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The Asia Liberty Forum and the search for rule of law and economic freedom

“There is no evidence that fuel and electricity subsidies benefited the poor. There is no evidence that trade protection benefited the poor. Elimination of subsidies if compensated by reduction of cost doing business (corruption) will help the poor.”

— Muhamad Chatib Basri,
presentation about Indonesia energy and food subsidies,
EFN Asia conference September 2004, Hong Kong

Those conclusions were made by Dr. Chatib “Dede” Basri in his presentation, “Can subsidy and protection do any good for the poor?” at the Economic Freedom Network (EFN) Asia conference in 2004. At that time, he was a faculty member of the University of Indonesia and individual member of EFN. He used an econometric model and the Grosman and Helpman (G-H) model (trade protection is the result of bargaining between government and various lobby groups). The inevitable conclusion of his paper was that market reforms and the reduction, if not removal of dependence by the poor on the state will actually help them and taxpayers over the long term.

Dr. Basri later became Minister of Finance from May 2013 to October 2014 when the administration of Indonesian President Susilo Bambang Yudhoyono ended. Dr. Basri will be among the keynote speakers in the Asia Liberty Forum (ALF) this coming Feb. 10-11 at Mandarin Hotel Jakarta, Indonesia. The event is sponsored by the Atlas Foundation and co-hosted by the Center for Indonesian Policy Studies (CIPS).

Aside from Dr. Basri, other important speakers in this year’s conference will be the following:

1. Saidah Sakwan, chairwoman, CIPS; also a commissioner of the Indonesian Business Competition Commission (KPPU).

2. Brad Lips, CEO of Atlas Network, Washington DC, USA.

3. KH Yahya Cholil Staquf, general secretary of Nahdlatul Ulama (NU) Supreme Council, world’s largest Muslim organization with 50+ million members.

4. Siegfried Herzog, Regional director for Southeast and East Asia, Friedrich Naumann Foundation for Freedom (FNF), Thailand.

5. Suraj Vaidya, chairman of SAARC Chamber of Commerce and also chairman of Samriddhi Foundation, Nepal.

6. Rainer Heufers, executive director of CIPS.

7. Razeen Sally, Prof. at Lee Kuan Yew School of Public Policy, National University of Singapore.

8. Ronald Meinardus, Regional director, FNF South Asia, India.

9. Parth Shah, president of the Centre for Civil Society, India.

10. Lorenzo Montanari, exec. director of Property Rights Alliance (PRA), Washington DC, USA.

11. Barun Mitra, founder and Director of Liberty Institute, India.

12. Junjie Ma of Unirule Institute, Beijing, China.

There are many other interesting speakers to talk on many topics — policy reforms to broaden support for classical liberal principles, education policy, Ease of Doing Business Index, Protection of private property rights, Intellectual Property Rights (IPR), micro-enterprises, entrepreneurship in e-commerce, state-owned enterprises (SOEs).

Are Asian economies getting more market-oriented or state-distorted? Is there greater rule of law now or greater rule of men? Are public institutions more protective or more confiscatory of private property rights?

There are many studies and annual reports that track and monitor various indicators and parameters to help answer these and related questions. Among the important annual reports are Fraser Institute’s Economic Freedom of the World (EFW) reports, Heritage Foundation’s Economic Freedom Index (EFI), PRA’s International Property Rights Index (IPRI), World Bank’s Doing Business, and World Economic Forum’s (WEF) Global Competitiveness Index (GCI).

The GCI is composed of 12 pillars and the first pillar are Institutions. These are composed of 21 sub-pillars like property rights, IPR protection, diversion of public funds, public trust in politicians, irregular payments and bribes, judicial independence, favoritism in decisions of government officials, burden of government regulation, efficiency of legal framework in settling disputes and challenging regulations, transparency of government policy making, and reliability of police services.

I checked the latest WEF 2017-2018 report for East Asian economies and compared with the report two years ago for pillar #1, Institutions (see table).

The Asia Liberty Forum and the search for rule of law and economic freedom

So for Institutions, the numbers above show three important results: One, out of the 144 countries and economies covered, many East Asian nations land in the first half (i.e., 1st to 72nd), 11 of the 15 economies mentioned above. Singapore and Hong Kong are in the top 10.

Two, the biggest gainers in global ranking are India (+21!), South Korea, China, and Laos. And three, the biggest loser in ranking is the Philippines, dropping 17 places or notches.

In the WEF Executive Opinion Survey 2017, the most problematic factors for doing business in the Philippines were: (1) inefficient government bureaucracy, (2) inadequate supply of infrastructure, (3) corruption, (4) tax regulations, and (5) tax rates.

For Asian countries outside the first half like Thailand, Vietnam, Philippines and Cambodia, there is an immediate need to improve the rule of law and further debureaucratize, deregulate and depoliticize the economy.

 

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

minimalgovernment@gmail.com.

David and Goliath in MPBL

Gary David and Marlou Aquino are two of the best players ever played in the PBA, but basketball fans had a difficult time recollecting how their respective careers in the pro league ended.

A scoring champion multiple times, David found himself bouncing in and out of teams in the PBA following his great run for the 2012 MVP Derby, which he lost to Mark Caguioa.

The image of David showing his figuratively burning hands in torching then top seeded B-Meg Llamados of the old Purefoods franchise being handled by Tim Cone in his first conference, was the most vivid picture of how great the 6-foot-2 gunner from Lyceum was.

He steered the eighth seeded Powerade Tigers of the Coca-Cola franchise all the way to the finals before losing to Talk ’N Text in the 2012 Philippine Cup before the franchise was sold to GlobalPort the following season.

After his brief stint with GlobalPort, the man known as El Granada was traded to the Meralco Bolts where he spent three seasons. He was suspended by Bolts management due to insubordination and he was released by the squad.

The former Philippine Cup Best Player of the Conference was picked up by the San Miguel Beermen, who hardly used him before the veteran swingman ended up with Mahindra, now known as Kia, until his contract expired.

Aquino, the 6-foot-9 center, had a more illustrious career.

Following numerous stints in the national team and a colorful career in the PBL, Aquino joined Ginebra San Miguel, the most popular team in the PBA, and quickly made a huge impact in the league.

The Gentle Goliath emerged as the Rookie of the Year of the 1996 season, and became a Mythical First Team for two consecutive seasons. He was instrumental in the franchise’s last championship under Robert Jaworski in 1997.

In year 2000, Aquino was traded to Sta. Lucia, his long-time amateur squad, and quickly he became an integral part of the Realtors’ campaign, helping the squad to winning its first ever championship in the 2001 Governors’ Cup.

He was again instrumental in 2007 in the Realtors’ last drive for the championship until the franchise was acquired by the Meralco Bolts.

In 2010, Aquino was acquired by Barako Bull, but his stint was short lived as the team filed for a leave of absence due to financial pinch and that was the last time PBA fans had a glimpse of The Sky Scrapper in action.

But basketball fans will see David and Aquino back in action as they will play in a fledgling Maharlika Pilipinas Basketball League, a league founded by Senator Manny Pacquiao. MPBL will also have Commissioner Kenneth Duremdes calling the shots.

David will reinforce the Bataan Defenders while Aquino will take his wares to the Bulacan Kuyas coached by Ogie Gumatay.

Starting Jan. 25, the two veteran players will get a new lease in life in continuing to pursue the game that they loved and a new chapter will be added to their colorful story.

Basketball fans deserved to see David exploding every game and watch Aquino clamping down on defense and bringing toughness to his new squad.

Thanks to MPBL, their careers will be revived.

 

Rey Joble has been a sportswriter covering the PBA games for more than a decade. He is a member of the PBA Press Corps and Philippine Sportswriters Association.

reyjoble09@gmail.com

DENR boosts frontline enforcement with new lawyer hires

THE Department of Environment and Natural Resources (DENR) said it hired 147 new lawyers to boost its frontline enforcement functions.

DENR-Environment Management Bureau Assistant Secretary and concurrent director Juan Miguel T. Cuna said the lawyers will be deployed in Community Environment and Natural Resources Offices (CENROs) to aid the regional offices in prosecuting violators.

“In my experience in the past, if there are people that we’d prosecute or reprimand for violations of policies and certain laws, the cases aren’t continue due to technicalities,” he added.

“It’s important that we have lawyers on the front lines so that legally, the cases we file will prosper.”

Mr. Cuna noted that the Environment and Natural Resources Secretary Roy A. Cimatu ordered the reinforcement of frontline offices like the CENROs, as enforcement is the department’s biggest need.

“I don’t think we can reach the number [of lawyers] that we want but the hiring of 147 lawyers for the front line is a really big step in the right direction in being able to assist the field personnel in pursuing violations,” he added.

“[The CENRO is] the front line office in terms of proximity to the people. The lawyers can help the personnel on the proper procedure so cases can actually be filed.” — Anna Gabriela A. Mogato

MVP: P3B a ‘good price’ for CURE frequency

By Patrizia Paola C. Marcelo,
Reporter

PLDT, Inc. Chairman, President and Chief Executive Officer Manuel V. Pangilinan said P3 billion is a “good price” for possible compensation by a future player for the frequency surrendered by the telco as part of the government approval of its merger with Digitel Telecommunications Philippines, Inc. (Digitel).

“I don’t know how much it would cost. It’s not really up to us, it’s with the NTC [National Telecommunications Commission]. It’s a good price, but it’s not up to us,’ Mr. Pangilinan told reporters on the sidelines of a Voyager Innovations, Inc. event on Jan. 18. 

NTC Deputy Commissioner Edgar Cabarios has said the third telecommunications player will have to compensate PLDT about P3 billion if they are to get the 3G (third generation) frequency returned by PLDT, then owned by its unit Connectivity Unlimited Resources Enterprises (CURE), to the government as part of the approval of the merger with then-Gokongwei-owned Digitel.

NTC in 2011 ordered the divestment of 10 MHz of the 2100 MHz band, used for 3G, a condition for the approval of the deal with Digitel.

NTC Commissioner Gamaliel A. Cordoba at that time said the government would bid out the surrendered frequency, with PLDT given monetary compensation. PLDT would not be allowed to participate in the bidding, which has not been conducted until now.

The Department of Information and Communications Technology (DICT) is preparing the guidelines for the specifics of the frequencies to be given to the telco which will win in the selection process.

The DICT is set to reveal on Jan. 24 its specific guidelines for the selection of a third telco player.

DICT Officer-in-Charge Eliseo M. Rio, Jr. said the compensation is still needed, and the third player, if interested in acquiring the 3G frequency, will have to assume the responsibility of compensation.

“Acquiring the frequency from CURE must be assumed by those who would get the frequency,” Mr. Rio said in a phone interview.

Mr. Rio said on Friday, Jan. 19 that the remaining frequencies, which are estimated by the Philippine Competition Commission at only around 12% of the entire frequencies, are “enough” for the third player to compete with PLDT and Globe Telecom, Inc.

 The DICT however, is looking at a “more equitable” allocation of frequencies in the long term, and this would possibly include reallocation or re-farming of frequencies.

However, Mr. Rio admitted this would take a long process and cannot immediately be carried out.

PLDT and Globe have earlier said they are wary of the said plan of the government.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

US shutdown update: McConnell threatens early Monday morning vote

WASHINGTON — The House and Senate are in session Saturday as lawmakers try to resolve a spending impasse that partially shut down the federal government at 12:01 a.m.

Here are the latest developments, updated throughout the day:

EARLY MONDAY VOTE (7:08 P.M.)
Senate Majority Leader Mitch McConnell said on the Senate floor that the chamber will vote at 1 a.m. Monday on his plan to reopen the government and fund it for three weeks — with no action on immigration — unless Democrats agree to hold the vote earlier.

“We’ll be right back at this tomorrow and as long as it takes” to pass a spending bill, Mr. McConnell said.

Senate Minority Leader Chuck Schumer said on CNN that the White House hasn’t called him and “they say they are not negotiating — that’s foolish.”

“I’ve asked them to bring the big four” congressional leaders to the White House, “but we haven’t heard from them,” Mr. Schumer said. He said he wants a bipartisan deal that sets budget caps for defense and non-defense spending, protects young undocumented immigrants from deportation, and provides disaster funds.

HOUSE GOP HINTS AT POSSIBLE WEEKEND DEAL (6:14 P.M.)
A senior House Republican said vote counters are being told a deal could be reached Sunday to reopen and fund the government for three weeks, while a bipartisan group of senators met to discuss offering their own plan to leadership.

It’s not clear the talks will amount to anything as Republicans and Democrats sniped and traded potshots on the first day of a government shutdown. House members jeered loudly at each other during afternoon floor debate as other lawmakers worked behind the scenes.

The senior House Republican, who spoke on condition of anonymity, said a deal would be based on a commitment by Mr. McConnell to accommodate, at some later time, Democrats’ demand for a vote on a bill to protect young immigrants from deportation. Republican Senator Lindsey Graham proposed such a plan earlier Saturday.

The bipartisan group of 19 senators, led by Republican Susan Collins and Democrat Joe Manchin, met with the goal of agreeing on a plan to present to leadership on Sunday.

The senators would be playing a very “useful and welcome role” if they can present ideas that move the talks forward, Ms. Collins told reporters afterward. “It’s a difficult path for the leaders to tread,” she said.

Neither Ms. Collins nor Mr. Manchin, who joined most Republicans in backing the House-passed stopgap spending bill Friday, would say what members in the room were looking at. Mr. Manchin said an immigration proposal by Mr. Graham and Democrat Dick Durbin was a possible “rallying point,” adding that lawmakers are looking at a variety of issues and legislative vehicles.

“We’re trying to see if we can talk to the leadership on both sides and tell them what we think is a pathway forward,” Mr. Manchin said. Immigration “has to be part of the package,” he said.

The White House insists that it won’t negotiate on immigration until Congress passes a spending bill to reopen the government.

Several senators, including Mr. Graham, went to Mr. Schumer’s office after their private meeting. Asked whether they have a bipartisan proposal to avert the shutdown, Mr. Graham said, “We’re hoping that will be the case.”

Still, some House Republicans said they hadn’t heard of any progress.

“I think we’re still waiting on the Senate to act, but nothing has changed significantly,” said Mark Meadows, chairman of the conservative House Freedom Caucus.

Also on Saturday, Mr. Trump’s presidential campaign released a strongly worded video ad that said regarding the president’s efforts to stem illegal immigration, “Democrats who stand in our way will be complicit in every murder committed by illegal immigrants.”

WHITE HOUSE SNIPES AT SCHUMER (2:57 P.M.)
White House Budget Director Mick Mulvaney said Senate Minority Leader Chuck Schumer needs to “up his game” in negotiations. His comment intensified the sniping between each side in shutdown talks by contending that Mr. Schumer publicly mischaracterized his conversation with President Donald J. Trump on Friday.

Mr. Schumer said on the Senate floor that he offered to give Mr. Trump the US-Mexico border wall that the president campaigned on and Democrats have thus far resisted. Mr. Mulvaney, at a White House briefing, said Mr. Schumer didn’t offer the full $20 billion Mr. Trump is seeking, but only the $1.6 billion the president sought for one year’s funding.

“You have to ask at some point is it even profitable to continue negotiating with someone like that,” Mr. Mulvaney said. He accused Democrats of having “a 2-year-old temper tantrum” in insisting on immigration legislation as part of a spending bill.

Mr. Schumer spokesman Matt House responded on Twitter, “Director Mulvaney was not in the lunch, and is not telling the truth.”

Mr. Schumer said earlier that Mr. Trump has repeatedly changed what he’s willing to agree to. “Negotiating with President Trump is like negotiating with Jell-O,” said the New York Democrat.

Mr. Mulvaney also said Mr. Trump won’t go to Florida Saturday for an inauguration-anniversary party at his Mar-a-Lago club, while his plans to go to Davos, Switzerland, for the World Economic Forum this week are on a “day-to-day” basis.

Second-ranking Senate Democrat Dick Durbin said Democrats are insisting on attaching immigration legislation to the must-pass spending measure because of what happened in 2013, when the Senate passed a broad, bipartisan overhaul of immigration law and the House refused to take it up.

LAWMAKERS POINT FINGERS; NO PLAN IN SIGHT (1:02 P.M.)
Republican and Democratic leaders dug in their heels publicly over who’s to blame for the shutdown and how to pass a spending bill to reopen the government, with no solution yet in sight.

Behind the scenes, some lawmakers continued to discuss a short-term stopgap bill to give more time for talks on immigration legislation sought by Democrats.

President Donald J. Trump has spoken with Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan, White House spokeswoman Sarah Huckabee Sanders said. “The president will not negotiate on immigration reform until Democrats stop playing games and reopen the government,” she said in a statement.

“Senate Democrats shut down this government and Senate Democrats need to open it back up,” Mr. Ryan said in a House floor speech.

Mr. McConnell said Senate Minority Leader Chuck Schumer “thinks the entire federal government should be shut down until he gets his way on illegal immigration.”

Mr. Schumer contended that he offered Mr. Trump support for a wall at the Mexican border — a significant change for the Democrats — but said, “Negotiating with President Trump is like negotiating with Jell-O.”

“The president can’t make a deal and congressional Republicans won’t,” Mr. Schumer said. “As a result, a paralysis has descended on Capitol Hill.”

House Democratic Leader Nancy Pelosi told reporters that Democrats are willing to do a shorter term stopgap if a deal is reached on an outline for protecting young immigrants brought to the US as children and border security, and if the two parties can agree on continued parity between defense and non-defense discretionary spending.

Mr. Trump is staying home from a planned weekend trip to his Mar-a-Lago resort in Florida for a lavish party celebrating a year since his inauguration. He angrily blasted Democrats on Twitter for the shutdown.

“Democrats are holding our Military hostage over their desire to have unchecked illegal immigration. Can’t let that happen!” he tweeted.

WHAT HAPPENED FRIDAY:
The US government began a partial shutdown at 12:01 a.m. Saturday after Senate Democrats and some Republicans voted to block a stopgap spending measure that would have extended funding through Feb. 16. The vote was 50-49, with 60 votes needed to advance the measure. Four Republicans — Lindsey Graham, Mike Lee, Jeff Flake and Rand Paul — voted against the stopgap. The failed vote came after a meeting earlier in the day between Messrs. Trump and Schumer. The two parties blamed each other for the standoff, with Mr. Trump and Republicans labeling it the “Schumer Shutdown.” They noted the House passed the spending measure and the president was prepared to sign it. Even so, it was the first time in decades the government shut down when the same party controlled the White House and both chambers of Congress. The Republican-written stopgap included a six-year extension of funding for the Children’s Health Insurance Program and a delay in implementation of three taxes imposed by the Obama-era Affordable Care Act. Mr. Schumer blasted Mr. Trump’s inability to set a clear path and the failure of Republican congressional leaders to deliver on immigration. — Bloomberg

In sign of times, Swiss luxury watchmaker Audemars embraces second-hand business

GENEVA — Swiss luxury watchmaker Audemars Piguet said it would launch a second-hand business this year, becoming the first big brand to announce plans to tap into a fast-growing market for pre-owned premium watches.

The company told Reuters it had carried out a test run in one store in Geneva and would launch the business more widely at its outlets in Switzerland this year. If this proved successful, it said it would roll out the operation in the United States and Japan.

“Second-hand is the next big thing in the watch industry,” Chief Executive Francois-Henry Bennahmias told Reuters in an interview at the SIHH watch fair in Geneva last week.

Luxury watchmakers have hitherto eschewed the second-hand trade, fearing diluting the exclusivity of their brands and cannibalizing their sales. They have instead ceded the ground to third-party dealers.

But some are now looking to change tack, driven by an industry-wide sales slowdown combined with a second-hand market that is expanding rapidly, fueled by online platforms like Chrono24 and The RealReal.

“At the moment, in watches, we leave it to what I call the ‘dark side’ to deal with demand for pre-owned pieces,” added Bennahmias, whose company is known for its octagonal Royal Oak timepieces that sell for 40,000 Swiss francs ($41,680) on average.

“Anybody but the brands (is selling second hand) — it’s an aberration commercially speaking,” he said, without giving any details about how they would price pre-owned watches.

Several smaller brands, including H.Moser & Cie and MB&F, have signaled interest in the second-hand trade.

“It is important to control the sale of second-hand watches to protect the owners and the value of watches already in the market by keeping the grey market in check,” H.Moser & Cie boss Edouard Meylan told Reuters.

MB&F, which plans to launch second-hand sales via its Web site this year, told Reuters it expected to typically give a 20% to 30% discount on second-hand watches. A spokesman said customers buying from established watch brands could feel confident they were getting genuine products in good working order and with a valid warranty.

Bigger brands Rolex, Patek Philippe, Swatch Group, Richemont and Breitling all declined to comment when asked whether they planned to enter the second-hand market, while LVMH’s watch division was not immediately available.

‘WATCHES BY THE BUCKET’
Audemars Piguet said it would launch its second-hand business in several, but not all, of its 26 Swiss outlets, but declined to specify how many stores or give a more precise date.

It will initially allow customers to trade in old Audemars Piguet watches as part-exchange for new ones, and then sell on the second-hand watches. It has not yet decided whether to buy second-hand watches for cash, added the firm, saying its sales had come close to the 1 billion Swiss franc mark last year.

Experts say the second-hand luxury watches business, mostly done via online platforms or specialized retailers, is growing rapidly as a new generation of customers that values variety more than permanent ownership enters the luxury world.

In an example of the discounts offered online, a diamond-studded Audemars Piguet Royal Oak “with moderate scratches” sells for $9,450 on The RealReal, about a third of the “estimated retail price.”

Kepler Cheuvreux analyst Jon Cox said he estimated the size of the second-hand market at around $5 billion a year in revenue, including watches sold at auction, and that it had outperformed the market for new pieces in the last couple of years.

That is still dwarfed by a new luxury watch sector worth €37 billion ($45.3 billion), according to consultancy Bain & Cie. However Swiss watch exports fell 3.3% in 2015 and 9.9% in 2016 before posting a modest 2.8% rise in the first 11 months of 2017.

The United States, where sales of new watches have been falling for years, is the number one market for pre-owned watches, followed by Britain and Japan, said US retailer Danny Govberg, who sells new watches for Rolex and other brands, but also an increasing number of second-hand timepieces.

His company said its second-hand sales had grown by 37% to 40% year on year over the past five years. In an example of prices, it said it listed a second-hand Audemars Piguet Royal Oak for $24,950 compared with a $32,000 retail price.

Together with a partner in Hong Kong and a Singapore-based investor, Govberg recently launched global e-commerce platform WatchBox for buying and selling pre-owned luxury watches.

“People sell us watches by the bucket,” he said.

He said many people sold watches to buy a new one so the pre-owned market was actually driving new sales, like in the car market. “The brands are still trying to figure it out, they don’t have the solution yet,” he said.

Audemars Piguet’s Bennahmias said watchmakers had to amend business models to deal with changing consumer habits.

“We’re witnessing a social and cultural change that forces us to think about what the business will look like in five or 10 years,” he added. “Time flies, we need to watch out.” — Reuters

Mayon Volcano continues to spew lava, pyroclastic

MAYON VOLCANO remained highly active over the weekend, continuing to have “quiet lava effusion from the new summit lava dome and lava collapse,” according the Philippine Institute of Volcanology and Seismology’s (Phivolcs) report as of Jan. 21. Phivolcs said “14 rockfall events and 10 pyroclastic density currents or PDCs were recorded by Mayon’s seismic monitoring network” from Saturday to Sunday early morning. The agency also said that at present, “the Miisi lava flow has advanced to three (3) kilometers from the summit crater well within the Permanent Danger Zone (PDZ). Weak ash clouds were lofted from the rockfall events as well as from the persistent disintegration of lava on the advancing front of the Miisi lava flow before drifting to the southwest.” Alert Level 3 remains in effect, which means that Mt. Mayon is still in “a relatively high level of unrest and hazardous eruption is still possible within weeks or even days.”

Megaworld says 80% of Maple Grove commercial lots sold

MEGAWORLD Corp. has seen a brisk take-up for commercial lots in its 140-hectare township in General Trias, Cavite, noting 80% of the P9 billion worth of lots for sale have been purchased.

The Andrew L. Tan-led property developer said in a statement more than 250 out of the 360 commercial lots for sale in Maple Grove Commercial District has already been sold, 45 days after it was unveiled in November 2017.

“We have received an overwhelming tranche of booked sales for this project during the past days, even during the holidays. It really did not come as a surprise to us because even before we have announced this, we have already received a lot of inquiries,” Megaworld Vice-President for Sales and Marketing Mary Rachelle I. Peñaflorida said in a statement. 

The commercial district covers 35 hectares within the Maple Grove township, which is also set to have residential, institutional, and retail components. Lots range in size from 360 square meters (sq.m.) to 1,008 sq.m., as Megaworld develops the area into a central business district similar to that of Makati. 

“General Trias, Cavite is a rising growth center and everyone is looking forward to the new proposed CBD that we will build… We envision this to be the ‘Green City of the South,’ because of its numerous sustainability features and environment-friendly amenities,” Ms. Peñaflorida said.

Maple Grove is less than an hour away from Makati via Coastal Road and the Cavite Expressway, and is accessible through Sangley Point, where the government is proposing to rehabilitate the existing Sangley Airport in order to ease congestion in Ninoy Aquino International Airport.

Amenities within the commercial district include seven green and open parks, one of which will be called Central Park.

Megaworld looks to complete development of the commercial district in 2022, after which turnover will start. The company expects lot owners to develop their buildings within five years after they have been turned over.

The listed firm has earlier announced that it will be spending P10 billion over the next 10 years for the development of Maple Grove. This is the company’s fourth project in the Cavite-Batangas area, where it has a land bank of more than 2,000 hectares.

Megaworld’s revenues grew 5% to P37.1 billion in the first nine months of 2017, boosted by higher rental income. Attributable profit accordingly rose 11% to P9.98 billion, against the P8.98 billion it posted in the same period a year ago. — Arra B. Francia

DoF to brief House panel on TRAIN package 2 at midweek

THE HOUSE COMMITTEE on ways and means will start to discuss with the Department of Finance (DoF) the second tax reform package on Wednesday before the proposed bill formally enters the legislative process.

Committee chairman Rep. Dakila Carlo E. Cua (Quirino) said that he has yet to read the proposal that was submitted by the Department of Finance on Jan. 15.

“DoF is scheduling a briefing on Wednesday. We hope to learn more about the package. I heard it’s in the House already, but I haven’t seen it physically,” Mr. Cua told reporters at the Annual Reception for the Banking Community at the Bangko Sentral ng Pilipinas on Friday evening.

Asked when he expects to file the bill and start committee-level discussions, he said: “very soon.”

He added, he “can’t put a target yet” on having the measure approved at committee level. “I hope to get more insight after the briefing scheduled this Wednesday. It’s premature at this point.”

“It’s going to be a different challenge, not easier or harder, it will be a different challenge. It’s different by nature,” he added.

According to the Constitution, all tax measures must originate from the House of Representatives.

The measure seeks to lower the corporate income tax (CIT) rate to 25% from 30% currently, while at the same time withdrawing some tax holidays.

Finance Undersecretary Karl Kendrick T. Chua messaged reporters that the DoF need to wait for House sponsors to file a bill before it can release copies to the media.

Finance Secretary Carlos G. Dominguez III told reporters in an interview that the bill will seek to be revenue-neutral.

“Our plan always is always to have two sides of the coin, one revenue raising, one revenue reduction. We will balance it. Our approach is always balanced,” Mr. Dominguez said.

Asked whether companies will need to meet certain conditions to avail of lower corporate income taxes, he said: “I don’t think so. I think it focuses the issue on what they really want — lower income tax, or incentives that are targeted time-bound and measured? So it focuses the mind.”

“So if you are a company, you would really balance that out. Do I really need this incentive or am I better off with lower income tax? So always a balanced approach, giving them a choice,” he added.

“How can you justify incentives that are in place for 40 years? You need to graduate to become a normal company. I think in the past [there was] neglect in measuring whether or not it works, and that’s why we want to thank the previous admin for passing the TIMTA law,” Mr. Dominguez said referring to the Tax Incentives Management and Transparency Act, or Republic Act No. 10708.

In a statement over the weekend, Mr. Chua said that the tax system is “unfair,” as small companies pay the top rate of 30% while some large corporations enjoy a lower rate and a number of tax holidays.

“It has created a very unfair system wherein those paying the regular rate pay 30% of their net taxable income. But, those receiving the holidays and the special rates only pay one-third of that at around 6 to 13% in effective tax rate,” Mr. Chua said.

“The present fiscal incentives system has been suffering from policy overload such that there is now a proliferation of incentives laws granting tax and duty exemption privileges,” he added.

Mr. Chua said that there are about 14 investment promotion agencies (IPAs) granting business incentives that “do not complement each other.”

In 2015, a total of P104.40 billion worth of tax perks were issued, according to the DoF.

Among the 14 agencies, the Philippine Economic Zone Authority accounted for P66 billion worth of income and customs duty tax perks given in 2015, followed by the Board of Investments with P29 billion. The 12 other agencies meanwhile accounted for P9.4 billion worth of incentives.

The bulk of the incentives go to electronics manufacturing companies, followed by business process outsourcing services firms, and logistics, the DoF said. — Elijah Joseph C. Tubayan

Chinese state media: US government shutdown exposes ‘chronic flaws’ in political system

BEIJING — China’s official news agency said in a commentary on Sunday that the shutdown of the US government exposed “chronic flaws” in the US political system.

Funding for federal agencies ran out at midnight on Friday in Washington after lawmakers failed to agree on a stopgap funding bill.

“What’s so ironic is that it came on the first anniversary of Donald Trump’s presidency on Saturday, a slap in the face for the leadership in Washington,” China’s Xinhua News Agency said in a commentary by Xinhua writer Liu Chang.

The commentary said that the Trump administration had “backtracked” on policies supported by his predecessor, Barack Obama, including the Trans-Pacific Partnership trade agreement and US participation in the Paris climate agreement.

“If there was any legacy that has survived the transfer of power, it was the spirit of non-cooperation across party lines,” the Xinhua commentary said.

While Xinhua commentaries are not official statements, they offer a reflection of Beijing’s thinking.

“The Western democratic system is hailed by the developed world as near perfect and the most superior political system to run a country,” it said.

“However, what’s happening in the United States today will make more people worldwide reflect on the viability and legitimacy of such a chaotic political system,” it said.

At a twice-a-decade congress of China’s ruling Communist Party in October, President Xi Jinping was anointed for a second term as party chief, strengthening his grip on power. — Reuters

What is a PDR?

What is a PDR — this strange acronym for what has kicked at the shin, the 1987 Constitution Section 11, Article XVI that insists, “The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly owned and managed by such citizens.”

There are at least three high-profile media corporations namely ABS-CBN, GMA, and Rappler that have used Philippine Depository Receipts (PDRs) to obtain foreign investment, even at the expense of recognizing the constitutional prohibition of foreign ownership in the industry of mass media (Lorenzo E. Delgado, editor-in-chief, The Bedan Review, January 2018: “Philippine Depositary Receipts: Mass Media’s Existing or Emerging Loophole To Constitutionally Mandated Full Filipino Ownership?”) PDRs are financial instruments that foreign funds can buy into, allowing media and other Filipino firms that must keep foreign ownership at 40%, to raise funds globally (Ibid.).”

PDRs are not new, perhaps copied from one of the most common types of Deposit Receipts (DRs) — the American Depository Receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s. These are negotiable (transferable) certificates, traded on the local (US Stock Exchanges) but with underlying other security, usually in the form of equity, that is issued by a foreign publicly listed company (Investopedia: Jan. 10). There are also global depositary receipts (GDRs) — the European DRs and international DRs, denominated in dollars or in euros, traded on the stock exchange of the investor’s country as certificates/receipts rather than the actual equity share, which is deposited in a foreign bank (Ibid.).

The ADR (or the PDR) likens to a financial derivative evolved from an original equity investment, and may be traded as a derivative at its level, while it is also an option bought by the investor to be exercised when and if the investor wants to convert to the underlying equity itself.

The Philippine Stock Exchange affirms that “a Philippine Depositary Receipt (PDR) is a security which grants the holder the right to the delivery of sale of the underlying share (as cited in the Bedan Review, op. cit.). A PDR consists of a deposit price and an option price, which is considered as payment when the buyer opts to convert said PDRs to a corporation’s share. PDRs are not evidences or statements nor certificates of ownership of a corporation. However, each PDR represents a share, even in a restricted company, and when bought by a foreign entity, gives the buyer the right to all the dividends due the shares of stock acquired (Ibid.).

SyCipLaw advised Mercury Media Holdings Ltd. in the special block purchase of P2.3 million PDRs issued by ABS-CBN Holdings Corporation from Marathon Asset Management LLP at the Philippine Stock Exchange in May 2013 (www.syciplaw.com, June 14, 2013).

Lawyers specified that “under existing Philippine law, the Underlying Shares may not be owned by, or registered in the name of, non-Philippine nationals. In the event of exercise of the right of delivery of the Underlying Share by a PDR holder that is not a Philippine national, the Underlying Share will be sold by an eligible broker in the open market to a qualified person, and the proceeds of the sale will be paid to or to the order of the PDR holder (Ibid.).

In 2015, Rappler, Inc. (RI) and Rappler Holdings (RH, owns RI) filed SEC 10-1 Notice of Application for Confirmation Exempt Transactions reporting some 20 million PDRs issued to NBM Rappler and Omidyar Network Fund LLC variously (www.sec.gov.ph).

In December 2016, the SEC received a letter from the Solicitor General asking for an investigation into the Rappler PDRs “for any possible contravention of the 1987 Constitution (Ibid.).” The SEC investigation focused on the covenant between Rappler and the NBM/Omidyar PDRs (called the ON PDRs) that said that RH/RI will “not without prior good faith discussion with ON PDR holders and without the approval of at least 2/3 of ON PDR Holders alter, modify or otherwise change the Company (RH/RI) Articles of Incorporation or By-Laws or take any other action where such alteration, modification or action will prejudice the rights in relation to the ON PDRs (see SEC Commission en banc Decision Jan.11 re Rappler, Inc. and Rappler Holdings Corporation, SP case No. 08-17 001, @sec.gov.ph).

The SEC found “Rappler, Inc., and Rappler Holdings Corporation, a mass media entity, and its alter ego violating the constitutional and statutory Foreign equity Restrictions in Mass Media enforceable through laws and rules within the mandate of the Constitution (Ibid.).” The Omidyar PDRs were declared null and void pursuant to Sec. 17.2 of the Securities Regulation Code (SRC) for being a fraudulent transaction under the ambit of Sec 16.1 of the SRC. The certificates of registration of Rappler, Inc. and Rappler Holdings were revoked for selling control to foreigners (Ibid.).

It may not be fair to cast aspersions on the motivations of Rappler, a known media fighter for truth and righteousness, nor would it be thinkable that the esteemed and respected SEC would allow itself to be used as a political tool to persecute Rappler for its frequent tirades against the incumbent administration.

In fact the SEC must be commended for firmly upholding their interpretation of the law without fear or favor, and indirectly but loudly affirming that everyone, even the ruling powers-that-be must always observe the rule of law. Yet something there is, that tells us that perhaps this PDR thing is more basic than the ethereal love of country condensing in ugly politics.

Let us look at the imbroglio wrought by these PDRs without the indignation on the implied political attack on press freedom that Rappler so represented: on the purely finance and accounting side for practitioners and participants in the stock and financial markets — does not the creativeness and exuberance for newfangled finance schemes mimicked from foreign markets often bring us, with our less developed markets, to convoluted ramifications of unforeseen risks and trouble?

The PDRs are different from the ADRs, GDRs, and DRs of the world.

First of all, mass media companies here in the Philippines really must observe the all-Filipino rule for mass media in the Constitution. No ifs or buts, no indirect or backdoor sneaking in and around this.

And what must not be forgotten in finance is never to invest or offer something which you do not fully understand, unless, as the SEC implied — do you precisely want to skirt the attendant issues?

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

HIMAP eyeing investment in Zamboecozone

THE BOARD of the Health Information Management Association of the Philippines (HIMAP) under the Information Technology and Business Process Association of the Philippines (IBPAP) is eyeing an investment inside the Zamboanga City Special Economic Zone (Zamboecozone). In a recent meeting conducted inside the Zamboecozone,the Zamboecozone management, Zamboanga City Information and Communication Technology Council, and the HIMAP-IBPAP officers discussed the possible investment opportunity in this city. Christopher Lawrence S. Arnuco, chairperson and administrator of Zamboecozone, said “the IBPAP officers found possibilities in the city’s large number of IT and allied health graduates, as well as their proficiency in Chavacano, which makes them easily trainable in handling Spanish voice processes,” Mr. Arnuco said the potential investors are also attracted to the incentives being offered by the ecozone (http://www.zfa.gov.ph/index.php/locators/incentives.html). — Albert F. Arcilla

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