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Tax reform outcome hints at package 2 unpredictability

CONGRESS is free to modify tax reform package 2 beyond the Department of Finance’s (DoF) own recommendations, adding an element of unpredictability to the revenue potential of the bill, Secretary of Finance Carlos G. Dominguez III said.

“We have no choice. I mean just like (package 1) we will make a case for it, then they will decide how we will move forward,” he added.

When Republic Act No. 10963, the first package of the tax reform program, was still in legislation, the House of Representatives inserted the excise tax for sugar-sweetened beverages — which was not in the Finance department’s original proposal — along with other insertions modifying the list of value-added tax exempt sectors.

The Senate meanwhile included a new tax on cosmetic procedures, while raising rates for coal, minerals, tobacco and on some passive income taxes.

Along with the tempering of rates in other revenue-raising measures such as the fuel and automobile tax hikes, legislation brought the tax reform’s incremental revenue to P82.3 billion in the first year of its implementation, from P206.8 billion estimate in the DoF’s proposal when it submitted the bill in September 2016.

The DoF intends the second package to be revenue-neutral, meaning that it would not generate additional revenue for the government.

It aims to lower corporate income tax rate to 25% from 30% currently to attract investment, and at the same time plug losses and leakage by rationalizing tax holidays granted to firms, making them performance-based and time-bound.

Mr. Dominguez said that the department intends to submit package 2 to the Congress today as the regular session resumes.

“We should be ready by then. Because that’s when they open,” he said, noting that the department is “just putting the final touches on it.”

According to the constitution, all tax bills should originate from the House of Representatives.

The DoF said that foregone revenue from tax perks given to large enterprises totaled P301 billion in 2015, accounting for 2% of the economy. — Elijah Joseph C. Tubayan

SSS revenues up 9.3% to P175B

SOCIAL SECURITY System posted single-digit growth in its revenues for the first 11 months of 2017 driven by bigger collections in members’ contributions.

In a statement sent to reporters over the weekend, the state-run agency said total revenues of the pension fund stood at P174.94 billion in the January-November 2017 period, up 9.3% or P14.92 billion from the P160.02 billion in the same period in 2016.

Broken down, member contributions grew to P144.36 billion in the eleven months ended November, almost 10% higher than the P131.28 billion reported in the same period the prior year.

Contributions accounted for 82.5% of SSS’ total revenues.

“The growth in our contribution collection is primarily due to the collection drive of the current administration of the Social Security Commission along with the efforts of SSS employees who are in direct contact with our employer- and employee-members every day,” SSS President and Chief Executive Officer Emmanuel F. Dooc said.

Meanwhile, investment and other income rose by 6.4% to P30.58 billion from the P28.74 billion booked in the comparable year-ago period.

The increase was driven by income from government securities, equities, and salary loans which stood at P11.04 billion, P8.15 billion and P7.61 billion, respectively.

“Total investments, representing 92.6% of the pension fund’s total assets, went up by P16.68 billion due to additional placement in government bonds, new salary loans releases including restructured member loan accounts and the reclassification of real estate properties,” Mr. Dooc explained.

Meanwhile, SSS doled out more than P157.39 billion in benefit payments to its about 35 million members in the period, up from P123.17 billion in 2016.

“This includes the release of the P1,000 additional pension benefit mounting to P30.85 billion from January to December 2017.”

“The third and fourth tranches’ pension adjustment arising from unlumping of 1985 to 1989 contributions amounting to P72.43 million and P66.92 million given in June 2017 and September 2017, respectively, to SSS death, retirement and disability pensioners also contributed to the increase in benefit payment,” Mr. Dooc added.

Hawaii panics after false alert of incoming missile

HONOLULU — An alert warning of an incoming ballistic missile aimed at Hawaii was sent in error Saturday, sowing panic and confusion across the US state — which is already on edge over the risk of attack — before officials dubbed it a “false alarm.”

Emergency management officials eventually determined the notification was sent just after 8:00 a.m. (1800 GMT) during a shift change and a drill after “the wrong button was pushed” — a mistake that lit up phones across the archipelago with a disturbing alert urging people to “seek immediate shelter.”

There were frenzied scenes of people rushing to safety — a bathtub, a basement, a manhole, cowering under mattresses.

Adventurer Alison Teal called it “the worst moment of my life.”

The erroneous message came after months of soaring tensions between Washington and Pyongyang, with North Korea saying it has successfully tested ballistic missiles that could deliver atomic warheads to the United States, including the chain of volcanic islands.

“I deeply apologize for the trouble and heartbreak that we caused today,” said Vern Miyagi, administrator of Hawaii’s Emergency Management Agency (EMA).

“We’ve spent the last few months trying to get ahead of this whole threat, so that we could provide as much notification and preparation to the public.

“We made a mistake,” he acknowledged in a press conference. “We’re going to take processes and study this so that this doesn’t happen again.

“The governor has directed that we hold off any more tests until we get this squared away.”

As social media ignited with screenshots of the cell phone emergency warning, Representative Tulsi Gabbard quickly tweeted that it was a “FALSE ALARM,” with Hawaii’s EMA confirming “there is NO missile threat to Hawaii.”

US military spokesman David Benham later said US Pacific Command “has detected no ballistic missile threat to Hawaii. Earlier message was sent in error.”

The warning — which came across the Emergency Alert System that authorities nationwide use to deliver vital emergency information — read: “BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL.”

A corrected message indicating that “there is no missile threat or danger to the state of Hawaii” was not dispatched to phones until nearly 40 minutes later.

“I know firsthand that what happened today was totally unacceptable,” Governor David Ige said of the alert, which was also broadcast on some local television stations.

“I’m sorry for that pain and confusion that anyone might have experienced.”

In explaining the delay, he noted there was no automatic way to cancel the false alarm, so it had to be done manually.

‘JARRING’
Both the governor and Mr. Miyagi assured no single person would be capable of making such a mistake in the future, and the Federal Communications Commission said it was launching a “full investigation” into the incident.

The White House said US President Donald J. Trump had been briefing about the incident, calling the alert “purely a state exercise.”

Senator Brian Schatz of Hawaii, echoing stances of outrage taken by several other of the state’s politicians, called the mistaken notification “totally inexcusable.”

Though the alert was quickly deemed false, many Hawaii residents heeded the nerve-wracking warning, scrambling to take refuge in hallways and basements.

Ms. Teal, the adventurer and Hawaiian native, said “everyone was in a panic.”

“Traveling the world as an extreme adventurer, I’ve been in very scary situations from snowstorms to sharks to hot lava. Nothing as terrifying as a missile coming to kill everyone you know and love,” she told AFP.

Lauren McGowan, on holiday in Maui with family members and friends, was on her way to breakfast when her phone blared the alert.

She and her family quickly returned to their hotel, where staff ushered them along with some 30 people to a basement cafeteria and distributed water and food.

The alert and rush to shelter caused “confusion,” Ms. McGowan said, particularly for the children in the group.

“No one had any idea what was really going on,” the 28-year-old from New York told AFP, explaining they had no cellular service underground.

“It was a bit jarring for sure,” she said of the experience.

Andy Priest said his parents thought they would die when the warning came.

“My mom started to get up to go, and my Dad told her that if it was their time to go, he wanted to be looking at the ocean and enjoying the view,” he wrote on Twitter.

Several golfers participating in the US PGA Tour’s Sony Open in Honolulu also reacted to the alarming episode.

“Under mattresses in the bathtub with my wife, baby and in laws,” American golfer John Peterson tweeted. “Please Lord let this bomb threat not be real.”

NO TIME FOR ‘POSTURING’
Tourists and residents received the false alert just one month after Hawaii tested its nuclear attack siren system. The state will conduct the drill — the first of its kind since the Cold War era — monthly as part of its regular siren test, an emergency management spokesperson told AFP.

Mr. Trump — who in the past has deployed bombastic rhetoric at North Korea and its leader Kim Jong-Un — had yet to react to the false warning.

The US leader recently said he would be willing to speak directly with Mr. Kim, with whom he has traded sharp words over Pyongyang’s missile and nuclear tests, raising fears of attacks.

Ms. Gabbard accused Mr. Trump of “posturing” and not taking nuclear threats from North Korea seriously and urged to begin direct talks with Pyongyang without preconditions.

“The people of Hawaii experienced that in 15 minutes, they and their families are going to be dead,” the Democratic lawmaker said. “Gone. That’s what they just went through.” — AFP

Aches, pains and illness ahead of Aussie Open

MELBOURNE — An unusually long list of injuries and illnesses could take its toll on the Australian Open, which has already seen withdrawals by Serena Williams and Andy Murray.

AFP Sport gives the rundown of who has been struggling in the lead-up to the first Grand Slam of the year which starts on Monday:

NOVAK DJOKOVIC. Six-time Melbourne champion has been sidelined since Wimbledon in July with a right elbow injury. Admits it is still not 100%, but at a level where he can play. Appeared at the Kooyong exhibition tournament last week.

RAFAEL NADAL. A knee injury forced the Spanish world number one out of the warm-up Brisbane International, but he said Saturday he “feels good” after intensive practice sessions in Melbourne.

STAN WAWRINKA. The 2014 champion and his team only made the decision to play the Australian Open on Saturday as he returns from two operations on a knee cartilage injury. Said the knee was holding up well but he was still feeling pain.

MILOS RAONIC. Calf and wrist problems kept the tall Canadian out of action since last October. Played the Brisbane International, but was bundled out by a wildcard.

NICK KYRGIOS. Leg was strapped at the Brisbane event which he said related to fluid on the back of his left knee. It didn’t seem to trouble Australia’s big hope, who won the tournament.

JACK SOCK. The American retired from a match at the Hopman Cup with an injured hip, but returned two days later when he lost to Roger Federer.

DOMINIC THIEM. The Austrian world number five pulled out of the warm-up Qatar Open just hours before his semifinal with flu and a fever. The same issue forced him out of a scheduled match at the Kooyong Classic last week.

JO-WILFRIED TSONGA. The 2008 Australian Open runner-up withdrew from the Qatar Open before it started with a wrist injury.

GARBINE MUGURUZA. World number three retired from Brisbane after collapsing with severe leg cramps. Also pulled out of the Sydney International last week with a thigh injury, but said it had responded well to treatment.

SLOANE STEPHENS. The US Open champion withdrew from Brisbane to rest a troublesome knee and was knocked out of Sydney in the first round. Insisted the knee was now “all good.”

JOHANNA KONTA. A semifinalist in Melbourne two years ago, the Briton’s Brisbane campaign ended early when she retired with a right hip injury. Was bundled out of the Sydney International in the first round but said this week “so far, so good” on the injury.

CAROLINE GARCIA. The rising French star retired in tears from Brisbane with a back injury in the opening round, saying she could barely move.

PETRA KVITOVA. The two-time Wimbledon champion pulled out of Brisbane with a viral illness and was knocked out of Sydney in round two. She missed last year’s Australian Open after being attacked with a knife near her Czech home.

JULIA GOERGES. The German, ranked 12, withdrew from the Sydney International just hours after beating Caroline Wozniacki to win the warm-up Auckland Classic, citing a right knee injury.

EUGENIE BOUCHARD. The Canadian lost all three matches at the Hopman Cup and was eliminated in the first round at Hobart, but said a buttock injury suffered in Perth was now fine. — AFP

Robinsons Land opens 2nd mall in Tacloban

ROBINSONS Land Corp. (RLC) has once again expanded its mall portfolio with the opening of its second mall in Tacloban, Leyte bringing the total number of malls under its umbrella to 47.

“This mall is the symbol of Tacloban’s resilience, we want it to be a happy place,” Arlene G. Magtibay, general manager of the commercial centers division of RLC, told the media during the launch on Dec. 13.

Located in Abucay, Tacloban, the new mall sits about 15 minutes from the company’s original mall in Marasbaras.

“People have asked us why we put up a second mall when the first is so near, but the two malls are actually serving to different markets,” said Ms. Magtibay.

The first mall, Robinsons Place Tacloban, opened in 2009 and serves the people living mainly in Tacloban while the second mall, by virtue of its location — it is right across the New Tacloban Terminal which handles transportation from other Leyte towns as well as Northern and Eastern Samar — serves people who lives in nearby towns and in the province of Samar.

The second mall was also a testament to how much trust the company has in the resilience of Tacloban, which was devastated by typhoon Yolanda (international name: Haiyan) in 2013, Ms. Magtibay added.

But unlike Robinsons Place Tacloban which has undergone two expansions — it now has a new building, a Go Hotels, and a soon-to-be-opened Summit Hotel — North Tacloban mall will probably not be expanded as Ms. Magtibay pointed out the space they currently have is limited.

The three-level mall was designed by LG+V Architects which also designed other RLC malls such as Robinsons Naga. It took design cues from the province’s yearly Sangyaw Festival which is celebrated on June 29, and as such the walls and fixtures of the mall feature a combination of fiesta colors like red and yellow.

“We were given a free hand to design the mall, [so we opted to] feature festive colors while the triangular designs are for the San Juanico Bridge,” said Dennis A. Villanueva, managing partner of LG+V Architects, referring to the famed span which connects the provinces of Leyte and Samar, during the launch.

But unlike Robinsons Naga whose interior design prominently uses Bicol region’s prime produce — the gabi leaf and the pili nut — as accents, Mr. Villanueva said they decided to make North Tacloban “not very fancy but elegant” as evidenced by the scalloped ceiling accents.

“It’s timeless but not outdated,” he explained.

The 34,000-square meter mall contains Robinsons Malls anchor tenants such as Robinsons Department Store, Robinsons Supermarket, Daiso Japan, and Handyman hardware store.

It also has four Robinsons Movieworld cinemas and one 3-D cinema.

Homegrown Tacloban brands comprise 25% of the total number of tenants including Shimanami Japanese Restaurant and Marco Pollo café, among others. — Zsarlene B. Chua

SM developing more malls in provinces

SM Prime Holdings, Inc. is on track to achieve its five-year road map that targets to double revenues and profits by 2018, supported by its aggressive mall and residential expansion.

The holding firm for country’s richest man Henry Sy, Sr.’s property investments is currently on the last year of this five-year vision, which should see SM Prime book double the P16.3-billion net income and P59.8-billion revenue it had in 2013.

“We are on schedule to meet the five-year program unveiled in 2013. The growth will be driven by malls and residential operation complemented by offices and hotels and convention centers,” SM Prime said in a presentation to investors for the month of January.

For its mall expansion, SM Prime ended 2017 with a total of 9.3 million square meters (sq.m.) in gross floor area (GFA). Of this, 86% are covered by the 67 malls in the Philippines, while 14% come from seven malls in China.

This brings the company closer to its target of 10.5 million sq.m by end-2018.

SM Prime disclosed it has eight malls lined up in the following years, primarily located outside of Metro Manila. The company will be opening in the following locations: SM Center Imus in Cavite, SM City Legazpi in Albay, SM City Urdaneta in Pangasinan, SM City Telabastagan in San Fernando, Pampanga, SM City Ormoc in Leyte, SM City Dagupan, SM Moonwalk Parañaque, and SM Center Cabuyao in Laguna.

“New malls are geared towards provincial cities,” the company said.

SM Development Corp. (SMDC), which manages the company’s residential business, launched a total of 117,424 units across 54 projects under the primary home component in 2017. This marks a 15% increase in number of units year on year.

SMDC would have to launch 11 more projects in 2018 to hit its target of 65 projects by the end of 2018, for a total of 132,424 units.

For the leisure component, SMDC had a total of 16 projects by the end of last year with 2,363 units. The company looks to end 2018 with three more launches for a total of 19, composed of 2,600 units.

SM Prime’s commercial business had a total of six towers in 2017 covering 0.38 million sq.m., the same figure as in 2016. The company is currently constructing ThreeE-Com Center within the Mall of Asia complex, which will be completed in 2018. The tower will add a GFA of 130,000 sq.m., up to SM Prime’s target of 0.51 million sq.m. and seven towers by the end of the year.

Meanwhile, the company has already reached its target of 1,510 rooms and six project for hotels and convention centers. These include six hotels, four SMX Convention Centers, three Megatrade Halls with over 37,000 sq.m. of leasable space.

SM Prime’s earnings grew by 14.9% in the first nine months of 2017 to P20 billion, against the P17.5 billion in the first three quarters of 2016. The company’s revenues climbed by 12% to P64.7 billion in the same period. — Arra B. Francia

Palawan held up as model for fishing in Negros-Cebu strait

NON-GOVERNMENTAL organization Oceana Philippines is pushing for the monitoring of all commercial fishing vessels in the provinces along the Tañon Strait Protected Seascape (TSPS), covering the body of water between Negros and Cebu islands.

Oceana Philippines Vice-President Gloria E. Ramos told BusinessWorld on Friday that the Philippines has enough laws to protect the marine biodiversity and manage the fisheries but these are not well-implemented.

“[I]n Palawan, they crafted their own ordinance to limit the sale of species of fish which were vanishing. Of course, the [fishing] industry questioned that but the Supreme Court supported that, saying that it’s a valid exercise of power,” she added.

“There’s really no reason why these laws cannot be implemented. We don’t need more laws.”

The TSPS is the largest protected marine area in the Philippines and is considered one of the richest fishing grounds and a key biodiversity area in the country. Despite this, the TSPS is still considered overfished.

Last year the Bureau of Fisheries and Aquatic Resources drafted vessel monitoring rules and started holding public consultations in a bid to achieve better compliance.

In November, the first charges related to the Tañon Strait were filed, leading the Department of Justice to designate a special prosecutor for the protected area.

The Philippines is part of the “Coral Triangle,” which contains 53% of the world’s coral reefs, providing livelihood to around 120 million people.

The Bureau of Fisheries and Aquatic Resources estimates that 75% of the country’s fishing grounds are overfished, leaving them vulnerable to becoming “dead zones” where fish cannot regenerate their populations. In 2017, there were 500 dead zones around the world.

Less than 1% of coral reefs in the Philippines are classified to be in “excellent condition,” according to the University of the Philippines Marine Science Institute and the Biodiversity Management Bureau. — Anna Gabriela A. Mogato

Peso to move sideways

THE PESO will likely move sideways against the dollar this week amid the greenback’s sustained weakness on the back of mixed US economic data as well as some tightening moves from the European Central Bank (ECB).

On Friday, the peso moved sideways against the dollar as it lost four centavos to close at P50.40. This was due to bargain-hunting seen in the afternoon session despite softer US producer prices data and hawkish remarks from the December meeting of ECB policy makers.

“The dollar might depreciate this week against the peso, sustaining its weakness last Friday evening amid speculations of some tightening moves from the European Central Bank (ECB) this year,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines, said in an e-mail over the weekend.

Minutes of the December meeting of ECB published on Thursday hinted that the monetary authority is preparing to gradually cut its stimulus program in line with increasing confidence amid the global economic recovery.

Mr. Dumalagan said the greenback might move downwards in the first three days of the week on the back of the mixed US economic data released on Friday night.

“While US core inflation picked up in December 2017, headline inflation and retail sales showed slower readings, supporting views of a gradual pace of US interest rate normalization in 2018,” Mr. Dumalagan noted.

The US consumer price index — the measurement used to calculate core inflation — rose 0.3% in December in a comparable month-ago period, topping analysts’ expectations.

However, US retail sales grew weaker than expected, standing at 0.4% in December from the 0.5% estimates. Stronger retail sales in December was due to strong consumer demands during the holiday season.

“Towards the end of the week, there might be sideways movement for the dollar amid mixed signals abroad,” Mr. Dumalagan added.

US Federal Reserve officials Robert S. Kaplan, Charles L. Evans Loretta J. Mester are expected to deliver speeches this week, which is in support to more interest hikes this year. However, Mr. Dumalagan noted that this upbeat news will be tempered by likely stronger 2017 Chinese economic growth data.

Last Thursday, Chinese Premier Li Kequiang said he expected the country’s gross domestic product (GDP) to have grown 6.9% in 2017, faster than the 6.8% forecast from analysts as well as 6.5% target of the government. This faster growth will likely be driven by construction boom and increased demand for Chinese imports, Reuters reported.

Meanwhile, another trader said corporate demand “specifically from oil companies” will drive the movement of the peso.

“Usually, we see them buying mid-month and with the world prices of oil continuing to trade higher. I guess there’s room for them to buy dollars for them to pay their requirements,” the trader said over the phone on Friday.

For this week, Mr. Dumalagan expects the peso to move between P50 and P50.60 against the greenback, while Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, gave a lower range of P50.30 to P50.80. — K.A.N. Vidal

Republican powerbrokers: The intensely private Mercer family

WASHINGTON — He is a reclusive hedge fund billionaire who made a fortune using complicated algorithms to bet on things other people could not see.

One of his gambles was on Donald J. Trump.

And his backing of the long-shot presidential candidate has made Robert “Bob” Mercer, the former co-CEO of Renaissance Technologies, the top powerbroker in Republican politics today.

The Mercer family is not nearly as well known as the industrialist Koch brothers or the Las Vegas casino magnate Sheldon Adelson when it comes to supporting right-wing causes in the United States.

And they are more than happy to keep it that way.

Mr. Mercer, 71, who worked as a computer scientist at IBM before joining Long Island-based Renaissance Technologies, has always shunned the limelight.

According to numerous accounts, Mr. Mercer is socially awkward and intensely private.

He is described in Michael Wolff’s bombshell new book Fire and Fury as “almost nonverbal, looking at you with a dead stare and either not talking or offering only minimal response.”

In November, Robert Mercer abruptly announced that he was stepping down as co-chief executive of Renaissance Technologies because of the unwanted press scrutiny brought about by his political activities.

In his resignation letter, Mr. Mercer also made his most expansive public comments to date, outlining the core principles of his libertarian philosophy.

ADVOCATE OF SMALL GOVERNMENT
“I believe that individuals are happiest and most fulfilled when they form their own opinions, assume responsibility for their own actions, and spend the fruits of their own labor as they see fit,” he said.

“This is why I support conservatives, who favor a smaller, less powerful government.”

In his book about the Trump White House, Mr. Wolff expanded further on what he claimed was the Mercer family doctrine.

He said they were attempting to build a “radical free-market, small-government, home-schooling, antiliberal, gold-standard, pro-death penalty, anti-Muslim, pro-Christian, monetarist, anti-civil-rights political movement in the United States.”

With the silver-haired Mercer patriarch remaining behind the scenes, it is up to Rebekah, 44, the second of his three daughters, to channel the family money to conservative causes and maintain the direct line to the White House.

While the Koch brothers and other Republican mega-donors sat out the 2016 presidential race because of a distaste for Mr. Trump, the Mercers threw their considerable resources behind the brash real estate tycoon after initially backing Texas Senator Ted Cruz.

They donated millions to Mr. Trump’s coffers and persuaded his then floundering campaign to take on board two figures seen as instrumental to his upset victory over Democrat Hillary Clinton — anti-establishment ideologue Steve Bannon and pollster Kellyanne Conway.

Robert Mercer, who reportedly has an abiding hatred of the Clintons, is a long-time patron of Mr. Bannon, who headed the right-wing website Breitbart News until becoming chief executive of Mr. Trump’s election campaign.

When President Trump angrily severed ties with Mr. Bannon recently over comments he made in the Wolff book, it was a damaging blow to his former White House chief strategist.

But the coup de grace to any remaining political ambitions Mr. Bannon may have had came a few days later, when the Mercer family pulled the plug on their long-time ally.

“I support President Trump and the platform upon which he was elected,” Rebekah Mercer said in a rare public statement.

“My family and I have not communicated with Steve Bannon in many months and have provided no financial support to his political agenda, nor do we support his recent actions and statements.”

The excommunication marked the end of the long-standing collaboration between the Mercer family and Mr. Bannon, who had been a fringe player in Republican politics until a $10-million investment by the Mercers turned his Breitbart News into a powerful conservative voice.

The Mercers are estimated to have contributed a total of more than $100 million to conservative causes over the past decade, including funding for the Government Accountability Institute (GAI).

Rebekah Mercer serves as chairwoman of the board of the Florida-based institute co-founded by Mr. Bannon whose stated mission is to root out “cronyism and corruption.”

GAI is perhaps best known for a 2015 book by its president, Peter Schweizer, that was highly critical of the Clintons: Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich.

Besides contributing to Breitbart and GAI, the Mercers also invested in Cambridge Analytica, a political data analysis firm whose efforts have been credited with helping Mr. Trump win the 2016 election.

While Mr. Bannon has been the Mercers’ frontman for their political activities for years, his departure from the scene would not appear to lessen their influence.

According to The Daily Beast, before repudiating Mr. Bannon, Rebekah Mercer held a telephone call with the White House, where she spoke with President Trump. — AFP

Kanlaon Volcano update

ALERT LEVEL 2 status remained over Kanlaon Volcano, according to Phivolcs’ update on Sunday which also noted five volcanic earthquakes during the past 24 hours. The bulletin also read: “The local government units and the public are strictly reminded that entry into the 4-kilometer radius Permanent Danger Zone (PDZ) is strictly prohibited due to the further possibilities of sudden and hazardous steam-driven or phreatic eruptions.”

We need an Alfred Kahn

Alfred E. Kahn is considered the “father of airline deregulation” in the United States. A former professor in economics of Cornell University, he was chair of the Civil Aeronautics Board (CAB) under former US president Jimmy Carter, and was in charge of regulating commercial airfares. He then he ordered the deregulation of airfares. Essentially, Kahn presided over the abolition of the CAB. He deregulated CAB out of its existence as a regulator of air fares by airlines to set their own fares.

Kahn’s impact on the US transportation industry was huge. His deregulation paved the way for low-cost airlines, such as People Express and Southwest Airlines, to enter the industry. In time, other countries followed Kahn’s policy, and the sheer variety of airlines with different business models, from low-cost, budget airlines like AirAsia, to premium ones, like Singapore Airlines, owe much to the legacy of Alfred Kahn.

Alfred Kahn comes to mind because the Department of Transportation and its related transport agencies like the Land Transport and Franchising and Regulatory Board (LTFRB), seem to be stuck in pre-Kahn thinking that more regulation can solve transport problems. On the contrary, consumer welfare is sharply diminished with more regulation.

Take for example the LTFRB’s attempts to regulate Uber and Grab.

At first, it banned them, Uber in particular, citing the need for these companies to register their operations. After getting Uber to pay a hefty fine, however, it set a cap on the number of driver applicants it could process. The result is that demand exceeded supply, forcing the riding public to wait longer to get a ride, or even pay higher.

Meantime, complaints continue to pile up over the regulated taxi industry. Many riders complain about the refusal of taxi drivers to accommodate them if they refuse to pay fares in excess of the metered rate or if their destinations are far. The regulated taxi industry is also known for dilapidated vehicles, poor service, and rude, if not dangerous, drivers. In other words, regulation hasn’t produced the kind of service the commuting public expects.

The LTFRB’s ire over surge pricing is also misplaced. Surge pricing incentivizes Transport Vehicle Network (TVN) drivers from Uber and Grab to log in and thus increase the supply of transport vehicles for hire on the road. By banning surge pricing or capping it, riders are inconvenienced by the lack of rides when they most need it.

The problem is that transport authorities think like the old Soviet economic planners: they think they know everything — have all the information on hand to set the correct pricing — and can anticipate everything. One example of this is their PUV Modernization plan, a well-meaning but impractical plan to phase out the smoke-belching, diesel-guzzling jeepneys from the roads. Under the plan, current jeepneys are to be replaced by “environmentally friendly and safe” jeepneys. These modern jeepneys would have automated fare collection, speed-limiters, CCTVs, GPS equipment, and dashboard cameras, and would be PWD-friendly.

Fine. However, the rub is that it would cost jeepney drivers P1.2 million to P1.5 million acquire such a vehicle. The investment would be beyond what most jeepney drivers could afford. It’s also questionable whether the investment will yield a good return under the present regime of regulated jeepney fares. Understandably, the PUV modernization program was met with protests and strikes by jeepney groups.

The answer to the problem of lack of public transport, traffic congestion, rude taxi drivers, and even the jeepney modernization program is not for transport officials to act like Soviet apparatchiks but to deregulate the industry, i.e. transport fares should no longer be determined by LTFRB. Registration of public service vehicles should be as simple and as easy as possible.

What happens if the market is placed as the center of transport policy? Taxis may increase fares, but they would have to improve to get their share of the riding public. Various business models will arise, as had happened in the airline industry, from low-cost, no-frills transportation to premium services — all competing for their share of the affections of the commuting public. Transport companies, whether taxi operators, buses, or jeepney operators, will start developing and protecting their brands. Commuters will then know which kind of service they will get from the brands that these vehicles carry. Operators will then be more conscious of the service they are offering because the reputation of their brands and their market share could suffer if they give anything less than what they are purportedly offering.

Taxi and other transport operators may then start using technology, like what Uber and Grab are doing, to get more efficiency from their operations and to distinguish themselves in the marketplace. For example, clearly for parents, having the power under Uber and Grab to track and monitor the movement of the transport of their sons or daughters contribute to their peace of mind. That is something that taxis may also incorporate, but only if they are deregulated.

Jeepney operators will likely modernize on their own if they are also freed from regulation. Riders will naturally shift to jeepneys which are safe, clean, and provide a good service, and will boycott those that don’t. Jeepney operators therefore will upgrade and modernize their vehicles voluntarily, but only if they can charge what they want and get a good return on investment.

There should be no fear that deregulation will result in higher prices.

As we have seen in the airline industry, deregulation brought lower prices. It also brought wider choices, resulting in higher consumer welfare and satisfaction. An airline passenger, for example, can choose to bring only a backpack and pay a lower fare, while another one can choose to pay extra to bring for two bags. One can also choose to bring his own sandwich while another would pay for a full meal.

Dr. Kahn’s deregulation policy was an unqualified success. More people were able to travel by air. Dr. Alfred Kahn, an economist who only saw airplanes as “marginal costs with wings” died of cancer at the age of 93 in 2010. May his spirit descend on our transport officials.

 

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.

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Warriors hold off charging Raptors

LOS ANGELES — Klay Thompson delivered 26 points and Kevin Durant tallied 25 as the reigning National Basketball Association (NBA) champion Golden State Warriors held on to defeat the Raptors 127-125 in Toronto on Saturday.

The Warriors recorded their league-best 19th road win of the season as they won the battle against a Raptors team lying second in the Eastern Conference.

They didn’t make it easy, however, blowing a 27-point halftime lead before hanging on for the victory.

DeMar DeRozan helped spark Toronto’s rally with a 42-point performance for the Raptors, who lost to Golden State for an eighth straight time.

Two-time league MVP Stephen Curry scored 24 points for the Warriors after missing the last two games with an ankle injury.

Durant came up with some clutch baskets down the stretch to secure the win.

DeRozan’s layup moved Toronto to within 121-119 with just over two minutes left, but Durant countered to give the Warriors a four-point lead. DeRozan responded, cutting the Raptors’ deficit to 123-122 with 63 seconds remaining.

After Curry surprisingly missed two free throws with 45 seconds left, Durant’s basket with 21 seconds remaining made it 125-122. Curry then made amends by making two free throws with two seconds left.

Toronto’s Fred VanVleet nailed a three-pointer at the buzzer to round out the scoring.

After the game, Curry praised the Raptors for the way they fought back.

“They played amazing in the second half. You knew in this building they would make a run. I didn’t think it would be that big,” said Curry.

All the Raptors coaching staff and players wanted to talk about after the game was perceived poor officiating.

A frustrated DeRozan said it seemed like all three officials were against them.

“Being out there it felt like we played five on eight,” he said. “Some of those calls was terrible, period.”

Raptors coach Dwane Casey added: “There were some tough calls in the second half. It is mind boggling when you ask the officials, ‘Did you see it?’ ‘No I didn’t see it.’ ‘Wasn’t my call.’ I have got to have an explanation.”

Elsewhere, Zach LaVine scored 14 points in his first game in 11 months, rookie Lauri Markkanen added 19 points and the host Chicago Bulls edged the Detroit Pistons 107-105.

In Washington, John Wall scored 23 points and added 16 assists as the Washington Wizards beat the Brooklyn Nets 119-113 in overtime. — AFP