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SEIPI sees little impact from Indian duties on smartphone parts

THE electronics industry said it does not expect a significant impact from a new 10% Indian tariff on smartphone components.
Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said India, the world’s second-largest smartphone market, is not among the top 10 destinations for Philippine electronics exports.
“Effect is not significant,” Mr. Lachica said in a mobile message, when asked about India’s imposition of a 10% levy on imported printed circuit boards used in smartphones.
India hopes to cut its reliance on imported electronic products as it prepares its own electronics industry to meet domestic demand.
The Philippines’ top markets for its electronics products are Hong Kong, China, Japan, Singapore and the United States.
The Philippine Statistics Authority estimates 2017 export sales from electronics products at $32.704 billion, up 11.2% and representing over half of total merchandise export sales.
This year, SEIPI is targeting 6%-8% growth in electronics shipments. Mr. Lachica said that the industry is on track to meet this target amid increasing demand for electronic parts.
He said SEIPI has submitted a draft of its Product and Technology Holistic Strategy (PATHS) and road map to the Department of Science and Technology. The proposed five-year plan determines the products which the industry plans to focus on to ensure it retains a competitive niche in the global market.
Under PATHS, investment in the electronics sector is projected at $1.5 billion in 2020; $3 billion in 2025; and $5 billion in 2030, with export sales amounting to $40 billion by 2025. — Janina C. Lim

SC denies Napoles’ petition for bail

By Arjay L. Balinbin
Alleged pork barrel-scam mastermind Janet Lim-Napoles’s petition for bail has been denied by the Supreme Court (SC), stressing that invoking its ruling in the case of former President Gloria Macapagal-Arroyo is “unmeritorious.”
According to SC’s resolution dated Feb. 6, Ms. Napoles filed a motion for the reconsideration to overturn the Court’s decision dated Nov. 7 last year which affirmed the Sandiganbayan’s dismissal of her application for bail.
In her petition, Ms. Napoles argued that the SC in the case of Ms. Arroyo “reversed the Sandiganbayan’s denial of the demurrer to evidence in the plunder case against her on the prosecutions failure to specify the identity of the main plunderer, for whose benefit the ill-gotten wealth was amassed, accumulated, and acquired.”
Ms. Napoles’s camp argued that the SC’s ruling in Ms. Arroyo’s case “should have been applied to her case.”
“The Court finds (the) argument unmeritorious,” the SC said in its resolution penned by Associate Justice Andres B. Reyes, Jr. and concurred in by 10 other justices..
It explained: “In a demurrer to evidence, as in the case of Macapagal-Arroyo, the accused imposes a challenge on the sufficiency of the prosecution’s entire evidence.”
“This involves a determination of whether the evidence presented by the prosecution has established the guilt of the accused beyond reasonable doubt. Should the trial court find the prosecution’s evidence insufficient in this regard, the grant of the demurrer to evidence is equivalent to the acquittal of the accused.”
The SC also argued that “the stage at which the accused may demur to the sufficiency of the prosecution’s evidence is during the trial on the merits itself-particularly, after the prosecution has rested its case.”
Ms. Napoles’s case, however, is still in the “hearing for the petition for bail in which the trial court does not sit to try the merits of the main case.”
Sought for comment during a Palace briefing, Senior Deputy Executive Secretary Menardo I. Guevarra agreed with the SC’s decision.
“She cannot apply that (Ms. Arroyo’s case), because right now she is still in the bail hearing.”
But when her case proceeds to a trial proper, Ms. Napoles can take Ms. Arroyo’s route, Mr. Guevarra, a lawyer, said.
“Meaning, mayroon ng (there is a) trial proper on the merits of the case and the prosecution has already presented all its evidence against the accused.”
“Now, if the defense thinks that the evidence presented by the prosecution is insufficient to prove her guilt beyond reasonable doubt, that’s when she files a demurrer to evidence. And if that is granted that is tantamount to an acquittal. If that is denied, alright so it’s up to her, she can challenge it upstairs if she wants on the ground of grave abuse of discretion if need be. Well, she can take that through the way former President did it.”
Mr. Guevarra likewise stressed that Ms. Napoles’s case is different from Ms. Arroyo’s. “Of course, magkaiba naman ng kaso iyan, magkaiba naman ng ebidensiya na ipe-present diyan.”
(Of course, [Ms. Napoles’s] case is different. The evidence to be presented will also be different.)
“But that could happen if a demurrer to evidence is presented and (if) that’s granted, that’s acquittal,” he said further.

Sara Duterte condemns NPA burning of heavy equipment

MAYOR Sara Duterte-Carpio condemned the burning Saturday by the New People’s Army (NPA), of construction heavy equipment in three different villages in the city Saturday which are said to be worth P65 million. “The attacks were downright cowardly and indicate that the NPA is nothing but a terrorist group that deserves our collective rejection and condemnation,” Ms. Duterte-Carpio said in a statement. The burned heavy equipment were supposed to be for the construction of roads in Barangay Callawa in Buhangin, Barangay Fatima in Paquibato, and Barangay Dalagdag in Calinan. All these road projects are now temporarily stalled because of the attacks. “The fresh atrocities reveal that the terrorist group only truly intends for people to continue living in a condition of poverty, which they could use as a capital in their propaganda against the government and to justify their presence in the communities where their influence and significance are waning,” Ms. Duterte-Carpio said. Davao City Police Office (DCPO) Sr. Superintendent Chief Alexander C. Tagum said they are already preparing a criminal complaint. Capt Jerry S. Lamosao, spokesperson of the 10th Infantry Division, said that based on the interviews with witnesses, they were able to confirm that the perpetrators are NPAs. — Carmencita A. Carillo

Davao City to hold travel expo

ABOUT 100 participants including travel agents, national tourist organizations, travel product suppliers and tour operators, and such enterprises as hotels, resorts, airlines, cruise and shipping lines, and theme parks are expected to participate in the upcoming Travel and Leisure Expo Davao (TLEX) slated on May 10-13 at the SMX Convention Center, SM Lanang. TLEX Davao will be on its second year, running alongside the PHILBEX (Philippine Building and Construction Exposition) Davao. Charles L. Lim, president of Selrahco management and consultancy services, expressed confidence that TLEX will promote tourism within the regions and will stimulate travel as we experience Philippine tourism moving up to a new level. He encourages travel and hospitality stakeholders to participate in this four-day event, noting that Mindanao is an important market base, especially for domestic tourism. — Maya M. Padillo

Amendments on compensation tax

My employed friend recently requested me to compute her annual income tax due for the prior year 2017. Her gross compensation from her lone employer was less than P250,000. I arrived at her annual income tax due after deducting the taxes withheld by her employer. I told her then that, if she receives the same amount of compensation this year, there will be no more withholding tax and annual income tax due. To my surprise, her employer continuously withheld tax on her January and February 2018 salary, even if she has been receiving the same monthly salary since last year. This was despite the passage and effectivity of the TRAIN Law effective Jan. 1, 2018 and notwithstanding the other pertinent issuances by the Bureau of Internal Revenue (BIR) early this year. Her employer explained that their reason for the continuous withholding was that they were still waiting for the BIR’s specific guidelines on implementing the new compensation tax rule in the TRAIN law.
As invalid as the excuse might be, my friend and others in a similar situation could now be thankful that the BIR has published Revenue Regulations (RR) No. 11-2018, which implements the new compensation tax provisions, among other provisions, of the TRAIN Law.
RR No. 11-2018 does not only reiterate that those receiving an income of not more than P250,000 in a taxable year, beginning Jan. 1, are exempt from income tax, and consequently to withholding tax, it also provides guidelines for other employment-related taxes. Some of the salient provisions are described below.
1. EXEMPTION OF MINIMUM WAGE EARNERS FROM WITHHOLDING TAX
For minimum wage earners (MWE), holiday pay, overtime pay, night differential pay, and hazard pay earned by an MWE shall, likewise, be exempt from withholding tax. Additional compensation such as commissions, honoraria, fringe benefits, benefits in excess of the mandatory non-taxable amount of P90,000, taxable allowances, and other taxable income given to an MWE by the employer other than those which are expressly exempt from income tax, however, shall be subject to withholding tax using the revised withholding tax table.
Based on the above, in addition to the basic pay of the MWE, their exemption covers even holiday pay, overtime pay, night differential pay, and hazard pay. An MWE will only be taxed on the amount of the additional compensation which is not covered by the exemption.
The inclusion of this categorical guideline in RR No. 11-2018 is a welcome development for MWEs. It can be recalled that there was a 2008 BIR regulation suggesting that an MWE who receives additional taxable compensation and benefits shall no longer be entitled to the privilege of being an MWE and, therefore, their entire income is subject to tax. For example, if a MWE receives, in addition to his minimum salary, a P1 commission for selling his employer’s inventory, not only would this commission be subject to tax but also his entire salary. Unfair, right? One would think that it is better to not receive additional taxable benefits than to receive less take-home pay, because of withholding tax.
Although this 2008 regulation was nullified in a 2017 Supreme Court decision, it is comforting to note that the above categorical guideline in RR No. 11-2018 to protect the exemption of MWEs is in place.
As an administrative requirement, in case of hazardous employment, the employer shall indicate in the annual Alphabetical List of Employees, the MWEs who received the hazard pay, period of employment, amount of hazard pay, and justification for such payment as certified by the concerned Department of Labor and Employment (DoLE)-allied agency. The certification is an attachment in the filing of the Annual Information Return (BIR Form No. 1604C). In case the MWE is in the public sector, the document to be attached is the Department of Budget Management (DBM) Circular related to such payment of hazard pay.
2. REVISED WITHHOLDING TAX RATES AND TABLES
Starting Jan. 1, the employer shall deduct and withhold from such compensation a tax determined in accordance with the prescribed withholding tax table, as published by the BIR under Revenue Memorandum Circular (RMC) No. 1-2018.
Using the new withholding tax table as an example, if you are receiving a monthly compensation of P20,000 (net of SSS/GSIS/PHIC/HDMF) and are single with no dependents, your monthly withholding tax should be P0. Prior to the TRAIN Law, though, if you have the same monthly compensation, your withholding tax would then be P2,916.75.
Check your withholding tax this year. The revised tax table is effective beginning Jan. 1. See if you are entitled to a refund.
3. INCREASED AMOUNT OF CERTAIN DE MINIMIS BENEFITS
Although the TRAIN Law did not touch on amendments to de minimis benefits, it is a welcome development that the Department of Finance made upward adjustments to certain nontaxable de minimis benefits.
The nontaxable cash allowance to dependents of employees rose to P1,500 per employee per semester (P250 per month) from not exceeding P750 per employee per semester (P125 per month).
In addition, the nontaxable rice subsidy has been raised to not more than P2,000 per month from not more than P1,500.
Further, the nontaxable uniform and clothing allowance has been increased to P6,000 per annum from P5,000.
Based on the increases above, employers may consider reevaluating their compensation policy, particularly in giving salary increases, to possibly maximize their employees’ take-home pay.
With all the illustrative examples in RR No. 11-2018, I hope my friend and all other employees would be more aware of the computation of their taxes. Every peso counts, especially now that commodity prices have gone up, because of the TRAIN Law. On the part of the employers, compliance with tax regulations is a must, because failure to do so could result in penalties or possible deficiency tax assessments.
Nikkolai F. Canceran is a senior manager of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

Nation at a Glance — (04/03/18)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Mocha Uson charged before Ombudsman

Akbayan Youth on Monday, April 2, filed an administrative complaint against Presidential Communications Operations Office (PCOO) Assistant Secretary Esther Margaux J. Uson before the Office of the Ombudsman for grave misconduct, serious dishonesty, and conduct prejudicial to the best interest of the service. In its 10-page verified complaint, the group cited various situations where Ms. Uson allegedly lied and misled the public. Sought for comment, Senior Deputy Executive Secretary Menardo Guevarra who presided over Monday’s press briefing at Malacañang said, “We’ll im sure Asec Mocha will be able to defend herself. Meron naming mga (We have) processes to follow, and she will be given her fair chance to be able to explain her side.” — Minde Nyl R. Dela Cruz

Expanded environmental rights and anti-coal drama

“Matter is energy … Energy is light … We are all light beings.”

— Albert Einstein

Several recent events in the Philippines energy sector which when implemented, might mean an extended and long-term penitence for electricity consumers nationwide.
One is the planned expanded “environmental rights” to be put in the draft Constitution by Retired Chief Justice and Consultative Committee (ConCom) Chairman Reynato Puno. Two, the Energy Regulatory Commission (ERC) meeting with anti-coal groups Sanlakas and Philippine Movement for Climate Justice (PMCJ) with the ERC saying that it will “explore the possibility of incorporating environmental policies into its relevant upcoming policies…”
The ConCom chairman’s plan will open up a floodgate of endless environmental militance. It will be harder for companies to put up new airports and expressways, new malls and commercial districts, new factories and industrial zones, new universities and residential condos, new coal or gas plants because militants and environmental lobbyists can easily assert that the area is “reserved” for nature. But they can easily lobby to put up expansive “green” solar plants, wind farms, etc.
Chairman Puno said the expanded environmental rights will cover “Right to clean air and clean water, right to a healthy environment and ecology…”
If that is the case, government should prohibit candles and gensets in cases of brownouts. Gensets are noisy and run on diesel and hence, very polluting. Candles often cause fires. People should rely only on intermittent wind-solar as much as possible. If the wind does not blow and if the sun does not shine, people will be then left to endure brownouts.
Chairman Puno also said that there will be “stronger writ of kalikasan in the bill of rights so that it may not be subject to withdrawal or revision by the Congress or the Supreme Court.”
This is related to the second event as there are many anti-coal groups which also hate any brownouts that coal plants precisely want to prevent.
In August 2012, a group of ecologist-militants and allied organizations have successfully stopped the construction of a 600 MW coal power plant in Subic on the “writ of kalikasan” argument issued by the Supreme Court. The delay in the construction of that big power plant has contributed to higher price pressure in the Luzon grid in recent years.
Anti-coal activists think that all MW are the same.
This is wrong.
A 100 MW from wind or solar plant at 11 a.m. can become 20 MW or 5 MW at 11:05 a.m. when the wind suddenly stops blowing, when clouds grow dark, or when it rains. Whereas a 100 MW from coal or gas will be 100 MW for 24 hours whether the wind blows or not, whether it is a sunny or cloudy day or night time.
Below are some numbers for ASEAN countries from the International Energy Agency (IEA). Demand for power generation is in million tons oil equivalent (mtoe), electrical capacity in Gigawatts (1GW = 1,000 MW), and electricity generation in terawatthours (TWh). 2000 and 2015 data are actual, 2016 are estimates, 2025 and 2030 are projections (see table).
SEA Energy Policy
Check out the numbers for coal — projected electrical capacity in the region in 2030 is only 29% of total but projected electricity generation is 40% of total. The opposite is the case for other renewables (wind, solar, geothermal), nearly 11% of power capacity in 2030 but projected to produce only 7.4% of actual electricity. If geothermal is removed from this group, electricity generation will become even smaller.
During the S&P Global/Platts’ Philippine Energy Forum last March 20, 2018 at Grand Hyatt BGC, S&P analyst Deepak Kannan observed that from 2000 to 2016 in the ASEAN, “Oil continues to be a dominant source of energy accounting for 34%, coal demand has more than tripled accounting for 17%.”
It is not wise that environmental militance be incorporated in the Constitution. Any environmental advocacy should be done via legislation, not put in the charter. The ERC should also be wary not to commit anything to the anti-coal groups because they hop from one venue to another to promote their ecological-socialist agenda.
 
Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
minimalgovernment@gmail.com.

China urges more trade talks as tariffs on US goods begin

China urged trade talks with the U.S. to prevent greater damage to relations while saying that previously announced retaliatory measures on American imports took effect Monday.
The U.S. didn’t respond to China’s March 26 request for consultation on Washington’s steel and aluminum tariffs, the Commerce Ministry said in a statement Monday, adding that officials have widespread public support for tougher measures and repeating Beijing’s stance that disputes should be resolved with dialogue. China previously planned to seek compensation for trade lost because of the U.S. metals actions.
“A lot of people have expressed their endorsement to the measures via phone and email, and they support the government to take actions to defend the interest of the nation,” the ministry said of responses during a public comment period that ended March 31. “Some people suggested even stronger measures.”
That followed a statement Sunday from the Customs Tariffs Commission saying that previously announced tariffs on 128 kinds of imported goods originating in the U.S. would take effect from Monday.
Those are in response to the U.S. tariffs on metal that President Donald Trump announced in March on national security grounds. Beijing said the move violated World Trade Organization rules. The U.S. has since announced some exceptions for allies, including Australia and Canada. China said Sunday the tariffs “caused serious damage” to its interests.
Items on Beijing’s original hit-list, issued on March 23, included fresh and dried fruits, ginseng, nuts, wine, and pork, as well as certain steel products, with a value of about $3 billion — a tiny fraction of its imports from the U.S., and an amount matching its exports of steel and aluminum to the U.S. So far, high-volume agricultural exports to China, such as soybeans, haven’t been swept into the mix.
China said earlier it could impose tariffs in two stages: a 15 percent duty on 120 products, and a 25 percent tariff on eight other products, including pork, after further assessing the impact of American tariffs. Sunday’s announcement covered all 128 products simultaneously.
“This shows China has the tool box to counter the unfair trade actions from Washington,” said Li Yong, a senior fellow at the China Association of International Trade in Beijing. “It’s very measured, and with no intention to escalate tension.”
Beyond the actions on metals, the Trump administration is preparing to propose a list of other Chinese products to be targeted with tariffs. Trump announced in March that the U.S. will impose duties on about $50 billion in Chinese goods to punish Beijing for what Washington sees as widespread violations of American intellectual property.
U.S. Trade Representative Robert Lighthizer has until April 6 to release the list. U.S. Commerce Secretary Wilbur Ross said on March 28 that an announcement on the measures will come “very shortly.” China has said it has a plan to act further if the import levies on its goods go ahead. — Bloomberg

Executive privilege shields President Duterte from inquiries

Joel Ruiz Butuyan wrote in his Inquirer column of March 5: “Malacañang has not explained what the Philippines stands to gain in the President’s pivot to China. Is he using the China card to wangle better terms from Western countries? The substantial decline in foreign direct investments to our country seems to negate this expectation. Or is the President turning to China as a means to neutralize Western criticism of his human rights record? The Duterte administration owes the Filipino people an explanation.”
No congressional committee, no court of law, no one can compel President Rodrigo Duterte to explain his bias towards China. The right of executive privilege shields the President from any investigation or inquiry into his policy, program, action, or decision — thanks to a Supreme Court subservient to the power that be.
Executive privilege is the right of the President and other members of the executive branch of government to keep certain communications confidential because disclosure would be contrary to the interests of the President. Those who are bent on finding out if the advice or opinion given by Executive Secretary Salvador Medialdea to Janet Lim-Napoles’ lawyer Stephen David, who has been seen in Malacañang, was at the prompting of the President, and if the President really upbraided Secretary Aguirre for the exoneration of drug lords or was chastised for letting the exoneration become public knowledge would only be frustrated as the two officials can invoke the executive privilege.
Originally, the right of executive privilege was invoked when the information sought would jeopardize national security, diplomatic relations, or economic stability.
But on March 25, 2008, the Supreme Court ruled that conversation and correspondence between the President and public officials that are integral to the President’s executive and policy decision-making process fall under executive privilege. The ruling was in response to then National Economic and Development Authority Director General Romulo Neri’s invoking executive privilege when asked what then president Gloria Arroyo and he discussed about the National Broadband Network (NBN) project.
In April 2007 Department of Transportation and Communications Secretary Leandro Mendoza and Zhong Xing Telecommunications Equipment (ZTE) Vice-President Yu Yong signed a $329-million contract (ZTE originally offered $130 million for the project) that was supposed to provide landline, cellular, and Internet services in all government offices nationwide. The contract signing, which was done in Boao, China, was witnessed by President Arroyo.
Presidential Spokesperson Ignacio Bunye described Arroyo’s quick trip to Boao thus: “That’s the way things looked like for president Gloria Macapagal-Arroyo in her brief stay in this picturesque coastal town Saturday as she ‘came and went like a thief in the night.’” Witnessing the signing of the contract was so important to her that she left for Boao when her husband Mike was fighting for his life following a high-risk heart surgery.
Shortly after the signing of the contract, coffee shops began to buzz with ugly rumors of alleged bribery, overpricing of $130 million, payment of advances or kickback commissions involving high-ranking government officials, and other anomalies which included the loss of the contract, collusion among executive officials, and political pressures against the participants in the NBN Project. The Senate committees on Accountability of Public Officers and Investigation (Blue Ribbon), Trade and Commerce, and National Defense and Security called for an investigation of the project.
In September, Jose “Joey” de Venecia, who was president of Amsterdam Holdings, the company that lost its bid for the NBN project, testified before Senate committees that he was in China with Commission on Elections Chair Benjamin Abalos, who appeared to be brokering the NBN-ZTE deal, and that he heard Abalos “demand money” from ZTE officials. Later that month, Neri was invited by the Senate Blue Ribbon Committee to attend its hearing on the alleged anomalies in the deal.
executive
He testified at the Senate that Abalos and he were discussing the NBN-ZTE project while playing golf when Abalos told him: “Sec, May 200 ka dito.” Neri took it as a P200-million bribe offer in exchange for Neri’s endorsement of the project. Neri further testified that he had informed Arroyo of Abalos’s bribe offer and that Arroyo had told him to reject it.
When asked by senators 1.) whether or not the Ppresident followed up the NBN Project, 2.) whether or not she directed him to prioritize it, and 3.) whether or not she directed him to approve it, Neri, invoking executive privilege, refused to answer. He snubbed subsequent hearings on the matter. When the Senate Committee cited him for contempt, he petitioned the Supreme Court to nullify the contempt order of the Senate.
On March 25, 2008, the Supreme Court, in a 9-6 vote, upheld Neri’s invocation of executive privilege with regard to the three questions. Nine justices found the information sought to be elicited by the three questions as, first, falling under conversation and correspondence between the president and public officials necessary in the president’s executive and policy decision-making process and, second, that the information sought to be disclosed might impair our diplomatic as well as economic relations with the People’s Republic of China.
The decision was penned by Justice Teresita Leonardo-de Castro and concurred in by Justices Leonardo Quisumbing, Renato Corona, Dante Tinga, Eduardo Nachura, Ruben Reyes, Nenita Chico-Nazario, Presbitero Velasco, and Arturo Brion. Except for Quisumbing, who was appointed by president Fidel V. Ramos, all the concurring justices were Arroyo appointees to the Court. Brion was not yet an SC justice when the Court heard oral arguments on Neri’s petition.
Four other Arroyo appointees to the Court — Justices Antonio Carpio, Conchita Carpio-Morales, Adolf Azcuna, and Alicia Austria-Martinez — dissented with the majority as did Justice Consuelo Ynares-Santiago, an appointee of president Joseph Estrada, and Chief Justice Reynato Puno, who was named to the Court by president Fidel Ramos but named Chief Justice by Arroyo.
In Justice Ynares-Santiago’s opinion, the executive privilege doctrine applies only to information if divulged would be against the public interest. She wrote that Neri failed to show how disclosure of his conversations with Arroyo would affect the country’s military, diplomatic, and economic affairs as he asserted before senators. The deal was with a company, not with the Chinese government.
Justice Carpio-Morales’ position was that executive privilege cannot be invoked when “Congress has gathered evidence that a government transaction is attended by corruption.” Justice Carpio also argued that executive privilege cannot be used to hide a crime. Chief Justice Puno held that while branches of government are independent of each other, they work interdependently as the whole government is constitutionally designed to function as an organic whole.
There is a clause in the decision that says that the president and officials of the executive branch of government can invoke executive privilege during their term of office and afterwards.
So, former president Benigno Aquino and former Health secretary Janet Garin can invoke executive privilege when the Volunteers Against Crime and Corruption bring them to court for the Dengvaxia mess as, first, whatever the two officials discussed was part of the president’s executive and policy decision-making process and second, as it might impair our diplomatic as well as our economic relations with France, home of Sanofi, the Dengvaxia supplier.
 
Oscar P. Lagman, Jr. is a member of Manindigan! a cause-oriented group of businessmen, professionals, and academics.
oplagman@yahoo.com

Should there be ‘independent directors’ in the GOCC sector?

While I was the incumbent Chair of the Governance Commission for GOCCs (GCG), I had a short conversation with Securities and Exchange Commission (SEC) Chair Teresa J. Herbosa who encouraged me to institute within the GOCC Sector the system of independent directors, which she found to be foremost feature of corporate governance reforms in the private sector.
In the “publicly held corporations” (PHCs), independent directors are elected in order to represent the public interests, as distinguished from the regular directors who represent primarily the stockholders’ interest. I had thought deeply on the issue, and eventually came out with the conclusion that in the public corporate sector, the institution of the system of independent directors would by duplicative, if not a surplusage, for the following reasons:
Firstly, unlike private corporations which are set-up to represent private interests, essentially profit-maximization for the benefit of the stockholders, all GOCCs, even the ones created as stock corporations under the Corporation Code, primarily have a “public interests” purpose for their establishment, or are expected to achieve the public ends which the government seeks to achieve. The owner of all GOCCs is essentially the government, which does not seek maximization of profits as its goal in setting-up a GOCC (it can create more income through its taxing powers).
Consequently, all the members of the governing boards of GOCCs take on their role to pursue the public purpose for which the entities were formed which is to pursue the full benefits to the members of the public for whose benefit the entities are established — which is fully in accordance with the Stakeholder Theory.
Secondly, all members of every GOCC governing board, whether ex officio or appointive, take their posts as “public officials” and sworn to serve the public interests. The exercise of their fiduciary duties of diligence and loyalty to the government whose objective it is to serve the public interests and not a maximization of profits, promotes directly the interests of the publics which constitute the stakeholders of the entities they serve in.
In effect, GOCC directors and trustees are sworn to serve the public interests in a deeper sense than independent directors in the private sector, who in the end legally are bounded to fiduciaries duties to the corporation and its stockholders.
TERM OF OFFICE OF DIRECTORS AND ‘HOLD-OVER PRINCIPLE’
The GOCC Governance Act follows the one-year term policy under the Corporation Code for private corporations and provides that notwithstanding the provisions of the charters of GOCCs, “the term of office of each Appointive Director shall be for one (1) year, unless sooner removed for cause.”
The act formally expressed into statutory term the “hold-over principle” that pervades in common law for private corporations, in that in spite of the lapse of the one-year term, “appointive director shall continue to hold office until the successor is appointed.”
The act formally incorporates the “merit system” pervading in PHCs in that the re-appointment of any director shall be based on good performance in office, thus: “An Appointive Director may be nominated by the GCG for re-appointment by the President only if one obtains a performance score of above average or its equivalent or higher in the immediately preceding year of tenure as Appointive Director based on the performance criteria for Appointive Directors for the GOCC.”
The adoption of the one-year term-holdover principles for the GOCC Sector has provided a double-edged sword when it comes to the good governance principles. Indeed, there has been a mild outcry in the public sector against discarding the “fixed tenure” system of directors and trustees as provided in GOCC charters since it would engender short-sighted agenda in GOCC corporate planning, and it undermines the sense of independence and professionalism of Governing Boards against a politically inclined Administration.
Our reply to the alleged “short-termism” mentality that would pervade the GOCC Governing Boards whose members are only given a one-year term is not supported at all by the long-term experience in the private sector, where the one-year term system has been the inflexible system since the adoption of the Corporation Law in the Philippines. Indeed, the Boards of Directors/Trustees of private corporations, are perceived to have achieve the corporate visions of their corporations, since they have to renew their mandates on an annual basis, and their annual performance becomes the basis by which they are able to achieve a fresh mandate for a new one-year term during annual stockholders’ meetings. In the GOCC Sector, all directors and trustees, are mandated to pursue the President’s PDP during the six-year term of his administration, and the one-year term given to GOCC directors and trustees ensures that they will serve during the entire term of the President only when they are able to actively pursue the breakthrough goals that are set out for them that would contribute to the realization of the objectives of the PDP.
On the other hand, we do recognized that the one-year term does present a danger that during an administration where politics and pork-barrel system pervades, that GOCC directors and trustees, to be able to ensure renewal of their terms would be less professional in their work, and become swayed by the political moods pervading the government sector.
In other words, in times where the incumbent administration does not pursue the highest callings of “public service is a public trust,” or worse when corruption and self-aggrandizement pervades the top brass of the administration in power, the one-year term-holder over system becomes a tool that weaken the independence of GOCC Governing Boards, who seek to cater to the demands of the appointing powers to ensure survival in their office.
It is in those times that the professionalism and integrity of the GCG as the key government agency that oversees the GOCC Sector, as well as the integrity and competence of the members of the Governing Boards become the keys to preserving the integrity of public corporate governance in the GOCC Sector.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP).
 
Cesar L. Villanueva is a member of the Management Association of the Philippines (M.A.P.) , the former Chair of the Governance Commission for GOCCs and the Founding Partner of the Villanueva Gabionza & Dy Law Offices.
cvillanueva@vgslaw.com
map@map.org.ph
http://map.org.ph

The demand side of culture

Humanities as a field of academic pursuit or lifelong obsession has been relegated to a quaint addiction, like restoring antique cars or collecting stamps. Interest in culture, if too ardently expressed, is seen merely as an affectation.
In a conversation over dinner with slight acquaintances and newly met (but celebrated) strangers, culture, and its neglect in this part of the world, can sometimes crop up. The take on the subject is usually its lack of attention given (we don’t have a ministry of culture) and the almost envious state of nurturing and embrace in other countries. Coming to the defense of the motherland by taking the opposite view of culture’s rise here and the growing feasibility of expensive tickets to culture, both pop and middle brow, as well as the rise of art auctions seems a hopeless task.
The pronouncement of the self-appointed moderator of table conversations is a statement that no one can argue with — only wealthy countries and socialist ones (think Bolshoi ballet) can actively promote culture, which is subsidized by the state or large corporations to make ticket prices affordable for the middle-income audience, if not the masses. This temporary ceasefire of verbal friction brings the conversation back to how best to promote culture.
The celebrity’s seatmate declares (he is the most senior person in the table) that sports gets disproportionate time and attention in the curriculum that used to rest on three former mandates “education, culture, and sports.” Aren’t the tycoons too besotted with sports at the expense of the arts? Here, the conversation stalls and turns on the sorbet — yes, it is refreshing.
We bring up the matter of audience development, which is the demand side of culture. Of course, nobody at the table picks that up. The conversational train keeps heading towards the comparative advantage of culture in richer economies, even the nearby ones that require no visas to visit. Of course, they add, the talents, including conductors, are all imported to serve the local audience. So imported supply meets local demand for culture.
Maybe, in culture too, such as theater, music, and visual arts, the economists should have a say. Aren’t art and culture products too that need to be marketed? Perhaps, the supply side of culture where the talents such as the ones at our table, two siblings in the world of music and theater, has been getting an unfair advantage. The talent shows on TV and audition sessions from foreign theater groups feed the supply of outstanding artists. The singers, performers, and actors overwhelm the demand for them. Many talents then find their home abroad and bewail the lack of a local audience to sustain them. Ironically, it is when they harvest international acclaim are they finally appreciated by their own country and given the audience they lacked before.
Peter Drucker, our favorite management philosopher, stated that the purpose of business (and culture, perhaps) is to “create a customer.” The demand side of culture needs to be attended to. Not only should audiences be willing to travel to the venue to watch a play or ballet or orchestral performances, they should be willing to pay for it.
Developing an appetite for culture (maybe slightly less voracious than that for food and sex) needs to start early in the individual. When I look back at my own education and the nurturing of my love for the humanities, I realize that all those “must go” events where a reaction paper is required like the school plays (Julius Caesar, Macbeth, Hamlet) contributed to a lifelong affection (or affectation) for the arts. The muscle memory residing in the heart longs for those long-ago habits of sitting in a darkened theater to be moved and jangled out of my mental ruts.
These cultural forays were not exclusively devoted to performances, they extended to a love of books, ease in discussing ideas, and buying art. The development of an audience for art and culture is a kind of ecosystem. It is a self-sustaining sphere that gives talent its proper due, even in terms of material rewards. In a cultured society, cultural work is a sustainable occupation.
Audience development starts with an individual who is moved by art and culture. If there are foodies who love to explore and discover new cuisine, there must be also the “culturati,” a discerning audience that applauds and supports the arts. And there’s work to do for both groups.
 
A. R. Samson is Chairman and CEO, TOUCH xda.
ar.samson@yahoo.com