Global pact to curb illicit tobacco trade to take effect in September

June 29, 2018 | 10:28 am

The World Health Organization announced Thursday that a “game-changing” global pact to battle the illegal tobacco trade would soon kick into action, after Britain became the 40th country to join.
The UN health body said that with the ratification by Britain and Northern Ireland on Wednesday, “the necessary number of parties to the Protocol to Eliminate Illicit Trade in Tobacco Products has been reached.”
That means the treaty, which aims to create an international tracking system with the goal of halting the smuggling and counterfeiting of tobacco, will take effect after 90 days, or on September 25.
“It’s a historic day in the fight against tobacco,” WHO chief Tedros Adhanom Ghebreyesus said in a Tweet, describing the entry into force of the treaty as “a vital step towards a tobacco-free world.”
When the pact was first announced in November, 2012, Tedros’s predecessor Margaret Chan described it as “a game-changing treaty”.
“This is how we hem in the enemy,” she said at the time, addressing a meeting in Seoul of WHO’s Framework Convention on Tobacco Control (FCTC), calling the new pact a major step towards “eliminating a very sophisticated criminal activity”.
About 10 percent of the global cigarette market is estimated to go through illicit trade, according to Vera Luiza da Costa e Silva, who heads the FCTC secretariat.
Due to the shadiness implicit in the illicit trade, the scope of the problem is unclear, and WHO could not provide any specific numbers on how much it might be worth.
According to Euromonitor International however, overall cigarette retail values in 2016 were worth $683.4 billion, so the annual value of illicit cigarette sales alone could conceivably be valued at around a tenth of that, not to mention other tobacco products.
‘Big public health problem’
“Illicit trade in tobacco products is a big public health problem,” da Costa e Silva told journalists in Geneva, adding that “it also has an impact on countries’ revenues.”
It is estimated that some $30 billion a year are lost in tax revenues due to this illicit trade.
A major aim of the new treaty is to prevent the illegal trade in the first place, by obligating parties to for instance use non-removable markings and to coordinate globally to detect illegal tobacco trading.
Agents, suppliers and tobacco manufacturers will all have to be licensed. Manufacturers will have to carry out checks on customers to ensure they are genuine or if they have associations with criminal organisations.
Under the pact, countries will also be obliged to establish “tracking and tracing” systems, at the national, regional and international levels, within five years.
The European Commission’s Tobacco Products Directive has bee criticised for allegedly relying on tobacco companies themselves to handle the tracing aspect, sparking questions over whether it might be forced to change track once the new treaty takes effect.
Asked about what role tobacco companies would be permitted to play under the new pact, da Costa e Silva said the final format would only be determined during a first meeting of the members of the treaty, in Geneva from October 8-10.
“There are open questions that we will only be able to handle with the meeting of the parties,” she said.
She insisted that the new treaty amounted to “a war against illicit trade.”
“The current parties to the protocol will have the instruments … to implement provisions to exterminate, eliminate the illicit trade of tobacco products.” — AFP

Standing the test of time

June 29, 2018 | 9:30 am

(This profile of the late godfather of the Philippine accounting industry, Washington Z. SyCip, who would have turned 97 today, was first published in BusinessWorld on June 30, 2010.)

By Anna Patricia G. Valerio

The turtle figurines in Washington SyCip’s office say little of the titan who collected them. Even at 89, the man is a far cry from the animal that has come to be associated with slowness.

“For longevity,” explains Mr. SyCip, the brains behind the one-man accounting firm that grew to become SyCip, Gorres, Velayo & Co. (SGV), the largest auditing and consulting firm in the country. A joint venture with Fred Velayo, a childhood friend, and Ramon Gorres, a former senior partner at Henry Hunter Bayne & Co. (HHB), the company recently became an affiliate practice of top global auditor Ernst & Young.

He points to a Chinese painting hanging on his wall: an old man is asking for advice from a turtle. The Chinese characters, which he had asked his friends to translate, say: “Take it easy” — a reminder that couldn’t be more fitting for the no-nonsense mogul who, from Mondays to Saturdays, and sometimes even on Sundays, can be found in his office at seven in the morning.

This is the same man who gave up a golf session with friends to accommodate the visit of Mark Shepherd, then chairman of Texas Instruments, as he was looking to invest in the country. Realizing that there were going to be more of these weekend visits from prospective foreign investors, Mr. SyCip decided to quit golf altogether. “I didn’t want [my friends] to get mad at me for not showing up,” he says. Choosing business over leisure proved to be a wise decision, as he has since attracted numerous ventures to the country over the years.

Washington SyCip’s story, wrote Palanca award winner and author of Wash: Only a Bookkeeper Jose Dalisay, Jr., is “a biographer’s dream:” He was accelerated three times in elementary school, and completed college in just two and a half years. Graduating summa cum laude at the age of 17, he taught and finished his master’s degree at the University of Sto. Tomas (UST). At 19, thinking himself too young to practice accountancy, he headed to Columbia University in the United States for further studies.

But for someone who very early on already seemed predestined for a bright career in finance — being the son of Chinabank co-founder Albino SyCip — Mr. SyCip, or Wash as he is known to his friends, is very much a self-made success.

Believing that his father was among those killed in the Manila bombings during the Second World War, he joined the US military, which sent him to perform code-breaking tasks in Calcutta, India. This was how he acquired his American citizenship — a prerequisite for working in the US security intelligence department. Mr. SyCip returned to the Philippines, however, to see his father alive and the market brimming with demand for accounting services due to a sudden surge in war damage claims.

At a time when British firms had a virtual monopoly of the market and took in mostly Westerners as their partners, Mr. SyCip sought local, up-and-coming businesses through his one-man firm, W. SyCip & Co., where he worked as an accountant, messenger, and his own company’s janitor. He set up shop at the Trade and Commerce Building in Binondo, a structure overseen by his brother Alex, whose law firm was next door to his office. Like another sibling, David, who operated an export-import business in the same building, Mr. SyCip occupied the space as a regular tenant, paying his brother rent for the room he was using.

As the firm grew, it had only to maintain the professionalism that Mr. SyCip had instituted on his own, a standard he says he got from his father. “I wanted the company to be a complete meritocracy,” he says. “My father would always tell us not to work in the bank. He would say, ‘If you do well and I promote you, they’re going to say it’s nepotism, and it’s embarrassing. If you don’t do well, it’s also embarrassing.”

The firm’s steady expansion, spurred mainly by mergers and partnerships, soon required it to relocate to bigger headquarters. For this, the company, which had by then acquired its current name, SGV, built its own buildings, SGV I and II, along Ayala Avenue. It would not be the end of its progress. The following decades saw the accounting firm branch out to Taiwan, Thailand, Indonesia, Singapore, Malaysia, Vietnam, Hong Kong, Korea, and China.

“I never expected [the company] to grow so fast,” says Mr. SyCip. He sought to establish a regional network in another field, helping set up the Asian Institute of Management (AIM) with the late Ramon del Rosario, founder of Phinma, using a US$1.2-million grant from the Ford Foundation and aid from local conglomerates. Ayala Corporation had given the AIM 13,000 square meters of land in Makati, and Eugenio Lopez wrote it a P6.5-million check, which in the 1960s was the largest cash donation given by a Filipino donor.

For all his work in the Asian business sector, however, Mr. SyCip remains rooted in the Filipino community. He believes in the potency of education in alleviating poverty, a conviction that has benefited the schools he has been part of, either as a teacher or as a student: the University of the Philippines (UP), University of Sto. Tomas (UST), and Victorino Mapa High School all receive funding assistance from him. What could perhaps sum up the 89-year-old business pillar are the words of Carlos Palanca, Jr., who had described him as a man with “a Filipino heart, an Asian mind, and an American citizenship.”

In 2007, Ayala Land opened the Washington SyCip Park as a tribute to his contributions to Philippine business. Quick to downplay his achievements, Mr. SyCip pointed to his wife Anna, without whom he says he could not have gone far in his profession. “She was so patient,” he says. “She had to take care of the children while I was working night and day.”

Today, Mr. SyCip celebrates his 89^th birthday. “So, life goes on,” he says with a smile that seems to say that this is just another day for the man who, amid all of his accomplishments, would rather be known simply as a bookkeeper.

The building blocks of the country’s future

June 29, 2018 | 9:25 am

On the back of a massive ongoing plan by the Philippine government to upgrade and modernize the country’s infrastructure, the construction industry is in for a boom.

As Metro Manila continues on its growth track toward becoming a megalopolis, ambitious efforts are being rolled out to decentralize the country’s business from the urban complex and divert them to Special Economic Zones around it. The undertaking includes the expansion of roads, ports, and train lines, as well as the cooperation of the big name real estate players to construct residential and commercial districts outside the metro, all of which requires a substantial chunk of investment.

This is where the President Rodrigo R. Duterte’s administration’s P7-trillion ($137 billion) infrastructure development plan comes in.

According to the research arm of the Fitch Group, BMI Research, the Philippine construction industry is projected to steadily expand over the next decade, gradually expanding at an average real rate of 9.8% in the decade between 2017 and 2026. The positive outlook is a continuation of a longstanding upward trend from the 1970s and early 2000s, before it was interrupted by economic issues in 2011.

“If we take a look at the trend from the ’70s to the early 21^st century the construction trend was on a steady level, which drastically dropped in 2011 due to economic setbacks,” local design and construction firm Mundo Builders told BusinessWorld in an interview.

“However, from 2015 onward the industry has been on an upward incline.”

In addition, Mundo Builders pointed out that while the urban landscape of Metro Manila may not seem to hold any more space for building new structures and edifices, old buildings are being torn down and replaced with new high rises, and new developments are growing in the areas of Bonifacio Global City, Pasig, Quezon City and the reclaimed areas in Muntinlupa. These developing areas and the rebuilding efforts, Mundo Builders noted, have contributed to the present steady rise of the construction industry.

“Because of the steady incline in the construction industry this contributed to a steadier source of livelihood for all levels of society. A steady supply and demand for the materials needed in the industry has also opened up new venues for budding entrepreneurs as well,” the company said.

Foreign players are also expected to profit from the greater investments and project opportunities provided by the government’s “Build, Build, Build” project, with BMI Research expecting construction, engineering and heavy industry firms from China and Japan largely benefiting from the robust growth of the industry.

The research unit predicted that imports of infrastructure-related goods from the two countries are going to continue on upward trajectories, noting “we expect this trend to continue to manifest with the number of project opportunities remaining significant.”

According the BMI Research, the Philippines’ has maintained historically warm relationship with Japan regarding trade and industry, and Japan’s significant investments into the Philippines are currently being bolstered by its infrastructure export strategy. Meanwhile, Mr. Duterte’s recent efforts to push for friendlier relations with China are strengthening the economic ties between the two countries.

Many of the Duterte administration’s largest proposed projects have been converted from public-private partnerships (PPPs) to official-development assistance projects, with the implicit aim of targeting the generous financing packages available from China and Japan.

“We note that switching from developing projects from PPPs to be financed by overseas development assistance threatens locking other international companies from benefitting similarly,” it wrote in its report.

But with opportunities come challenges. There is mounting pressure to maintain the Philippines’ attractiveness to foreign investors, as the construction industry is largely dependent on the local economy and the political environment. This is worsened by factors including the rapid pace of inflation and the country’s deteriorating currency.

“On a large scale, this industry is deeply affected by the status of our political environment. We are largely dependent on the local economy at the moment due to the current political situation. Once our political climate becomes friendlier to the foreign investors who need to build infrastructures in the country, our industry will see a larger growth,” Mundo Builders said. “Our global image as a country is also a contributing factor in enticing foreign investors to build more infrastructures. Maintaining a positive global image will assure us that the construction industry will see a steady growth.”

The company added another point of issue in the construction industry: professionalizing it. “It is still a challenge to ‘professionalize’ the industry. There are licensing and/or certifying bodies but a lot of entities still look for opportunities to make fast and easy money and skip out on all the legalities. Investors must be wary of the fact that not all entrepreneurs have really taken time to calculate their personal risks and embark on a construction endeavor with the purest of intentions.”

Mundo Builders added that addressing the current issues in the country’s construction industry at the very least involves taking another look at the political relationship between conglomerates and the government.

“Fixing, even challenging at the very minimum, the political effect on the country’s construction industry, and probably across all others as well, comes only with ideal circumstances. For now, the conglomerates will continue to nourish this industry with their visions. The government, for its part, must be able to help in as far as regulating material prices and leveling labor ordinances,” the company said.

“Strict promulgation of regulations and certifications added to aggressive information campaigns will eradicate the proliferation of “fly by night” contracts. This way, prospective investors will have more confidence in dealing with local providers thus increasing business takes.”

Additionally, construction companies should be mindful of the limited space available, as prices continue to rise rapidly. Massive efforts are being done to curb Metro Manila’s overcrowding issues, including the promotion of new central business districts like Clark Freeport outside the capital.

It may be too early to tell whether such efforts would be enough to forecast a bright future for the Philippine construction industry. Current global political tensions, such as that of an imminent trade war between the world’s most powerful nations, and local economic issues, such as the rising inflation and depreciating peso, are weighty adversaries to such a goal. But Mundo Builders remains optimistic.

“The possibilities are endless for the industry,” the company said.

Toward a greener construction industry

June 29, 2018 | 9:20 am

The country’s construction industry is seen sustaining its growth, supported by robust macroeconomic growth and the acceleration of infrastructure as pushed by the government.

Oxford Business Group (OBG) said in a 2017 report, “Nowhere are the effects of the Philippines’ sustained economic growth more apparent than in the construction industry, which is benefitting from pent-up demand and a positive outlook for future growth. This momentum has driven the industry to one of the highest growth rates in the country, with the Philippine Statistics Authority reporting growth of 11% in 2014, 10.4% in 2015 and a jump to 14.6% in 2016.”

“Years of investment and strong economic development have fostered a robust real estate sector that now extends beyond Metro Manila and into secondary markets. Economic development and a growing middle class continue to fuel demand for new, high-grade residential units, while commercial investment drives an ever-increasing amount of retail and office space,” it added.

Sharing a positive outlook for the country, the report said that these growth prospects exhibited by the construction industry will seem to gain momentum in the future.

“The Duterte administration has expressed its intention to boost domestic spending, particularly on large infrastructure projects and socialized housing, both of which would trigger a sustained rollout of big-ticket items for the construction industry as the state ramps up its infrastructure spending to 7% of GDP.”

With the strong demand for commercial space in the country, particularly in Metro Manila, OBG said that developers and contracted construction companies have been focusing on adding new floor spaces as quick as possible. And while a number of these new projects have been built to modern standards, with high-tech, aesthetically pleasing details, the report said that only recently have environmental concerns become a relevant component of building design and construction.

More than ever, going green in construction is vital especially since buildings’ energy consumption has an effect on health as well as environment; and can contribute to the growing problem of global warming.

Apart from reducing the negative impacts on the environment, experts said that adopting green solutions in buildings can bring forth positive yields to a business, including lower business costs; increase in value of property; conservation of resources; improved air quality; and improved occupant health and productivity, among others.

Amid this call for greener solutions, other reports also highlighted the growing importance of paying attention to the way a building is built or its “embodied energy’’ rather than how it is used.

Embodied energy concerns the upstream value of the energy consumed by the processes associated with building production — from mining and the processing of natural resources straight through to manufacturing and transport. This is according to a report of International Finance, a member of the World Bank Group through its Excellence in Design for Greater Efficiencies (EDGE) program.

“The worst culprits in building materials manufacturing are easy to determine. Five to seven percent of global CO₂ emissions are caused by cement production. The iron and steel sector account for 11% of global CO₂ emissions. And more than 5% of the world’s entire electrical generation is spent on the production of aluminum,” the report said.

“Not only does the manufacturing of building materials have significant energy-related GHG emissions, but it also causes high levels of air pollution.”

In designing a green building, the report said that finding realistic ways to reduce the embodied energy of the roof and floor structure is critical. Thus, the report suggests the following: reduce the quantity of materials used by adding “filler” in slabs and/or reducing column spacing; substitute high-embodied energy materials with lower embodied energy materials; selecting a more efficient construction technology such as post-tension concrete slab, planks and joists; and identifying a completely different material such as timber floor construction.

The report also positively noted that mainstream building material manufacturers are committed to making initiatives to reduce their carbon emissions in the years to come.

“Given the important role that building materials play in global resource consumption, air pollution and GHG emissions, it is essential that the measurement of embodied energy become a crucial part of the decision-making process for designers and clients. Recognition must also be given to those who are responsible in their choices. Through greater awareness we can create a larger market for low embodied energy products and put pressure on all manufacturers to develop alternatives for their respective markets,” the report concluded.

Meanwhile, the Green Building Market Intelligence report of EDGE for the Philippines stated that green buildings can reach as high as 20% to 25% of the market in 2025 due to a combination of policy support, tax benefits, educational and awareness programs and realized savings from energy efficiency.

IFC also projects that the overall percentage of new green building is expected to steadily increase by 2% to 5% every year, at least until 2030.

Building a legacy of excellence

June 29, 2018 | 9:15 am

By Mark Louis F. Ferrolino, Special Features Writer

From a small company with less than 10 employees in 2009, Mundo Builders, Inc. continuously grows and gains popularity for its distinctive, one-on-one approach. Within nine years of operations, the firm has become instrumental in designing and creating the world of its clients from diverse industries, with quality workmanship and professionalism. As it moves forward, Mundo Builders not just leaves footprints of yesterday’s dreams but as well as a legacy for future generations.

Mundo Builders is a one-stop design and construction firm founded by the industrial designer MJ Ringor on February 2, 2009. Mr. Ringor is well-known for his “hands-on” approach in the business, which ensures quality in every project completed by the company.

Together with Mr. Ringor, reliably talented engineers, architects, and designers make up the firm. These professionals have respective specialization in all aspects of traditional, transitional and contemporary design.

The firm offers design and construction services, specializing in fit-out interiors. Mr. Ringor’s brand of design, which is about sleek spaces, is manifested in all Mundo Builders’ projects from residential homes to commercial facilities.

“Having been in this industry for nine years, we are a fairly young company. We have been blessed and fortunate enough to have worked with both large and small design and construct projects,” said Mundo Builders to BusinessWorld.

Mundo Builders treats each of its project, may it be small or large, with equal care and attention to detail. It has been committed to its mission of providing its clients with complete and quality services that range from creative design, commercial tender, project implementation and management, and maintenance.

On top of these services, the firm also offers analytics for the return on investment of the project, marketing and IT (information technology) services for the site.

“We are a one-stop shop, so the clients don’t need to talk to several suppliers for a design build project. We also do personalized, one-on-one service with the clients. More often than not, our clients start with one project. Then, when they become satisfied with our service and they feel comfortable working with us, it will be easy for them to trust us and seek our service for their future projects,” Mundo Builders said.

Through the years, the firm has established a loyal customer base, which mostly comprises of promising local and international companies. It has strived to deliver noteworthy projects and has earned the trust of its clientele by adhering to its avowed principles.

Mundo Builders is behind the creation of the corporate offices of some big corporations in the country, such as 2GO Group, Inc. located in Double Dragon Plaza in Pasay City; Union Bank in Union Bank Plaza in Pasig City; Linde Philippines in Cyber Sigma in Pasig; Microsoft in Ayala Office Tower in Makati City; Philex Mining Corporation in TV5 Media Center in Mandaluyong City; Kantar Millward Brown and Kantar: TNS in BDO Equitable Tower in Makati City; and TaskUs in Anonas, Quezon City.

Mundo Builders’ portfolio also includes the following: Western Union project in Quezon City; Horizon Homes in Shangri-La at the Fort in Taguig City; and Honda in Makati City, Cebu and Davao.

Like any other businesses, Mundo Builders strives to grow bigger and become more profitable. And for the company, its growth also means giving back to its own employees.

“If we grow, they benefit as well. We believe in paying it forward so the entire team works hard to reap the benefits of their hard labor. This creates a positive ripple effect that constantly benefits everyone in the company,” Mundo Builders said.

The embattled yet hopeful Duterte presidency

June 29, 2018 | 9:10 am

The presidency of Rodrigo R. Duterte has always been marred by conflict. From the beginning, it was unceasing, coming as if from all sides, from the disputes brought about by his adamant stance on the war on drugs, to the heated political arguments of his supporters and critics on social media.

The beginning of his second year in office saw the outbreak of the Battle of Marawi, a five-month battle against terrorist groups in Lanao del Sur.

The battle started between Philippine government security forces and militants affiliated with the Islamic State of Iraq and the Levant (ISIL), including the Maute and Abu Sayyaf Salafi jihadist groups on May 23, 2017 and lasted until Oct. 23, becoming the longest urban battle in the modern history of the Philippines.

It came at a time when a wave of terrorism was sweeping the world and forced the president to declare martial law in Mindanao. The Battle of Marawi ended with the deaths of militant leaders Omar Maute and Abu Sayyaf chief Isnilon Hapilon. Martial law is extended in Mindanao to help in Marawi’s rehabilitation.

On another front, the coming of 2018 signified the implementation of Mr. Duterte administration’s plans to overhaul and modernize the Philippines’ tax system. The Tax Reform for Acceleration and Inclusion (TRAIN) law is envisioned to correct a number of deficiencies in the tax system to make it simpler, fairer and more efficient.

The revised tax code did away with the personal income taxes of Filipinos in the lower tax brackets and simplified estate and donor’s taxes, compensating the projected loss of revenue with increased excise taxes on products such as oil, automobiles, and sweetened beverages and expanding the value-added tax base.

By 2022, the government expects TRAIN to reduce the poverty rate from 22% to 14%, lifting an estimated six million Filipinos out of poverty, and to improve the economy enough to achieve an upper-middle income country status. In the long term, by 2040, it seeks to eradicate extreme poverty, create inclusive economic and political institutions and achieve a high-income country status.

“For us to be able to achieve the vision of TRAIN, we need to lead the investment growth of 7% to 10%,” the Department of Finance states on its Web site.

“Over the long term, all these investments require additional funds of around P1 trillion per year in 2016 prices, on top of the current P1.7 trillion. Over the medium term, the government will need to raise some P366 billion per year between 2016 and 2022 (or P2.2 trillion in total).”

Currently, economists and lawmakers are in the midst of challenging Mr. Duterte’s comprehensive tax reform program, inciting a conflict between those who believe tax reform is good for the economy and those who believe it is a burden on the poor.

One of the main goals of TRAIN is to fund the administration’s massive P10.6-trillion infrastructure development plan, which the National Economic and Development Authority believes will generate as much as P31 trillion.

Among these projects are the Metro Manila Subway Project-Phase 1 (P354.9 billion), Malolos-Clark Airport-Clark Green City Railway (P211.4 billion), Philippine National Railways (PNR) Manila-Bicol Line (P175.3 billion), and the PNR Tutuban-Los Baños Line (P124.1 billion).

Titled “Build, Build, Build,” the massive project aims to accelerate development of infrastructure, increase the productive capacity of the economy, create jobs, increase incomes and strengthen the investment climate leading to sustained inclusive growth.

Critics argued that the tax reform, made effective at a time of a worldwide oil price hike, is pushing the prices of consumer goods upward. Inflation rose for a fourth successive month in April, hitting a five-year high of 4.5%, blemishing the Philippines’ reputation as one of Asia’s fastest expanding economies for the past six years.

Two more tax reform packages are in the pipeline, and it remains to be seen whether the effects of rising prices will counteract the positive benefits envisioned by TRAIN.

The outcome will be significant for consumers, as another point of contention with President Duterte’s government is his promises to crack down on illegal forms of contractualizations such as “endo” or “end of contract” arrangements. Dishonest businesses are abusing contract laws to avoid giving contractual employees stable hours and benefits.

President Duterte issued an executive order denouncing this practice, but labor groups criticized it for not making an effort to normalize direct hiring in employer-employee relations, something they have long been clamoring for.

For the President’s part, he admitted his powers are limited. To end all forms of contractualization, he said, Congress needs to amend the Labor Code.

There are some good news for Filipinos, however. Through signing laws such as the Universal Access to Quality Tertiary Education Act and the landmark Mental Health law, which aims to provide accessible and affordable mental health services, the president came through for Filipinos in low-income families.

Interestingly, the main opposition to the Universal Access to Quality Tertiary Education Act, which seeks to provide free tuition for students of 112 state universities and colleges (SUCs), came from President Duterte’s own economic advisors. Budget Secretary Benjamin Diokno claimed that the policy would require funding of P100 billion, a sum which the government could not afford in its current budget. The President apparently disagreed, saying that the benefits outweigh the costs.

Among the other victories of the Duterte administration are the successful extension of the validity of Philippine passports and driver’s licenses, the greenlighting of laws providing free irrigation, free Internet access in public places, as well as the increase of the salaries of the police and military.

President Duterte also put into law the Ease of Doing Business Act, which mandates government offices to process transactions within days and introduces a “zero contact” policy to reduce the likelihood of corruption, similar to his much-alluded anti-red tape practices implemented in Davao City when he was mayor.

In addition, the law seeks to create a one-stop shop for government permits so that businessmen, and even overseas Filipino workers, no longer need to visit separate government offices for separate permits.

Through such laws, and many executive orders like it, President Duterte will conclude his second year in office. Other big-ticket promises, like his push for the adoption of a federal system of government or the long-awaited Bangsamoro Basic Law, are taking more time. But as of now, whether his embattled presidency will be remembered or his victories will be judged truly as victories down the line, no one knows. Only time will tell.

Improving lives through infrastructure

June 29, 2018 | 9:05 am

President Rodrigo R. Duterte’s centerpiece project, the “Build, Build, Build” program aims to usher in the “Golden Age of Infrastructure,” and is known as boldest infrastructure development program in recent Philippine history.

According to the Department of Finance (DoF), the current administration chose to embark on this ambitious program to address the country’s poor state of infrastructure, which, for the longest time, has been a major restriction to growth.

“This dismal state of public infrastructure cannot, and should not, be allowed to continue,” the DoF previously said in a press release, citing that Philippines has the worst overall infrastructure among the ASEAN-5 countries since 2010 according to the World Economic Forum Competitiveness Rankings.

One of those problems related to poor infrastructure is Metro Manila’s worsening traffic, which according to a report by the Japan International Cooperation Agency (JICA), costs the country about P2.4 billion daily, and is projected to amount to P6 billion daily by 2030.

Meanwhile, in a separate report, Finance Undersecretary Grace Karen Singson said that this program is in keeping with the government’s goal to sustain rapid growth, attract investments, and attain economic inclusion for all Filipinos.

Although ambitious, as Ms. Singson said, every penny is worth spending for. “The ‘Build, Build, Build’ program will create 1.7 million jobs by 2022 as well as secure our country’s fast-paced growth in the medium term.” Separate reports stated that 1.1 million jobs are to be generated every year through the program.

Moreover, the Undersecretary said that the program is in line with the President’s vision to reduce poverty incidence from the current 21.6% to 14% by 2022. She then continued that this would result in the improved lives of more than six million Filipinos and would set the economy securely on the road to upper-middle-income status by 2022 and to a high-income one by 2040.

In particular, the DoF said the government targets 75 flagship aimed to be completed by 2022. These include six airports, nine railways, three bus rapid transits, 32 roads and bridges, and four seaports. The DoF said these projects will help bring down the costs of production; improve rural incomes; encourage countryside investments; make the movement of goods; and people more efficient, and create more jobs.

The airport projects include the construction of a new world-class passenger terminal in Mactan-Cebu International Airport, which is reported to be fully operational starting July; as well as the construction of Bicol International Airport, which is slated to be completed by 2020.

Slated for implementation this year is a new passenger terminal building at Clark International Airport, which aims to increase passenger capacity by eight million per year from the existing number of more than four million passengers per year.

Apart from developing the Clark International Airport, the government is also set to construct New Clark City, which is envisioned to be a modern metropolis and the next growth driver in Luzon. Bases Conversion and Development Authority recently said the 9,450-hectare project is on track, and is positioned to be the country’s first smart, green, and resilient metropolis in the country.

Railway projects on the other hand include LRT-1 South Extension Project, which aims to extend the LRT Line 1 system southward starting from the existing line in Baclaran, and will traverse the cities of Parañaque and Las Piñas in Metro Manila and the City of Bacoor in Cavite. Another is the LRT Line 2 East Extension Project, which will extend the services of LRT Line 2 from Santolan Station to Masinag.

Railway projects also include the Line 7 (MRT-7) — a 22-kilometer elevated railway line with 14 stations from San Jose Del Monte, Bulacan to MRT-3 North Avenue in Quezon City.

In addition to this, the Mega Manila Subway project is also under its way. The first ever subway in Metro Manila, the 25-kilometer underground mass transportation system aims to connect major business districts and government centers. It is expected to be partially operational by 2020 and fully operational by 2025, and will serve around 370,000 passengers per day in its opening year.

Meanwhile, NCR will be easily connected to Clark International Airport and New Clark City via the PNR North 2 project. The 69.5-kilometer mass transportation railway will extend PNR North 1, and will enable a one-way travel time of 56 minutes between the two destinations.

Moreover, PNR 2 is meant to be seamlessly connected to PNR North 1 and PNR South Commuter. The 38-kilometer PNR 1 will connect Malolos, Bulacan with NCR; while the 72-kilometer PNR South Commuter will connect Manila to Los Baños, Laguna.

These PNR projects aim to form one integrated commuter rail system serving commuters traveling to, from, and within NCR, Region III and Region IV-A.

For the southern part of the country, the government is rolling out the Mindanao Railway: Tagum-Davao City-Digos (TDD) Segment, which is expected to reduce travel time from Tagum City, Davao del Norte to Digos City, Davao del Sur from 3.5 hours to 1.3 hours once operational by 2022. Spanning over 100 kilometers, the project is a segment of the larger 830-kilometer Mindanao Railway network.

In addition to these projects, the “Build, Build, Build” program is also set to construct the following: four energy facilities that will ensure stable power supply at lower prices; 10 water resource projects as well as irrigation systems that will raise agricultural output; five flood control facilities that will help protect vulnerable communities as well as boost their resilience against the impact of climate change; and three redevelopment programs that will deliver sustainable solutions to best meet the needs of urban populations.

Toward a stronger economy

June 29, 2018 | 9:00 am

The current administration inherited a robust economy from its predecessor. And exactly two years after President Rodrigo R. Duterte assumed the office, the economy stays strong and is expected to grow steadily in the succeeding years.

Early last year, the Department of Finance (DoF) and the Presidential Communications Operations Office (PCOO), in cooperation with the Center for Strategy, Enterprise & Intelligence (CenSEI), unveiled the administration’s economic and development blueprint for the country called “DuterteNomics.”

According to Executive Secretary Salvador Medialdea, the DuterteNomics started out with a simple yet pragmatic economic strategy — rid the streets of criminals, free the people from the menace of drug abuse, bring lasting peace to the southern islands and neutralize extremist and terrorist groups.

During the campaign period for the 2016 presidential election, President Duterte projected a very different image from other candidates. As early as these days, he made it clear that he would focus on suppressing illegal drugs because it destroys the hope and future of the country — the Filipino youth.

The government’s fierce anti-drug campaign was able to lower the prevalence of illegal drug use in communities. It marks the first time in the Philippine history that the government pursued a serious effort to fight illegal drug abuse from national down to community level. However, the campaign has gained criticisms in and outside the country, putting the government through a number of controversies.

The administration is also pulling out all the stops to fight crime and the spread of terrorism across the country by focusing its efforts on major crimes while pursuing an all-out offensive against terror groups.

“The concept is easy to understand: restore peace and order and the rule of law, and everything else will follow, including economic and social development,” Mr. Medialdea said.

This economic strategy of the government seems to be working. Signs of improvements in the country’s gross domestic product (GDP), trade exports and foreign investments are reflective of this performance.

By the numbers, the Philippine economy continued to sustain the high rates of growth seen last year. In the first and second quarters, the country’s GDP grew by 6.4% and 6.7%, respectively, and accelerated to 6.9% in the third quarter. With a 6.6% GDP growth in the fourth quarter, the Philippine economy expanded by 6.7% for the entire year of 2017.

According to Oxford Business Group (OBG), rising domestic and external demand, together with high levels of growth from the country’s many key sectors, helped make the Philippines one of Asia’s best-performing economies last year.

“Overall growth was driven by strong performances in some of the Philippines’ key sectors,” the OBG said, noting that the services sector — which accounts for more than 50% of GDP — saw its rate of growth mirror that of the broader economy.

Despite some stabilization of investment growth, the World Bank said in the latest Global Economic Prospects report that the Philippines can be expected to remain one of Southeast Asia’s fastest-growing economies.

It added that the Philippines’ good macroeconomic fundamentals are credited to state policy.

As World Bank stated on the report, “In some ASEAN economies, such as Indonesia and the Philippines, supportive monetary policy had spurred investment and, hence, capital accumulation in the wake of the global financial crisis.”

“Rapid capital accumulation has also reflected infrastructure upgrades. In the Philippines, improved macroeconomic policy management and the government’s public-private partnership initiative, have boosted capital accumulation,” the international financial institution added.

To ensure that the Filipino people directly benefit from these economic gains, the Duterte administration instituted reforms that broaden access to free and better education, health care medicines, and other basic social services; pursuing irrigation, reforms in the housing sector; and ensuring job security in the private sector.

The government shows no sign of slowing down to further boost the country’s economy. It is building more big-ticket infrastructure projects across the country, with public spending targeted to reach P8 trillion to P9 trillion from 2017 to 2022.

This ambitious infrastructure plan is made financially feasible under the Tax Reform for Acceleration and Inclusion (TRAIN), which took effect at the start of the year.

“Through TRAIN, every Filipino contributes in funding more infrastructure and social services to eradicate extreme poverty and reduce inequality towards prosperity for all,” the DoF said on its Web site.

The new tax reform law seeks to correct a number of deficiencies in the tax system, making it simpler, fairer and more efficient.

“The additional revenue raised by the tax reform will be used to fund the infrastructure program of the Department of Public Works and Highways (DPWH), which consists of major highways, expressways, and flood control projects. Funding these major infrastructure projects is possible with tax reform for our country to sustain high and inclusive growth,” the DoF said.

“The proposed tax reform program aims to provide the needed additional revenues that would fund our country’s investment needs, promoting better lives for Filipinos,” the financial agency added.

Duterte reminds municipal mayors to enforce law and order

June 29, 2018 | 4:41 am

By Arjay L. Balinbin, Reporter
President Rodrigo R. Duterte on Thursday, June 28, warned that if mayors fail to enforce “law and order” in their respective municipalities, they will be stripped of their powers over the local police.
“If mayor[s] cannot enforce law and order in their municipalities, I will withdraw [their] deputization. Tatanggalin ko ang (I will remove their) power(s) nila over the police,” Mr. Duterte said in a media interview in Panglao, Bohol on Thursday afternoon.
Mr. Duterte was in Bohol to attend the 25th Annual National Convention of the Vice Mayor’s League of the Philippines.
Also during the interview, Mr. Duterte said that he is “not satisfied by the way” some mayors “have responded to the problems” in their municipalities.
The President said he has observed that there is a rising number of mayors “throughout the Philippines who do not want to do their duties.”
“Nonchalant attitude. Aba hindi pwede ‘yang ganun (That is not allowed). If that is the way how you behave as a mayor, you better go out,” he added.
In his speech in Zamboanga del Sur on June 26, Mr. Duterte reiterated that mayors should also enforce the law as what he does in the national government.
“Whatever I have to enforce, you need to enforce it as well…If you are the municipal mayor, you are the president of your municipality. That’s why we don’t meddle in your affairs. We only supervise,” he explained.
He added: “There is always the illegal logging, there is always the illegal drugs, [and] the high rate of crime in your municipalities. What are you doing?”
In his speech on Thursday, Mr. Duterte reminded the local officials that they “play a pivotal role in the administration’s thrust to rid the society of the ills that have made [the Filipino] people suffer and have long impeded [the] country’s development.”
“As part of the LGUs (local government units), you are one of our front-liners in bringing the government closer to the people. May you continue to be a partner in helping us attain peace, progress and prosperity for our communities and our country,” the President also said.

‘Better-than-expected’ tax gains cited

June 29, 2018 | 12:32 am

By Melissa Luz T. Lopez
Senior Reporter
“IMPRESSIVE” gains from tax reform bode well for the Philippines’ credit rating, Moody’s Investors Service said, even as local political noise and tighter global financial conditions pose risks for the economy.
“[W]e have seen the tax reform pass, and we have seen the impact on revenue is even probably better than expected,” Moody’s senior credit officer Christian de Guzman said in a briefing yesterday.
“Revenue performance has actually been fairly good… It does go some ways to addressing the weaknesses of the Philippine fiscal profile.”
Moody’s affirmed its “Baa2” rating — a notch above minimum investment grade — with a “stable” outlook for the Philippines in June last year.
Back then, the debt watcher flagged “increased” domestic political developments as well as overheating concerns as possible downside risks to the rating.
At the same time, it said “greater revenue mobilization” would help boost the country’s creditworthiness.
Starting Jan. 1, Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, reduced personal income taxes for those earning below P2 million a year, alongside a simpler system for computing donor and estate taxes.
Foregone revenues will be offset by the removal of some exemptions to value-added tax; increased tax rates for fuel, automobiles, tobacco, coal, minerals, documentary stamps, foreign currency deposit units, capital gains for stocks not in the stock exchange, and stock transactions; as well as new taxes for sugar-sweetened drinks and cosmetic surgery.
Mr. De Guzman said last year’s rating affirmation did not yet price in the impact of TRAIN as it was then still in the legislative mill. Now, increases in revenue collections have proven to be encouraging.
He recalled that the Philippines was the lowest revenue earner among investment-grade countries in 2014, but recent changes has improved the country’s standing.
Mr. De Guzman said he expects state revenues to reach “over 16%” of gross domestic product (GDP) on the back of tax reform and administrative improvements that began under former president Benigno S. C. Aquino III and sustained under President Rodrigo R. Duterte.
“We are looking at a constellation of factors,” Mr. De Guzman said when asked about a possible rating upgrade.
“In the coming months when we start to see some of the dust settle with regard to the impact of TRAIN on inflation and the economy at large, when we have more clarity on prospects for further revenue reform… We will see how these stack up to our published rating triggers.”
The government intends to raise P2.846 trillion in revenues this year, 15.1% more than 2017’s P2.473 trillion and equivalent to 16.3% of GDP.
Revenue effort took a 15.82% share last quarter, improving from 14.91% the past year, according to the Finance department.
The bigger revenue-to-GDP share is also “impressive” in the context of economic growth, which Moody’s expects to clock 6.8% this year against the government’s 7-8% target and 2017’s actual 6.7%.
The Moody’s analyst also noted that economic growth will likely ease across Southeast Asia, even as the Philippines will remain resilient in the face of tightening credit conditions worldwide and higher crude oil prices.
Still, Mr. De Guzman flagged persistent political noise and resulting “polarization” of political sectors as a source of risk.
“Unpredictable” bilateral ties with China — consisting of closer economic cooperation on the one hand and a simmering maritime dispute in the South China Sea on the other — are also a key risk.
“We haven’t changed our overall view on political risks, those… remain elevated,” the credit analyst added.
“At the same time, we have not seen evidence of that political noise affecting this government’s ability to pass reform.”
Moody’s said Mr. Duterte still has enough political capital to push much-needed economic reforms through Congress. Hence, Mr. De Guzman said, he is confident that the remaining three to four tax reform packages will secure legislative approval within the year, as pushed by the Finance department. Succeeding proposals look to trim corporate income taxes to 25% from 30% while reducing tax incentives deemed redundant. A set of additional luxury taxes — higher duties on fancy cars and jewelry, duties on fatty food, as well as income taxes from lotto and casino winnings — may also be considered should there be a need to “augment” tax collections.

Gov’t plans to raise up to P300B in Q3 debt

June 29, 2018 | 12:31 am

THE GOVERNMENT plans to raise up to P300 billion from the sale of Treasury bills and bonds next quarter, according to a June 27 memorandum for securities dealers posted on the bureau’s Web site on Thursday.
The bureau will continue to hold weekly auctions for 91-day, 182-day and 364-day T-bills between July and September, offering up to P15 billion at each auction.
It will also offer P15 billion worth of T-bonds at each of the seven auctions to be held in the same three months with tenors of three, five, seven, 10 and 20 years.
The government is aiming to raise as much as $2 billion via bond issues denominated in yen and US dollars before the year-end, depending on market conditions.
The Philippines, one of Asia’s most active issuers of sovereign debt, is raising money to finance its P8-9-billion “Build, Build, Build” infrastructure plan that aims to upgrade or build roads, bridges, railways, seaports and airports.
National Treasurer Rosalia V. De Leon said in a mobile phone message that the government plans to borrow less next quarter as the Treasury “calibrated financing requirements considering the RTB (retail Treasury bond sale) and strong collection performance of revenue agencies.”
The government raised P121.8 billion from its 21^st RTB sale on May 30-June 8. The three-year retail bonds had a 4.875% coupon.
One bond trader said the borrowing schedule is a “welcome development” since the total BTr borrowing in the first half was less than what was programmed.
In the second quarter, out of its P325-billion program, the government borrowed a total of P202.829 billion from the domestic market as it chose to make partial awards due to high rates.
The Treasury borrowed P124 billion out of the planned P240 billion in the first quarter.
“The decision to change the schedule to twice a month instead of weekly issuance is also better for the market,” the trader said.
“The weekly [T-bonds] auction [gave] the market the chance to re-price faster which is not good for the BTr. The bi-monthly auction will let the market digest news and data.”
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at three percent of gross domestic product.
Plans for another dollar bond sale as well as yen-denominated “samurai” debt are currently being finalized. — Karl Angelo N. Vidal and Reuters

The Philippines’ corals are disappearing

June 29, 2018 | 12:30 am

By Zsarlene B. Chua
Reporter
The Philippines, with its more than 7,000 islands, is considered one of the world’s 18 mega-biodiverse countries — the archipelago contains “two-thirds of the earth’s biodiversity and between 70% and 80% of the world’s plant and animal species,” according to the Convention on Biological Diversity.
Looking beneath its waters is a similar sight as the country has about 25,000 square kilometers of reef systems — it is home to 505 coral species and 915 reef fish species. The country is the world’s third most coral-rich area after Indonesia and Australia.
But that bounty may not last for long as the country has so far lost “a third of the corals in the last 20 years,” said Dr. Wilfredo Y. Licuanan, a marine biologist at De La Salle University, during an interview with BusinessWorld on June 26 in the university’s Manila campus.
This conclusion was according to the recently finished Nationwide Assessment of Coral Reef Environment which was started in 2014.
The P93-million program was funded by the Department of Science and Technology-Philippine Council for Agriculture, Aquatic and Natural Resources Research and Development (DoST-PCAARRD). It was the first nationwide assessment in 40 years.
Dr. Licuanan and his team surveyed 166 randomly selected reef stations across 31 provinces from 2015 to 2017 and the results were not promising as “none of these stations were classified in the ‘excellent’ category based on live coral cover, and more than 90% of the same stations were in the ‘poor’ and ‘fair’ categories,” said a study published in the Philippine Journal of Science in June 2017.
The study only focused on fringing reefs or flat reef areas that directly skirt non-reef islands. These are the most common types of reefs and are the most vulnerable ones, said Dr. Licuanan, because they are the nearest to human settlements.
Reef stations are considered “excellent” if live coral cover makes up over 75% of the area, and are considered “fair” if the cover is from 25% to 50%, and “poor” if cover is 0% to 25%.

Philippine corals 2 — A healthy reef — *PHOTOS COURTESY OF DR. WILFREDO Y. LICUANAN*

The same study stated that the average hard coral cover is 22%, down 10% from 20 years ago when it was 32%.
“We lost roughly a third of the coral in 20 years and we lost our ‘excellent’ category corals in the last 40 years,” Dr. Licuanan said in the interview.
The 40-year-old nationwide assessment conducted by Drs. Edgardo Gomez and Angel Alcala, both of whom are National Scientists, showed that 5% of the reefs surveyed at the time were “excellent.”
Four decades later, the country has lost all of them.
“These values indicate a marked decline in the condition of local reefs over the last four decades, thereby revealing the urgent need for the revision and update of conservation and management policies,” the study said.
REEFS UNDER THREAT
The Philippines is not alone when it comes to reef damage and loss: Australia’s Great Barrier Reef — the world’s largest coral reef — has also seen a 50% decline in coral cover from 1985-2012 (though this assessment does not take into account some coral recovery in recent years or the global bleaching event in 2016), according to the Great Barrier Reef Foundation website.
And while many might blame climate change and global warming as the main reasons for the damage, Dr. Licuanan said “the effects of climate change is actually secondary to human impact.”
Pollution, overfishing, blast fishing, among others, destroy reef systems, particularly fringing reefs which can be really close to human settlements.

Philippine corals 3 — An attempt to grow corals. — *PHOTOS COURTESY OF DR. WILFREDO Y. LICUANANA*

The Washington-based non-profit environmental advocacy group, Ocean Conservancy, noted in 2015 that the Philippines is one of the top sources of plastic trash dumped into the sea, contributing 2.7 million metric tons of plastic waste and half a million metric tons of plastic-waste leakage per year.
The 2017 study pointed out that reefs in Luzon were mostly in the “poor” category, with Pangasinan, in particular, only having 14% average hard coral cover based on the assessment of two stations. On the other hand, the province of Albay, also in Luzon, had the highest average hard coral cover at 39% based on the assessment of two stations.
In all, “more than 90% of the stations of the present study are in the poor (74 of 166 stations) and fair (80 of 166 stations) categories.”
“People have started reminding me that I can be very depressing when presenting,” Dr. Licuanan said before adding that he is a biodiversity scientist, a job one of his colleagues likened to writing the obituaries of nature, as most of the time that’s what they do — document the loss of biodiversity.
But all is not lost, as Dr. Licuanan observed that in some stations where there is monitoring, they have seen some improvement in coral cover.
Ninety-one monitored reef stations were not included in the 166 stations in the 2017 study, he explained.
“There was some kind of management in those [monitored] reefs. In the 91 reefs that are monitored, coral cover was actually increasing over the period of 2015 to 2017. So it shows us that [while] the big picture is bad, but if you look at data from a select set of reefs that benefit from some management, it is recovering,” he said.
Dr. Licuanan pointed out that out of the 14 monitoring stations in Lian, Batangas where the Alfred Shields Ocean Research Center (of which he is the founding director) is located, “at least four reefs bounced back while the rest are still declining.”

BENEFIT OF COMMUNITY MONITORING
This silver lining, if you will, paints a somewhat hopeful view of the state of coral reefs in the country.
“The big picture might be bad but if you look at 2016 to 2017 when at least a third of the Great Barrier Reef was lost, [but] during that same period, the reefs we monitored were recovering,” he said.
There is, for example, Tubbataha Reefs Natural Park which is considered “the largest, and the best managed marine protected area in the Philippines,” according to a study by Dygico, et. al in 2014 as quoted by the Licuanan, et. al 2017 study.
“Monitoring allows us to see warning signs, it allows us to detect stressors and in both cases, monitoring allows us to do something rather than just lament [over] what we have lost,” Dr. Licuanan said.
Monitoring is crucial in maintaining and helping reefs recover but Dr. Licuanan said that the monitoring is being done by universities and that there are very few marine biologists like him in the country (he figures that there are only about 200 to 300 marine biologists going by the members of the Philippine Association of Marine Science), so there’s not a lot of people to go around.
What he and his team now are trying to do is to encourage communities to manage their coastal waters.
“I have a team in Batangas training people in two towns to monitor reefs that are important to them,” he said.
One of the towns, Tingloy, has a reef near one of the barangays where one of the major sources of income is bringing tourists to snorkel in the reef.

Philippine corals 10 — A coral reef that was badly damaged by typhoons. — *PHOTOS COURTESY OF DR. WILFREDO Y. LICUANAN*

“That’s the idea of community-based management/conservation because the first to benefit, if they do it right and protect the reef, is the community. If the community fails, they’re the first ones who will be affected,” Dr. Licuanan said.
“It also encourages accountability. Our challenge when it comes to reef management is it’s ‘out of sight, out of mind.’” He added that since only universities do the monitoring, once the researchers are done, monitoring stops and the destruction continues.
Dr. Licuanan and his team train fisherfolk in these two towns on how to monitor reefs using a custom-made monopod which takes photos and allows people on land to measure and count corals. He said they are piloting this program in these two towns in order to urge other communities to do the same.
Aside from the communities, Dr. Licuanan stressed that much can be done if marine conservation is taught in schools.
“It’s not about training more marine biologists, it’s making marine biologists of anyone who cares to listen or, ideally, everybody who is made to listen because it’s in their curriculum,” he said.

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