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Osaka’s star quality

FOR sports buffs who welcome controversy as part and parcel of competition, the United States Open women’s singles final is unquestionably a gift that keeps on giving. A full four days after the Arthur Ashe Stadium played host to a bizarre awarding ceremony in which the winner was being propped up by the vanquished and not the other way around, feedback continues to come. The latest is from chair umpires, who believe Carlos Ramos acted rightly in penalizing eventual runner-up Serena Williams thrice for code violations.
The officials couldn’t have been more on the mark. Taken individually, the transgressions deserved sanction. First, Williams was cited for receiving coaching instructions early in the second set, netting her a warning. Second, she smashed her racket on the DecoTurf after having been broken later in the set, costing her a point. And third, she subjected Ramos to verbal abuse, leading to a forfeited game close to the end of the set. She was guilty on all counts.
On the other hand, matches don’t happen in a vacuum, precisely the reason umpires are given leeway and discretion to enforce regulations as they see fit. And in prominent settings, as Williams’ battle against Naomi Osaka most certainly was, prudence should have been foremost in Ramos’ mind. Considering that he’s one of but a handful of chair arbiters with a gold badge signifying excellence in work, he must have understood the value of exercising maximum tolerance, particularly on the last violation.
True, Williams had no right to call Ramos “a thief” for allegedly stealing a point from her in the previous set. On the other hand, the score was then 4-3 in Osaka’s favor; the end was near, and the latter had been playing close to flawless tennis to ensure victory. Making it an unearned 5-3 would have — and ultimately did — cast a cloud on the outcome. Had he let things pass, the celebration would have more fittingly reflective of the upset. Instead, everybody wound up feeling cheated: the winner for being denied the feeling of dominating the overwhelming favorite for a first major title; the loser for being denied the chance, however minuscule, to come back; and the spectators, for being denied, the proper culmination of a fortnight of outstanding play.
Moving forward, the sport’s governing bodies need to use the experience as an opportunity to institute much-needed changes to rules. Out-in-the-open coaching should be allowed, period; it’s being done, anyway, albeit through surreptitious signals that place even more burden on umpires to call or not to call. Other violations should be cited with more consistency, whether strictly or in the breach, so as to eliminate the suspicion of bias. In the US Open men’s singles final, for instance, would-be champion Novak Djokovic repeatedly went over the allotted 25 seconds to serve, but wasn’t called for it.
If there’s any silver lining to the affair, it’s that Osaka proved her star quality long after the match. She may be all of 20, but the poise with which she met adversity at a time when she had every reason to pout for not getting her due stands as her biggest achievement. With her idol Williams nearing the end of a remarkable career that hasn’t been all roses, she figures to serve as a finer example of sportsmanship and class. Tennis should be so lucky.
 
Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994.

Duterte’s war on drugs: swift or dark justice?

IN June 2018, 38 member states of the United Nations Human Rights Council (UNHRC) signed a statement calling on President Rodrigo Duterte to stop the killings in the Philippines and to investigate abuses resulting from his administration’s controversial war on drugs.
Much has been said about President Duterte’s drug war, but despite international condemnation, he appears resolute, “committed to protect the human rights of the most vulnerable citizens.” His supporters insist that the streets are safer, and that swift justice deters crime. Indeed, the Philippine National Police (PNP) has reported a drop in all index crimes (against persons and property) since the President assumed office in July 2016, and since the implementation of “Operation Double Barrel,” a coordinated campaign between the PNP and barangay officials targeting suspected drug addicts and small-time dealers.
To the President’s credit, the drug war has highlighted the severity of the local drug problem and dysfunctions within the Philippine criminal justice system. In 2017, the Commission on Audit reported that 146,302 inmates in prisons nationwide exceeded jail capacity by six times, and cited “the surge in drug-related cases” and “the slow or little action on pending cases” as core issues.
Court cases literally take decades to adjudicate. Meanwhile, the suspects rot in jail. Magistrates remain overworked, underpaid, and some ostensibly on-the-take. Judicial bottlenecks clog the criminal justice system, and partly explain the urge of the police and local officials to be both judge and executioner.
The drug war’s death toll, however, is staggering.
The PNP reported killing 4,251 in official police operations from July 2016 to September 2017. For the same period, the Human Rights Watch recorded the death toll at 13,000, but opposition senators allege this toll has exceeded 20,000. Rappler reports that the President has gone on record on multiple occasions, encouraging law enforcers and Filipinos to harm, and even kill delinquents. Were people killed in legitimate operations or slaughtered by ninja cops in cold blood?
Critics also doubt the effectiveness of the executions, their chilling effect notwithstanding. In Mexico and Colombia, for instance, drug cartels persist despite death tolls surpassing 200,000. And in our very own Davao City, despite two decades of ex-Mayor Duterte’s iron-hand rule, over 9,000 drug addicts surrendered in 2016.
When the dust settles, when President Duterte is gone and the drug lords are back in business, I pray we do not realize that those thousands of souls executed legally or illegally perished in vain. Unless core constraints in the Philippine criminal justice system are identified and systemically addressed, the symptoms will only resurface. Solving the drug problem permanently needs an alignment of strategies of all pillars of the system — the community, law enforcement, prosecution, the judiciary, and corrections — that are mandated to hasten, not clog, the wheels of justice.
For instance, the judiciary, not the law enforcers (police), judges the innocence or guilt of suspects. The community (e.g., schools and churches) deters criminality through value formation.
I pray that President Duterte leverages his political will to systemically win his war on drugs without having to kill or sacrifice due process. I pray he empowers the judiciary to adjudicate cases faster and to reform corrections and other constraints in the justice system.
I pray for a Philippine criminal justice system that:
treats judicial reforms, deterrence, and rehabilitation with more zeal than it punishes victims and encourages police to take short cuts;
dispenses justice swiftly and brings the one million pending court cases down to zero;
punishes the big fish instead of killing suspected addicts;
builds ten times as many courts, hires ten times as many incorruptible judges, prosecutors, and court personnel, and increases their pay; and
builds more humane prisons and rehabilitation facilities, where drug users and criminals can find new purpose and meaning in their lives.
I dream of a Philippines that allows my children to walk safely and fearlessly on our streets. I dream of swift, reformative justice, not just more guns, goons, or cemeteries.
President Duterte, with due respect, please convene the dormant Judiciary Executive Legislative Advisory and Consultative Council and reassess your drug war policy and strategy.
Joseph Pangilinan is CEO of adish International Corp., a business process outsource firm. He is a Professional Lecturer of Strategic Management at the DLSU Ramon V. Del Rosario College of Business. He is also the brother of Senator Francis Pangilinan, President of the Liberal Party of the Philippines.
jnpangilinan@gmail.com

E-smoking and ASEAN integration, Part 2

THIS is a continuation of the earlier column published on Sept. 4, 2018. We are exploring some inconsistency in the formulation that “more smoking (and drinking) prevalence means more cardio-vascular diseases (CVD), cancer, etc.” and hence, people live less healthy and live shorter.
The World Bank’s World Development Indicators (WDI) database provides a good and wide range of data. The selected data shows some surprising results: developed Asian economies Singapore, Japan and S. Korea have high smoking prevalence compared to Australia, US and UK and yet these Asians have (a) lower mortality from CVD, cancer, etc., and (b) higher life expectancy (see Table 1).

A Malaysia-based free market think tank, the Institute for Democracy and Economic Affairs (IDEAS) in partnership with Manila-based Minimal Government Thinkers will organize a small group forum, “Alternative Tobacco Product Regulations: The Role of the Consumers” on Friday, Sept. 14, at the Holiday Inn Makati.
The event will explore various arguments on the merits and demerits of more government regulation of tobacco and alternative products considering that (a) government wants more revenues and less public health harm, (b) consumers want more freedom about their own lives, and (c) illicit and smuggled products should be controlled because they are a lot cheaper and will encourage more smoking and smokers, not less.
As noted by the earlier paper, whenever the free market is curtailed and restricted, the black market immediately comes in and thrives. Prostitution, prohibited drugs, prohibited gambling, smuggling, all of these products and services are legally banned and prohibited and yet all of them exist until today.
Then IDEAS and Economic Freedom Network (EFN) South East Asia will hold another small group, by invite-only roundtable discussion in the afternoon of the same day, same hotel venue, on “Economic integration within ASEAN.”
Some interesting data on foreign direct investments (FDI) are shown above related to the subject. While FDI inflows constituted only 7.4% of gross fixed capital formation (GFCF) globally in 2017, 4.7% in East Asia, it was 17.7% for ASEAN countries.
FDI inward stock as percent of gross domestic product (GDP) in 2017, the ratio was only 27% for East Asia, 40% globally, but 79% in the ASEAN.
These two data show the high degree of ASEAN economic integration not only among themselves but also with the rest of the world. External capital and business are playing a big role in the economic dynamism of the region (Table 2).
For the Philippines in particular, FDI inward stock was only $3.3 billion in 1990, rose to $13.8 billion in 2000, $25.9 billion in 2010 and $78.8 billion in 2017. Good expansion but still low compared to our neighbors in the ASEAN as of 2017: $129.5 billion in Vietnam, $139.5 billion in Malaysia, $219.4 billion in Thailand, $248.5 billion in Indonesia, and $1,284.9 billion in Singapore.
The Charter change initiative of the Duterte administration was wasted by federalism hard sell and short-sightedness, instead of focusing on liberalizing the Philippine economy to more foreign investments and businesses.
 
Bienvenido S. Oplas, Jr. is president of Minimal Government Thinkers, a member institute of Economic Freedom Network (EFN) Asia.
minimalgovernment@gmail.com

Convergence

PEOPLE tend to take more decisive political action after experiencing the convergence of what may be labeled as economic and political discontent, and the persistence of such discontent. If people are unhappy with governance, but happy with the economy, then they tend to be subdued or reserved in their opposition. The same with the reverse. But if people are unhappy with both the government and the economy at the same time, then expect some trouble.
The French Revolution of 1789 was preceded by a situation where the French government, under a monarch, was heavily in debt after years of war abroad. It thus imposed new taxes, which heavily burdened commoners. At the same time, years of bad harvests, which were supposedly worsened by deregulation of the grain industry, resulted in public resentment particularly towards the rich as well as the clergy, who remained well-fed.
The situation prompted commoners, dying of hunger, to demand change. A violent upheaval, led by the poor, resulted in the eventual storming and fall of the Bastille, the fortress/armory/prison that “represented” royal authority in Paris. The revolution took hold, ousted and executed the monarchy, and led to the rise of Napoleon and the creation of the republic.
About 200 years later, in the United Kingdom, the “Winter of Discontent” occurred in 1978–1979, when public sector trade unions went on strike as they demanded larger pay rises. This was after the Labor Party government led by then Prime Minister James Callaghan imposed salary caps to fight inflation. In early 1979, blizzards and deep snow, the coldest since 1962–1963, rendered some jobs impossible, reducing retail spending, and worsening the UK economy.
Despite what was then publicly perceived as “chaos” resulting from unemployment and strikes by bus and truck drivers as well as garbage collectors and grave diggers and in the UK, then PM James Callaghan reportedly had this to say to journalists: “Well, that’s a judgment that you are making. I promise you that if you look at it from outside, and perhaps you’re taking rather a parochial view at the moment, I don’t think that other people in the world would share the view that there is mounting chaos.”
Other developments at the time: just before winter, in September of 1978, Callaghan’s Labor Party government announced that no general elections would be held that year, which left many voters dismayed. Then, the public workers’ strikes occurred in winter, which impacted on voters as well. Thus, by January of 1979, the opposing Conservative Party was already leading in the polls.
Then, in March 1979, referendums on “devolution” were held in Scotland and Wales. The matter lost in both territories, prompting the Scottish National Party to withdraw support for the Callaghan government. This led to the calling of a general election, which allowed the Conservative Party led by Margaret Thatcher to boot out the Callaghan government. The “Winter of Discontent,” which was also part of the opening line of William Shakespeare’s Richard III, is seen as a major factor in the eventual fall of Callaghan.
Not too long after that, in early 1986, another government, this time in Southeast Asia, fell in a popular revolt. It was, to my mind, also the result of the convergence of political and economic discontent. At the time, the nation was grappling with inflation — from a high 20.9% in 1979 to an even higher 50.3% in 1984, and 23.1% in 1985. The economy was in shambles particularly in 1983 to 1985. Elections were also called in February 1986 by President Marcos, but the results were put into question given allegations of manipulation by the incumbent.
There was already brewing political discontent, especially during and after a period of political suppression during the martial law years from 1972 to 1981. And when the economy also started to stumble further from 1983 onwards, certain groups and political factions were prompted to call for a change in government. Popular support was gained in the process, and culminated in an uprising that resulted in the ouster of Marcos and the exile of his family. And the rest was history, as they say.
An “upheaval” of sorts also occurred in 2016, when a new president was elected given a strong clamor for “change.” A local political figure, rather than a national one, then Davao City Mayor Rodrigo Duterte, gained national public support to ascend to the presidency. Economic discontent was not exactly an issue at the time, but there was mounting dissatisfaction with the previous Aquino government in line with the delivery particularly of public services.
Some issues were local, like those involving vehicular traffic and mass transit in Metro Manila, and some were national but parochial like lack of license cards and license plates. However, the Aquino government’s seeming lack of attention to these things, including incidents of “tanim-bala” at the airports, all came together to prompt a call for change. There was also a perceived disconnect between the Aquino government and the common man.
To date, we are still experiencing a lot of “bottlenecks” in the delivery of services. For a time, passport supply was an issue. And we still lack license plates and license cards. Airports and roads remain congested, and mass transit issues remain. There is also talk of hospitals not being able to collect from PhilHealth for services rendered to the taxpaying public. There is also brewing unrest in the ranks of labor, over issues of wages and contractualization.
Couple this now with inflation, rising prices of fuel locally and abroad, additional consumption taxes, a rice supply shortage and the rising prices of food, brewing crises involving power or energy supply and potable water supply, and geopolitical developments including scuffles at West Philippine Sea and a trade war between the US and China. The foreign exchange rate is also pointing to a weaker peso, while the stock market has been bearish.
Inflation, and rising interest rates, are seen to persist until October at least. Food price crises are seen to persist as well. Aggravating factors in the coming quarter are the coming Christmas season, winter that usually results in higher global prices for oil and fuel, as well as typhoons and weather disturbances that can impact harvest and food supply. Global trade disruptions are also expected.
It is anybody’s guess what is in store for us late in the fourth quarter. But I see trouble brewing ahead. One hopes that the government can soon address particularly local supply bottlenecks that can bring food prices down, temper inflation, and lower interest rates. Improving on gut issues like food, and the delivery of basic public services, are measures that have the most immediate impact on the public, especially the poor. We need to prioritize fixing the economy. Politics can wait.
 
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council
matort@yahoo.com

Comfort food

By Tony Samson
AS A marketing strategy, promoting a restaurant as a haven of comfort food seems risky. In terms of Filipino cuisine, comfort food usually consists of meals taken at home without calling delivery. It is traditional home cooking for Sunday family lunches.
The dictionary suggests “comfort food” as something enjoyable, familiar, evoking nostalgia (maybe from childhood) and hinting at unhealthiness — perhaps cholesterol-inducing offerings such as crispy pork knuckles, again reminiscent of long-ago days when hardening arteries were possibilities as distant as owning a rest house in the South of France.
The nostalgic flavors from long ago may be accompanied by memories of deprivation when such special treats were only available at parties of richer relatives. Thus, the now allowable “healthy food” consisting of mushy items like oatmeal and porridge, seemingly pre-masticated, for easier passage, seems to cry out for variety and rebellion. What better options than food that invites head-shaking from those who run in place on a treadmill, just to look good…and, perhaps feel healthier?
Still, even home cooking as a way of nourishing the body may be a waning practice, especially for solo dwellers and empty nesters. Condo designs for ever-shrinking spaces even question the need for a kitchen. It takes up space and is hardly used, if you don’t count the microwave oven and an espresso machine that can occupy a small counter. The kitchen with its ovens, large sinks, dishwashers, and closet space for frying pans and woks may become a thing of the past, for the basic home.
Comfort food is also getting a makeover and bowing to the dictates of healthy living. But instead of taking out the fats and the carbs and cholesterol loading, the only nod to the nutritionally correct police is plating. The guilty pleasures are simply served in smaller doses and may be surrounded by green leaves and stuff, like a garish house with good landscaping.
Without losing its native allure, comfort food standards like oxtail in peanut sauce (with a catchy name like KKK) or chicken and pork cutlets in vinegar and soy sauce are not served in a big bowl for digging into, “family style.” They are cut into small pieces and drained of their saucy bathtub.
Let’s set aside the truly frightening comfort food like the innards of a pig cooked in its own blood. Here, there is just enough sauce for covering the bottom of a small bowl. The accompanying rice cake balls are smaller and off to one corner. The black motif is accented with large green peppers.
What about that quintessential nostalgic offering that used to be hawked in a basket at sunset, the vendor shouting it out in an ascending vibrato, as he wends his way through the neighborhood streets? This partially formed duck fetus, swimming in its amniotic fluids accessed by breaking the shell and throwing the whole content down the gullet, is part of the childhood experience. True, it was never home-cooked, but always home-bought.
This duck egg is a favorite test for survival reality programs. The shock approach is an obstacle in marketing native dishes globally. We promote the “balut challenge” with foreigners visiting us all the time. We applaud when they hesitate with a look of undisguised disgust — those are not hairs, Sir. They’re feathers. Is the little duck winking?
The prefix “comfort” seems to embrace a wide range of meanings beyond food. The comfort room, perhaps a unique usage for us (not comprehended by those abroad), denotes a place offering relief of a physical sort, whether number one or number two — often without toilet paper at hand. A comfort letter provides a quasi-legal assurance of a negotiation for an acquisition to move forward under certain terms and conditions, pending due diligence. Comfort women denote a shameful occupation enforced by conquerors in the last war. Comfort zones are organizational situations and jobs that require skills already possessed and easily proffered without stress.
In all its uses, comfort as a modifier seems to imply a temporary state. The relief that is provided is not expected to last, and even likely to result in unintended consequences.
As to our comfort food, the nostalgic glow from its ingestion soon fades. The unhealthy adventure is sure to invite penance in needing to go back to healthy and less joyful options, including fasting and prayers.
 
Tony Samson is chairman and CEO, TOUCH xda
ar.samson@yahoo.com

Chinese foreign minister set to visit Philippines

THE DFA said that both parties will discuss further cooperation on oil and gas exploration, as well as the Build, Build, Build program, among other matters. PHOTO: FACEBOOK/DFAPHIL

By Anna Gabriela A. Mogato
CHINESE State Council and Foreign Minister Wang Yi will be visiting the country from Sept. 16 to 18, the Department of Foreign Affairs said. The agenda: To improve relations between Philippines and China.
This comes after economic managers, led by Finance Secretary Carlos G. Dominguez III, urged for more cooperation in various projects during their visit to China last month.
In a statement, Foreign Affairs secretary Alan Peter S. Cayetano said that the upcoming visit shows that “our bilateral ties are becoming solid and steady as never before.”
“The Philippines and China are both committed to continue on the path of cooperation, all the while ensuring that the Filipino and the Chinese peoples will reap the dividends of our mutual efforts,” he added.
The DFA said that both parties will continue to discuss further cooperation on oil and gas exploration, as well as the Philippine government’s Build, Build, Build program.
The South China Sea dispute will also be discussed during Mr. Wang’s official visit next week.

Fewer Pinoys made shopping trips in first half of 2018 — Study

sari sari store
Sari-sari stores and market stalls were among the most affected in the general cutback in shopping trips caused by increasing consumer prices. Analysts say this signals a need for firms to adapt accordingly.

By Anna Gabriela A. Mogato
MORE than half of Filipino households cut down on shopping trips to buy fast moving consumers goods (FMCG) in the first half of 2018, new study shows.
The study, conducted by consumer knowledge research firm Kantar Worldpanel, reported that the average household only went out 178 times to buy FMCGs in the first six months of the year, a drop from 183 shopping trips made during the same period last year.
But despite the drop in trips, certain industries saw an overall spike in volumes as households opted to buy these goods in bulk.
“Personal and home care categories […] both enjoyed upsizing and bigger volumes bought by local households,” the research firm said.
Among the 53% of Filipino households that cut their shopping trips, the most significant drop came from Class D and Class E households, having shopped six times and five times less, respectively, from January to July this year.
Kantar Worldpanel noted that due to the cutbacks, sari-sari stores and market stalls were heavily affected.
While 45% of respondents expressed a willingness to add more trips to purchase FMCGs if necessary, a whopping 98% of households reported a change in their shopping behavior. Kantar Worldpanel analysts said this signals a need for firms to adapt accordingly.
Kantar Worldpanel Account Director Ruth Mendoza-Sazon in a statement said that amid increasing consumer prices, FMCG brands should adapt to the change by making “each shopping visit count for Filipino consumers.”
“[C]ommunicating the right value proposition of our brands will be very critical to stay in their shopping basket as the budget becomes more challenged,” she added.
However, the study found that shopping behavior around food remained largely unchanged compared to numbers reported in the same period last year.
“They also preferred to allocate a similar basket size for food items amidst the increase in prices,” the research firm said.
The study also saw that households bought more water in larger volumes as the price of sugar-sweetened drinks increased with the first package of the Tax Reform for Acceleration and Inclusion law, or TRAIN.
“Revisiting healthier options such as water will be crucial in staying afloat,” Ms. Mendoza-Sazon said.

Fullerton Health PH secures $40M IFC loan to expand HMO services

IFC’s Vivek Pathak says this new development “will help reduce low and middle-income households’ reliance on out-of-pocket payments to fund healthcare expenses.”

By Anna Gabriela A. Mogato
THE local branch of Fullerton Healthcare Corp., Ltd. has secured a $40 million long-term loan from International Finance Corp. (IFC) to develop its vertically integrated managed care services in the country.
In a statement made on Wednesday, Fullerton Health Philippines Holdings Corporation and Fullerton Health Philippines Pte Ltd will be using the loan from the World Bank Group member to further integrate financing and healthcare provision.
This is in a bid to improve the health maintenance organization (HMO) markets, the company said. The loan will also be used to expand HMOs nationwide and improve working opportunities in the healthcare sector.
“IFC’s support will also include sharing of best practices within different areas of operations, including facilitating introductions within IFC’s network of health care clients,” the company added.
Fullerton Health expressed its intention to enter the Philippine market last December 2017 after announcing that it will acquire a 60% stake in managed care services provider Intellicare Group. The acquisition was completed last May 18.
The firm’s Chief Financial Officer Tam Chee Chong in the statement said that having IFC onboard as a long-term partner “validates our strategic partnership with the Intellicare Group to deliver a holistic approach to managed healthcare in the Philippines.”
IFC Director for East Asia and the Pacific Vivek Pathak in the same statement cited the need for high quality and affordable healthcare to ensure long-term sustainable development. This is particularly true in the Philippines, which Mr. Patak noted to have a “wide gap in health insurance coverage.”
“[The g]rowth of Intellicare and other companies in this segment will help reduce low and middle-income households’ reliance on out-of-pocket payments to fund healthcare expenses,” Mr. Pathak said.
IFC has supported more than 100 companies in the Philippines since 1962, investing more than $3 billion in the same period.
Its committed portfolio for reducing the impact of climate change, increasing rural incomes, promoting sustainable urbanization, and addressing governance constraints is at $763.8 million as of December 2017.

Philippine trade year-on-year performance (July 2018)

FLAT merchandise export sales and inbound foreign goods’ continued surge caused the country’s trade gap to widen further in July, the Philippine Statistics Authority (PSA) reported on Tuesday, putting more pressure on the peso that has lately been hitting its weakest level in nearly 13 years. Read the full story.
Philippine trade year-on-year performance (July 2018)

Trade gap widens on import surge

By Carmina Angelica V. Olano, Researcher
FLAT merchandise export sales and inbound foreign goods’ continued surge caused the country’s trade gap to widen further in July, the Philippine Statistics Authority (PSA) reported on Tuesday, putting more pressure on the peso that has lately been hitting its weakest level in nearly 13 years (Read article here).
The value of merchandise exports grew by just 0.3% annually to $5.851 billion in July, according to PSA’s preliminary data. This was slower than the 2.8% growth in June and 21.9% in July 2017.
On the other hand, July import payments increased to its fastest pace so far this year with a 31.6% growth to $9.397 billion compared to June’s 24.2% rise and the 0.3% decline in July 2017.
Philippine trade year-on-year performance (July 2018)
Consequently, the country’s trade deficit expanded to $3.546 billion in July, wider than June’s $3.188 billion and $1.305 billion in July 2017.
To date, merchandise export sales shrank 2.8% to $38.744 billion from $39.869 billion in the same seven months last year while imports increased by 15.7% to $61.234 billion versus last year’s $52.923 billion.
Under the government’s program, exports and imports of goods have been targeted to grow by nine percent and 10%, respectively, this year.
On a cumulative basis, the balance of trade yielded a $22.49-billion deficit, 72.3% bigger than the $13.055-billion trade gap recorded in January-July 2017.
Outbound manufactured goods, which made up 83.4% of total sales in July, dipped 0.3% to $4.882 billion, although electronic products, which made up around 56% of total exports, rose 5.2% to $3.276 billion.
Outbound shipments of agro-based products likewise dropped by 5.4% to $386.103 million while those of petroleum products plunged 75.9% to $12.484 million.
Bucking the trend were exports of mineral products (4.3% growth to $373.603 million) and forest products (130.8% to $24.488 million).
Meanwhile, the July import print marked the fourth straight month of double-digit growth.
Purchases of raw materials and intermediate goods, which made up 36.8% of total imports that same month, grew 28.3% to $3.457 billion.
Likewise, capital goods, comprising 33.9% of the import total, grew 38.9% to $3.183 billion.
Also growing that month were imports of consumer goods (22% to $1.561 billion), as well as mineral fuels, lubricant and related materials (35.8% to $1.142 billion).
“As the global trade situation becomes less encouraging, improving the overall climate for export development becomes all the more indispensable…” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted as saying in a statement of the National Economic and Development Authority, which he heads as director-general.
“Trade war fears have weighed on business sentiment, and we now see softer global activity. With a resolution unlikely in the short term, the dispute is expected to dampen growth in both economies and drag down growth in the wider global economy.”
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), said that the slowdown in exports was due mainly to base effects from a double-digit growth a year ago alongside effects of a broader US and China trade war.
“Prospects of a wider trade war between the US and China — the world’s two largest economies and among the biggest export market of the Philippines — also partly caused the slower growth in Philippine exports,” Mr. Ricafort said.
US President Donald J. Trump considered imposing further tariffs on another $200 billion worth of Chinese imports. This is on top of the tariff on $50 billion of Chinese goods already imposed earlier, of which China responded in kind on US goods.
Furthermore, Mr. Ricafort attributed the faster import growth in July to the “increased importation requirements of the Philippine economy.”
“[The country] is still among the fastest-growing in Asia in terms of increased demand for capital equipment, raw materials, and finished goods, some of which may be for productive purposes amid the record high foreign direct investments in recent years…” he said.
OUTLOOK
Despite the flat merchandise export performance, analysts were upbeat on growth prospects of the sector for the year despite risks.
“At least our country’s exports [performance] is able to maintain a positive growth for the last two months despite starting the year on the negative side. This can be the trend for the rest of the year. Hopefully, [it is] higher,” Philippine Exporters Confederation, Inc. president Sergio R. Ortiz-Luis, Jr. said.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, shared this optimism saying: “Exports are expected to improve in [the second-half of 2018] with the Christmas season anticipated to drive demand higher.”
At the same time, Mr. Asuncion noted “possible risks” with the escalation of the US-China trade war.
“Although the impact on the Philippines is uncertain, the certainty that the Philippines is interconnected to global trade particularly with the US and China… cannot be denied,” he said.
For RCBC’s Mr. Ricafort, “export growth could still improve in the coming months, with the expected pickup in electronic exports… amid the country’s increased imports of electronics… that may be further processed for re-export, as well as the faster economic growth in the US… a major market for Philippine exports.”
However, “Philippine exports that are part of the supply chain in the production of Chinese exports to the US and the production of US exports to China would experience lower sales in both countries,” Mr. Ricafort cautioned.
The US was the Philippines’ top export market in July with a 16.6% share at $972.52 million, followed by Hong Kong’s 14.7% ($859.98 million) and Japan’s 13.7% ($799.02 million) market shares.
The same month saw China as the Philippines’ top source of imports with a 19.8% share ($1.859 billion) followed by South Korea’s 10% ($936.49 million) and Japan’s 9.7% ($911.48 million).

Senate sets work on 2nd tax reform

By Elijah Joseph C. Tubayan, Reporter
THE SENATE will start next week committee-level work on the second tax reform package designed to overhaul the corporate tax and incentives scheme.
“We’ll most likely begin hearings on the bill next week,” Senate ways and means committee chairperson Senator Juan Edgardo M. Angara said in a mobile phone message on Tuesday.
“We in the Senate will probably scrutinize the measure thoroughly — its effect on jobs, prices, given the state of the economy at present,” he added in apparent reference to spiking inflation — which clocked in at a surprising near-decade-high 6.4% in August and a year-to-date 4.8% against the central bank’s 2-4% full-year target for 2018 — that has been blamed partly on the first tax reform under Republic Act No. 10963 that took effect in January.
This was after the House of Representatives approved on final reading on Monday House Bill No. 8083, or the “Tax Reform for Attracting Better and High-quality Opportunities” (TRABAHO) bill.
The bill seeks to cut the corporate income tax (CIT) rate gradually to 20% from 30% currently by a two-percentage-point deduction every other year starting 2021 in a bid to put the country at part in this regard with its Southeast Asian peers.
The measure also streamlines corporate fiscal incentives by removing those deemed redundant that have been costing the economy billions of pesos in foregone revenues, ensuring that only those that satisfy performance criteria will enjoy such perks and making income tax holidays and other perks time-bound.
The Department of Finance (DoF) had intended the measure to be revenue-neutral, but the removal of a provision pegging the pace of CIT rate reduction to revenues raised from streamlined perks had raised concerns that it could throw a wrench on the state’s carefully watched fiscal balance. The version approved by the House states that the President may even “advance the scheduled reduction” in CIT rate “when adequate savings are realized from the rationalization of fiscal incentives…”
Senators have been lukewarm to the measure, arguing that removal of some incentives may lead to job losses, but eventually Senate President Vicente C. Sotto III filed a counterpart measure last month.
The Senate version cuts the CIT rate to 25% in the first year of implementation, while the Finance department has wanted the cut to be 25% as well, but conditional on the amount of additional revenues raised from streamlining of incentives.
The DoF aims to have TRABAHO implemented starting 2019.

Banks increase exposure to real property sector

By Melissa Luz T. Lopez, Senior Reporter
BANKS lent out more funds to the real property sector as of June, although growth slowed from the previous quarter as interest rates climbed.
Banks’ overall exposure to the real estate sector reached P2.139 trillion as of end-June, 11.2% more than the P1.924 trillion recorded in the same period last year, according to the Bangko Sentral ng Pilipinas (BSP). The latest growth pace compared to a 13.3% year-on-year increase recorded as of end-March.
Broken down, credit extended by banks for property acquisition and development reached P1.837 trillion, up 11.7% from the P1.644-trillion loans as of June 2017, data showed. This credit segment accounted for bulk of banks’ total exposure to this industry.
Bank investments in real estate-related securities grew 8.1% to P302.518 billion from P279.832 billion in the same comparative periods. Lenders placed P195.836 billion in real property-related debt papers and P106.682 billion in property-related equities.
Bulk of the approved property loans went to commercial real estate projects, growing by a tenth to P1.192 trillion as of the first semester. Home loans increased by 15% to P645.247 billion from the P561.311 billion.
Despite the increase, property loans actually saw a smaller share in total bank lending. Such credit took a 19.92% share of banks’ total loan portfolio, down from 20.48% as of end-March and 20.79% as of end-June 2017.
The BSP has been tightening rules on banks’ real estate exposure as it sought to temper rapid credit growth, which some credit raters have flagged as a possible sign of an overheating economy.
BSP Circular 976 issued last year requires banks to report details of real estate loans covering mid- and high-end housing units, as well as socialized and low-cost housing within a month after the end of every quarter starting this year. Reporting deadlines were pushed back to the second half of this year to give lenders more time to comply.
Back in April, the BSP also relaxed lending ceilings on banks and allowed construction firms implementing major infrastructure projects to have a separate borrowing limit from their parent companies. In effect, this move lets such projects secure bigger loans from banks and quasi-banks and serves as the BSP’s way to support the “Build, Build, Build” program of the Duterte administration.
At the same time, soured property loans increased by 11.9% to P33.087 billion, accounting for 1.8% of total borrowings, a steady share from the previous year.
The slower rise in property lending came after the BSP introduced back-to-back rate hikes in its May and June meetings, which drove benchmark interest rates 50 basis points higher. Total bank lending growth eased to 19.1% in June from 19.3% in May, according to central bank data.

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