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Palace signs mother-child health law

PRESIDENT Rodrigo R. Duterte has signed Republic Act. No. 11148, a measure promoting the health of mothers and children, upgrading the government’s offerings in the areas of maternal, neonatal, and child health and nutrition in the first thousand days of life.
The law, also known as the Kalusugan at Nutrisyon ng Mag-Nanay Act, was signed on Nov. 29.
It aims to provide comprehensive, sustainable, multisectoral strategies and approaches to address health and nutrition problems of newborn infants and young children, pregnant and lactating women and adolescent females, and addresses issues that negatively affect the development of newborns, infants and young children.
The law also integrates planning from other government agencies to address hunger, improve health and nutrition, and reduce malnutrition in response to the global call to eradicate hunger and improve nutrition as one of the 17 Sustainable Development Goals (SDGs).
The Department of Health (DoH), the National Nutrition Council (NNC), the Department of Agriculture (DA), in coordination with local government units and stakeholders, are directed to develop a comprehensive and sustainable strategy for the first 1,000 days of life.
The law is a consolidation of Senate Bill No. 1537 and House Bill No. 5777. It was passed by the Senate and the House of Representatives on Sept. 17 and Sept. 19 this year, respectively.
Senator Juan Edgardo M. Angara, the principal author of Senate Bill 1537, said in a statement that the program “prioritizes poor families identified by the National Household Targeting System, urban and rural populations who reside in disaster-prone areas, areas with high prevalence of undernutrition, and hazard/conflict-prone areas.”
The First 1,000 Days program provides for “immunizations, micronutrient supplements, checkups, and monitoring systems for both mothers and children.”
“Such measure would boost maternal and child health and nutrition that would provide a pathway to good education, decent jobs, and a way out of poverty. This would lay the proper foundation for the country’s growth and development,” Mr. Angara was quoted as saying. — Arjay L. Balinbin

PCC wins ISO certification for quality management

THE Philippine Competition Commission (PCC) has received an International Organization for Standardization (ISO) 9001:2015 certification for its Quality Management System (QMS).
The competition regulator said in a statement Monday that it became the first ISO-certified agency among those formed since 2016.
“The certification is a testament to PCC’s strong commitment to consistently execute its mandate towards merger reviews, enforcement cases, and other operations that meet international standards. This demonstrates PCC’s ability to provide quality and timely regulatory and enforcement requirements,” PCC Chairman Arsenio M. Balisacan was quoted as saying.
The ISO 9001:2015 certification is given to organizations that are judged as able to fulfill regulatory functions that improve customer satisfaction.
The PCC said the award conferred by third-party auditor TÜV Rheinland will be valid for three years from Nov. 21 until Nov. 20, 2021.
“As the PCC Quality Policy emphasizes, the Commission shall continually commit to fulfill our mandate as a quasi-judicial agency, achieve our mission to prohibit anti-competitive practices, attain our vision of becoming a world-class competition authority, and improve our systems and processes to ensure the highest level of satisfaction of all our stakeholders,” Mr. Balisacan added
The PCC was formed in 2016 through Republic Act No. 10667 or the Philippine Competition Law. It seeks to promote competition across industries to ensure a well-functioning market influenced by competitive forces to safeguard consumer welfare. — Denise A. Valdez

Business group wants lower assessments for property transfers within families

THE Management Association of the Philippines (MAP) on Monday called for a 50% assessment level under the Department of Finance (DoF) Schedule of Market Values (SMV) for estates transferred to relatives ahead of the donor’s impending death and free transfers of property to relatives during the donor’s lifetime.
MAP also recommended that for national tax purposes, “assessment levels be likewise applied on the DoF’s valuation, as published in the SMV, to temper the impact of inflation in property values reflected when the SMVs are periodically upgraded to conform to current market values,” MAP said in a statement on Monday.
“Accordingly, the MAP recommends an assessment level of 50% of the DoF’s SMV for transfer mortis causa (ahead of the donor’s impending death) of estate property and gratuitous transfer inter vivos (during the donor’s lifetime) of property among members of the family up to the 4th degree consanguinity,” it added.
It said using full market value as the basis for such transfers will defeat the purpose of the 6% estate tax amnesty rate under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
“The benefits of such lower rate of 6% that encourages high level of compliance going forward will be eroded if the full market values, as appraised and periodically upgraded, will be used as the valuation base for non-commercial transactions among family members,” MAP said.
The group also hoped its proposal will be considered in the bills filed in the House of Representatives and the Senate that form part of the third package of the government’s tax reform program.
Asked for comment, Senator Juan Edgardo M. Angara, chair of the Senate ways and means committee, said the panel will take into consideration MAP’s proposal.
“We will study. Note however (that) rates have already gone down dramatically in the last year to 6% from much higher rates in the old law,” Mr. Angara said in a text message to BusinessWorld.
Also asked for comment, a DoF official who asked not to be identified said: “We oppose. We already lowered the national internal revenue taxes on TRAIN, estate and donors. Number 2, we’re following international standards, all valuations should apply equally.”
The DoF official also said that the MAP has not provided sufficient justification why assessment valuations should be halved.
Under current laws, the valuation of the national government is based on the property’s zonal value, while the valuation of the local government is based on fair market value. The assessment level of valuation percentage depends on the land use.
The House of Representatives passed on third and final reading House Bill No. 8453 or the proposed Real Property Valuation and Assessment Reform Act on Nov. 12. Its counterpart version, Senate Bill No. 44, remains pending in the committee level.
The proposed measure directs the DoF’s Bureau of Local Government and Finance (BLGF) to develop and maintain a uniform valuation standard that is in line with international standards. The uniform valuation standard will guide local government appraisers and assessors in preparing their SMV.
The SMV will then be used as basis to determine real property taxes of national and local governments.
Aside from their proposal to lower assessment levels, MAP also recommended that the actual selling price of low-cost or socialized housing units to the first buyer be deemed the market value and assessed value, which will also be the valuation basis for taxation.
It also called for public hearings to be conducted on the initial SMVs by government before its implementation. — Camille A. Aguinaldo

Royalties: Active or passive income?

A sentence is said to be written in an active voice if the subject of the sentence performs the action. Conversely, if the subject of the sentence is the recipient of the action, the sentence is written in passive voice. As such, it is simple to determine if a sentence is written in either active or passive voice by merely identifying if the subject performs or receives the action.
For items of income such as royalties, however, how can one determine if the royalties are active or passive income? Section 27 (A) of the Tax Code provides that gross income, including royalties, shall be subject to a regular corporate income tax rate of 30%. Section 27 (D), on the other hand, provides that certain passive income, which also includes royalties, shall be subject to a final withholding tax rate of 20%. As expressly denoted in the Code, royalties must be in the nature of passive income to be subject to 20% final withholding tax.
The Bureau of Internal Revenue (BIR) has clarified in various rulings that royalty income is considered active income if the same arises from the active pursuit of business, using as basis the primary purpose indicated in the Articles of Incorporation (AOI). But how can you determine if the activity is related to the primary purpose of the business and not merely incidental? What if the primary purpose of the business is to lease out its assets, but its actual income is from franchising? When is an item of royalty subject to the regular corporate income tax rate of 30% or to the final withholding tax rate of 20%?
In a case brought to the Supreme Court (SC), a taxpayer was assessed by the BIR for deficiency income tax on its royalty income earned during taxable year 2010. The taxpayer is a domestic corporation engaged in manufacturing, buying, selling, and dealing alcoholic and non-alcoholic beverages, as stated in its amended AOI. The taxpayer entered into a license agreement with another company (Company A) for the latter’s use of certain domestic intellectual property (IP) rights and received royalty fees. The taxpayer contended that the royalty fees are merely passive income arising from mere ownership of an asset. The generation of such income does not require any active action or material participation from the taxpayer. The taxpayer further reasoned that the act of licensing out certain IP rights is merely incidental to its primary purpose. It also claimed that it did not actively pursue Company A to enter into the said license agreement.
The BIR, however, argued that the taxpayer’s amended AOI revealed that part of the taxpayer’s primary purpose is “to own, purchase, license and/or acquire such trademarks and other intellectual property rights necessary for the furtherance of its business.” Hence, the BIR believed that there is factual basis to conclude that the taxpayer generated its royalty income in active pursuit and performance of its primary purpose. In addition, an analysis of the taxpayer’s financial statements disclosed that it had no other source of income other than the royalty income and a minimal amount of interest income.
The SC, on the other hand, pointed out that the amount of cash inflows from the taxpayer’s operating activities consists only of income from its royalty and interest income, as presented in the Statement of Cash Flows for both taxable years 2010 and 2009. Similarly, the SC observed that the taxpayer’s income tax return did not reflect any cost of sales or services for 2010. Having no amount reflected as cost of sales or services gave the SC sufficient reason to doubt whether the taxpayer’s main line of business actually involves manufacturing, buying, selling, and dealing alcoholic and non-alcoholic beverages, as they claim.
The SC deduced that the taxpayer’s royalty income from licensing its IP rights is income generated in the active pursuit and performance of its primary purpose; thus, it is not considered passive income subject to final withholding tax.
With the SC decision, taxpayers should revisit their agreements involving royalty transactions and determine if the related royalty income is generated in the active pursuit and performance of their primary business. Check whether the activities conducted in generating the royalty income are directly related to the primary purpose, as stated in the AOI. Taxpayers, especially those who mainly earn royalty income, such as franchising businesses, may need to reevaluate if the fees it derived from the grant of use of property, trademarks, and licenses are indeed passive income. These items of income are generally recognized as passive income. It is important to assess each income item and determine if they are derived from the conduct of the primary purpose of the business or merely supplemental.
 
Anthony Joseph A. Cometa is a senior of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.
AJ.Cometa@ph.gt.com
+63(2) 988-2288

Returning the Bells

Sung Kim
By United States Ambassador to the Philippines Sung Kim
THIS morning, a US Air Force plane bearing three historic bells from San Lorenzo de Martir Church in Balangiga will land at Villamor Air Force Base. These bells were taken 117 years ago; later today it will be my honor to return them. Their safe return is thanks to the efforts of US Secretary of Defense James Mattis, supported by President Donald Trump, and is driven by respect for the Philippines, our friend, partner, and ally.
It has been a long road home for these bells, which were caught up in the aftermath of the tragic conflict that raged across this archipelago at the turn of the last century. The US Army’s 9th Infantry Regiment, whose C Company was garrisoned at Balangiga returned with one of the bells to its home garrison in Sackets Harbor, New York. This bell followed the Regiment to subsequent assignments, most recently residing at a US Army base in South Korea. The two other bells were sent to Fort D.A. Russell in Cheyenne, Wyoming with the 11th Infantry Regiment, where the bells were displayed as part of a memorial to fallen US service members.
Good-hearted individuals and groups labored for decades to bring the bells home. Former Presidents, cabinet secretaries, Philippine and US Ambassadors, historians, philanthropists, and many others worked tirelessly to raise awareness of the history of the bells and to advocate for their dignified return.
Others viewed the bells in a very different light. In the state of Wyoming, some US military veterans expressed their belief that the two bells housed there were an integral part of a war memorial that should not be deconstructed or disturbed. In the fall 1999, Congress passed legislation that made it unlawful to remove the two bells from the memorial on the base, challenging efforts to lobby for their return.
The turning point in this century-long saga came in October of this past year during the 2017 ASEAN Defense Ministers Meeting in Clark. Secretary Mattis met with Secretary of National Defense Delfin Lorenzana to discuss security cooperation and opportunities to further strengthen the US-Philippine defense relationship. At this meeting, SND Lorenzana raised the issue of the “Balangiga Bells.” Later that day, in a meeting with President Duterte, Secretary Mattis stated definitively that it would be his personal initiative to find a way to return these religious artifacts. In the Secretary’s words, “all wars end,” and it was time to heal a wound that had strained the US-Philippines relationship for too long. Following this important meeting, I maintained direct communication with the Secretary and my colleagues and I worked with his outstanding staff to ensure the bells’ swift return.

In Washington, Secretary Mattis sought legislation that would make it legally permissible to return the bells. Members of Congress and senior officials in the Department of State and National Security Council endorsed returning the bells. The American Legion and Veterans of Foreign Wars both passed national resolutions supporting the bells’ return. These unambiguous expressions of support clearly demonstrate the special bond veterans and the US public share with the Philippine people.
On Aug. 9, Secretary Mattis announced his intent to return the bells, which began a legally-required 90-day waiting period. On Nov. 14, the Secretary traveled to F.E. Warren Air Force Base and, in a solemn ceremony, officially informed Philippine Ambassador to the United States Jose Manuel “Babe” Romualdez that the bells would at last be returned to the Philippines. At the culmination of his moving speech, he turned to Ambassador Romualdez and asked him to “Bear these bells home, back to the Catholic Church, confident that America’s ironclad alliance with the Philippines is stronger than ever.” And so the bells began their journey home.
This decision to return the bells is consistent with our values and overwhelmingly viewed as the right thing to do. From World War II to today’s struggle to defeat ISIS and the scourge of terrorism, our militaries have fought together, bled together, at times died together. As your ally and friend, we will forever honor and respect this shared history.
Today we do not focus on looking back or relitigating a painful chapter in our past but investing in our shared future. In Secretary Mattis’s words, “In returning the Bells of Balangiga to our ally and our friend — the Philippines — we pick up our generation’s responsibility to deepen the respect between our peoples.” Ours is a close friendship, and we do not take it for granted. Strengthening and maintaining it requires sustained commitment and investment. To these bells — the Bells of San Lorenzo De Martir — welcome home. We wish you safe onward travel to Samar and your church in Balangiga.

The new chief justice begs for acceptance, love, and support

“I am an accidental chief justice. I know that you have expected maybe another individual to be appointed to this office,” said Chief Justice Lucas Bersamin when he spoke before justices and employees of the Supreme Court in the first flag-raising ceremony attended by him as chief justice. So he asked his colleagues: “Please accept me. I ask you to welcome me, to love me, to support me, to help me in my 11 months.”
When Pres. Rodrigo Duterte appointed Supreme Court Associate Justice Teresita de Castro as chief justice, he explained that he was abiding by the tradition of seniority as she had been in the Court longer than any of the nominees at the time. Senior Associate Justice Antonio Carpio had declined his nomination. But Lucas Bersamin was only the third most senior justice among the four nominees for the top post of the high tribunal. Justice Carpio, who at the time had accepted his nomination, was senior to him by eight years and Justice Diosdado Peralta by a couple of months.
In the case of Chief Justice Bersamin, the President defined seniority in terms of service in the entire judiciary instead of service in the Supreme Court as had been the time-honored definition. He named Justice Bersamin chief justice as he had served in the judiciary the longest, having been judge since 1986.
Absent during that ceremony were Justices Carpio, Peralta, and Estela Perlas Bernabe. Non-attendance in flag ceremonies at the Supreme Court grounds is often seen by observers as lack of support for the chief justice. That is most probably the reason why CJ Bersamin had to ask the justices present that day to accept, love, and support him. But acceptance or respect is not imposed and begged for, it is earned and offered. Apparent from his plea is that he had not earned it in spite of his having served 32 years in the judiciary.
He also “asked for unity to bring a good image back to the judiciary.” The call for unity was unnecessary. Most of the time the great majority of his colleagues, past and present, including Pres. Benigno Aquino appointees Francis Jardeleza and Bernabe, voted the same way he voted. But it is that very unity that had ruined the image of the entire judiciary, in particular the Supreme Court, as the great majority of the members of the Court have been united in handing out rulings in favor of the powers that be.
Justice Bersamin and the great majority of his associates in the Court voted to:

• uphold Pres. Gloria Arroyo’s midnight appointment of Renato Corona as chief justice;

• strike down as unconstitutional President Noynoy Aquino’s executive order creating the Truth Commission because it limited its scope only to the previous Arroyo administration;

• uphold Congress’ creation of a new congressional district to allow Pres. Arroyo’s son Dato to run in a district where there was no formidable opponent;

• dismiss the disqualification complaint against Pres. Arroyo’s son Mikey, who ran as a nominee of the party-list of tricycle drivers and security guards;

• stop the impeachment proceedings against then Ombudsman Merceditas Gutierrez, the Arroyos’ friend;

• uphold Neri’s invocation of executive privilege, thereby preventing the Senate from extracting from him Arroyo’s involvement in the NBN-ZTE bribery case;

• uphold the arrest of Sen. Leila de Lima, rabid critic of Pres. Duterte, over alleged involvement in illegal drug trade;

• acquit Gloria Arroyo of the charges against her;

• force Chief Justice Sereno, who had blocked Pres. Duterte’s orders to judges, to go on leave;

• uphold Pres. Duterte’s imposition of martial law in Mindanao;

• uphold his extension of martial law in Mindanao to the end of the year;

• give cognizance to the quo warranto petition against Sereno;

• nullify Sereno’s appointment as chief justice.

As associate justice of the Supreme Court, Lucas Bersamin has enacted new laws favorable to the appointing power. In August 2015, he declared that “Bail for the provisional liberty of the accused, regardless of the crime charged, should be allowed independently of the merits of the charge, provided his continued incarceration is clearly shown to be injurious to his health or to endanger his life. Indeed, denying him bail despite imperilling his health and life would not serve the true objective of preventive incarceration during the trial.” The Supreme Court ruled, therefore, that the fragile state of Sen. Juan Ponce Enrile’s health presented a compelling justification for his admission to bail.
Associate Justice Marvic Leonen vented in his dissenting opinion that the granting of bail to Sen. Enrile for humanitarian reasons set a dangerous precedent. The decision “will usher in an era of truly selective justice not based on clear legal provisions, but one that is unpredictable, partial and grounded on the presence or absence of human compassion,” wrote Leonen. Many eminent lawyers said the decision was contrary to the rule of law.
Justice Leonen said that the decision was “especially tailored” for Enrile. I wrote in this space that year that it was “couturiered” exclusively for former president Arroyo, who appointed Bersamin to the Supreme Court. I called the attention of the readers of the column to what Associate Justice Bersamin, who penned the decision, said of Sen. Enrile, “With his solid reputation in his public and his private lives, his long years of public service, and history’s judgment of him being at stake, he should be granted bail.” Only former president Gloria Arroyo among the many ailing lolos and lolas in prisons can be described similarly.
That is why no human rights lawyers had the audacity to petition for bail for the hundreds of enfeebled septuagenarians and octogenarians languishing in penal colonies and city jails on the basis of the new law because none of those ailing lolos and lolas had reputations comparable to those of Sen. Enrile and former Pres. Arroyo nor have any of them had long years of public service.
Every court, including the Supreme Court itself, is bound by the Bersamin ruling. In the legal community, the Supreme Court’s pronouncement is law. Bail will be granted if the poor health of the petitioner justifies it, even if not presented by the accused as the basis of his plea for provisional liberty.
That is why when former First Lady Imelda Marcos was found guilty of seven counts of graft by the Sandiganbayan, no political adversary of the Marcoses, no high-profile victim of marital law abuse, no political analyst, no ordinary citizen thought that she would spend a day in jail. She was expected to invoke the Bersamin doctrine.
In his column in the Inquirer last Sunday, retired Supreme Court Chief Justice Artemio Panganiban wrote that in July 2016, Gloria Arroyo “was acquitted, among other reasons because the Supreme Court ruled, for the first time, that in a prosecution for plunder, the ‘main plunderer’ must be identified in the information and proven during the trial before any alleged conspirator can be convicted. Again, this novel ruling was penned also by CJ Bersamin and is now a binding jurisprudence in plunder cases.”
The retired chief justice thinks that the lawyers of former First Lady Imelda Marcos are going straight to the Supreme Court in the hope that another new doctrine that would acquit Mrs. Marcos would be handed down by the Supreme Court. That is a distinct possibility with Lucas Bersamin as the chief justice of the Supreme Court.
I expect the Bersamin Court to rescind the Sandiganbayan’s order to Ramon “Bong” Revilla, Jr. to return to the national treasury part of the P124.5 million bribe money. If the Sandiganbayan found no direct evidence that Revilla received any kickback from Janet Napoles, the Bersamin Court would find no reason for Revilla to return any part of the P124 million.
Given the present composition of the Supreme Court and with Lucas Bersamin as chief justice, we can expect new doctrines in law favorable to the ruling power and its allies and minions to be handed down.
 
Oscar P. Lagman, Jr. is a member of Manindigan! a cause-oriented group of businessmen, professionals, and academics.
oplagman@yahoo.com

The ASEAN Single Aviation Market

Singapore — Freedom means mobility and more mobility means more freedom. The modern symbols of mobility are comfortable and fast cars, buses, motorcycles, airplanes, fast crafts and roll-on/roll-off (RORO) ships.
I am attending here the official launching of the ASEAN Prosperity Initiative (API) today at Intercontinental Singapore. API is pioneered by the Institute for Democracy and Economic Affairs (IDEAS) based in Kuala Lumpur and API used to be the Economic Freedom Network (EFN) South East Asia.
The launch features the publication of the newest reports by IDEAS: (1) ASEAN Economic Integration Report Card, and (2) ASEAN-EU Free Trade Agreement (FTA).
Travel from Manila to Singapore and the rest of ASEAN member countries is much easier now because of previous air travel liberalization policies, increased airline competition, and visa-free travel for 30 days or less.
The Philippines is among the laggards in East Asia in optimizing its tourism potentials. More than 7,500 islands and islets, lots of white sand beaches and islands, big mountains and waterfalls, nice golf courses and entertainment, and we got only six million foreign tourists in 2016 — about one-half of those going to Vietnam, Indonesia and Singapore , one-fourth those in Malaysia. In tourism receipts, Philippines got only one-fifth of those going to Thailand (see Table 1).
Table1
The bulk of the Philippines’ carrier departures (take offs) were domestic flights and passengers. We need to attract more foreign airlines and carriers that will bring in more foreign visitors and investors.
Table2
The same can be said for other ASEAN economies, especially the poorer ones like Cambodia, Myanmar and Laos.
In a paper published by IDEAS titled Economic Benefits of ASEAN Single Aviation Market, Adli Amirullah made this projection on the importance of more aviation liberalization (see Table 2).
Mr. Amirullah summarized the important policy reforms needed: (1) Liberalization through the ASEAN Single Aviation Market (ASAM) has already benefited millions of people in the region via more competition; (2) More benefits will be achieved if ASAM is fully implemented; (3) The biggest markets will be the biggest winners, particularly Indonesia and Philippines; (4) Specific steps are needed to advance ASAM, like prioritizing full implementation of ASEAN community carriers.
The liberalization should not be limited to city-city partnerships between two countries. Instead, an ASEAN-based airline should also be allowed to hop to other destinations of the Philippines after landing in Manila or Cebu before flying back. The same way, Philippines-based airlines should be allowed to hop to other destinations of neighboring countries after landing in capital cities before flying back home. This will optimize airline loyalty and related schemes.
Meanwhile, wind-solar lobbyist and businessman Eddie O’Connor resumed his attacks against me with his recent letter in BusinessWorld (“There is a well-known syndrome for coal lovers. It is called carbophilia,” published on Dec. 9). His parochial mind cannot comprehend that it is not me or anyone else in this country that advocates and implements more coal use for electricity generation in the region; it is the people and governments themselves: in China, coal accounts for 67% of 6,495 terawatt hours (TWH) production in 2017; India 76% of 1,497 TWH; Indonesia 58% of 260 TWH, Australia 61% of 259 TWH; S. Korea 46% of 572 TWH, Taiwan 47% of 270 TWH. My longer response to his letter will be posted in my blog as I do not want to further use this newspaper’s space to respond to marginal minds promoting expensive, subsidy-dependent and marginally-producing energy sources. [Mr. O’Connor also contributed a piece in today’s Opinion page. — Ed.]
More competition, more choices for the people. Governments should prioritize this as an overriding concern when they craft new policies and regulations — in land, sea and air transportation, in energy and other sectors.
 
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.
minimalgovernment@gmail.com

Delivering cheap power for PHL

By Eddie O’Connor
THE Philippines needs new power plants if it is to provide the electricity that will deliver the government’s ambitious growth plans. The country risks falling behind its neighbors as it competes for foreign direct investment in generation infrastructure. It also faces a future locked into expensive and polluting coal.
The question for government is: “How do we create a level playing field for the development of the electricity supply that delivers cheap and reliable electricity, while enhancing the country’s energy security”?
The answer is to be found in countries that have opened their markets to real competition, where all technologies compete on equal terms.
In Chile, in response to the government’s ambitions to develop renewable energy, the regulator revised the tender rules to enable wind, solar and hydro power to compete in open auctions with coal and gas plants. Over the last three annual auctions for new power, wind and solar plants have offered record low bid prices.
In South Africa, the country’s power procurement process has brought wind and solar projects into the market with prices significantly below that for new coal, and competitive with the country’s existing coal fleet. This process is underpinned by a 10-year energy outlook which allows the government to adjust its procurement plans to ensure the delivery of the lowest cost of generation.
There will always be incumbent players in any market who will complain and seek to protect their preferential position. With a robust independent regulator and clear tender rules, they cannot avoid the inevitable. Either they switch their investments into cheaper wind and solar plant, or they face considerable stranded asset risk.
As the cost of energy from wind and solar plants further undercuts that of coal, these incumbents face very real and very large losses.
The Carbon Tracker’s recent report on coal in the Philippines suggests local investors could lose $13 billion from their existing investments in coal plants, with San Miguel Corp., the Aboitiz Group, and DMCI Holding most at risk in this scenario.
This is in addition to the $20 billion investment in new coal projects that have already been announced locally. These projects must all now be at risk as developers update their financial models to take into account the falling cost of renewables and the rising cost of coal. That is before they look for funding.
Every week brings news of another abandoned coal power project as the sources of funding dry up. Last year, the Word Bank announced it would no longer invest in new coal; the World Bank’s investment arm, the International Finance Corp., also recently announced in Indonesia that it was tightening its lending criteria to broadly exclude coal, and to actively seek out investments in renewable energy.
In September, Marubeni of Japan announced that it would no longer invest in new coal generation; in October, Korean Midland Power indicated it was abandoning a 1,000-MW new coal plant in Indonesia in favor of a plan to convert the site to renewable energy.
In October, Storebrand Asset Management, one of Norway’s largest private asset managers, announced it was joining the exodus from investing in coal. “Coal stocks are toxic,” it said, “and if an energy company extends its coal operations, there is only one option for us: exit.”
As this global retreat from coal continues, the Philippines has an opportunity to be the investment country of choice for infrastructure and pension funds looking to put their money to work building out new renewable power plants. The demand for additional renewable energy investments in South East Asia from 2016 to 2030 is estimated at $3 trillion. Grabbing the largest share of that is a huge prize for this country.
With this investment in power plants will come ancillary investment in the supply chain, enabling the Philippines to bid for the manufacturing the towers and blades for wind turbines, the cabling and power electronics, and the operations and maintenance facilities.
The global retreat from coal and the global advance of renewable energy is inevitable and inexorable. The opportunities for the Philippines are immense and will enable the country to bring cheap, clean and reliable power to homes and businesses in the busiest metros and the smallest islands.
When government levels the playing field and allows renewable energy to compete with coal, there will only be one winner, the electricity customers of the Philippines.
 
Eddie O’Connor is the executive chairman of Mainstream Renewable Power, a renewable energy developer in high-growth markets.

Local shares join global rout on trade worries

THE LOCAL BOURSE took a dive on Monday as trade tension between the United States and China pummeled market sentiment across the globe.
The benchmark Philippine Stock Exchange index (PSEi) fell 1.51% or 112.85 points to close at 7,348.21 yesterday, marking its fourth day of losses, while the broader all-shares index dropped 1.21% or 54.74 points to 4,441.14.
“Equities markets were down all Asia including here in the PSE as worries that a rise in tensions between Washington and Beijing could ruin the chances of a trade deal,” Eagle Equities, Inc. Research Head Christopher John Mangun said in an e-mail on Monday.
Canada’s arrest of Chinese tech giant Huawei’s chief financial officer last week continued to worry investors, despite a 90-day truce promised by US President Donald J. Trump and Chinese President Xi Jinping last month.
The PSEi took cues from Wall Street’s negative performance last Friday, when the Dow Jones Industrial Average lost 2.24% or 558.72 points to 24,388.95; the S&P 500 index retreated 2.33% or 62.87 points to 2,633.08; and the Nasdaq Composite index plunged 3.05% or 219.01 points to 6,969.25.
Most Asian indices also fell, with Japan’s Nikkei 225 closing 2.12% lower, the Shanghai Composite index shedding 0.82%, while MSCI’s broadest index of Asia-Pacific shares ex-Japan losing 1.4%.
Mr. Mangun, however, noted that from a technical standpoint, the PSEi’s decline was a “healthy pullback” given its rally in the last three weeks.
All sectoral indices moved to negative territory, led by holding firms which incurred a 2.11% loss or 153.81 points to 7,135.97. Financials shed 1.58% or 28.30 points to 1,766.99; property slumped 1.25% or 45.86 points to 3,600.40; industrials tumbled 1.12% or 122.19 points to 10,719.33; mining and oil slipped 1.11% or 93.63 points to 8,317.60; while services declined 0.32% or 4.62 points to 1,407.67.
Some 2.26 billion shares worth P14.84 billion switched hands, compared to last Fiday’s 2.32 billion issues worth P6.29 billion. Without block transaction of Melco Resorts and Entertainment (Philippines) Corp., turnover would have been P5.1 billion. The company’s majority shareholder concluded its voluntary tender offer last week, with the shares tendered crossed from the PSE yesterday.
Foreign investors turned buyers, with net purchases at P3.96 billion, compared to Friday’s P261.78 million in net sales. The large figure, however, could also be attributed to Melco’s block transaction.
Stocks that declined were more than double those that advanced, 134 to 59, while 43 others ended flat.
“Looks like we’ll be short of catalysts for the remainder of the year, with the only possible exception being year-end window dressing,” Papa Securities Corp. Head of Online Trading Arbee B. Lu said in a separate e-mail.
“Considering how US markets are heavily in the red though, we aren’t expecting a significant boost from funds abroad.” — Arra B. Francia

Peso weakens amid renewed trade tensions

PESO slightly weakened against the US dollar on Monday. — BW FILE PHOTO

THE PESO depreciated against the dollar on Monday amid risk-off sentiment and renewed concerns over China-US trade relations.
The local unit ended Monday’s session at P52.80 versus the greenback, nine centavos weaker than the P52.71-per-dollar finish last Friday.
The peso traded weaker the whole day, opening the session at P52.78 per dollar. It went to as low as P52.825 intraday, while its best showing stood at P52.72 against the US currency.
Trading volume thinned to $603.12 million from the $973.95 million that switched hands the previous day.
A trader said in an e-mail the peso slightly weakened on safe haven demand after the arrest of Huawei’s chief financial officer (CFO).
“The arrest sparked fears of renewed US-China tensions despite the recently-agreed 90-day ceasefire on new tariffs,” the trader said in an e-mail.
Huawei CFO Meng Wanzhou was arrested in Vancouver on Dec. 1 at the request of US authorities. The US accused Ms. Weng of defrauding multinational banks about Huawei’s control of a company that was operating in Iran, in violation of American sanctions.
This sparked concerns over the trade relations between the world’s two largest economies that recently agreed on a 90-day trade ceasefire.
“It is the general sentiment amid a potential escalation of tensions between the US and China because of the recent arrest of Huawei’s CFO,” Ruben Carlo O. Asuncion, UnionBank of the Philippines chief economist, said in a text message.
“Although domestic matters are seemingly stable, it is the external environment driving the sentiment about foreign exchange.”
For today, Mr. Asuncion as well as the trader expect the peso to trade between P52.70 and P52.90. — K.A.N. Vidal

Localized peace deals get boost from gov’t

PRESIDENT Rodrigo R. Duterte has signed an order creating a national task force that will focus on localized peace processes to end the 50-year old communist armed conflict in the country.
Executive Order No. 70, signed on Dec. 4, institutionalizes the “whole-of-nation” approach in attaining inclusive and sustainable peace and directs the adoption of a national peace framework.
The whole-of-nation approach brings together government agencies, local government units, and civil society to address “the root causes of insurgencies, internal disturbances and tensions, and other armed conflicts and threats by prioritizing and harmonizing the delivery of basic services and social development packages by the government.”
The Task Force will be composed of the President as chair and the National Security Adviser as vice-chair. Most of the departments will be represented along with two private sector representatives who will be appointed by the President upon the group’s recommendation.
The Task Force is expected to formulate the policies for the peace strategy and implement these in coordination with relevant national government agencies, local government units (LGUs), civil society groups, and other stakeholders.
Funding requirements, based on the EO, will be charged against the existing appropriations of member-agencies of the Task Force and such other appropriate funding sources as the Department of Budget and Management (DBM) may identify, and when necessary, the Contingent Fund, subject to relevant laws, rules and regulations.
Mr. Duterte cancelled the peace talks last year with the communist umbrella group National Democratic Front of the Philippines (NDFP), the Communist Party of the Philippines (CPP), and its armed wing, the New People’s Army (NPA), citing their refusal to first sign a ceasefire agreement.
Various LGUs have since expressed support for localized peace talks and have been pursuing the surrender of NPA members, who are the ones fighting on the ground.
Armed Forces of the Philippines Spokesperson Brig. Gen. Edgard A. Arevalo said this new directive practically cuts out the NDFP in the peace process.
“Kailangan pa ba ang (Do we still need the) NDFP? Hindi na sila kailangan d‘yan (Not anymore),” Mr. Arevalo said in a phone interview yesterday.
He added that with the new strategy, the government is aiming to end the communist insurgency by 2019.
Also on Monday, the Palace released a copy of EO No. 69 that grants financial support to the citizen armed force geographical unit (CAFGU) active auxiliary service.
The CAFGU, which was created through the EO No. 264 (S. 1987), complements and supports the regular forces of the military in dealing with internal and external security threats.
Mr. Arevalo explained that CAFGU members have only been receiving a “subsistence allowance” of P160 per day.
Meanwhile, the Department of National Defense said it has been supporting localized peace talks, recognizing that local officials know and understand better the people and the situation in their respective areas.
“In fact, we encourage localized peace talks… (the) local chief executives mas alam nila kasi ‘yung (they know better their) constituents,” said DND Undersecretary for Civil, Veterans, and Retiree Affairs Reynaldo B. Mapagu during the launching of the Task Force Balik-Loob Christmas Campaign on Monday, Dec. 10.
Last year, various government agencies, including the DND, partnered for the implementation of the Enhanced Comprehensive Local Integration Program (E-CLIP) in pursuant to Administrative Order No. 10 signed by the President.
With the help of E-CLIP, which is led by the provincial governors, Mr. Mapagu said localized peace talks resulted to the surrender of NPA members.
Data from Task Force Balik-Loob indicates a total of 8,344 surrenderees, mostly coming from the areas under the military’s Eastern Mindanao Command.
CPP leader Jose Maria C. Sison, who has been exiled in the Netherlands, and NDF National Executive Committee member Luis G. Jalandoni were sought for comment on the new order, but have yet to respond as of press time. — Arjay L. Balinbin and Vince Angelo C. Ferreras

House declines Diokno request to postpone insertions hearing

THE HOUSE of Representatives maintained its decision to hold the “Question Hour” on Tuesday and declined Budget Secretary Benjamin E. Diokno’s postponement request.
“We stand firm on out intention to hold the Question Hour as scheduled and look forward on your appearance,” Majority Leader Rolando G. Andaya, Jr. of the 1st district of Camarines Sur said in a letter to Mr. Diokno on Monday.
The budget chief, in a letter dated Dec. 7, asked the chamber to “reschedule at a later date” to allow the Department of Budget and Management (DBM) to prepare a response to queries of the legislators.
“The additional time requested will enable the DBM to gather the necessary information and undertake coordination with the other agencies concerned,” Mr. Diokno said.
The Budget secretary was summoned upon the adoption of House Resolution No. 23, introduced by House Minority Leader Danilo E. Suarez of the 3rd district of Quezon, which sought to clarify the insertions in the National Expenditure Program.
Moreover, Mr. Andaya, in his privilege speech on Monday, countered DBM’s claim that a reenacted budget will result in economic slowdown.
“Let me remind everyone, that anyone who believes that a reenacted budget will result into economic slowdown, specifically in the first and second quarter as routinely announced by our Secretary of Budget… that’s a lot of hot air coming from his rear end. That is not true. Any person who believes that does not know his history,” he said.
Mr. Andaya recalled that in 2007, the country experienced a significant economic growth despite the budget bill’s late enactment on March 22.
“First quarter, we had 6.9% growth and the second quarter, a mind-boggling 8.3% growth for the second quarter,” Mr. Andaya said.
With Congress scheduled to adjourn on Dec. 12, the likelihood of a reenacted budget increases, considering the Senate is still in the process of tackling the General Appropriations Bill.
Meanwhile, despite its support for the chamber’s move to summon Mr. Diokno, Malacañang said the House, likewise, has to make some explanations.
“Well, you know the position of the Palace is that, that’s a different branch. Now they have to do their job. And I understand from what I read on the papers today that Budget Secretary Diokno has been invited to explain. So we leave it at that. We’ll see,” Presidential Spokesperson Salvador S. Panelo said in a briefing on Monday.
When asked about President Rodrigo R. Duterte’s position, Mr. Panelo said “his position is—I was talking to you when I say—he said that there will be some explanation on the part of Speaker (Gloria Macapagal-)Arroyo and others. So let’s hear them.” — Charmaine A. Tadalan

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