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Employers don’t see informal sector benefiting from new maternity law

maternity pregnant
THE Employers Confederation of the Philippines (ECoP) said the recently signed Expanded Maternity Leave (EML) Act will not be beneficial to most women in the work force.
In a phone interview with BusinessWorld, ECoP President Sergio R. Ortiz-Luis, Jr. said the EML law is well-intentioned, but it won’t help a majority of the 43 million people in the work force, most of them in the informal sector.
“The informal sector drives 86% of the labor force,” he said, adding that this sector expands every year, making the EML inaccessible for many mothers.
Mr. Ortiz-Luis also objected to the EML Law’s requirement for employers to absorb the differential in between Social Security Service (SSS) cash benefits by the covered mothers. In a position paper dated Feb. 8, ECoP said this provision will adversely affect micro, small, and medium enterprises (MSMEs).
“These enterprises normally operate and sustain their business on a day-to-day basis. To impose an additional increase in the cost of doing business is way beyond the capacity of the MSMEs,” ECoP said.
Last week, the SSS President and Chief Executive Officer Emmanuel F. Dooc said the law will cost P7.5 billion to implement and contributions will need to be raised.
Section 10 of the EML Law also states that women in the informal economy are covered by maternity benefits if they have remitted to the SSS at least three monthly contributions. Non-members will be covered under benefits provided by the Philippine Health Insurance Corp. (PhilHealth) Circular No. 022-2014 or the “Social Health Insurance Coverage and Benefits for Women About to Give Birth.”
ECoP said it does not object to the 105 days’ maternity leave under the law, which it said is in line with the International Labor Organization (ILO) Convention No. 183 which calls for maternity leave of not less than 14 weeks or 100 days. — Gillian M. Cortez

Poultry industry seeking protection from chicken imports as prices fall

THE poultry industry is lobbying for the abolition of the minimum access volume (MAV) on chicken in order to facilitate special safeguard (SSG) measures to protect the sector for imports.
“We are calling for the abolition of the MAV for chicken so that the SSG trade remedy can apply to all imports,” United Broiler Raisers Association (UBRA) President Elias Jose M. Inciong said in a mobile message on Monday.
“In 2005, under our World Trade Organization (WTO) commitments the In-quota and the out-tariff tariff (50% before 2005) became equal at 40%. Therefore, there is no longer a MAV for chicken,” according to Mr. Inciong.
The decline of farmgate prices for chicken started in late 2018 due to oversupply.
According to UBRA’s weekly survey as of Feb. 22, 2019, the average farmgate price of regular chicken fell 7.4% week on week to P68.50 per kilogram, while the price of prime chicken fell 10.4% to P68.76. The average price of chicken classified as off-sized fell 5.9% to P70.33.
Ilocos Norte Governor Imee R. Marcos has called for a total ban on the importation of pork and chicken, to help protect domestic hog and poultry growers.
Department of Agriculture (DA)Secretary Emmanuel F. Piñol said that the proposal could expose the Philippines to retaliation from other WTO members.
Mr. Piñol, asked last Thursday on the condition of the poultry industry after it has reported oversupply, replied, “Okay na naman. Iyang chicken kasi, kontrolado ang presyo sa merkado (It is now okay. Chicken prices in the market are controlled).”
Earlier this month, Trade Secretary Ramon M. Lopez said his department is considering SSGs to help the domestic poultry industry, but has yet to discuss the measure with the DA. — Reicelene Joy N. Ignacio

DoE policy points to end of missionary electrification charge

THE Department of Energy (DoE) signed what it called an omnibus missionary electrification policy for off-grid areas that will serve as a framework for future circulars that will end the collection from consumers of the universal charge for missionary electrification (UCME).
“Signed. For publication,” DoE Undersecretary Felix William B. Fuentebella said in a Viber message on Monday when asked about the status of the policy, which he previously said would be signed by end-2018.
When asked whether the provisions of the policy are in line with a DoE draft late last year, he said: “No changes I think.”
Mario C. Marasigan, director of the DoE’s Electric Power Industry Management Bureau, confirmed the signing of the policy.
“The Omnibus Guidelines on Enhancing Off-Grid Development and Operation was signed on Jan. 25, 2019,” he said in a text message.
Mr. Fuentebella earlier said that the circular on UCME would be more detailed than the general provisions included in the omnibus framework, which he said covers 15 sections and 19 pages.
The DoE is assuring consumers that future electrification programs will not be charged to consumers, but will be shouldered by the government, he said, adding that the move would answer persistent questions about why inefficiencies are charged to them.
He did not discuss the funding required by the government to cover rural energization without the UCME, but said it would be part of the state’s total electrification program and aligned with the plans of the National Power Corp. (Napocor) and the National Electrification Administration (NEA).
Napocor’s legal mandate is to provide power in areas that are not connected to the transmission grid. The UCME is collected from all on-grid electricity end users as determined by the Energy Regulatory Commission (ERC) and called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2011, or EPIRA.
For 2019, Napocor had sought in July provisional approval to collect up to P17.8 billion from electricity users or an increase to P0.1948 per kilowatt-hour (kWh) in their power consumption.
In its petition filed before the ERC, Napocor said the amount it is seeking to collect will result in an increase of P0.0768 per kWh from the previous rate.
The government-owned and-controlled corporation said the proposed basic UCME “is necessary in order to cover the required subsidy requirements and at the same time, maintain a reliable and stable funding source for its operating costs requirements.”
It said the amount includes subsidy for payment to new power providers, renewable energy developers, and qualified third parties that have taken over in full or in part the power generation function of Napocor in certain areas.
Mr. Fuentebella said distribution utilities in off-grid areas would be given a transition period of two to five years without the UCME. — Victor V. Saulon

Missionary Electrification
NAPOCOR

UK to implement GSP plus-like trade arrangements after exiting EU

THE post-Brexit United Kingdom (UK) expects to establish an export program that will emulate the effects of the European Union’s (EU) Generalized System of Preferences Plus (GSP+) scheme, ensuring a degree of continuity for exporters shipping goods there.
UK Trade Envoy to the Philippines and Member of Parliament Richard Graham said the UK intends to implement trade arrangements that will mirror GSP+, if current agreements hold.
“Under the terms of the agreement already reached, assuming we pass it, which I believe we will, then we go about this transition period of about 18 months where all the rules and regulations are the same. Nothing changes in practice on both the tariffs and the non-tariff barriers, customs arrangements, and so on. So in that scenario it is literally and exactly the same.”
“Now, if something goes wrong, and we leave the European Union without a deal, we’ve already said that we will replicate the GSP+ in exactly the same way, the same rules, the same conditions. We might call it something slightly different, I think it’s going to be called something like an economic agreement. But it’s going to be exactly the same from day 1 when we leave the European Union,” Mr. Graham said.
“So for all the exporters, it’s business as usual,” he added.
Under the EU GSP+, scheme, the Philippines enjoys tariff-free exports covering over 6,000 products on the condition that Manila complies with 27 core international conventions that cover human and labor rights, environmental protection and good governance.
In place since December 2014, the GSP+ makes the Philippines currently the only country within the Association of Southeast Asian Nations (ASEAN) that is allowed tariff-free trade with the EU.
Mr. Graham said trade and investment is likely to shift to non-European Union markets in the next few years in the wake of Brexit, with ASEAN becoming more of a focus area.
“At the moment around 48% of our exports go to the EU, around 52% to the rest of the world but the economic growth in ASEAN means that over the next 10 to 20 years, the percentage outside EU will increase anyway,” Mr. Graham told reporters in Makati City last week.
According to a 2018 ASEAN report, the combined gross domestic product (GDP) of ASEAN members accounted for 3.5% of global GDP in 2017.
“We’re exerting more effort. We have an independent department for international trade, we have trade envoys and we’re encouraging businesses to look further afield. I think that figure will only grow and grow,” he added.
The UK’s Department of Trade said total trade with non-EU members in 2018 was £838.8 billion, accounting for 65% of the UK total and rising 3%.
In a statement in December assessing the UK’s trade performance in the second quarter last year, the UK said exports to ASEAN rose 10.4% year on year, with some of the world’s fastest-growing economies showing great interest in British produce.
Mr. Graham also made a pitch for the Philippines to look into the potential of the UK market.
“With the Philippines, with your high levels of English… I think the UK is a better natural partner for you than some of the countries in continental Europe. So we want to be your partner of choice, not just in the EU but in the West,” he said. — Janina C. Lim

Bill regulating activities within power corridors hurdles Senate on 2nd reading

THE Senate approved on second reading a bill seeking to prevent obstruction or hazardous activities along power line corridors.
Senate Bill No. 2098 or the proposed Anti-Obstruction of Power Lines Act provides a mechanism that will ensure that power line corridors, which include the land beneath, the air space, and the area traversed by power lines, will be “kept clear and free from any Power Line Obstructions, Dangerous Structures, Hazardous Activities and Improvements.”
The National Grid Corp. of the Philippines (NGCP) has been calling for the immediate passage of the bill in order to address the numerous obstructions within power line corridors which have produced power interruptions.
“With the approval of this measure, we shall put in place a mechanism that will allow for undisturbed, maintenance and rehabilitation of transmission, sub-transmission, and distribution lines,” said Senator Sherwin T. Gatchalian, chair of the Senate committee on energy, in his sponsorship speech.
The measure gives power line operators and owners the right to clear trees within power line corridors without securing prior clearance or permit from the Department of Environment and Natural Resources (DENR) and the Philippine Coconut Authority (PCA).
In cases wherein the power line corridor is located within private property, the measure requires the owner to remove the obstruction in coordination with the power line operator or owner.
The measure also prohibits the planting of tall plants and the construction of hazardous improvements or the conduct of hazardous activities in power line corridors. It also prohibits the refusal of entry to duly authorized agents of the power line owner or operator.
Penalties include a fine ranging from P50,000 to P200,000 or imprisonment between one month to 12 years, depending on the seriousness of the offense.
The power line owner or operators may also seek the assistance of local government units, the Philippine National Police (PNP), and the Armed Forces of the Philippines (AFP) in carrying out the clearing.
The bill also outlines relocation arrangements for persons residing in buildings partially or wholly inside the power corridor. — Camille A. Aguinaldo

Bank secrecy, the BIR and the Tax Amnesty Law

The concept of being secretive is quite ironic. Before something is considered a “secret,” someone must not only conceal something, but another must also know or be wary of the concealment. In fact, some experts would say that the more people desiring that secrets be divulged gives more power to those who know them.
So I ask: Is it really best if things are kept secret? Recent updates in Philippine tax laws seem to say otherwise.
Recently, the President vetoed the provisions of the general tax amnesty. The veto might be a consequence of him being cautious of what taxpayers may be hiding. He cited the lack of power to verify the applicant-taxpayer’s bank account which may facilitate false declarations of assets or net worth. This is in part due to the Bank Secrecy Law or Republic Act No. 1405, as amended.
Bank secrecy is one of the main features of banking. More recently, it has also been proven a double-edged sword; a feature of the law disallowing the exchange of information was exploited as a tool for money laundering involving millions of dollars in 2016. Apart from the Philippines, Lebanon and Switzerland are reported to have similar features in their banking laws.
Under the Bank Secrecy Law, bank deposits of whatever nature including investments in government bonds are considered absolutely confidential. This law prohibits the government and its agencies, including the BIR, to look into bank accounts. Of course, the law admits instances where inquiry into bank deposits is allowed, e.g., when there is written permission of the depositor, impeachment cases, upon order of a competent court where the money deposited is the subject of litigation, and cases involving the Anti-Money Laundering Act, among others. The Supreme Court has noted that some exceptions are provided for in other special laws.
The National Internal Revenue Code (Tax Code) provides some of those additional exceptions.
In Section 5 of the Tax Code, as amended, the law grants broad authority to the Commissioner of Internal Revenue (CIR) to examine any record or book or obtain any information from any person to ascertain the correctness of a tax return and ultimately to determine the liability of a certain taxpayer. Much discretion and leeway are assumed by the Bureau in its assessment and collection powers. However, this overarching authority bends down to the absolute confidentiality of bank deposits. The same provision would then restrict this power to say that the same shall not be construed as giving the BIR the power to investigate bank deposits.
The Tax Code only allows a limited power to the CIR to inquire into these bank deposit accounts. His authority is granted only in three instances: (1) to be able to determine the gross estate of a decedent; (2) in acceding to compromise of a taxpayer’s liabilities due to financial inability to pay the tax assessed; and (3) when information is requested by a foreign tax authority pursuant to an international agreement entered into by the Philippines.
As regards the inquiry due to compromise, this may only happen when the financial position of the taxpayer shows a clear inability to pay the assessed tax. Given that the act of compromise by the BIR is discretionary, and its approval based on existing facts and circumstances, it is necessary to provide a waiver of the account holder’s rights under the bank secrecy law. The inquiry is to determine whether the taxpayer is, indeed, incapable to pay. Thus, a waiver should be included in the formal application to the BIR for compromise.
It may be deduced that the application to avail of the general tax amnesty is akin to a compromise agreement. Both would permit the taxpayer to pay a smaller amount of tax than the tax assessed and would require a claim for availment before the BIR. The main difference would be that lawmakers viewed it best not to touch on the Bank Secrecy law in availing of the general tax amnesty; unlike in an application for a compromise agreement, it is expressly provided that a waiver of bank confidentiality is needed.
In essence, the BIR does not have the power to ascertain the contents of a taxpayer’s bank account outside these exceptions in the Tax Code. If the general tax amnesty provisions went ahead as approved (that is, without requiring the waiver of bank secrecy), the BIR would be constrained to go to court and request an order just to access bank account information and ascertain the true net worth of the amnesty applicant. Tax administration-wise, this would be excessively time-consuming and would take more effort.
This, perhaps, is the difficulty predicted by the President should the vetoed provisions be signed into law. Due to the rigidness of the confidentiality of bank accounts in our laws, the availment of the tax amnesty may as well be given lazily by just trusting the records on hand such as the taxpayer’s Statement of Assets, Liabilities and Net Worth (SALN). This opens up the BIR to the possibility that tax fraud and tax evasion cases would slip right through its fingers.
The President now urges Congress to pass another tax amnesty bill covering the vetoed general tax amnesty provisions. But this time, he requests the inclusion of the waiver of bank secrecy before a taxpayer may benefit from these provisions. If the general tax amnesty goes ahead someday, the taxpayers should be open to this particular requirement if their self-assessment proves beneficial for them to avail of the amnesty. At least only in this instance, disclosing secrets may be best.
 
Philip Conrad D. Vales is an associate with the Tax Advisory and Compliance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.
Philip.Vales@ph.gt.com,
+632 988-2288.

Putting the EASE into Doing Business

Much has been said about the difficulty of doing business in the Philippines, from the time it takes to incorporate a business to the complex maze of procedures we need to follow to get anything done, and the number of approvals needed to move anything.
During a forum on Ease of Doing Business, DTI Sec. Ramon Lopez highlighted key measures under the Ease of Doing Business Act, among which are:

• Single unified business application form at the local government level

• Business one-stop shop

• Automated, electronic systems

• Zero-contact policy

• Centralized Philippine Business Portal

• One-government approach

These are certainly welcome, and we await the IRR which is now with the President for signature.
In the MAP letter sent to DTI last October 2018, there were several areas of difficulty that members noted. What is striking about these is that many are implementation issues. As we have seen many times in the past, we have good laws and regulations, but implementation and execution are where the real test comes.
We took the liberty of suggesting to Sec. Lopez some of the learnings we have had:

• Ensure that new initiatives are fully tested. There have been many laudable initiatives that resulted in slower processes and much delay rather than speeding things up, because in the rush to implement, the system (both manual and computerized) was not fully tested. This is not something unique to the government. Many businesses fall into the same trap in the rush to beat competition in introducing new products, new services, or new features.

• Allow for a transition period. While better processes and increased computerization are very welcome, we need transition periods to allow for issues to surface and be ironed out, and to take into account the concerns of all stakeholders. For example, micro businesses are having difficulty complying with the SSS requirement for online reporting of contributions. Can they be allowed a longer period to comply, to be able to upgrade their infrastructure, or can there be alternatives designed for them? Difficulty in complying often leads to total non-compliance.

• Communicate extensively with the public using different media including social media which Filipinos are so fond of. For example, most citizens did not know that driver’s license applications or renewals could be scheduled online with the LTO, resulting in a low utilization rate for the online reservation system when it was implemented, and continued long lines in the regular lanes.

• Work with the private sector to ensure that the final rules and regulations do not overlook critical elements. While the government often involves the private sector in formulating laws and regulations, we are often “disinvited” once the laws are passed. But continuing involvement is often necessary to iron out the kinks in the processes.

• Related to this, Conduct post-implementation audits. We have often seen that while published turnaround time standards look very good, the actual times are well beyond what was promised. Again, this is something we also see in the private sector.

• Finally, who will oversee compliance by the various government agencies, particularly by the local governments? I think most of us have heard numerous stories of the difficulty of dealing with local government units. The maze of regulations, the number of permits, approvals, etc can be really daunting. Hopefully, the Ease of Doing Business Act, with its mandate of a business one stop shop, computerized processing and zero-contact can help resolve these issues. The PEZA zones, with their one-stop-shop approach, have proven this can be done.

We have come a long way, but we still have a long way to go, and can certainly aspire for more.
office workplace business
For example, the World Bank ranks New Zealand first among 190 countries in ease of doing business. In New Zealand, there is only one procedure to start a business, and it only takes half a day. We have cut our number from 16, but we still have 6. Regulations and legislation can be found online in official government websites.
Speaking of online, this is certainly one area which can facilitate ease of doing business, but it is one where much needs to be done to make the Philippines globally competitive.
Digital allows for faster transaction times, service on demand 24/7 across multiple channels, lower transaction costs, and easier processes.
As seen on e-commerce platforms, digital can stimulate the economy by enabling SMEs to reach a wider audience in a cost-effective manner. And digital tools like cashless payments allow automatic tracking and help small businesses to flourish even without complicated accounting systems, thus promoting inclusivity.
But in the World Digital Competitive Rankings of the Switzerland-based International Institute for Management Development, the Philippines ranked 56th out of 63 countries, dropping 10 places from 2017’s 46th spot. In the Asia Pacific, we are one of the worst ranked at 12 out of 14. Slow internet remains a big reason for the low rankings: we rank 61st in internet bandwidth speed, and 62nd in communication technology, out of 63 countries — almost dead last!
We need to improve not just our physical infrastructure — roads, bridges, airports — but our digital infrastructure, and upgrade our laws and regulations to keep up with technological advancement. New businesses or products using online or mobile media often cannot be launched due to the lack of governing regulations.
Perhaps the government needs to invest in training for its personnel to be able to properly regulate the new digital world, and beyond that, create an environment where science, technology and innovation can grow and flourish.
In this respect, we welcome the DTI’s push to create a nation of smarter, tech-savvy entrepreneurs, such as the transformation of the Philippine Trade Training Center into a Global MSME Academy which will include focus on digital technology, and the creation of platforms for small local businesses to be able to sell online.
The EODB Law, along with the government’s push towards digitalization, holds much promise for a much more competitive business environment, and we look forward to its successful implementation.
This article was lifted from the speech of Management Association of the Philippines (MAP) President Rizalina G. Mantaring at the January 30, 2019 EODB Forum.
 
Rizalina G. Mantaring is Chair of Sun Life Financial Philippine Holding Co., Inc. and former CEO and Country Head of Sun Life Financial Philippines.
Rizalina.Mantaring@sunlife.com
map@map.org.ph
http://map.org.ph

Is optimism a national trait?

By Tony Samson
PERIODIC surveys that check how respondents feel about the future show that as a people, we are an optimistic lot. Our scores on having a positive outlook rank us consistently in the top three in the happiness index. The results favor those who are full of hope on what’s coming ahead. This positive outlook persists even through the bad times we find ourselves in.
Is optimism a trait we should project to investors (property boom) and tourists? Is it more fun in the Philippines not just due to the clean beaches and radiant sunsets, but also because Filipinos are just more fun to be with? Underneath the traits of friendliness and hospitality to strangers is a dose of positive vibes.
Our optimism partly flows from religion and leaving our woes to the mercies of divine providence. The word “bahala” is a corruption of “bathala” (or a deity in the ancient belief system). And so, the expression used to confront and shrug off complex situations that can lead to uncertain outcomes is a sigh, “bahala na,” leaving the resolution of pesky problems to cosmic forces coming to our aid. Such an optimistic (maybe even over-optimistic) dependence on divine providence makes for a sunny outlook. Such a capricious attitude can irritate those who look at different scenarios requiring contingency planning.
Still, even John Maynard Keynes concedes — “There is nothing so disastrous as a rational policy in an irrational world.”
Our upbeat nature must be part of our national DNA. The story of the lazy Juan waiting for the fruit from the tree to drop into his mouth is as much a parable of laziness as it is of blind optimism. While this character is much maligned as a role model, it is a worry-free antidote to the stressed-out workaholic. Idleness is underrated as a muscle relaxant, though not to be taken too often in large doses.
12% of the population working abroad send an ever-growing inflow of foreign-generated wealth back to the homeland. This cash is even accompanied by boxes of goodies and gifts to the family. This also explains why a rich relative acts as a mini welfare state taking care of the education of nieces, health care of sisters, and job offers for distant cousins. This same “family first” bias however also underlies corruption (both in the public and private sectors) and the role of dynasties.
Optimism is not a natural state. One works hard to achieve it. It can be a form of self-delusion. A positive outlook needs constant affirmation to explain away the speed bumps on the road to well-being. Optimism takes a beating with drug-related killings, botched rehabilitation efforts in war-torn provinces, attacks on media freedom, and daily traffic jams.
Exhortation for media to report “the good news” smacks of sucking up to the administration. Sure, there are segments of the news that feature returned wallets left in taxis, the humanitarian efforts of NGOs like building homes for the homeless, and the reining in of inflation. News reporting instinctively has a bias for what’s wrong, pointing out that two cable lines are obstructing a walkway, rather than the expansion of utility services that those new cables bring.
In the late eighties, the phone company I used to work for (no names mentioned here) created a sponsored three-minute news segment (not yet called branded content then), appended to the regular news program. The new feature was called simply “the good news.” For content, the news item was produced by an investigative reporting group, highly respected for doing documentaries on issues of a controversial nature. The corporate mandate to these fierce journalists was to dig out and “investigate” success stories. These interviews of managers and owners of small businesses, many of them exporters, who have opened new markets abroad and making headway in their entrepreneurial efforts. Other segments featured NGOs helping the community. The program ran for almost two years and accumulated over 300 success stories featured in the evening news. It was positively received by the public.
Maybe, it takes the same journalistic zeal to look for what’s going right as it does in investigating what’s going wrong. Looking for something to be optimistic about is not automatically government propagandizing. It is about what’s good about our country, and about us as a people. It’s about having faith in ourselves and our future.
 
Tony Samson is Chairman and CEO, TOUCH xda
ar.samson@yahoo.com

Peso to climb on US-China deal

THE PESO is expected to strengthen against the dollar this week due to positive developments in the US-China trade relations.
The local currency ended last week at P52.065 against the greenback, up 6.5 centavos from Thursday’s P52.13 finish, propelled by hawkish comments from Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.
Week on week, the peso also appreciated from the P52.43-per-dollar finish last Feb. 15.
Traders interviewed said the peso could strengthen against the dollar this week as risk appetite improved following the extension of the trade truce between US and China.
US President Donald J. Trump announced yesterday that Washington is planning on delaying the additional tariffs on Chinese goods scheduled to begin on March 1 as its talks with China made “substantial progress.”
He added that the world’s two largest economies are planning to conduct a summit in Mar-a-Lago, Florida to “conclude an agreement.”
“Should we have good trade headlines coming out from US and China, that could further bring about a stronger peso,” a trader said last Friday, although noting that the US-China trade developments are “widely priced in already.”
Meanwhile, a market analyst said the “welcome development” could improve investors’ risk appetite, which can counteract any deterioration in market sentiment as a result of the postponement of a final vote on the Brexit divorce agreement of British Prime Minister Theresa May.
“Towards the end of the week, the dollar is expected to depreciate further amid expectations of weaker US economic data on housing and GDP (gross domestic product) growth,” the analyst added.
“The dollar’s decline, however, might be tempered by potentially mixed Chinese manufacturing and nonmanufacturing data,” the analyst said.
Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort said the passing of BSP Governor Nestor A. Espenilla, Jr. “should have no impact” on the peso-dollar trading as the “monetary policy direction would likely remain the same.”
Mr. Espenilla passed away on Saturday after battling tongue cancer since late 2017. He had been on intermittent medical leaves since, after undergoing surgery and radiation therapy.
For this week, the analyst expects the peso to trade between P51.75 and P52.35 versus the dollar, while the trader gave a P51.80-P52.20 range. Mr. Ricafort, on the other hand, sees the local unit trading within P52-P52.30. — Karl Angelo N. Vidal

Earnings, US-China trade talks in focus this week

By Arra B. Francia, Reporter
LOCAL STOCKS are seen to firm up this week as more companies disclose their earnings results for 2018, while investors also monitor how trade negotiations between the United States and China will pan out.
The benchmark Philippine Stock Exchange index (PSEi) climbed 0.38% or 30.83 points to finish at 7,962.13 last Friday. It closed the week 0.67% higher or 53.24 points.
“As more earnings reports come in [this] week, this may provide the catalyst that the market needs,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
Companies that will be releasing their earnings reports include BDO Unibank, Inc., Manila Water Company, Inc., Manila Electric Co., and SM Investments Corp. These firms account for 8.85% of the PSEi basket.
“We are still positive that the market will perform better and end the week with gains as economic fundamentals are intact, the continuous inflow of foreign funds and the strengthening of the currency,” Mr. Mangun explained.
The Eagle Equities analyst added that investors may prop up the market considering that it is the last trading week of February.
“[I]nvestors may want to end the month in the green. The main index is currently down 0.56 percent for the month which is not much and a strong move to the upside [this] week will cause it to end the month in the green,” Mr. Mangun said.
Overseas, market leads include news on how the US-China deal is progressing ahead of their truce’s deadline on Friday, March 1.
“Regardless, fund managers may need to assess if both would agree to zero, status quo, or higher tariff, specifically on its impact on key production input items. The odds that may support for increase in tariff appear likely, possibly at a rate lower than anticipated,” online brokerage 2TradeAsia.com said in a weekly market note.
US President Donald J. Trump tweeted on Monday morning that he will delay the scheduled increase in tariffs against billions of dollars of Chinese goods on Saturday, noting that the US has made “substantial progress.”
Mr. Trump also said they are planning a summit with Chinese President Xi Jinping at Mar-a-Lago in Palm Beach, Florida to conclude an agreement, if both sides continue to make additional progress.
“Once the dust clears, however, higher tariffs may still weigh on consumption and investment demand growth. Given this, views for slower US economic expansion would be supported, and prod players to revert their attention to the Fed,” 2TradeAsia.com explained.
Eagle Equities’ Mr. Mangun placed the PSEi’s support level from 7,900 to 8,000, with resistance from 8,100 to 8,300.
Financial markets were closed yesterday for the EDSA People Power Revolution anniversary.

Trump shouldn’t settle for a chicken-rice meal

By David Fickling
COULD a banquet of chicken, beef and rice be the solution to the trade tensions between China and the US.?
It’s looking increasingly likely. President Donald Trump is extending a deadline for the ongoing trade negotiations after making “substantial progress” during talks in Washington, he said via Twitter on Sunday night in the US.
While Trump also cited issues of intellectual property, technology transfer, currencies and services, agriculture is the area where most clarity is emerging. China would buy an additional $30 billion a year of US agricultural produce as part of a deal, people with knowledge of the plan told Bloomberg News last week. Corn, ethanol, beef and poultry have been part of the trade discussions and China could move “relatively quickly” on resuming larger soybean purchases, US Agriculture Secretary Sonny Perdue said Saturday.
While China’s total agriculture imports from the US came to only $24.2 billion in 2017, it’s not hard to see how that ambitious-seeming $30 billion target could be reached, just by taking the brakes off a few products that have struggled in recent years.
Take chicken and beef. China imported about $4.1 billion of beef and poultry in 2017, up almost 90% from three years earlier. The US got just $25 million of that total, due mostly to barriers related to mad cow disease that have only recently been removed and others related to avian influenza that have just been imposed. If China were to buy as much as the biggest US import partners for those products — Hong Kong and Japan in the case of frozen and fresh beef, Mexico in the case of poultry — that would already amount to an almost $10-billion increase over current levels.
Next, consider animal feed. Soybeans and dried distillers’ grains are two popular ways for livestock farmers to get additional protein to bulk up their herds, but both have suffered from trade restrictions in recent years. In the three months before Trump’s inauguration, China bought about $8.9 billion of American soybeans; that had fallen to just $117 million in the last quarter of 2018, as a result of levies and unofficial import bans imposed in response to US tariffs.
rice food
It’s a similar picture with distillers’ grains, a byproduct of producing corn ethanol. The trade was worth $1.8 billion in the 2014 marketing year, according to the US Grains Council. Because of the impact of a drawn-out anti-dumping investigation, it came to just $44 million in the most recent 12 months. Just restoring these two commodities to their averages before trade restrictions came in would add another $10 billion or so to the total.
There are other areas with potential. Removing barriers to US pork could increase China’s imports by a median of $8.9 billion, according to a study last year by Minghao Li, Wendong Zhang, and Dermot Hayes of Iowa State University. The total increase in major agricultural goods could be a median of $35 billion and as much as $53 billion, they argued.
Our estimates don’t even include serious moves to open up trade in China’s most protected crops — corn, wheat and rice. All three operate under tariff rate quota systems, by which paltry amounts are allowed in with a one percent tariff but shipments outside of the quota are subject to a punitive 65% rate.
At present, China captures just $506 million of America’s $17.4-billion export trade in these products. Even letting in the full volume of imports allowed under the current regime could be worth another $2 billion or so, although the US might not capture all of that value.
That sounds good as far as it goes, but the problem comes if that’s all on offer. Trump’s tweet promises major progress on intellectual property, technology transfer and services, but we’ve seen vastly less information leaking out of the talks on those areas. Possibly that’s just a sign of the sensitivity of the process. If not, it would go a long way to explaining the split between a deal-focused president and his more hawkish trade advisers.
Trade Representative Robert Lighthizer has always been clear that he’s seeking a deal addressing fundamental structural issues. With China aggressively moving up the technological value chain and seemingly prepared to use market power and outright industrial espionage to get its way, high-tech US businesses that have suffered faltering demand and retaliatory tariffs aren’t likely to be satisfied with a promise to buy more chicken.
President Trump would do well to learn a lesson from Chinese history: Those who bring war to an end by signing unequal treaties are rarely remembered with fondness.
 
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Bangladesh vs India in the development race

By Noah Smith
THERE’s an old theory that as an organism develops, it progresses through the same evolutionary stages traveled by its ancestors. Traditionally, economic development has worked in a similar way. When a country first shifts from agrarian poverty to industrialization, it tends to start out in light manufacturing, especially textiles. Later it masters more complex manufactured products, and finally it progresses to inventing its own cutting-edge technology. Thus, each country’s development tends to look a bit that of nations that already went through the process.
That certainly seems to describe the experience of South Korea and Taiwan, which reached developed-country status relatively recently. It’s also the path being followed by China. As these countries got richer and their wages rose, low-tech labor-intensive manufacturing industries tended to migrate to countries with cheaper workers.
Recently, one of the biggest beneficiaries of this process has been Bangladesh. The garment industry accounts for more than 80% of the South Asian nation’s export revenue, and about a fifth of its gross domestic product. In 2017, Bangladesh was the world’s second-largest apparel supplier after China, with 6.5% of the market, outpacing neighboring India despite the latter’s much larger economy.
This economic development path has no doubt come at a real human and social cost — Bangladesh’s workers suffer harsh working conditions and many industrial accidents, including a horrific factory collapse in 2013 that killed more than a thousand people. But overall, the tried-and-true industrialization strategy seems to be working. Real GDP per capita has doubled since the turn of the century, and Bangladesh appears to be on a similar exponential growth path as its neighbor India:
India, meanwhile, has generally underperformed in manufacturing. The country does have a few bright spots — for example, it’s now the world’s sixth-biggest auto manufacturer, with an immense factory cluster in Gujarat, and has been increasing its production of smartphones. But overall, manufacturing has declined as a share of the economy:
This isn’t to say that India’s leaders have ignored manufacturing — indeed, they have long called for a big effort to industrialize. Prime Minister Narendra Modi has courted foreign manufacturers, but so far the effect has been limited. Most observers agree that a lack of infrastructure and an excess of regulatory red tape are the reason India remains a difficult place to make things.
Despite its struggles in manufacturing, however, India is growing rapidly — even faster than Bangladesh, in most years. The reason has been growth in service industries. India’s famous outsourcing companies are just the tip of the iceberg — software, finance, online services, tourism, logistics, media, health care, and other services have been the biggest driver of India’s impressive growth. Some have suggested that India has discovered a development model that could leapfrog manufacturing entirely, going straight from agrarian poverty to a post-industrial economy. Others are more skeptical.
This all leads to a very important question. Will Bangladesh, with its traditional approach to growth, catch up and overtake India? Or has India stumbled upon a new development model that cuts out the need for a country to do a stint as the workshop of the world?
This is a crucial question because as technology advances, there’s a concern that the traditional path out of poverty might be closing. Automation is making textile manufacturing less labor-intensive. For one thing, that means that poor countries might no longer be able to create mass urban employment in the garment industry. But even more troubling, it might cause the industry to migrate back to rich countries like the US, where labor is expensive but capital is relatively cheap. Some of this reverse migration might already be happening.
In other words, the developing world is at risk of premature deindustrialization. If Bangladesh fails due to competition from rich-world robots, it will bode ill for countries such as Ethiopia that are looking to hop on the escalator to prosperity. That would leave India’s service-centric development model as the only feasible path.
Some economists argue that automation hasn’t closed off the traditional path, and that there is still plenty of work for industrious people in poor countries. Bangladesh, meanwhile, is scrambling to diversify into more valuable manufacturing industries such as autos and electronics.
So although the leaders of Bangladesh and India have similar goals, the difference in the country’s development models is making for an interesting experiment. Countries in Africa hoping to follow these two South Asian giants’ growth trajectories should be watching keenly. If Bangladesh grows faster, it will suggest that manufacturing, starting with textiles, is still the ticket to industrialization; but if Bangladesh falters and India sustains its growth, it will imply that poor countries should look to services first.
 
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