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House hearing bills on P40-P60 per pack increase in cigarette tax

THE HOUSE WAYS and Means Committee on Monday continued deliberations of the bills raising excise taxes on tobacco products to P40 to P60 per pack from P35, which is intended to fund Universal Health Care (UHC).
“We support this important reform to raise tobacco excise taxes so we can do two things: number one, fund the Universal Health Care (act), which is an important upcoming law, which remains underfunded; and second, to prevent the youth and the poor from wasting their lives in the future,” Finance Undersecretary Karl Kendrick T. Chua told the panel.
The Committee was tackling House Bills 4575 and 6648, written by Albay 2nd district Rep. Jose Maria Clemente S. Salceda and Quezon 4th district Rep. Angelina D.L. Tan, M.D., respectively.
House Bill 4575 proposed to increase excise tax to P40 to 60 within five years of implementation and a 5% annual increase thereafter; while House Bill 6648, which embodies the DoF proposal, proposed to increase it to P60 with an annual increase of 9%.
Mr. Salceda’s version calls for 80% of the incremental revenue to be earmarked for the UHC and 20% to provide assistance to farmers.
Ms. Tan proposed to allocate 75% of the revenue for the UHC; with the remaining 25% to be divided between a government program to eliminate tuberculosis, which is to receive 10%; another program to prevent and control HIV/AIDS, receiving 10%; and a third program of health promotion, receiving 5%.
Stakeholders, meanwhile, asked the panel as well as the Finance and Health Departments to reconsider the additional excise taxes on tobacco products, taking into account that enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which imposed higher taxes on tobacco products.
“The PMFTC (Phillip Morris Fortune Tobacco Corp. Inc.) supports the retention of the current excise tax rates which were passed only last December 2017. We believe before new proposals increasing excise tax rates are entertained the government must give an opportunity to first review the implementation of the existing rates,” Patrick Muttart of PMFTC told the panel.
“We believe that such a review would show an additional increase in excise rates at this time would create a challenge that would have a profound impact on the entire tobacco value chain,” he added.
Universal Leaf Philippines Inc. President Wynston P. Uy said: “I think it’s only fair that the government collects properly from the tobacco but… (we’re) forgetting other sin products that also do have harm to society.” — Charmaine A. Tadalan

NFA expected to survive under rice tariffication regime as keeper of buffer stock

SENATOR Cynthia A. Villar, chair of the committee on food and agriculture, said on Monday that the National Food Authority (NFA) will not be abolished with the implementation of the rice tariffication bill.
Ms. Villar said that only the regulatory and importation functions of the NFA will be removed, but the agency will remain, to solely focus on buffer-stocking with its inventory acquired from domestic farmers.
“There is no provision in the rice tariffication on the abolition of the NFA. We think it will limit its role to buffer-stocking, buying from the local farmers, but no abolition,” Ms. Villar told reporters after the Senate budget hearing for NFA on Monday.
“We want to keep the buffer-stocking except that now the NFA is required to buy it from local farmers, not importing,” Ms. Villar said.
According to Ms. Villar, the budget for the NFA should be pegged at around P7 billion, strictly for the maintenance of a buffer stock to stabilize the rice supply and allow it to sell subsidized rice to the poor and to release emergency supplies during periods of calamity.
Ms. Villar added that with the NFA committed to buying domestic rice at P17 per kilo, with an additional P3 incentive, the price of NFA rice might be P33 per kilo, a level seen sufficient to achieve break-even.
“If it is purchased at P17, the break-even price is P30. If it is purchased at P20, the break-even is P33,” Ms. Villar said.
Ms. Villar said that the senate committee will discuss in plenary session on Monday, Dec. 3, the NFA budget for 2019.
“We go plenary on Monday… There is a prediction that the budget will be re-enacted for one month. I don’t think we can finish the budget from Dec. 3 to Dec. 12, two weeks. I think we’ll finish sometime in January so that means the budget will be re-enacted for one month and then we pass the 2019 budget in January,” Ms. Villar said.
The rice tariffication bill is due for submission to President Rodrigo R. Duterte for enactment into law.
“We will forward it to the President as soon as we ratify the bicameral report,” Ms. Villar said.
The bicameral conference committee approved last week the rice tariffication bill which aims to lift quantitative restrictions on importation of rice, and impose a tariff on importers, to be used for the rice competitiveness enhancement fund. — Reicelene Joy N. Ignacio

Senate panel opens hearing on raising tobacco tax

THE Senate ways and means committee on Monday opened its inquiry into the bills increasing the excise tax of tobacco products, especially cigarettes.
The proposed measures hope to find additional funding for the universal health care program, which is set to be rolled out in 2019 with the expected enactment of the UHC bill this year. However, other stakeholders raised concerns that raising taxes might further cripple the tobacco industry.
Senate Bill No. 1599, introduced by Senator Emmanuel D. Pacquiao, proposes to increase the cigarette tax to P60 per pack by 2018. Meanwhile Senate Bill No. 1605, written by Senator Joseph Victor G. Ejercito, sets the tax at P90.
During the hearing, Department of Finance (DoF) Assistant Secretary Teresa S. Habitan expressed support for the Senate bill and proposed some amendments to improve the measure.
“Among which is to broaden the coverage of the bill to include not only cigarettes but also other tobacco products. And also to dedicate the entire proceeds or the incremental proceeds from the Senate bill if it’s passed into law to funding universal health care,” she said.
Philippine Health Insurance Corp. (PhilHealth) Independent Director Anthony C. Leachon said raising tobacco taxes would help address the estimated P164 billion funding gap in the implementation of the universal health care program. He said about P257 billion is needed to fund reforms under the program with the current budget funding only P93 billion.
“Hopefully, the increase in tobacco and alcohol taxes will fund the gap for UHC and decrease the health burden. It’s a twin bill addressing health issues and generating revenue to fund the illnesses brought about by smoking and alcohol drinking,” he said.
However, the National Tobacco Administration’s Deputy Administrator Mel John I. Versoza warned that any further increase to the present taxes imposed on tobacco products may lead to job losses in the industry.
“Tobacco farmers are fewer. More than 2,000 employees in the tobacco manufacturing sector have been terminated… The consecutive tax increases since 2004 have taken their toll on the industry so it means the industry is dying,” he said.
Officials from tobacco-producing provinces also raised concerns about the possibility of lost livelihoods with the imposition of increased taxes on cigarettes.
Both Misamis Oriental governor Yevgeny Vicente Emano and La Union Sangguniang Panlalawigan chairperson Christian Rivera said the national government must ensure livelihood alternatives are provided for tobacco farmers if the proposed measure is signed into law.
“If, right away, we will increase taxes, if the company (buying from the farmers) leaves the province of Misamis Oriental or the municipality of Claveria, will the Department of Agriculture (DA) have alternative sources of livelihood? Or will the national government help us?” he said.
Senator Juan Edgardo M. Angara, chair of the Senate committee on ways and means, said the challenge was finding the “sweet spot” that would balance the interests of stakeholders.
“I don’t want to prejudge it. We’ll hear everybody out. We’ll consult with the members of the committee, the authors and see what’s the best solution,”he told reporters after the hearing.
“We’re committed to finding funding for UHC. That’s one thing I can say with certainty,” he added. — Camille A. Aguinaldo

Net work force turnover rises to 1.7% in 2nd quarter

By Jochebed B. Gonzales
Senior Researcher
NET WORK FORCE turnover at large firms rose to 1.7% in the second quarter from 1.6% a quarter earlier due to hiring activity in the industry and services sectors, the Philippine Statistics Authority (PSA) said.
According to the PSA’s Labor Turnover Survey for the three months to June period, labor turnover rate — or the difference between accession and separation rates within firms — accelerated between quarters.
The indicator means that for every 1,000 persons employed, large firms hired an additional 17 workers on a net basis during the second quarter.
The accession rate, or the rate of hiring by employers to either replace former employees or expand their work force, increased to 11% from 9.3% in the preceding quarter.
The rate of separation — which covers terminations and resignations — was 9.3%, rising from 7.7% previously.
The net labor turnover rate was highest in the industry segment, at 3.9%, following an accession rate of 13.3% and a separation rate of 9.4%.
Net hiring was also seen in services, where the net work force turnover rate was 1.1%. This sector posted accession and separation rates of 10.5% and 9.4%, respectively.
Asked for comment, Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), attributed the positive turnover in industry and services to their “robust and solid” expansion in the second quarter as a result of increased expenditures from the private and public sectors.
“Overall, each of the said sectors is continuously expanding due to increasing government spending and rising private investment,” he said.
“The continued interest in the Philippine economy by foreign and local investors has fueled labor demand for both the industry and services sectors.”
Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort, concurred: “The positive labor turnover in industry and services sectors may be attributed to the continued pick up in manufacturing and export activities and also amid the continued growth in real estate and construction, partly due to the sharp increase in government spending on infrastructure since the start of 2018.”
However, more people left their jobs in agriculture, forestry and fishing which posted a negative turnover rate of 1.3% after recording a separation rate of 6.4%, compared to its 5.1% accession rate.
RCBC’s Mr. Ricafort pointed to higher wages offered particularly in the construction sector.
“The negative labor turnover in the agriculture sector of some agriculture jobs over the years to industry and services may partly reflect higher pay in construction jobs amid some tightness in construction jobs especially over the past 2-3 years, the conversion of some agricultural areas/farmlands to industrial areas, residential, and commercial areas (that also reduced employment in adversely affected agricultural areas),” Mr. Ricafort said.
UnionBank’s Mr. Asuncion added: “Neglect and the lack of political will to deal with market inefficiencies, I think, have rendered the (agriculture) sector helpless and languishing in weakness amidst meager expansion and the threat of climate change.”
Data from the survey also showed 219,022 job vacancies in the three months to June, 2.2% lower than the first quarter level.
These vacancies were highest in the services sector with a 76.1% share equivalent to 166,713 openings. The share of the industry sector stood at 19.9% (43,536) while that of agriculture, forestry and fishing was 4% (8,773).
In terms of major occupation group, employers mostly looked to fill in positions for service and sales workers (accounting for 18.4% of job vacancies), technicians and associate professionals (16.3%), elementary occupations (16%), professionals (15.9%) and clerical support workers (15.7%).
Meanwhile, out of the 9.3% separation rate, 5.6% were employee-initiated while 3.7% were employer-initiated. Being “hired by another company” was the top reason for employee-initiated separations, as cited by 32.6% of the respondents who left their employers on their own initiative.
Some 18.3% left due to “family considerations,” 14.4% said they would work overseas while 10.7% went absent without official leave (AWOL).
On the other hand, project completion accounted for 44.8% of employer-initiated separations. It was followed by those who went AWOL, at 20.5%, while those who were separated from the company because of retirement, reorganization/downsizing and termination comprised 8.0%, 4.7% and 3.6%, respectively.
Moving forward, the economists are optimistic that hiring will be sustained in the next quarters.
“I still see positive numbers from the industry and services sectors, while agriculture will remain the growth laggard,” UnionBank’s Mr. Asuncion said.
RCBC’s Mr. Ricafort said, “Philippine hiring/employment growth could still improve amid continued growth in both local and foreign investments, as a major economic growth driver in recent years, especially new record high foreign direct investments (FDIs), with the shift of more FDIs from China to other ASEAN countries such as the Philippines amid the trade war (i.e. higher tariffs) between the US and China.”
“The pick up in manufacturing, including exports (as some investments/FDIs are completed/become operational), would also help create more job opportunities.”

Alcohol tax hike hurdles House committee on 2nd reading

A BILL imposing higher excise taxes on alcohol products was approved on second reading at the House of Representatives on Monday.
House Bill 8618, approved by voice vote, is expected to generate P60 billion within five years of implementation.
The measure will generate “P60 billion for five years, P7 billion for the first year,” House Ways and Means Committee Chair Estrellita B. Suansing told reporters in a chance interview after the hearing on Monday.
She noted that revenue from the measure will also be used to fund the proposed Universal Health Care (UHC) act. “Everything will go to the UHC,” Ms. Suansing confirmed.
The bill provides for distilled spirits to be levied a 22% ad valorem tax on the net retail price (NRP) per proof from the current 20%, in addition to a specific tax of P30 per liter in 2019, up from P23.40. The specific tax rates will be increased to P35 in 2020, P40 in 2021, P45 in 2022 and shall increase by 7% annually beginning 2023.
The Committee Report on House Bill 8618 noted the annual increase of specific taxes was raised to 7% from 4% “to account for inflation.”
The measure also proposed to levy a 15% ad valorem tax per liter, which is currently not imposed; and a P650 specific tax per liter for Sparkling Wines in 2019, which shall increase by 7% annually, regardless of price. This compares with the present system of a P316 per liter tax on sparkling wines costing P500 or less per 750 ml bottle in 2019, with an P885.7 per liter levy on bottles costing more than P500.
For still wines and carbonated wines with 14% alcohol or less, the excise tax will be increased to P40 per liter in 2019 from P37.9, which shall also increase by 7% every year beginning 2020.
Still wines and carbonated wines with more than 14% alcohol, meanwhile, will be taxed P80 per liter in 2019 with an annual 7% increase thereafter. Currently, taxes on still wines with more than 14% alcohol are as follows:

• P75.9 per liter in 2019 for still wines with 14% to 25% alcohol per liter of volume capacity

• P23.4 per liter in 2019 for fortified wines or still wines with more than 25% alcohol per liter of volume capacity.

For fermented liquors, the excise tax will rise to P28 per liter from P25.40 in 2019;. It is scheduled to increase to P32 in 2020; P34 in 2021; and P36 in 2022. It was provided also that the rates will be increased by 7% every year beginning 2023. — Charmaine A. Tadalan

Makati surpasses 2018 revenue target in October

MAKATI City said it hit its 2018 revenue target with two months left in the year, raising P16.19 billion in the 10 months to October to beat the full-year goal by 3%.
City treasurer Jesus Cuneta announced the 10-month collection level in a report.
According to the report, business tax accounted for P8.9 billion of the total, up from 8.2 billion a year earlier. Meanwhile, real property tax totaled P5.2 billion, down from P5.4 billion a year earlier.
The city raised P720 million from fees and charges. Other income sources, including the internal revenue allotment from the national government, accounted for P948 million, while interest income generated P213 million.
Mayor Abigail Binay-Campos said in the report that new business registrations hit 3,762 as of the end of September, citing the records of the Business Permit Office (BPO). The registrants made combined capital investments of over P24.5 billion.
The number of permit renewals at the end of the third quarter was 33,781, it said. — Vince Angelo C. Ferreras

NEDA, PRA sign agreement to prevent ‘indiscriminate’ reclamation project approvals

THE NATIONAL Economic and Development Authority (NEDA) and the Philippine Reclamation Authority (PRA) signed a joint memorandum circular on Thursday firming up supervision of reclamation project proposals before they are approved.
The directive aims “to foster heightened compliance with the approval of reclamation projects” and “prevent indiscriminate illegal reclamation activities which lack prior NEDA Board approval.”
It states that “completed staff work by the PRA and the corresponding PRA Board endorsement, through a PRA Board Resolution, of a reclamation project and reclamation component of a development or infrastructure project should be obtained before submission to the NEDA Board Investment Coordination Committee (ICC) and/or NEDA Board, as the case may be.”
It also noted the “strict implementation” of Executive Order 146, series of 2013, which delegates to the NEDA Board, chaired by President Rodrigo R. Duterte, the power to approve reclamation projects.
The joint memorandum circular was signed by Socioeconomic Planning Secretary Ernesto M. Pernia and PRA General Manager and Chief Executive Officer Janilo E. Rubiato.
The joint circular will be endorsed to the Office of the President for notation, NEDA said.
Mr. Pernia said in a statement that the new circular will balance economic and environmental interests in the implementation of reclamation projects.
“Reclamation projects can be good or bad for sustainable development depending on how, and to what ends, they are done. So we must strike a balance between the twin goals of economic growth and environmental sustainability,” Mr. Pernia said.
In 2017, the Davao city government cancelled the P40-billion Davao Sasa port reclamation project due to negative environmental implications. However it is seeking the revival of the project for 2019.
There is also a proposal from Davao-based businessman Dennis A. Uy for a P62-billion reclamation project in Pasay City.
Solar Group’s Wilson Y. Tieng and the SM Group’s Henry T. Sy, Sr. have also submitted an unsolicited proposal for a $12-billion airport in Sangley, Cavite, which involves land reclamation work. — Elijah Joseph C. Tubayan

Arroyo backs minority on underspending inquiry

SPEAKER Gloria Macapagal-Arroyo on Monday supported the Minority bloc’s intent to look into underspending by the Duterte Administration.
“I agree with them, I agree with the minority, on the general evaluation of the situation,” Ms. Arroyo told reporters over a lunch meeting at the Speaker’s Social Hall.
“We’d like to find out what the reasons are, and how we can help to address those reasons,” she added.
The Speaker said at this point, the 17th Congress should turn its focus on its oversight functions to assess the implementation of the policies legislated in the past three years.
She said that while the Executive branch is responsible for ensuring the implementation of laws, the House of Representatives may offer support to the implementing agencies, particularly through House Resolutions or through House oversight functions.
“Of course the other congressmen, they have their own point of view and if their oversight wants to look into underspending that’s a very good function. That’s a very good intention,” the Speaker added.
The Minority bloc, led by Rep. Danilo E. Suarez of the third district of Quezon, had earlier questioned the government’s alleged P975 billion worth of underspending and filed House Resolution 2307 to hold a “question hour” with Budget Secretary Benjamin E. Diokno.
“What I tell the congressmen, this is free assembly with freedom of thought and freedom of action as long as you stay with the parliamentary rules,” she said.
“So if they want to have a Question Hour, it’s their call.” — Charmaine A. Tadalan

OPCs: A new way of doing business for solo entrepreneurs

We are nearing the end of 2018; so many of our tax laws affected by the Tax Reform for Acceleration and Inclusion (TRAIN) Law have changed. The reforms, however, are not yet over. We are seeing steady developments in the proposed amendment to the Corporation Code of the Philippines. Both the Senate and the House of Representatives have passed on the third and final reading their own versions of bills amending the Corporation Code. As of the date of this publication, the bicameral conference committee session is to reconcile the House and Senate versions.
One of the significant provisions in both versions is the inclusion of a new chapter on Special Corporations — Corporations. The one-person corporation (OPC) provisions in both the Senate and House versions are very similar; there is a high likelihood that these will be carried in the final version.
Under the current Corporation Code, there should be at least five stockholders to register a corporation with the Securities and Exchange Commission (SEC). With the proposed provision on OPC, however, the Code will allow a single person, whether natural or juridical, to form a corporation. This would be a welcome development for entrepreneurs who do not wish to share their business with others, but would like to avail of the benefits of being a corporate entity.
Currently, a solo entrepreneur’s only option for a business structure is to register as a sole proprietorship. In a sole proprietorship, the business and the owner are treated as one and the same. Hence, any liability of the business is also a personal liability of the owner. This means that creditors can run after the personal assets of the owner to settle the obligations of the business. A corporation, on the other hand, is considered a separate legal entity, and its liabilities are limited to the amount of stockholder investment. It may seem that setting up an OPC is more advantageous than setting up a sole proprietorship, if we consider the limited liability of a corporation.
Before diving into an OPC, though, we also have to consider the different tax implications and administrative requirements of a sole proprietorship vis-à-vis an OPC.
A sole proprietorship is considered an individual for taxation purposes. With the TRAIN law, individuals can avail of the 8% special tax rate in lieu of graduated income tax rates and percentage tax, provided that the gross sales or receipts for the year do not exceed the value-added tax threshold of P3,000,000. This option is usually best for first-time entrepreneurs with minimal expenses, since the taxation is simplified. If the expenses of the business are high, however, opting to pay under the regular rate of 0 to 35% may result in a lower income tax payable. There is even a P250,000 exempt bracket under the graduated rates.
A corporation, on the other hand, is subject to a fixed corporate income tax rate of 30%, which is 5% lower than the maximum income tax rate that may be imposed on an individual. In case the business avails of the 40% optional standard deduction (OSD), the 40% OSD for an individual is based on their gross sales or receipts. For a corporation, though, the 40% OSD is based on its gross income. This means that, if the business has high direct costs, a corporation has the advantage of being able to deduct its cost of sales or service in full; for individuals, the OSD comes in lieu of all their deductions.
While the corporate income tax is lower than the top rate for individuals, the earnings remaining after the corporate income tax is still taxed at 10% when distributed to the individual shareholder. It is not yet clear if the same kind of “double taxation” will also be applied to OPCs, i.e., whether the profits after tax of the OPC will also be taxed when the owner takes the profits out of the corporation.
In terms of administration, a sole proprietorship is the easiest and cheapest form of business to register. It does not have to be registered with the SEC compared to an OPC. Since an OPC is regulated by the SEC, it is understandably more difficult to register and would require extra costs, considering the additional reportorial requirements. Some of the reportorial requirements that are not applicable to sole proprietors include the filing of articles of incorporation and annual audited financial statements (AFS). However, if the total assets or total liabilities of the corporation are less than P600,000 (per Senate version) or P3,000,000 (per House version), auditing the financial statements is not required; but the financial statements must be certified under oath by the corporation’s treasurer and president. Further, the OPC will be governed by the Corporation Code of the Philippines, which means it would need to adhere to certain formalities. These include appointing corporate officers including a Corporate Secretary and maintaining a minutes book for any corporate act of the OPC.
We also have to consider that a corporation has perpetual existence, which means that a corporation shall continue to exist despite the death or incapacity of the owner. For a sole proprietorship, however, the death of the owner is equivalent to the death of the business which means that, if the legal heirs should wish to continue the business, all the assets of the business would have to be transferred under the name of the new owner first, and all existing contracts or agreements of the business would have to be amended.
As a vehicle for doing business, an OPC is not necessarily unfavorable or more advantageous compared to a sole proprietorship. The best business structure would still depend on the needs and goals of the company.
We have long been hearing about the concept of single-shareholder corporations in other countries. With the addition of the OPC to the business structure options available to entrepreneurs, we hope this can help us keep up with global competitiveness and encourage entrepreneurs to open up more businesses.
 
Juvy H. de Jesus is a manager of the Tax Advisory and Compliance of P&A GrantThornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing service firm in the Philippines.
Juvy.deJesus@ph.gt.com
+63(2) 988-2288

Runaway trains

I had the opportunity to revisit Japan last Nov. 16-19 for the 2018 Philippine Studies Conference in Japan (PSCJ) in Hiroshima University. While I could have taken a direct flight to Hiroshima (give or take a layover to another country), circumstances compelled me to land in Kansai International Airport (KIX). From there, I took multiple train line transfers (including the Shinkansen) from KIX to my hotel in Hiroshima.
Fourteen hours riding train cabins gave me a first-hand appreciation of the complexity and efficiency of Japanese megacities’ rail systems. Newcomers and long-time riders openly laud the sense of comfort and order these interconnected rail systems (both public and privately-run) provide the riding public.
Indeed, nearly every globalizing Asian country today looks to the Japanese experience in trying to build its own railway complexes — as seen in cities like Seoul, Kuala Lumpur and Bangkok. Inevitably, however, this exposure to Northern Hemisphere efficiency makes me look wistfully at the dismal state of railway transport in Metro Manila.
Here at home, upgrading train wagons can take decades. A train line not breaking down for a fortnight is a miracle. We have three lagging train lines in a metropolis that in any other country will already require way more. Let’s not even get into how equivalent rail systems have not been replicated in other provinces and urban areas in the nation.
But instead of simply lamenting the failings of land transport governance in the Philippines, I feel there might be more critical questions. What exactly went wrong in our pursuit of railway mobility? What, in turn, did most countries with working systems succeeded at? Finally, to what cost are these mobility infrastructures run and maintained — and whose?
Serendipitously, the answers were waiting for me at Hiroshima. The Third World Studies Center (TWSC) of the University of the Philippines-Diliman is pursuing a project on the history of The Mass Transit System in Metro Manila. Their current findings presented in PSCJ 2018, in brief, could be summarized as follows.
First, much of our prewar tranvia and bus systems, commandeered and destroyed during the Second World War, were never properly rehabilitated. Attempts to resurrect mass rail through the Philippine National Railways (PNR) also fell through due to bad management (coinciding with the Martial Law years). These were further compromised by market forces, both local and international, pushing for the primacy of cars.
Second, our current existing Metro railway lines (the LRT1, LRT2 and MRT3) have all been beset by uncompetitive bidding, incomplete planning and ill-thought agreements since their inception. All of these were signed and maintained under governments (from Ferdinand Marcos to Noynoy Aquino) in state-private sector partnership schemes. The results, as seen in our train lines’ dismal performances, would be prioritizing the profits of private partners, instead of addressing actual public needs.
The lesson we glean from these kinds of stories is that railway governance cannot be solely a “nationalization”/”privatization” debate. If ill-minded political will and irresponsible business interest already holds sway, we can expect this reality. Neither available technological advances nor balanced public-private schemes of ownership will benefit the riding public.
train
This emblematic policy disconnect persists to this day. In Asia, the lesson is already being learned with harsh effects to commuters and taxpayers.
Since his reelection this 2018, Malaysian Prime Minister Mahathir Mohamad engaged in widespread investigation of his much-criticized predecessor Najib Razak’s railway projects. Nearly all of the proposed systems are tinged with corruption and collusion with foreign Chinese capital. It was likely to cost Malaysians decades of debt servicing if they proceeded.
Even back in Japan, the railways privatization scheme of the Japanese government means the high-quality service provided for by the Japan Railways Group (JR) remain exclusive to urban residents. Meanwhile, semi-urban and rural areas throughout Japan have local railway systems suffering from declining ridership and infrastructure quality.
This brings us to the uncomfortable reality of transport infrastructure policy. For most countries, efficient train access is concentrated to the mega-cities. It seems reasonable for governments to focus on upgrading railway and access facilities in heavily urbanized areas. After all, they house the bulk of national business and drive economies aloft.
Yet it is visible that these policy schemes directly contribute to core-periphery inequalities. Cities become major centers of economic and social activity while the suburban and peri-urban fringes are left to wither away. If not, these make them very vulnerable to property developer speculation and takeover.
Such was dramatically illustrated in Arnisson Andre Ortega’s recent award-winning work Neoliberalizing Spaces in the Philippines (published by ADMU Press). Urban restructuring in the Philippines is directly facilitated not only by predatory broker local governments (often dynastic). It is also normalized by exclusivist mind-sets cultivated along urban middle- to upper-classes — ripe impetus for predatory property development.
If the Duterte administration’s approach to infrastructure building is any indication, we are likely to see more of government irresponsibility, lack of transparency and non-consultation of affected sectors. These fears have been solidified with its trade deals with Chinese President Xi Jinping last Nov. 20. Most of these are to be executed with Beijing’s oversight and directly conflicting with existing land rights issues.
Even the most current attempt at expanding railways, the Araneta-sponsored MRT-7, is being hounded by right-of-way and expropriation issues. Furthermore, communities in Bulacan directly affected by construction are complaining that it will not only displace around 300 farming families and 10,000 urban poor. It may also wipe out around 600 hectares of farming land.
To be sure, I definitely appreciate the value of train-riding and mass transit systems. I still dream that apart from rehabilitating land transport, we also begin properly investing in mass rail. Yet ultimately, the right to the city always has to be determined by people and communities, never by official state fiat or by grasping private investment. Otherwise, we only reinforce an exclusionary road to progress.
 
Hansley A. Juliano serves as lecturer in the Department of Political Science, School of Social Sciences, Ateneo de Manila University. He is also engaged in research and advocacy for various sectoral issues (such as labor rights and agrarian reform).

Debating with Mr. RE

In a paper, “Setting up the debate with Mr. Coal,” published in BusinessWorld yesterday, Mr. RE and climate scam Eddie O’Connor of wind-solar lobby made new wild claims but did not answer the points I made against his previous paper.
In my paper, “Corrupted science to justify renewables cronyism” in BusinessWorld last Oct. 11, I made these points that the RE/climate scam did not respond to:
(1) “Earth’s climate history is one of natural warming-cooling cycles since the planet was born some 4.6 billion years ago.” I showed there a chart, ”450 Million Years of Unrelatedness between Atmospheric CO2 and Temperature.”
In his paper yesterday, O’Connor showed a chart of ocean heat content the past 50+ years. Sorry but planet Earth was not born in the ’60s as starting point of temperature measurement. Here is another chart showing warming-cooling cycle (see Figure 1).
Figure1
(2) “Solar price of P9/kWh at P54/US$ is not 2.9 cents but 17 cents/kWh. Wind price of P8.5/kWh at P54/$ is not 4.1 cents but 16 cents/kWh.”
In his paper yesterday, Mr. O’Connor made other wild and fake claims:
(1) “Of course, the developers of wind and solar agree to abolish mandatory dispatch.”
This is lie #1. Mandatory dispatch was put in the RE law of 2008 (RA 9513) because it was demanded by the solar-wind developers. Cost upon dispatch includes the total price (capex and opex; WESM price + FIT-All) and not just the marginal price. In 2018, the total price of solar is P9+/kWh, the total price of wind is P8.50/kWh, data from ERC.
(2) “Regarding abolishing the feed-in-tariff. It is not hard to agree to this, as it is already abolished.”
Lie #2. FIT is still there, not abolished. The FIT-Allowance in our monthly electricity bill has been rising from 4 centavos/kWh in 2015 to 12.40 in 2016, 18.30 in 2017, and 25.32 centavos /kWh since June 2018 billing.
(3) “I am alarmed, indeed devastated by the disappearance of some 60% of species by 2020 due to global warming.”
Lie #3. In a paper published in Nature this year, Steinbauer and 52 other scientist-co-authors reported “a continent-wide acceleration in the rate of increase in plant species richness, with five times as much species enrichment between 2007 and 2016 as fifty years ago, between 1957 and 1966… consistent across all [continental regions], with no single region showing the opposite pattern.” (See Figure 2.)
Figure2
(4) “I am afraid that Mr. Oplas is a latter day flat earther for denying climate science.”
Lie #4. I believe in climate change and global warming, they are true, they are happening. What I do not believe is that they are “man-made.” On the contrary, the climate/RE scam and square-earther is the big denier: (a) deny that global warming has many precedents and not ‘unprecedented’; (b) deny that climate change is natural and cyclical; (c) deny that global cooling can happen after global warming phase; (d) deny that natural factors — the Sun, galactic cosmic rays, water vapour, clouds, geological degassing, AMO/PDO in the ocean, etc. — are big factors for climate change.
Finally, square-earthers (e) deny that coal remains a big if not biggest source of electricity for many Asia-Pacific economies (see Figure 3).
Figure3
Square-earthers produce lots of lies and fake stories to fool the public so that the people will keep subsidizing their expensive, intermittent solar-wind energy.
 
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.
minimalgovernment@gmail.com

The hard truth about high-value crops

High-value commercial crops refer to “those crops that have competitive returns on investment when traded in fresh form vis–a–vis alternative investment opportunities. These crops are characterized by defined regular or niche market or potential domestic and/or export markets, command high prices, with value added or are good foreign exchange earners. High-value commercial crops are also called non-traditional crops. (High Value Crops Farmer Guidelines – Department of Agriculture (DA) – CAR).
Some 20 high-value agricultural commodities were prioritized by the DA in 2014 under the World-Bank assisted Philippine Rural Development Program. These commodities include abaca, banana, cacao, calamansi, cassava, coconut, coffee, corn, mango, oil palm, onion, pineapple, rice, rubber, seaweeds, sugar, temperate vegetables, livestock and poultry (https://www.philstar.com/business/).
Certain high-value commercial crops were also identified by the Philippine Crop Insurance Corp. as eligible for insurance subject to their feasibility. These are abaca, ampalaya, asparagus, banana, cabbage, carrot, cassava, coconut, coffee, commercial trees, cotton, garlic, ginger, mango, mongo, onion, papaya, peanut, pineapple, sugarcane, sweet potato, tobacco, tomato, water melon, white potato, etc. (http://pcic.gov.ph/high-value-crop-insurance/Retrieved Nov. 3, 2018)
My take on the term high-value crops: I recall my personal conversation with former Prime Minister Cesar Virata, decades back, who said: High-value crops become low value when prices go down because of oversupply.
What is high value? Value is derived from productivity, expressed in quantity per hectare multiplied by farmgate price. Let us subject this to the 2017 data from the Philippine Statistics Authority (PSA).
What are the reality checks that will debunk “high value?” The exercise below shows that productivity is a major factor. Markets and costs are important as well, but these are not the focus of discussion (see table).
Farmgate prices of selected crops, 2017
High-priced products include: coffee, garlic, tobacco, abaca, peanut and mango. But low productivity takes its heavy toll. Garlic is high priced, but its yield is very low, and quality is not globally recognized. That is why garlic from China dominates as its yield is at 27 tons per ha vs. 3 tons for local garlic. Mango has lost market shares in Japan. Other countries, such as Mexico, Peru and Thailand, have brought in their own varieties.
Low yield products: Other crops similarly suffer from low productivity. If the coffee farmers produce 2,500 kg/ha (Vietnam average) instead of 270 kg/ha, the Filipino farmer will be earning P243,000/ha and will not be poor. Meanwhile, cassava yield is only about half that of Thailand. Doubling Philippine yield will double farmers’ income, and the country may not import cassava starch.
Irrigated palay farmers with two crops/year will earn P159,400/ha. But with the high cost of P12 per kilo, the farmers net less than P60,000 per ha per year.
High-value products: The leading crops in value per hectare are: Cavendish banana, mango, pineapple, onion, and cabbage. Banana and pineapple are export-driven and with intensive level of management. The latter’s prices are relatively low, but productivity is high and world market is not that volatile.
The bottomline is that the definition of high-value crops and the commodities classified as such can be misleading. Value depends on productivity and price.
The key factor is the general level of low productivity which makes a third (34%) of Filipino farmers poor. This is more than twice the ASEAN peers — Indonesia, Thailand and Vietnam.
Price cycle volatility is another force to reckon with. This is being faced now by coconut, rubber and oil palm farms. Low productivity and low price is a bitter combination.
This 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.
 
Rolando T. Dy is the vice chair of the M.A.P. AgriBusiness and Countryside Development Committee, and the executive director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.
map@map.org.ph
rdyster@gmail.com
http://map.org.ph