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BSP updates rules on client identification, dirty money

THE BANGKO SENTRAL ng Pilipinas (BSP) has updated its rules for validating client identity by accepting the national ID and the use of technology for verification.
Circular 1022 issued by BSP Governor Nestor A. Espenilla, Jr. likewise tightens rules to improve guards versus dirty money deals.
The 17-page issuance now puts in the manual of banks the recognition of the Philippine Identification System (PhilSys) ID card as an official document for financial transactions. This is on top of documents issued by other government agencies and school ID for students.
The PhilSys will assign a unique 12-digit number to Filipinos and resident aliens to serve as their digital identity across multiple platforms, while the ID is expected to replace most of the government-issued cards to simplify access to public and financial services.
The central bank has also included a person’s PhilSys number as part of the minimum information to be collected by financial players before carrying out a transaction, alongside one’s name, date and place of birth, address, contact number, nationality, and specimen signature or biometric for individual users.
To add, the BSP also included the use of information and communication technology (ICT) to “capture and record” personal data of customers, on top of the traditional modes of collection via photocopying or scanning of documents as well as the manual recording of information.
“The use of ICT in the conduct of face-to-face contact and/or interview may be allowed: Provided, that the covered person has measures in place to mitigate the ML/TF (money laundering/terrorist financing) risks and that the entire procedure is documented,” the central bank said.
Prior to this, the BSP required banks be “in possession of” identification papers from a prospective client.
The central bank previously approved the use of electronic know-your-customer procedures that allow banks and financial players to use online channels like video calls and geocoding to verify a client’s identity. This is expected to ease the burden on customers by making it more convenient to get bank accounts and transact.
The circular also requires a more comprehensive strategy for financial firms to combat dirty money. The central bank prescribed lenders to have a “group-level” Money Laundering and Terrorist Financing Prevention Program, which should be under the watch of senior management.
On a broader scale, the new rules also require players to comply with relevant resolutions made by the United Nations Security Council in conducting due diligence among customers, especially on the “prevention, suppression and disruption” of the use of weapons of mass destruction and its financing.
These changes come just as the Philippines is going through its third mutual evaluation carried out by the Asia Pacific Group on Money Laundering, and inter-governmental body which assesses whether safeguards installed by governments are sufficient to combat illicit money flows.
Last week, President Rodrigo R. Duterte issued Executive Order 68 forming a multi-agency coordinating body that will enforce the National Anti-Money Laundering and Countering the Financing of Terrorism Strategy 2018-2022. — Melissa Luz T. Lopez

Airlines move flights to New Panglao airport

LOCAL airlines on Tuesday are moving flights to the new Bohol (Panglao) International Airport following the closure of the Tagbilaran Airport, which used to be the main gateway to the Bohol island.
Following the inauguration of the new airport on Tuesday, the Civil Aviation Authority of the Philippines (CAAP) said in a notice to air men it is shutting down the Tagbilaran Airport and moving all official flight operations to Panglao starting Wednesday (Nov. 28) at 6 a.m.
AirAsia Philippines landed its first flight using the Airbus A320 at the new airport yesterday, when it sent CAAP officials to the inaugural event.
Philippine Airlines (PAL) and Cebu Pacific said in separate statements yesterday they will start operations at the Panglao Airport today.
PAL said it will give passengers a three-week transition period to adjust to the Panglao Airport — which is 40 minutes away from the old one — and will keep its ticketing office at the Tagbilaran Airport open until Dec. 15.
Cebu Pacific said it flies three times daily to and from Manila and Tagbilaran. Its subsidiary Cebgo flies once a day from Tagbilaran to and from Cagayan de Oro and Davao.
By Dec. 15, Cebu Pacific said it will start daily flights between Clark and Tagbilaran.
The new Panglao Airport was designed to handle 2 million passengers every year. It stands on a 220-hectare land, 10 times the lot size of the Tagbilaran Airport which occupies a 22-hectare area. — Denise A. Valdez

Bank stocks back on the menu after 3Q selloff


By Mark T. Amoguis, Researcher
WITH THE LOCAL stock market showing signs of recovery, investors may consider bank stocks as banks gradually reprice their loan portfolios following the successive interest rate hikes from the central bank.
The barometer Philippine Stock Exchange index (PSEi) gained 1.2% in the third quarter, a reversal from the 9.9% decline posted in the second quarter albeit slower than last year’s 4.2%.
On the other hand, the financials sub-index — which included the banks — continue to drop by 8.9% in the July-September versus the 1.2% growth notched in the third quarter last year. This was, however, slower than the 14.9% slump recorded in the previous quarter.
As of end-September, the sub-index slipped by 27.7% compared to the 18.4% growth recorded in the same nine months last year.
This gloomy downtrend was reflected the listed banks’ share prices during the July-September period with only two of the 14 listed banks registering quarter-on-quarter gains: Philippine Trust Co. (ticker symbol: PTC, 4.2%) and Philippine Bank of Communications (PBC, 2.3%).
Union Bank of the Philippines (UBP) saw the biggest drop in share price during the third quarter at 23.4%, followed by Security Bank Corp. (SECB, -23.0%), China Banking Corp. (CHIB, -14.1%), Philippine National Bank (PNB, -10.8%), and East West Banking Corp. (EW, -10.6%).
Rizal Commercial Banking Corp. likewise shed its share price by 9.6% as well as Metropolitan Bank & Trust Co. (MBT, -8.7%), Bank of the Philippine Islands (BPI, -5.9%), BDO Unibank, Inc. (BDO, -4.5%), Philippine Business Bank (PBB, -3.4%), Philippine Savings Bank (PSB, -3.0%), and Asia United Bank (AUB, -0.5%).
While the banks’ stock prices tumbled for the quarter, they managed to eke out earnings during that time.
Universal and commercial banks booked a cumulative P116.07-billion net income as of September. This was 9.2% higher than the P106.26 billion recorded in the same nine months of 2017, data from the BSP showed.
Net interest margin (NIM) — the ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income to average earning assets — improved to 3.15% in the third quarter from 3.11% in the second quarter and 3.06% in the same three months to September last year.
Higher interest rate environment that pushed banks’ funding costs was the main culprit for the quarter’s disappointing performance among bank stocks.
The Bangko Sentral ng Pilipinas (BSP) decided to tighten its policy rates to rein in inflation expectations early this year. The BSP’s Monetary Board hiked its rates by 25 basis points (bps) each in May and June followed by a back-to-back 50-bps increases in August and September. It then fired off a softer 25-bps increase in November. Benchmark rates now range between 4.25% and 5.25% starting Nov. 16.
“Investors dumped banks stocks for the most part in Q3 due to fears that higher market interest rates would be detrimental for banks’ margins, as most expected that funding costs would rise faster than the repricing in loans,” said Zoren Philip A. Musngi, research analyst at Mandarin Securities Corp.
“Most were also disappointed by the quarterly earnings, as banks saw lower trading gains due to the difficult economic and market environment,” he added.
“In general, higher interest rates caused the banks’ funding costs to increase. Likewise, this also caused most banks to book poor trading performance,” said John Martin L. Luciano, senior research analyst at COL Financial Group, Inc.
Rachelle C. Cruz, research analyst at AP Securities, Inc., shared the same view: “In Q3, improvement in lending yields and sustained loan demand are the positive factors, while lower trading gains and fee-based income due to languid performance of the capital markets as well as impact of higher policy rates resulted to decline in income from non-core business.”
Still, analysts remained bullish on the banking sector, believing that a recovery will be seen by next year on the back of gradual loans repricing due to soaring interest rates.
“Our long-term outlook for the banking sector continues to remain positive,” COL’s Mr. Luciano said, but added that the banking sector’s performance in the near term may be weighed down by continued policy rate tightening.
“Higher policy rate and tighter liquidity in the system will cause banks to raise deposit rates to attract funding, increasing the funding costs of most banks. Likewise, the higher interest rates will drag the trading performance of banks. Nevertheless, these risks should be tempered as loans gradually reprice,” he said.
For her part, AP Securities’ Ms. Cruz saw recovery in earnings per share towards next year.
“This is as we expect loan demand to still settle at the low- to mid-teens growth, while lending rates is expected to trend up as banks gradually reprice their loans,” she said.
“The negatives on trading portfolio were already recognized this year — thus, we see more sustainable earnings growth from banks next year as core lending business will be driving the recovery.”
RCBC Securities, Inc. Research Head Raul P. Ruiz was “overweight” on the banking sector.
“Profit growth is expected to accelerate for most banks because NIMs have been rising sequentially quarter-on-quarter. We expect this to continue until next year as the BSP has guided on further rate hikes. Consumer loans will accelerate as some banks resume lending to public school teachers and car purchases pick up after slowdown this year,” he said.
Justino B. Calaycay, Jr., research and engagement head at Philstocks Financial, Inc., was also bullish on bank stocks, especially on the so-called big three and those which are well-positioned to expand in this “elite group.”
“Government’s continued push for its projects and the easing of inflation concerns, and hopefully, more stability in domestic rates, should allow banks to operate in a lending/borrowing conducive environment,” he said.
Emeterio “Jojo” D. Gonzales III, president, managing director, and head of research at Philippine Equity Partners, Inc., was also optimistic: “We think the drag on earnings would be largely confined to 2018.”
BANKS: THE GOOD AND THE BAD
Despite being bullish on the sector, analysts noted the different performances among banks during the quarter.
“Negative standout was SECB that posted single-digit loan growth in 3Q of just 8%,” said Arabelle C. Maghirang, deputy research head at Papa Securities Corp.
“SECB was the most challenged by negative factors among our covered banks, with much of the weakness coming from higher funding costs, absence of trading gains, and increase in effective tax rate,” AP Securities’ Ms. Cruz said.
AP Securities’ Ms. Cruz saw some “green shoots” on BDO and BPI as net interest income grew strongly on the back of higher asset yields, with their respective current account and savings account ratios protecting NIMs.
She said that the growth of Ty-led MBT, whose net income attributable to the parent company surged by 55.5% in the third quarter, was due to a “low base” in the same period last year following a big jump in provisions.
“Otherwise, (MBT’s) earnings were just in line with our estimates,” Ms. Cruz said.
Meanwhile, Mandarin Securities’ Mr. Musngi said that smaller banks such as EW, UBP, and SECB were the ones that saw sizable declines in their performance due to weaker-than-expected earnings, affected by their higher exposures in teachers’ salary loans, difficult trading environment, and reliance on high-cost deposits.
He said despite being a big bank, SECB “saw a large drop in their stock due to the significant miss in earnings, which was driven by their outlook for lower net interest margins.”
“This was caused by the bank having a relatively weak deposit franchise, considering they have just recently ventured into the consumer business,” he said.
Papa Securities’ Ms. Maghirang said that positive standouts mainly were BDO, which was boosted by trading gains, and MBT, on the back of less provisioning costs.
For Mr. Ruiz of RCBC Securities, he said that one of the quarter’s best performer was PNB which reported its sharpest profit hike because of a P3-billion gain on the sale of real and other properties acquired.
On the other hand, he noted EW’s third-quarter net income, which fell 13% year on year, reflecting the suspension of salary loans to public school teachers in the first semester of the year, which reduced both its interest income and fee income.
OUTLOOK
Moving forward, analysts said that fourth-quarter earnings will provide additional boosts to the banks on the back of holiday spending as well as moderating interest rate hikes from the BSP.
“An expected upsurge in spending — including on credit — by both businesses as they beef up inventories for the holiday season, and for consumers as the cheer gets into higher gear should translate to increased activity for banks,” Philstocks’ Mr. Calaycay said, as this could help these institutions sustain the momentum of the first three quarters for “decent-to-impressive” results for the full year that could provide impetus to its share prices.
“We can see consumer lending and commercial lending as the drivers with fair contributions from trading and investments allowing for wider margins both at the top and bottom lines,” he said.
“I think overall investor sentiment and inflation expectations would play a large part in bank stock performance,” Mandarin Securities’ Mr. Musngi said.
“Bank stocks typically lead the market in a rally/rebound and in the scenario that [domestic] inflation shows convincing signs of slowing down. [I]t may prompt the BSP to tone down their rate hikes and pause their tightening,” he said.
“We anticipate banks with stronger/established deposit bases (such as BDO and BPI) to have an edge in this market environment, as they continue to post NIM improvements due to their asset-sensitive balance sheets.”
Mr. Luciano of COL Financial expects net interest income and fees to continue to drive earnings growth for banks toward the end of the year.
“I think 4Q would be more of the same…slowing loan growth, improved deposit growth, NIM expansion may be clearer as banks reprice loans in the wake of rising interest rates,” Philippine Equity Partners’ Mr. Gonzales said.
AP Securities’ Ms. Cruz expects the banking sector to post mid to high teens earnings-per-share growth in the final quarter led by the big three banks, which include BDO, MBT, and BPI.
“With the current interest rate environment, most of the growth is expected to come from the core lending business as banks take advantage of higher yields to increase their spread,” she said.
Papa Securities’ Ms. Maghirang was of the same view: “4Q earnings should be in line with consensus estimates, driven by core lending income and some potential boost from trading gains.”
She said that moderating interest rates could provide for trading gains in the quarter ending in December and further lift valuations.
“Potential cut in the BSP’s reserve requirement (now at 18%) could also raise stock prices,” Ms. Maghirang said.
RCBC Securities’ Mr. Ruiz said: “Investors will start to be more confident about earnings momentum of banks, which will be seen in quarterly net income results,” which will be buoyed by lending business primarily driven by small and medium enterprises and consumers.

Atlantis announces first workshops for 2019

THE FIRST round of workshops for 2019 by Atlantis Theatrical will include an Acting Masterclass with award-winning international theater, TV, and film actor Pinky Amador, but there will also be classes for beginners.
Amador’s masterclass is designed for professional actors and individuals with extensive non-professional performing experience. It will cover advanced acting techniques, and at the end of the course, students will receive a professionally shot demo reel that they can include in their portfolio.
Entry into the class will be determined via auditions. The class is open to ages 18 and up. Classes will be held Mondays, Wednesdays, and Fridays, 7-10 p.m., from Jan. 7 to Feb. 8 at the Mirror Studio, SJG Center, Kalayaan Ave., Makati City.
Newbies can take the The Basic Musical Theater Class, a month-long course for students who wish to enhance their singing, acting, and dancing skills. It includes into basic theater history, stage terminology, and fundamental theatrical concepts. It also introduces students to jazz dance performance and assists them in exploring vocal techniques for the stage. The class is open to adults, 18 years old and above, and will be facilitated by Steven Conde and Sarah Facuri. Classes will be held Mondays, Wednesdays, and Fridays, 7-10 p.m., from Jan. 14 to Feb. 23, at The 9th Studios, Dominion Bldg., Arnaiz Ave., Makati City. At the end of the course there will be a recital on Feb. 23 at the RCBC Theater.
Finally, Atlantis will also be offering an Intermediate Musical Theater Workshop for students who have had experience in musical theatre performance and have basic knowledge of musical theater principles. It this course, students will delve into concentrated song and script analysis/text work, as well as intensive jazz dance training; be introduced to different schools of acting, stage make-up, monologues, and making a career in the theater. The course will also include a review of basic musical theater concepts and principles such as character study, improvisation, ensemble work and vocal technique. Students will be selected via teachers’ recommendation and/or a video audition process. The class will be facilitated by Cris Villonco and Nel Gomez. Classes will be held on Tuesdays and Thursdays, 7-10 p.m., from Jan. 15 to Feb. 23, at The 9th Studios. There will be a recital on Feb. 23, RCBC Theater.
Slots are limited for all classes. Contact workshops@atlantistheatrical.com or 0917-838-1534 for inquiries.

How PSEi member stocks performed — November 27, 2018

Here’s a quick glance at how PSEi stocks fared on Tuesday, November 27, 2018.
psei112718
Philippine Stock Exchange’s most active stocks by value turnover — November 27, 2018
pseiactive112718

Need for lateral thinking

It’s about time. At long last, the government has embarked on a bold initiative to address our inability to produce enough rice for our own needs. The plan to work with the government of Papua New Guinea to cultivate rice and transfer rice production technology is promising. Papua New Guinea is reported to have fertile soil and lots of wetlands to make rice production effective, since it is expected to be more cost efficient. So, we are finally recognizing that despite our decades of obsession with attaining self-sufficiency in rice, we can’t seem to make it work. There is of course, climate change, with unpredictable weather conditions, exceedingly high price of fertilizers, our aging farmers (average age now estimated at 60 years) and lack of interest of the younger generations in grueling farm work, and, of course, the usual widespread corruption all the way down to agricultural field technicians.
Developing Papua New Guinea as an alternative source of rice makes sense in order to ensure that we have other options outside of Vietnam and Thailand which are rethinking their rice businesses toward higher-end varieties, branding, etc. We may have to pay higher prices for our rice imports if we don’t cultivate alternatives.
Yes, we can produce abundant rice given the right environmental conditions. But can the government actually produce it efficiently? Perhaps, if it partners with technical resources such as the University of the Philippines in Los Baños which supplies the scientists working at the nearby International Rice Research Institute. And if private business runs the show. I am skeptical about our chances of success if the government, which cannot maintain railways, or run government corporations without running them down to bankruptcy, is the way to go.
Vietnam’s An Giang Plant Protection Company, the successful Joint Venture of a private businessman who mobilized a multiple-stakeholder approach work in an “everybody wins” formula, is worth studying. Government provided land for research and start-up production, the agricultural school provided technical support, and European suppliers of technical inputs and equipment (chemicals, seeds, fertilizers, combine harvesters, etc.) at innovative and conciliatory pricing synergized to make this joint venture succeed in producing and selling rice to domestic and export markets (all the way to Africa).
An Giang introduced several innovations that are worth emulating: the JV did not own the land, the small farmers retained ownership. The Joint Venture supplied the seeds, chemicals, fertilizers at reasonable rates, payable upon sale of the rice outputs at current market prices. An Giang also provided rice milling and storage facilities, also payable upon sale of the rice outputs. Very significantly, An Giang also hired and provided agricultural field technicians and trained them in community relations so that they could become “farmers’ friends” over and beyond being technical advisers.
Proof of An Giang’s success was the decision of a Swiss-based investment firm to invest in minority equity shares in the JV worth USD90 million. This is incredible given that Vietnam is a communist-run government.
thinking conversation brainstorming
The Department of Agriculture could benefit from organized consultations with academe, private entrepreneurs, and the government of Papua New Guinea toward formulating an approach that over the long term can result in an “everybody happy,” sustainable venture that can meet the multiple stakeholders’ expectations.
Perhaps the Secretary of Agriculture should also look into how our archipelagic nation, ironically surrounded by seas, can raise the productivity of our fisheries industry so that it becomes a prosperous contributor to our economy. Fisheries has been lagging behind manufacturing and services for many years. Perhaps the only time it became a significant contributor to our economic growth was when Malcolm Sarmiento was Director of the Bureau of Fisheries. Sarmiento (where is he now?) passionately pushed for acquaculture and marine sanctuaries to raise our productivity in fisheries. He also promoted sardine processing into bottled products in his home town of Dipolog. And look where we are now with even high end gourmet tuyo, branded, packaged, smoked tinapa, and other new gourmet products in our supermarkets.
There has been too much vertical thinking in our government approaches. Doing the same things over and over again, trying to just do the same things a little better each year. Obviously, we need more than that.
There is enough disruptive technology around the world to force us to wake up and anticipate the trends if we are to survive and hopefully, thrive.
I read recently that the Department of Science and Technology has been tasked with monitoring developments in information and communications technology. There seem to be threats to our Call Centers jobs over the long term with awesome developments in artificial intelligence, notably voice recognition. I hope Filipino IT experts such as Dado Banatao are being consulted on these.
The creative industries (film, fashion design, art, music, graphic arts, IT innovations) seem to be getting organized toward becoming a major force in our economic progress. Creative arts is something we seem to be naturally good at; and we should make serious efforts to develop these in our people, especially the youth. There are already too many lawyers, lawyering still considered a glamorous profession; and other career paths should be promoted instead.
In all of these enterprises, we need bold lateral, not vertical thinking.
 
Teresa S. Abesamis is a former professor at the Asian Institute of Management and an independent development management consultant.
tsabesamis0114@yahoo.com

Inflexible labor regulations have negative consequences

After more than two years in office, the Duterte administration has not fulfilled its promise to end contractualization. Reports indicate that there are an estimated 1.3 million Filipinos who are contractually employed in the country. The efforts of the Office of the President and the Department of Labor and Employment had not been able to resolve the perennial problem of job insecurity. The President himself admitted that the Executive Order he issued last year was not enough and it’s Congress that should pass a legislation to ensure security of tenure for laborers.
As we await the passage of the Security of Tenure bill in the Senate, a Social Weather Stations (SWS) poll put the number of jobless Filipinos at 9.8 million as of September this year. This marks an increase of 1.2 million since June. Out of the estimated 9.8 million who are said to be jobless, 9.2 percent, or some 4.1 million, were retrenched; 8.4 percent, or about 3.7 million, voluntarily left their jobs; and 4.4%, or 2 million, are first time job seekers.
What this means is that while the Philippine economy continues to sustain an upbeat growth momentum for some years now, translating that growth into jobs still remains to be a major challenge.
Unfortunately, the slower economic expansion in the second and third quarter, driven by record-high inflation, has made more Filipinos less optimistic about getting a job within the next year. The same SWS survey revealed that net optimism on job availability declined by 8 points from 47 percent in June to 39 percent in September.
Clearly, the major challenge for the Duterte administration now is how it can meet its economic growth targets and at the same time ensure that the economic growth will create more sustainable jobs.
In a recent roundtable discussion organized by the independent think tank Stratbase ADR Institute (ADRi), some members of the business sector, labor experts, and employers group expressed concerns about the negative consequences of further tightening labor regulations on economic growth and the labor market.
Dr. Vicente Pacqueo, Philippine Institute for Development Studies fellow and ADRi non-resident fellow, said the current proposed amendments to the Labor Code in the pending bills are likely to “make labor markets more inflexible, uncertain, and inefficient.” He warned that the version of the consolidated bill will likely make employers “reduce employment and production levels in the short runs to remain competitive and profitable.”
Dr. Pacqueo said the “restrictive and costly regulatory environment” in the Philippines makes it less attractive to foreign investors compared to, say, Singapore, China and even Vietnam. He urged policy makers to focus more on securing the well-being of the workers and enabling them to adapt to the emerging trends and disrupting labor-replacing technology and innovations.
It’s important to note that amidst such fears related to job insecurity and declining public optimism to find stable jobs, the government is pushing for the second package of its tax reforms package, or the “Trabaho Bill.” The bill seeks to lower corporate income tax rate from 30 percent to 20 percent but intends to rationalize the current set of tax incentives given by various investment promotion agencies.
For prospective investors, this has no doubt brought a strong feeling of uncertainty over tax perks. Some manufacturing firms recently announced postponing their expansion plan until they know the fate of the Trabaho Bill.
As of May this year, at least 1.39 million people are directly employed in Philippine Economic Zone Authority (PEZA)-registered firms. But investment approvals in the agency dropped by 55.9 percent in the first semester of 2018 compared to the same period last year.
The Japanese Chamber of Commerce and Industry and the European Chamber of Commerce in the Philippines (ECCP) also warned that the removal of incentives could send wrong signals to existing companies and prospective investors.
The proposed amendment to the labor code and the second tranche of tax reform package need to be reexamined to ensure that these measures can be a potent tool to create sustainable jobs and inclusive growth. The era of globalization calls for reforms in regulations and institutions to enhance the country’s competitiveness, promote flexibility in our labor regulations, and ease the burdens of investors in doing business in the Philippines in the long term.
 
Victor Andres “Dindo” C. Manhit is president of Stratbase ADR Institute.

The 11th Foreign Investment Negative List and its possible impact on online businesses

Odds are that in the past week, you liked a friend’s post on Facebook, bought food from Food Panda, and booked a ride with Grab. I, myself, have done those things in the past couple of hours. This is indeed the age of E-Commerce and online businesses. You look at the Forbes list and at the top you’ll find Mark Zuckerberg, Jack Ma, and Jeff Bezos, who, by means of the internet, created billion-dollar internet-based businesses. These pervasive online businesses also affect more traditional business models. For instance, a giant retailer like Toys “R” Us has announced plans to close because of online stores like Amazon. Travel sites like Expedia have rendered travel agents unnecessary. Traditional cable and satellite TV services are fast becoming obsolete as people now choose to stream similar contents using sites like Netflix.
The Philippines is likewise cashing in on the trend with emerging websites like Lazada, Zalora, and OLX. However, at present, there are restrictions in place when it comes to online based businesses registered in this country and I believe the proposed 11th Foreign Investment Negative List (FINL) will play a big role in the future of Internet businesses.
By way of background, last Oct. 2, 2018, the Business Inquirer published an article saying that the 11th FINL is now up for President Rodrigo Duterte’s signature. Socioeconomic Planning Secretary and NEDA chief Ernesto Pernia said the Philippines will now allow up to 100 percent foreign ownership for internet-based businesses. He further stated that the proposed 11th FINL, which contains a draft executive order, will no longer consider internet businesses as mass media.
online business
As it stands, the 1987 Constitution under Article XVI Section 11(1) restricts foreign ownership over mass media saying that it should be 100% Filipino owned. Moreover, Republic Act (R.A.) No. 7042, otherwise known as the Foreign Investments Act of 1991, and the Tenth Regular Foreign Investment Negative List provide that except for recording, no foreign equity is allowed in mass media. When the 1987 Constitution was passed, the Internet was not yet in existence and traditional mass media was limited to print and broadcasting. However, subsequent legislations and opinions of the Securities and Exchange Commission (SEC) now consider the internet and mobile technology as platforms for mass media.
R.A. No. 7934, otherwise known as The Consumer Act of the Philippines, defines “mass media” as any means or methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, mails and the like. Likewise, under R.A. No. 9211, otherwise known as the Tobacco Regulation Act of 2003, mass media is defined as any medium of communication designed to reach a mass of people. For this purpose, mass media includes print media such as newspapers and magazines, broadcast media such as radio and television, and electronic media such as the internet. These descriptions of mass media covering Internet platforms were reiterated by the Department of Justice in a 1986 opinion.
Several SEC opinions have now considered the internet and mobile technology as platforms for mass media and held that Internet-based platforms used for selling products are forms of mass media since the internet is used as a digital platform to broadcast information to the public. Relaxing this theory to allow foreign participation may change the internet-based business landscape in the Philippines.
Online based businesses would be ideal in the Philippines as nearly 60 million netizens have access to the internet. Many Filipinos spend a lot of their time on social media and online shopping. There are also more than 50 million Facebook users in the country. If the 11th FINL is passed, e-commerce giants like Amazon, Alibaba, or eBay can expand their business in the Philippines and bring in more investments. Conversely, Filipinos will also have more options on what website or online businesses to avail of to suit their needs. Whether this is good or bad through nationalistic eyes is a whole other topic and as I ponder on this question, I will order a burger from Food Panda.
This article is for general information and for educational purposes only. It is not offered as and does not constitute legal advice or legal opinion.
 
Agustin P. Geraldez, Jr. is an associate of the Corporate and Special Projects Department (CSPD) of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
apgeraldez@accralaw.com

Realpolitik

It seems that only President Donald Trump has a clear-cut — or, at least, unfuzzy — attitude towards the slaughter and reported dismemberment of Jamal Khashoggi, a columnist of Washington Post,allegedly on orders of Saudi Arabian crown prince Mohammed bin Salman. Kashoggi was last seen alive entering the Saudi embassy in Istanbul and, according to the CIA, was killed, cut up and disposed of on orders, or at least, with the full knowledge, of the crown prince.
Trump thinks that friendly relations with the Saudis, which translate into billions of dollars for America in arms purchases and investments, are more important to US interests than the grisly killing of a US resident who wasn’t an American citizen, anyway.
In fact, it is debatable whether US citizenship would have mattered to Trump, when weighed against the “benefits” that come with being a close ally of the Saudis, not to mention the repercussions of upsetting the cozy relationship.
American media and leaders on Capitol Hill, both Democrats and Republicans, have expressed grave concern over the killing and Trump’s nonchalant attitude, stressing that it besmirches the reputation of the US as a champion of justice and human rights.
Pragmatic observers say, Trump is simply practicing realpolitik. They also candidly add that if the Kashoggi killing were not so high profile and such fertile political and media fodder,American officialdom would have turned a blind eye to it.
The fact is that the US and other Western governments have routinely ignored Saudi Arabia’s human rights abuses for decades. But the Kashoggi killing leaves them caught between maintaining their moral ascendancy and protecting their economic, political and military interests. Trump, on the other hand, has no such problem, being unprincipled and amoral.
In other words, Trump is the perfect practitioner of realpolitik, a German term which is defined as “politics or diplomacy based primarily on considerations of given circumstances and factors, rather than explicit ideological notions or moral and ethical premises.”
A less esoteric — that is, moregarapalor brazen — illustration of realpolitik was reportedly expressed by a former Philippine secretary of foreign affairs, as follows: “If rape is inevitable, just lie back and enjoy it.”
This view of realpolitik appears to be the attitude of President Rodrigo Duterte in his relations with China, specifically in connection with the South China and the issue of Philippine territorial claims over parts of the area.
The recent state visit to Manila of Chinese President Xi Jinping is said to have resulted in an agreement to jointly exploit the wealth of oil and gas resources in what is considered Philippine territory. Along with that are expectations of expanded trade, direct investments, development loans and technical assistance.
Duterte has repeatedly pointed out the futility of going to war with China or even protesting China’s intrusion into territory claimed by the Philippines. He has admitted helplessness in the face of China’s encroachment, and has decided to apply realpolitik.

Xi Jinping and Rodrigo Duterte
President Rodrigo R. Duterte with Chinese President Xi Jinping. — PHILIPPINE STAR/KRIZJOHN ROSALES

In other words, allow the virtual rape and just “lie back and enjoy it.” And benefit from it. Thus, the joint exploration of natural resources and the loans and economic deals.
Some critics have warned that China’s designs go beyond joint exploration of resources. Former national security adviser Norberto Gonzales has even warned against a Chinese invasion of the Philippines.
In a news report, Gonzales “cited the building of Chinese defense bases right inside Philippine territory” and suggested that the Philippines “should prepare to be invaded by China.”
“Within hours,” Gonzales was quoted, “the Chinese can destroy most of the country’s defense facilities and probably some of our cities.”
Urging the government to “devise a contingency plan against a Chinese attack,” Gonzales added that “China does not have a history of invading other countries, but it is not averse to using military might to settle territorial conflicts.”
In this regard, Gonzales may want to consult Wikipedia to check out China’s history of invading neighboring countries like Korea and Vietnam, or he might want to consult his friends in the CIA to be reassured that the US will not allow that to happen to protect American interests.
At any rate, Duterte’s apologists and economic managers have pointed out the harsh reality that the Philippines does not have the financial and technological capability to exploit the natural resources and build the infrastructure required for national development.
“We will still need foreign investments, anyway,” they rationalize, “whether from the US or other countries. So why not China?”
Yes, indeed. Why not China? Didn’t China just sign a 99-year lease with Sri Lanka for control of the latter’s Hambatota Port, in order to pay off a loan? That was the only way the poor Sri Lankans could settle the IOU.
Are Duterte and his economic geniuses not concerned that they could be signing an IOU with the Philippines as collateral? Oh, but then, Duterte and these geniuses may be long dead when China decides to collect.
That’s realpolitik for you.
I had my introduction to realpolitik in my first ad agency job. I had refused to give in to a “request” of our biggest client that his girlfriend be made a star of a radio show that I was writing and directing. I protested that it was a matter of principle for me. I did not think that the client’s girlfriend was in the same category as the regular stars of the show.
My boss patiently explained that, while it was ideal for me to see things as either black or white, I needed to realize that in business, there was such a color as gray.
 
Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.
gregmacabenta@hotmail.com

Universal health care bill hurdles bicameral panel

By Camille A. Aguinaldo
Reporter
THE UNIVERSAL health care (UHC) bill, which provides automatic inclusion of all Filipinos in the government’s National Health Insurance Program, hurdled the bicameral conference committee level on Tuesday.
If signed into law, the bill will allow all Filipinos to be enrolled under the Philippine Health Insurance Corp. (PhilHealth) as direct or indirect contributors. Under the proposed measure, the PhilHealth ID is no longer needed for beneficiaries to avail themselves of such health benefits.
In a statement, Senator Joseph Victor G. Ejercito, chair of the Senate committee on health, said a provision was approved which provides the funding of the universal health care program from the incremental sin tax collections and 50% of the national government share from the Philippine Amusement and Gaming Corporation (PAGCor).
Other sources of funding include the 40% Charity fund, net of documentary stamp tax payment, mandatory contributions of the Philippine Charity Sweepstakes Office (PCSO), premium contributions of PhilHealth members, annual appropriations of the Department of Health (DoH), and the national government subsidy to PhilHealth under the General Appropriations Act (GAA).
Under the bill, PhilHealth’s primary care benefit package will now include medical examinations, medicines for basic conditions, and laboratory tests.
Patients are also given the freedom to choose his or her primary health care provider, whether public or private.
The bicameral panel also agreed to provide additional benefits for paying members as incentive for the increase in premium rate.
“The additional benefits will incentivize those who pay higher premiums and will encourage those who are voluntarily paying to keep paying,” Senate President Pro Tempore Ralph G. Recto, principal author of the bill, said in a statement.
The proposed measure also provides a gradual premium rate increase of .5% a year and gradual adjustment of income ceiling by P10,000 a year.
An income retention provision was also introduced in the bill, which will create a special health fund sourced from PhilHealth payments for local hospitals. The fund will be used to improve the health facilities and health service delivery of the local government units (LGUs).
The bill also creates a Health Technology Assessment Council (HTAC), which is tasked to study and make recommendations to the DoH and PhilHealth on developing policies in health insurance.
It also requires graduates of health-related courses with government scholarships to work for the government for three years.
Mr. Ejercito said he hoped the measure will be signed by President Rodrigo R. Duterte by Christmas and will be implemented next year so the benefits will be felt right away.
“We want to change that mentality that many Filipinos who are sick haven’t consulted with a doctor because of fear of the expenses,” he told reporters.

NICA proposes DICT power to shut down ‘harmful’ social media

By Vince Angelo C. Ferreras
Reporter
THE NATIONAL Intelligence Coordinating Council (NICA) on Tuesday proposed that the Department of Information and Communications Technology (DICT) be given authority to shut down social media accounts that may be deemed threats to public safety.
“We want the DICT to be empowered and to have authority to be able to shut down social media accounts like in Facebook, Twitter and other similar mechanisms,” said lawyer Roberton G. Lapuz of the NICA at a Senate hearing on Tuesday.
Committee on Public Order and Dangerous Drugs chair Senator Panfilo M. Lacson said the proposal will be included in the consolidated bill that would amend Republic Act 9372 or the Human Security Act of 2007.
“Definitely. In other countries as mentioned by one of the resource persons, the minister of transportation, for example, in Australia is within his mandate to shut down any account he deems (may add) peril (when it comes to) terrorism,” Mr. Lacson told reporters in an interview.
Mr. Lapuz for his part said, “We are getting our inspiration from many other jurisdiction like in India. They have this authority to shut down Facebook or ban other social media application that can be inimical to national interests.”
Lawyer Marwil N. Llasos, anti-terrorism program coordinator of the Institute of International Legal Studies also backed the proposal.
“Anything that is harmful or hurtful to the comfort, public safety, public order can be regulated by the State. The social media has been used as a means of radicalization already and the State has to preserve itself. We don’t have to wait for something to happen,” Mr. Llasos told the hearing.
He added, “I think there is clear and present danger of a substantive evil that the State has, not only a right, but a duty to protect the inhabitants. We don’t want another Marawi [Siege] to happen. I think this will be sustained even by appropriate judicial authorities when a case is filed to challenge this provision.”
Last October, top security officials proposed an extended period to 30 days on detention without warrant of arrest against suspected terrorists, from the present three days as prescribed under the Human Security Act and the Revised Penal Code.

Comelec short of funds for teacher training

THE COMMISSION on Elections (Comelec) said that it will need a bigger budget for the training teachers who will be assisting in the midterm elections next year.
During a hearing on Tuesday of the Joint Congressional Committee on Automated Elections regarding the status of the Comelec’s preparations for the national and local elections (NLE) in May, Comelec Chairman Sheriff M. Abas said they will try their best to stretch the allocation given to them by the Department of Budget and Management (DBM) for training members of the Board of Election Inspectors (BEIs).
“Dinidiskarte namin ang training kasi ang hiningi namin sa DBM ay P5 billion pero ang binigay nasa P1.7 billion lang (We’re strategizing the training because we asked the DBM for P5 billion, but we were given only P1.7 billion),” Mr. Abas said.
“We still need P3 billion (more).”
The proposed 2019 budget for the Comelec is P13 billion.
Mr. Abas said they are looking to deploy at least two BEIs per voting station and are expecting to train 255,000 people, including at least one technical support per station.
Comelec reported that there will be 85,000 precincts for the NLE.
In the meantime, Mr. Abas said they are employing various ways, such as the use of supplemental video, to educate BEIs since the training only comes every three years.
“Gumawa kami ng video at ‘yun ang magiging additional video d’un sa module para ‘yun ang ire-review ng teachers after the training (We made a video, additional to the module, that teachers can review after the training),” he said. — Gillian M. Cortez

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