kumikita nang malaki mula sa pagod at hirap nila (We have removed the middlemen who earn a lot from the labor of farmers and fisherfolk),“ he added.

He also noted that the new law “exempts both national government agencies and local governments from the Procurement Law when it purchases agricultural products directly from accredited farmer co-ops and organizations.”

“It also exempts donors from paying donors tax when making donations such as capital outlay for farm equipment, post-harvest facilities, and agriculture infrastructure, among others, to accredited farmers organizations,” he said. — Arjay L. Balinbin

Senate passes bill granting solar franchise to Leviste firm

THE Senate on Monday approved on third and final reading a bill granting a renewable energy distribution franchise to the Solar Para Sa Bayan Corp. (SPSBC).

With 16 affirmative votes, zero negative and one abstention, the chamber passed Senate Bill No. 8179, allowing SPSBC to “construct, install, establish operate and maintain” distributed energy resources and microgrid systems for 25 years.

SPSBC is controlled by Solar Philippines President Leandro L. Leviste, the son of Senator Loren B. Legarda.

Ms. Legarda was the lone abstention.

The bill, as approved by the Senate, authorizes the company to supply remote, unviable, unserved, or underserved areas in thirteen provinces.

These are Aurora, Batangas, Bohol, Cagayan, Camiguin, Compostela Valley, Davao Oriental, Isabela, Masbate, Misamis Occidental, Occidental Mindoro, Palawan, and Tawi-Tawi.

The bill provides that SPSBC is not entitled to “any government subsidy” in setting rates, while ampowering the Energy Regulatory Commission to set rates.

If enacted, the measure does not revoke existing franchises, and does not affect the Department of Energy’s mandate to promote private-sector participation in electrifying remote and unviable, unserved, or underserved areas. — Charmaine A. Tadalan

Checkpoints on the VAT refund maze

Our hoped-for radical changes in the processing of claims for value-added tax (VAT) refund filed with the Bureau of Internal Revenue (BIR) have seen the light of the day. Gone are the days when taxpayers would wait in vain for the acceptance or denial of their VAT refund application. Looking back, many have seen this as just a prerequisite to the true refund battle in the Court of Tax Appeals.

This year, the BIR issued Revenue Memorandum Circular No. 47-2019, which prescribes the revised guidelines and mandatory requirements for processing and granting VAT refund claims; and Revenue Memorandum Order (RMO) No. 25-2019, which prescribes the policies and procedures for implementing the 90-day period for processing and granting claims for VAT refund/credit. With the shortened processing time, criminal liability provisions in case of non-observance by the concerned revenue officers/officials (ROs) of the prescribed timeframe, and the requirement for the Commissioner of Internal Revenue to state in writing the legal and factual basis in case of denial of the claim, we are actually seeing a milestone in the VAT refund process. This news has brought hope to many, but the real question now is this: Would you be able to substantiate your claim fully?

The requirements for the VAT refund process are more stringent than before. If you are considering applying for a VAT refund in relation to Sec 112(A) of the Tax Code, as amended, refunds or tax credits of input tax on Zero-rated or Effectively Zero-rated Sales, read on for some checkpoints to know whether this pursuit is worth your while.

DO YOU HAVE ANY OUTSTANDING DELINQUENT TAX LIABILITIES?
RO/s will not accept applications where the taxpayer claimant has outstanding delinquent tax liabilities. As defined in RMO No. 11-2014, delinquent tax liabilities refer to a tax liability resulting in dishonored check, failure to pay taxes due on return filed, nonpayment of second installment due from individual taxpayers who availed of installment payments of income tax, and deficiency assessment issued by the BIR that became final and executory. However, if the tax liability pertains solely to VAT, the claim may still be accepted.

HOW MUCH TIME DO YOU HAVE BEFORE THE DEADLINE?
Taxpayers may file their VAT refund claims within two years after the close of the taxable quarter when the sales to which the input taxes being refunded are attributable were made. It is important to determine the volume of transactions and to project a timeline on the completion of requirements set forth under the revised checklist of mandatory requirements per RMC 47-2019. Among the requirements are various certifications to be requested from the BIR and Department of Finance, and authenticated documents from the Bureau of Customs in case of refund of VAT on importations. The processing time for these documents may take weeks or even months, depending on the additional requirements of the said government agencies.

WOULD YOU BE ABLE TO SECURE A CERTIFICATE OF REGISTRATION/INCORPORATION/ASSOCIATION FROM FOREIGN CLIENTS?
Some taxpayers decide to file refunds months before the deadline. In this case, the transactions may include sales to buyers that are no longer on the current client/customer list. This poses a challenge in terms of communicating with non-resident foreign corporation (NRFC) buyers to request for a consularized copy of their certificate of foreign registration/incorporation/association, which is one of the requirements to prove that NRFC buyers are not engaged in business in the Philippines.

ARE THE ORIGINAL COPIES OF THE OFFICIAL RECEIPTS AND INVOICES PROPERLY STORED AND COMPLETE?
If the period being applied for refund involves transactions from two years back at most, there might be a need to pull out some documents from the warehouse, as the original copies are required to be presented together with the photocopies of the invoices/receipts for sales and purchases. The assigned RO/s will validate the photocopies against the originals, and return the same after stamping “VAT Refund/Credit Claimed” thereto. Subject to the approval of the chief/head of the processing office, the assigned RO/s may perform the validation and stamping at the registered address of the taxpayer/claimant, if it is logistically impossible for the taxpayer- claimant to bring the original documents to the processing office.

WOULD YOU BE ABLE TO PRESENT YOUR BOOKS OF ACCOUNTS AND ACCOUNTING RECORDS?
The taxpayer claimant may be required to present its books of accounts and accounting records upon request of the assigned RO/s. Be prepared to pay administrative penalties in case the books of accounts or computerized accounting system used is not registered with the BIR.

It is worthy to note as well that taxpayers with claims for VAT refund are subject to mandatory audit by the BIR.

Submission of incomplete documents shall result in non-acceptance of the application, while failure to present books of accounts and accounting records is a ground for the denial of the claim. As a transitory provision, a taxpayer-claimant whose VAT refund claim has been filed before June 1, 2019 may submit certain documents and certifications within 30 days from the date of filing. Thereafter, no grace period will be given.

The application for VAT refund claim is a rather tedious task, and often takes a lot of time and resources. The difference now, though, is that the BIR gives us reassurance that our applications for refund will be acted upon, and that proper sanctions will be imposed on erring revenue officials. If you are positive that you can fully substantiate your claim for refund, pursue the application and plan it well. Who knows, just 90 days after filing, the unutilized input taxes in your books will finally be refunded.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Ma. Anneth Soledad Mirano is a senior from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

The ‘new cold war’ in the US-China trade wars: Application to Philippine foreign policy

The United States government’s ban that led Google to discontinue its software dealings with Huawei and other firms as part of the US-China trade wars has led key Philippine businesses to revisit their dealings with Huawei, a crucial partner in 5G development on the front lines of the Philippine government’s bid for telecoms modernization.

In November, the Duterte government paved the way for Mislatel, the telecom industry’s third player, to break the duopoly of Globe and PLDT. Globe and PLDT have downplayed the alleged Huawei threat to Philippine national security and declared that they are not breaking ties with the firm. Interestingly, the Philippine companies’ prudent response, based on wait and see and a commitment to explore vendor diversification beyond Huawei, says something about the need for a equally more circumspect perspective in our pursuit of foreign relations with great and emergent powers. It attests to the reality of the highly interconnected supply chains that embroil states with firms in the age of ICT revolution. Without considering these dimensions, it becomes simplistic to transpose US anxiety over the alleged Chinese state-sponsored hacking to the level of relations of Chinese firms with the markets of third states, such as ours.

Thus, what may be required of a globalized worldview is a more disaggregated application of the US-China ‘new cold war’ lens and its entanglement with the foreign policies of third states. This is to argue that the assumptions that legitimized the cold war world divisions between capitalism and communism, and between democracy and authoritarianism from 1945 to 1989, no longer define the 21st century strategic competition between US-China.

Contributing to the new cold war construct, the speech of US Vice President Mike Pence in October 2018, and the subsequent arrest of a Huawei executive in Vancouver in November formalized the warring path that the US has taken against China and its state-owned and private firms. Under the new cold war framework, these actions indicate categorically that the US believes China poses an existential threat to its national security.

As a foreign and security policy construct, the notion of a new cold war significantly diverges from the cold war event that marked the superpower rivalry between the US and the former USSR after the second World War. The difference is primarily attributed to the cold war’s rigid ideological basis and the nuclear arms race that underlined the world’s bifurcation between allies and spheres of influence. The end of the cold war also extended to the triumph of the US-led global democratic order or the unipolar moment.

What is the significance of the new cold war lens in the US-China trade wars to Philippine foreign and security policy?

The new cold war between the US and China does not reflect the context of the rigid superpower rivalry that marked global relations from 1945 until the turn of the 20th century. Alternatively, US and China competition is simultaneously situated on immensely intertwined global supply chains. The globalization argument cancels out the utility of nuclear war, the role of ideology and the loyalties that flow from great powers to the alliances and the spheres of influence. Because of the globalization of interests, the US-China trade wars will not neatly and automatically mobilize traditional alliance loyalties, which was characteristic of the earlier bipolar period. Additionally, the primacy of interest over ideology will make it difficult even for friends and allies to take sides. For instance, these countries have not totally cut ties with Huawei: Belgium, France, Germany, Italy, Poland in Europe; Thailand, Malaysia, Indonesia, Brunei, Vietnam and the Philippines, among ASEAN countries.

While the Philippine National Security Policy 2017 — 2022 is still premised on the unipolar position of the US, the Duterte government has already adopted a policy that hedges the risks associated with the US-China strategic competition in the South China Sea and beyond. In recasting its relationship with the US, the Philippine government, through Defense Secretary Delfin Lorenzana, has maintained the need to review the reassurance of mutual defense under the 1951 Mutual Defense Treaty. It has de-securitized its approach to the West Philippine Sea conflict to upgrade its relations with China. As a counterbalance, the Duterte government maintains the Visiting Forces Agreement and the Enhanced Defense Cooperation Agreement with the US. It has also re-opened the country to US military exercises with an emphasis in humanitarian action and disaster relief.

References to support the list of countries that have continued to work with Huawei are found in Bodetti, A (2019, April). Brunei: Huawei’s Foothold in Southeast Asia, The Diplomat; BBC News (2019, May). Huawei: Which countries are blocking its 5G technology; Panettieri, J. (2019, May 23). Huawei: Banned and Permitted in Which Countries? List and FAQ and Valdez, D. (2019, May 24). Globe stands firm on Huawei partnership. Businessworld Online.

 

Alma Maria O. Salvador is assistant professor of political science at the Ateneo de Manila University.

MAP urges holistic Laguna Lake rehabilitation for water security and eco-tourism

Water security and the environment are major concerns of the MANAGEMENT ASSOCIATION OF THE PHILIPPINES (MAP).

The recent water crisis in parts of Metro Manila exposed the Achilles Heel of Metro Manila’s water security. Almost all of raw water supply currently comes from one source — Angat dam in Bulacan. The water in the dam is vulnerable to extended drought, as being experienced now and in past years. Catastrophic earthquakes are another risk to water infrastructure. Activation of the West Valley Fault is said to be overdue and there is the recent revelation of the existence of hidden earth faults similar to the one that figured in the recent earthquake in Pampanga.

Water is essential to sustain life. The government cannot allow a scenario where water supply is severely disrupted and the teeming population of metropolitan Manila area would be denied or left to struggle for water to drink, cook food, clean, and wash, and in a mass exodus out of the metropolis in a desperate dash for water from other sources.

No matter how remote the possibility of such a dire scenario, contingency measures must nevertheless be put in place. Metro Manila has a fifth of the country’s population and accounts for over a third of the economy. A disaster here will inflict collateral damage to supply chains in the other regions.

It is for these reasons that MAP urges an immediate effort by the national government to emplace a failsafe water security system, with dams and Laguna Lake playing a redundant complementary role to ensure water supply, under any eventuality.

Laguna Lake is the largest freshwater lake in our country and among the largest in Southeast Asia. It is an ideal, logical, inexhaustible, and proximately-located source of fresh water for Metro Manila. It is well endowed to serve as a major component of a failsafe water security system together with dams, as well as having vast potential for public recreation and eco-tourism.

Unfortunately, the water quality of Laguna Lake has, despite sporadic efforts, continuously degenerated from long years of neglect and wanton disregard for the lake’s wellbeing much like other natural resources of our country. This deplorable condition persists despite Republic Act No. 4850, creating the Laguna Lake Development Authority, and Republic Act No. 9275, or the Philippine Clean Water Act of 2004, both of which remain to be fully implemented.

We have seen in Boracay the beneficial effects of strong political will exercised by President Duterte and concerted action taken by the Department of Environment and Natural Resources (DENR). We urge the President to order similar draconian measures in Laguna Lake with the issuance of an Executive Order to direct all national and local government units and instrumentalities to immediately implement all existing laws, rules, regulations and directives, particularly R.A. 4850 and 9275, to clean, rehabilitate, protect and conserve Laguna Lake and the forest cover of its watershed in the surrounding hills and mountains.

The President should make a policy declaration giving priority utilization of the lake as a viable and sustainable raw water supply for domestic, commercial and industrial uses, and that all other utilization of the lake, such as aqua and agriculture, shall be subordinated such that these secondary uses be allowed and maintained at an appropriate and sustainable level that would not conflict or put into jeopardy the priority purpose.

BW FILE PHOTO

Pending the rehabilitation of Laguna Lake, the National Water Resources Board should prepare ready-to-implement contingency measures for implementation in the event of disruption of water supply from other sources in the minimum quantity required for the survival of the population of metropolitan Manila, and that the national security adviser shall see to it that the plan is credible, viable and all resources available for its implementation when the need arises.

The public must be warned that the government will strictly enforce existing laws that prohibit, under pain of penalty, the dumping of waste into the lake. Polluting industries, such as factories, fish culture, poultry and livestock farms, must be strictly regulated.

All developments and structures must be banned within a no-build zone starting from the high-water mark to within, preferably, no less than fifty meters, especially in populated areas, to allow access to the public with ample space for recreation and common enjoyment of a national resource.

Necessarily, massive reforestation must be sustainably undertaken in the surrounding hills and mountains to enhance the productivity of the watershed. Ideally, indigenous wood species, fruit-bearing trees and bamboo should be utilized. No-build zones must likewise be established at the foot of the surrounding hills and mountains to guard against encroachment.

In accordance with R.A. 4850, the full potential of Laguna Lake must be harnessed to optimally utilize the resources of the lake regions, including for eco-tourism purposes, while guarding against unmanageable pollution and ecological imbalance. For public benefit, the Biodiversity Management Bureau (formerly Parks and Wildlife Bureau) should recommend and establish public recreational parks along the lakeshores.

As an alternative mode to land transportation, a lake ferry transportation system, preferably using green energy, can provide convenient, affordable and reliable connectivity between the towns and cities around the lake. Transportation connectivity is likewise necessary for convenient access to lakeshore developments.

This rehabilitation and development effort ought to be a Save Laguna Lake Movement participated in, supported and sustained by all, including private corporations as among their primary social responsibility projects. Civil society, including all environment protection organizations, is a stakeholder and must likewise participate.

Lastly, let the Laguna Lake rehabilitation be the model for all our freshwater lakes to be replicated all over the country.

 

Eduardo H. Yap is the Chair of the National Issues Committee of the Management Association of the Philippines and Initiator of this advocacy approved by its board of governors.

The Senate a rubber stamp?

With the 12 candidates endorsed by President Duterte elected to the Senate combined with his allies among the holdover senators, there is speculation that it would be easier now for the President to push his agenda through the Senate.

But for the Senate to become a rubber stamp for whatever President Duterte puts forth before it, he has to have in his pocket at least 13 senators, meaning he would have to have the unwavering support of the majority of the members of the Senate. For that to happen, at least 13 senators would have to blindly do the President’s bidding because they are beholden to him or because they have no mind of their own. Are there at least 13 senators among the 24 who are either extremely indebted to President Duterte or who are entirely clueless about their legislative function?

We may without question exclude from consideration the four opposition senators: Leila de Lima, Risa Hontiveros, Franklin Drilon, and Francis Pangilinan. Senators Panfilo Lacson and Ralph Recto were senators long before Mr. Duterte came to power. They are seasoned legislators who owe the President nothing. When Sen. Recto was the minority leader, he vowed to oppose the majority’s agenda if “it hurts the nation.” Sen. Lacson on many occasions has expressed opposition to the President’s policies and looked askance at some of the President’s decisions.

While they may have supported President Duterte’s legislative agenda, Senators Richard Gordon, a multi-term senator, Juan Miguel Zubiri, Joel Villanueva, and Sherwin Gatchalian were elected to the Senate on their own. They are not beholden to the President and neither are they unthinking members of the Senate. They have their own worthy advocacies. Now that President Duterte is nearing the halfway mark of his term, they will not be currying his favor as much as they did the past three years and would act more independently of him.

Senators Tito Sotto, another multi-term senator, and Manny Pacquiao have also been elected senators in their own and are therefore not beholden to the President. However, they were elected not on the basis of their qualifications for legislative work but on the basis of their celebrity status — Tito Sotto as the main character in the pang masa TV sit-com Iskul Bukol and Manny Pacquiao as the world champion of eight boxing divisions.

Mr. Sotto doesn’t tell jokes in the Senate session hall. In the deliberations of monumental issues, as in the impeachment trials of President Estrada and of Chief Justice Corona, he voted in favor of the president’s stand. I expect him to vote in favor of whatever President Duterte proposes as he has done all along.

Sen. Pacquiao is mainly a boxer. When he was a member of the House of Representatives, he was criticized for his poor attendance record. His response: “I don’t just sit around making laws, like others.” He spends more time in the boxing gym than in the Senate session hall.

The President is his fan. He went to Kuala Lumpur, bringing along Foreign Affairs Secretary Cayetano, Senate President Sotto, Solicitor General Calida, and National Police Chief de la Rosa, just to see Sen. Pacquiao fight the Argentinian boxer Lucas Matthysse. After the fight, Manny quipped, “the fight was one of a kind.” That was because President Duterte and his entourage of high-ranking officials of the Duterte Administration cheered for him. Expect Sen. Pacquiao to reciprocate the President’s support.

That brings us to the 12 newly-proclaimed senators. Now, that they have been elected, some senators no longer have to kowtow to the President’s every wish. A number of them, Senators Cynthia Villar and Sonny Angara among them, may feel that they owe the President nothing as they would have been elected just the same even without his support. Senators Grace Poe and Nancy Binay manifested that feeling graphically when they refrained from joining the others in thrusting their fists forward, known as the Duterte salute, at the proclamation ceremony.

Those eyeing the presidency or the vice presidency will pursue whatever course would enhance their political stock, regardless of whether they are aligned with the President’s agenda or not. Like senatorial race topnotchers in the past — Jovito Salonga, Gloria Arroyo, Loren Legarda, and Mar Roxas — Cynthia Villar must be seriously thinking of either she or husband Manny making a bid for the presidency in 2022. She will not sponsor bills or support programs that are not seen favorably by the voting population.

I believe Senator Pia Cayetano was hurt immensely by the President’s expression of preference for Bongbong Marcos as his successor over his own vice-presidential candidate Alan Peter Cayetano, Ms. Pia’s brother. That putdown was uttered in the presence of the Cayetano siblings, the Marcos siblings Bongbong and Imee, and a host of administration officials. I expect Senator Pia to hit back somehow at the President for the sake of her brother.

She had also been reproached by feminist groups, of which she is supposed to be a champion, for her deafening silence over the President’s misogynist utterances. I expect her to be not only critical of the President’s agenda but to take pot shots at the President occasionally.

As regards Senator Imee Marcos, Mr. Duterte’s endorsement of her bid for the Senate is only payback for the Marcoses helping bankroll his presidential bid in 2016. They are now “quits.” They are free of each other.

Another re-elected senator who must be hurting terribly is Koko Pimentel. He was dropped from the sample ballots distributed by Davao City Mayor Sara Duterte’s party, Hugpong ng Pagbabago. Her father would not be president if PDP-Laban president Koko Pimentel had not substituted the name Rodrigo Duterte for Martin Dino, who was originally PDP-Laban’s candidate for mayor of Pasay City. How the substitution resulted in Duterte becoming the PDP-Laban candidate for president instead of the candidate for mayor of Pasay can be attributed to Pimentel’s magical prowess. He too will drift away from President Duterte.

Francis Tolentino has more than enough credentials to be a senator. He earned a master’s degree in Law from the University of London and did post graduate studies in military schools abroad. He was a former mayor of Tagaytay and chairman of Metro Manila Development Authority. He did a superb clean-up job of the destruction Typhoon Yolanda wrought upon Tacloban. Still he needed the President’s all-out support to be elected senator. He is profoundly indebted to him. He will surely give the President full support.

Lito Lapid has the reputation of being the chair of the Senate Committee on Silence because in the 12 years he had been in the Senate, he was hardly heard, if at all. He admits there was really nothing he could do. He was not able to go to college because he was poor. All he knew was acting in the movies. His popularity as an action movie star catapulted him to the Senate. I am not convinced he has a mind of his own. He is likely to do whatever the President asks him to do.

Bong Revilla is another movie action star elected senator. He promised nothing during the campaign. He merely danced the buduts. He will dance in the Senate to the tune of DU30.

Bong Go was little known until Davao City Mayor Duterte ran for president. He said, “I will support his legislative agenda. In the past 21 years I have known him he has not given any flawed order.” I don’t expect Senator Go to see any flaw in the orders of President Duterte in the next three years. He will vote yes to whatever the President proposes.

When “Bato” de la Rosa was asked if he would be beholden to President Duterte, he said “Never.” Yet, he intimated he called the President to seek advice on some legislative matters. Instead of the President giving him advice, the President told him to do his job as senator. He had to be told to do what he was elected for. He will have to be told by the President what to do every time an issue is put to a vote.

Seven senators — Messrs. Pacquiao, Sotto, Tolentino, Lapid, Revilla, Go, and de la Rosa — fall short of the 13 required to make a rubber stamp.

 

Oscar P. Lagman, Jr. is a retired corporate executive, business consultant, and management professor. He has been a politicized citizen since his college days in the late 1950s.

Modi’s win is a populist warning to the world

By Mihir Sharma

IT’S A TERRIBLE FEELING to discover that your country is full of strangers. For some in India, the election of Narendra Modi in 2014, with a majority that India hadn’t seen in three decades, was that moment. Everyone knew there was discontent with the status quo; everyone knew that Modi was doing well, better than anyone had expected before he became a candidate — but to win an unprecedented majority? It meant that far more Indians than imaginable were willing to trust a leader with so disquieting a record.

Since then, I have seen that feeling of shock replicated elsewhere, and often. In Britain, for example, in the summer of 2016, as the country voted narrowly for Brexit. And again, in the U.S. that fall.

After a while, you refuse to believe what happened. It was special circumstances that led to this shock result, you’re told. Voters who should have known better were carried away with anger and enthusiasm, responding to a government floundering in corruption, or to years of feeling left out and ignored by mainstream parties, or to economic policies that didn’t sufficiently take their interests into account. Voters are sensible, people say; when they see how their choices aren’t working out as hoped, they will come around. Of course they will, that’s how democracy works.

In India, Narendra Modi’s premiership was certainly not working out as hoped. The jobs he had promised to create weren’t there. Rural distress was spreading, as the government’s tight control on food prices kept farmers from making the sort of profits they wanted. The prime minister took controversial, indefensible decisions like the overnight ban on 86% of India’s cash. And he lost several crucial midterm provincial elections, some by unusually large margins. Yes, he remained popular, but politics seemed to be snapping back to normal.

And then came May 23, 2019, when — instead of voting out Modi, or chastening him by reducing his majority, Indian voters instead rewarded him with an even greater majority. His party’s share of the vote jumped by more than 6%. Instead of seeing his term as a disappointment, his supporters retained their allegiance — and gained converts. Losing once to the populist might be bad, but you just have to look at India to realize twice is infinitely worse.

Liberals in India weren’t alone in being shocked in the past fortnight. A few days before Modi’s victory was announced, Australia’s incumbent right-wing government — after a shambolic few years — were returned to office, defying opinion polls and surprising pretty much everybody. A predicted swing against them didn’t materialize to any substantive degree, and voters in places like Queensland opted in larger than expected numbers for extremist parties — a choice that ultimately benefited the incumbents.

These are warning signs for the rest of the world. Do you believe that rational Brexit voters looking at the mess of the past two years will obviously change their minds? Think again. They may not see it with the eyes you do. The Brexit Party just won the biggest share of the U.K. vote in the European Parliament elections. Do you think the Democratic “blue wave” in the midterms of 2018 means Trump’s chances of winning re-election are low? Don’t bet on it.

If voters can make the wrong choice once, they can do it again — even in the face of objective evidence. Especially if their first choice has been misdiagnosed. If you imagine it was a protest, or a response to specific economic circumstances, then listen more closely to what your fellow citizens are saying — even if it makes you uncomfortable, because you don’t want to believe that’s what they want and believe.

In India, too many liberals came to the conclusion that Modi won in 2014 just because he promised jobs, or because the previous government had been a mess. It made his victory more palatable, more normal. It made our country more recognizable. But it was wrong. In fact, Modi promised pride. As his followers saw it, Modi promised to restore the greatness that more than a thousand years of foreign rule had sapped from India, culminating in the government of the Italian-born Sonia Gandhi.

He implied that the state would cease decades-old preferential treatment to Indians from historically disadvantaged or minority communities. His opponents sought to combat him on his economic platform, or on corruption allegations — but his voters chose not to listen to their arguments. Those issues simply weren’t what appealed to them in the first place. They liked his vision of the country, and so were resolutely deaf to arguments about anything else.

It turns out that, if you want to fight nationalist-populists like Modi, you can’t treat them like regular politicians. Nor can you assume away unpalatable truths about your fellow voters. You can’t change their votes by appealing to their pocketbooks, or by big economic promises, or by excoriating a populist government’s record, because they will always trust such leaders more than they will let you. You can’t change how they vote until you change their minds about what sort of country they want to live in. Only then can you defeat Modi — or Trump, or Brexit, or Le Pen.

BLOOMBERG

 

Mihir Sharma is a Bloomberg Opinion columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of Restart: The Last Chance for the Indian Economy.

The race for 650 million virtual bank accounts

By Nisha Gopalan and Andy Mukherjee

CHINA’S tech giants have upended the country’s payments system and promise to shake up its consumer-banking sector. The rest of the region won’t be so easy.

Asia is quickly becoming the next battlefront for Alibaba Group Holding Ltd.’s Ant Financial and Tencent Holdings Ltd.’s WeChat Pay, after both secured licenses to set up online-only banks in Hong Kong earlier this month. Singapore’s welcoming regulatory environment makes the city-state an obvious entry point to Southeast Asia.

The region’s huge market could offer some easy wins. Much of its population of over 650 million are digitally savvy smartphone owners, already comfortable with ride-hailing apps like Go-Jek and Grab. Meanwhile, inefficient bank branches, low interest rates and poor professional investment advice is trumping privacy concerns: 62% of people in developing Asian countries don’t mind sharing personal data to get customized products, compared with just 23% in wealthier Asian nations, according to a 2017 survey by McKinsey & Co.

Yet traditional lenders remain formidable competitors. Take Hong Kong: While the city has awarded licenses to eight virtual banks, three have gone to incumbent lenders Standard Chartered Plc, BOC Hong Kong (Holdings) Ltd. and Industrial & Commercial Bank of China Ltd. HSBC Holdings Plc, which has a lock on nearly 30% of the city’s deposits, hasn’t even applied.

HSBC may have good reason to be unmoved. Together, the city’s virtual-bank contenders will have a balance sheet of just HK$150 billion ($19 billion), which would put them on par with Hong Kong’s third-smallest bank, Dah Sing Banking Group Ltd., according to Citigroup Inc.

While picking up retail customers is one thing, getting them to put large amounts of money into a virtual bank account is another. Without a big-name lender behind them, newcomers grapple with a trust deficit.

Virtual banks also aren’t exempt from frustrating know-your-customer routines, which can hinder efforts to sign up cash-heavy small and medium enterprises. A hair salon that finally convinced HSBC it’s not laundering money will be reluctant to repeat that process. While an individual can open a virtual account in a matter of hours, the same can’t be said for SMEs, which face more onerous regulatory hurdles. That means it’s unlikely to be any less time-consuming than the average 38 days it takes for a traditional bank in Hong Kong. (As tedious as they may seem, such rules could help virtual banks avert some of the costly regulatory blunders of their rivals — particularly given startups often lack deep expertise in operational risk management.)

Another issue is that newcomers’ cost advantages may be smaller than anticipated. Virtual banks might save money by not having branches, but Hong Kong is setting the same capital requirements for online-only banks as their bricks-and-mortar rivals — something Singapore is likely to replicate.

Then there’s liquidity. Singapore’s DBS Group Holdings Ltd., which started a mobile-only digital bank in India in 2016, claims to be targeting SMEs with data-driven lending. It’s unclear if the deposit base required for a meaningful operation can come entirely from online-only customers. In Indonesia, Malaysia, Myanmar, the Philippines, Thailand, Vietnam — in addition to China and India — 46% of consumers flatly refused to move any of their money to a bank without branches, according to the 2017 McKinsey survey.

That doesn’t mean traditional banks should get complacent. Many startups are backed by deep-pocketed Chinese tech giants, which gives them the flexibility to scale up quickly. Old-world banks may be able to capitalize on this by developing more alliances with them. Using Chinese partner ZhongAn Online P&C Insurance Co.’s technology, for example, Tencent-funded Grab Holdings Inc. is offering its ride-hailing app in Singapore as a platform for insurers to sell policies without agents or brokers. About 60% of Cit-igroup’s consumer credit cards in Asia are now paid via Ant’s Alipay, according to the bank. Paytm, India’s most popular digital payment service, has made its peace with plastic: It’s now issuing credit cards jointly with Citi.

Ultimately, big banks may even want to consider ceding some of this race for retail clients to nimbler tech rivals. The real money to be made is in a dustier corner of the banking business: in the accounting departments of large multinationals. We’ll explore this option in a second column.

 

BLOOMBERG

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