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The Philippines improves in shipping connectivity scorecard, among biggest in tonnage

The Philippines improves in shipping connectivity scorecard, among biggest in tonnage

SRP for rice expected to be in place by late Oct.

By Reicelene Joy N. Ignacio
GOVERNMENT agencies will implement a suggested retail price (SRP) for all varieties of rice starting the last week of October, Agriculture Secretary Emmanuel F. Piñol said on Monday.
“By the last week of October, the DA (Department of Agriculture), DTI (Department of Trade and Industry) and the NFA (National Food Authority) will implement an SRP program for rice. The price range will be determined in a meeting to be held on Oct. 18 with stakeholders, millers and farmers,” Mr. Piñol told reporters after his meeting with the NFA Council.
The agreed SRPs are: P39 per kilogram for regular-milled rice, P42 for well-milled rice, and P44 for long-grain rice. The SRP is subject to seasonal adjustment.
Mr. Piñol also said all retailers of rice are required to sell four varieties, which must be clearly labeled.
“Last week of October, all rice sold in retail outlets will be properly identified as local rice or imported rice. There will only be four classifications: regular well-milled, well-milled, whole grain head rice, and special rice. Under these classifications, the retailer would classify the rice variety, but we will not anymore do branding of rice, like Sinandomeng, like Dinorado. We believe this will put everything in order in the rice supply chain,” Mr. Piñol said.
“There is no such thing as Sinandomeng. On the Dinorado, that will have to be classified as special rice. The imported rice will be classified as imported rice and should not be priced higher than the local rice,” he added.
Mr. Piñol said that the NFA will not regulate the price of special rice which includes brown rice and organic rice, as this would be determined by the sellers.
The Philippine Rice Research Institute also developed RC160, which Mr. Piñol said he hopes to be classified under special rice, and can be sold at P25 per kilo.
Mr. Piñol also said that these rice varieties should be sold in sealed packets and not in open boxes by the middle of 2019, with each pack having a label which indicates the classification, date of harvest, date of milling, the producer, and the miller.
The label should also bear the logos of DA, NFA and DTI, and indicate that the rice conforms to the quality standards set by the three agencies.
“This is for food safety and traceability,” Mr. Piñol said.

Businesses issue urgent call to build new power plants

By Victor V. Saulon
Sub-Editor
THE Federation of Philippine Industries (FPI) has called for the “immediate” construction of new power plants to ensure ample long-term supply of electricity while the government embarks on its massive infrastructure program.
“We want the power industry to step up and do something, so we can prevent a potential problem on electricity supply,” said FPI Chairman Jesus L. Arranza in a statement on Monday.
The federation, which counts as members 34 industry associations and 120 corporations in the manufacturing sector, called on the power industry to work together to ensure electricity supply and prices will not be an added burden to consumers.
Its call is addressed to the Department of Energy (DoE), the Energy Regulatory Commission (ERC) and private companies. The move comes amid concerns on supply and increasing prices of basic consumer goods and commodities, it said.
FPI also pointed out that most of the power plants in the country are ageing or around 15 years old or older, making them prone to unscheduled shutdowns. It questioned the motives of groups that “consistently block and oppose the construction of new power projects amid concerns on unnecessary delays that many projects are experiencing.”
The federation cited the planned 1,200-megawatt (MW) coal-fired power project of Atimonan One Energy, Inc., which has yet to start construction as it awaits regulatory approvals. It said power plants of that scale take around four to five years to build.
“The Atimonan project is an example of a very significant power project that can ensure supply availability in the future,” Mr. Arranza said.
The project is one of seven power plants with which distribution utility Manila Electric Co. (Meralco) entered into a power supply agreement (PSA) on April 29, 2016, or just before the extended deadline set by the ERC.
After the deadline, companies are required to first undergo a competitive selection process or CSP, which subjects a PSA to price challengers. Some sectors questioned the ERC’s extended deadline, leaving projects with a total capacity of 3,551 MW stalled ahead of the resolution of cases before the court.
Agnes T. Devanadera, ERC chairperson and chief executive officer, said the commission was working on eliminating its backlog of 480 cases, but the seven PSAs had been awaiting resolution at the Supreme Court.
“The seven PSAs are not just pending before the Supreme Court but the division endorsed [them] to the en banc, meaning all the entire Supreme Court will hear the case instead of a division of five or seven,” she said in an interview last week.
“We tried to look for a consensus in the commission and it appears that since [the cases are] now being heard at the en banc we might as well wait for it,” she added.
“It’s a collegial body and I cannot just decide singly,” she said.
Ms. Devanadera said that were it not for the court case, the commission would have been free to process the PSAs, which previously met with delays at the ERC with the suspension of four commissioners. Rate-setting cases require a majority vote of the commission.
The ERC will this week have a full complement of five commissioners plus its chairperson as the suspension ends, which also comes after the appointment of two new commissioners as replacements for those who retired.
Separately, the DoE said on Monday that it was rolling out energy projects in Mindanao with the holding of a forum that would present the investment opportunities in the region.
“The forum aims to present opportunities and updates on energy developments, which include the one-grid interconnection project and the establishment of additional power capacities in the area,” the DoE said in a statement.
The DoE said it aims to “bridge investors with financing facilities available for energy projects, concerned government institutions and the business sector for knowledge sharing on the industry’s best practices in the region.”
It earlier certified the Atimonan project as an energy project of national significance, a policy establishing a simplified approval process while harmonizing the relevant rules and regulations of government agencies involved in the permitting process.

Philippines, Japan sign loan deal for New Bohol Airport expansion

THE PHILIPPINE and Japanese governments signed on Monday the supplemental loan agreement for the ongoing New Bohol Airport expansion project on Panglao Island.
“This supplemental loan will cover the extension of the runway from 2,000 meters to 2,500 meters. This will enable the airport to accommodate large commercial aircraft,” Finance Secretary Carlos G. Dominguez III said during the signing ceremony.
Mr. Dominguez also said the loan also covers expansion of the passenger terminal building from 8,500 square meters to 13,300 square meters.
“This anticipates problems of congestion that may arise as tourism traffic in the area will rise quickly in the near future,” he said.
The loan, coursed through the Japan International Cooperation Agency (JICA), consists of P2.1-billion at 0.1% interest for non-consulting services and 0.01% for consulting services, payable over 40 years with a 12-year grace period.
A separate statement from the Department of Transportation said that the loan “finances the re-measurement of quantities and updating of cost of new/additional equipment for the New Bohol Airport Project due to revised scope and the effect of foreign exchange rate between the peso and yen.”
The airport will be upgraded to handle regional flights within the Asia-Pacific, replacing the old Tagbilaran airport, which only hosts domestic flights.
The airport is expected to accommodate about two million passengers annually, compared to 800,000 for Tagbilaran airport.
“The New Bohol airport will be the primary gateway to the province. This will accommodate the rapidly growing number of tourists to accelerate the economic growth of Bohol and contribute to its transformation as another key economic center in the region,” JICA Chief Representative Yoshio Wada said.
Work on the New Bohol Airport began in June 2015, and is expected to be fully operational by November, according to Mr. Dominguez.
Transportation Secretary Arthur P. Tugade meanwhile said that when he took over the project from the previous administration, the progress of construction was about 5%.
“There was some improvement in the accelerated pace in construction,” he said, noting that the initial 2021 completion target was “too long.”
Mr. Tugade said the department will extend the runway further to 2,800 meters in 2019, including the construction of a cargo terminal building, parallel taxiway, and a fuel depot.
Aboitiz InfraCapital, Inc. (AIC) last month was named original proponent for the airport’s operations and maintenance contract.
Mr. Dominguez said that the New Bohol Airport is “a perfect example” of its a hybrid Public-Private Partnership (PPP) financing mode, where the government or official development assistance takes over the initial phase of the project and later bids out its operations and maintenance to the private sector.
“Basically the asset is financed with a very soft loan, and the private sector cannot match that. By getting a low loan amount we are making sure that the public is going to be served properly and they are not going to pay a very high premium, and we can do it faster,” he said.
“If some future government or some future administration needs money, they can actually sell that asset. So while we can get good financing, we are building up our asset base. That’s like the savings of the people which can be tapped if some future administration needs it,” he added.
He said that the government is looking to redevelop the told airport via a possible joint venture with the private sector.
“Tagbilaran we are thinking of maintaining for general aviation or real estate development. That’s another asset that we have we can go in a joint venture,” he said. — Elijah Joseph C. Tubayan

Internet lobby wants tweaks to rules limiting cell-tower players

INTERNET advocacy group Better Broadband Alliance (BBA) said the draft rules limiting the proposed cell-tower industry to two companies should include performance commitments.
In a letter to Department of Information and Communications Technology (DICT) Acting Secretary Eliseo M. Rio, Jr. distributed to reporters on Monday, the BBA said the two-company limit in the first four years should come with guarantees on the extent of tower coverage.
It said these guarantees should include minimum tower deployment based on the network rollout plans of mobile network operators, small telcos and broadband service providers.
“While the BBA is aware that several (tower companies) operate in other countries (such as India, Indonesia, and Myanmar), and while we initially preferred an open market approach, we also recognize the local context-the high learning curve, risks, and difficulties that both the government and investors will have to contend with, as the Philippines shifts to common towers for the first time,” it said.
The DICT’s draft policy on telco infrastructure sharing, which restricted tower companies to two, was met with criticism from prospective tower companies and network providers when presented at a public hearing last month.
Representatives from Globe Telecoms, Inc. and Telenor Group, American Tower Corp. and Frontier Tower Associates aired concerns that setting the two-company restriction may not be effective in speeding up the deployment of towers.
But the BBA said given the transition from past practice of allowing telcos to set up their own towers to registering independent tower companies, it might be best for the government to “be given the leeway to offer incentives to potential investors and to set standards and rollout obligations in exchange for exclusivity, in order to achieve the objectives of expanding coverage at the soonest possible time.”
It noted, however, that the government must allow an unlimited number of tower companies to come in after the four-year trial period.
The BBA also raised the importance of selecting tower companies that will ensure improved services in unserved and underserved areas. It recommended that the government should start allowing other tower companies to come in if the registered ones “show little indication of rolling out in underserved and unserved areas.”
Another point raised by the BBA is the need to include small telcos and broadband service providers in the companies that will submit roll-out plans from which tower companies will base their commitments.
“While it is assumed that the primary clients of the towercos and pole owners will be (Globe and Smart Communications, Inc.), shared infrastructure should also, and more importantly, serve the small players and broadband service providers whose deployments have been limited to date due to the absence of support infrastructure, such as towers and poles, which, on their own, the small players cannot build and operate,” it said.
The BBA added, the policy must add more details on pole sharing policy and disaster resiliency of the infrastructure to be built. It also said the government must consider sustainability of the common towers and poles, and called for provisions that will address expediting the permit process and passing the Open Access Bill at the Senate.
Mr. Rio previously said the DICT plans to finalize the infrastructure sharing policy by November, in time for the entry of the third telecommunications industry player. — Denise A. Valdez

Online job recruitment rises 18% in Aug. — Monster.com

ONLINE recruitment activity in the Philippines grew 18% year-on-year in August, with most industries showing double-digit growth, research firm Monster.com said.
According to the company, which measures online hiring via its Monster Employment Index (MEI), retail hiring had the highest growth in August at 40%, followed by health care (33%), logistics (27%), banking, financial services and insurance (21%), consumer goods (18%), advertising (16%), manufacturing (12%), and engineering (10%).
Hiring activity in the business process outsourcing (BPO) industry was flat while education was the only sector posting a decline, at 3%.
Monster added: “Online hiring seems on a roll in the Philippines, with positive growth numbers in 9 out of 10 job roles monitored by the MEI.”
By occupational area, purchasing/logistics/supply chain jobs grew 38%, followed by sales and business development, health care and human resources and administration, which grew 32% each.
Other occupations posting growth were finance and accounts(31%), software (22%), marketing and communications (18%), hospitality (15%), and engineering (11%).
The one occupational category posting a decline was customer service, down by 1%.
“Infrastructure is the backbone of a country’s economic development. A McKinsey Global Institute study predicts the Philippine economy is set to rise again and will achieve sustained growth over the next decade. The (International Monetary Fund), too, retained its growth forecast of 6.7% for the country. In line with this optimistic outlook, the MEI has reported an uptick in the demand for talent in Logistics and Supply Chains. This can be attributed to the fast-changing infrastructural landscape of the economy which is likely creating more jobs,” said Abhijeet Mukherjee, CEO of Monster.com for the Asia-Pacific and Middle East.
“While the medium-term outlook may be positive, the labor market can be exposed to domestic risks and vulnerabilities as a consequence of market irregularities and structural changes. The government’s Build, Build, Build campaign is looking to pave the way for a new era of growth and prosperity in the Philippines,” he added. — Vincent Mariel P. Galang

House panel approves mining royalty bill based on margins

THE House Ways and Means Committee approved on Monday a substitute bill imposing a variable royalty on mining margins of 1-5% for firms outside designated mineral reservations, softening the Department of Finance’s (DoF) draft bill which had called for a 5% royalty on gross output on miners everywhere.
The committee agreed on royalties of 1 to 5% based on margins for firms operating off-reservation. Within these areas, the royalty is 3% of gross outputs.
“This is for (the mining industry’s) benefit. Actually it’s a win-win because we’re getting revenue for the government even if we change the basis of computation to margin-based from gross output,” committee chair Estrellita B. Suansing of the first district of Nueva Ecija told BusinessWorld in an interview, Monday.
The bill sets the royalty for firms outside mineral reservations to 1% for margins of between 1 and 10%; 1.50% for margins above 10% to 20%; 2% for margins above 20% to 30%; 2.5% for margins above 30% to 40%; 3% for margins above 40% to 50%; 3.5% for margins above 50% to 60%; 4% for margins above 60% to 70% and 5% for margins above 70%.
The royalty will be imposed on top of all other taxes, such as the 4% excise tax, the royalty to Indigenous People, and an average 1.7% local business tax among others.
The current system only imposes the 5% royalty on mining firms within mineral reservations. The enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) law also resulted in the increase of the 2% excise tax to 4%.
Ms. Suansing said the bill also deters miners from loading up on debt by disallowing the deduction of interest expense beyond certain indebtedness levels, with the threshold set at a 3:1 debt to equity ratio.
The bill will also cover small-scale miners within and outside mineral reserves, who will be made to pay a royalty amounting to 1/10 of 1% of gross output.
The substitute bill also proposed a surcharge that will be paid by miners engaging in open-pit mining, but this was later omitted during the deliberation.
“I would like to respectfully seek clarification, perhaps appeal that it be reconsidered, because it will penalize, it will prohibit an existing extraction method that is currently allowed,” Sagittarius Mines, Inc. President Joaquin C. Lagonera told the panel, which agreed to delete the provision upon consultation with Speaker Gloria Macapagal-Arroyo who was also present during the deliberations.
In a separate development, the House on Monday passed on third and final reading the bill exempting small-scale miners from tax on gold sales to the Bangko Sentral ng Pilipinas.
With 192 affirmative votes, 4 negatives and 1 abstention, the chamber approved House Bill 3297, which will exempt small scale miners from the current 2% excise tax and 5% creditable withholding tax. — Charmaine A. Tadalan

Employers, unions stake out negotiating positions ahead of NCR minimum wage hearing

THE Employers Confederation of the Philippines (ECOP) warned that a minimum wage increase will only benefit about 7-8% of the work force and subject them to a greater risk of layoffs from small firms that cannot afford to pay higher salaries.
The organization issued the warning after the Trade Union Congress of the Philippines (TUCP) said it will push for a P320 increase in the minimum wage in the National Capital Region for private-sector workers.
ECoP Acting President Sergio R. Ortiz-Luis, Jr. said in a phone interview with BusinessWorld that only 7 to 8% of the 43 million people in the labor force are minimum-wage earners and a P320 wage increase will not be beneficial to most workers since they are not covered by the wage adjustment.
“If you file for a P320 increase a day, assuming it gets approved, it means the 93% won’t have higher salaries,” Mr.Ortiz-Luis said.
Mr. Ortiz-Luis also said that most companies are Micro, Small and Medium Enterprises which may not be able to deal with wage increases of the magnitude being proposed, while also raising the possibility of strengthening inflation.
“Small companies only have two choices when there is a wage increase. If they can raise prices they will, and that causes inflation. If they cannot, they will reduce their personnel,” he said.
In a message to BusinessWorld on Monday, Associated Labor Unions (ALU)-TUCP Spokesperson Alan A. Tanjusay said TUCP filed a wage hike petition in June with the Regional Tripartite Wage and Productivity Board (RTWPB) for P320, which if granted will push the current daily wage in NCR to a little over P800.
“We filed for P320 to add to the current wage rate and push the current rate to P800. NEDA (National Economic and Development Authority) said the amount needed by a family of five to live decently in one day is P1,400. To get near this P1,400, we deemed it pragmatic and affordable for employers to set the wage at P800 level,” Mr. Tanjusay said.
NEDA Secretary Ernesto M. Pernia was quoted in June as saying that a family of five needs P42,000 a month in order to maintain a standard of living deemed “decent,” which is approximately P1,400 a day.
Also in June, ECoP put forward a motion to dismiss TUCP’s wage hike petition at the NCR-RTWPB because TUCP filed it less than 12 months since the NCR’s last wage order.
Wage boards can only entertain wage petitions after a region’s wage order hits its one-year mark. The NCR’s last wage order took effect on Oct. 5, 2017, bringing the NCR daily minimum wage to P475 for agricultural and P512 for non-agricultural workers.
TUCP President Raymond C. Mendoza said in a statement on Monday that the union will meet with President Rodrigo R. Duterte on Oct. 9 to discuss how to address the impact of inflation on workers.
“If given a chance, we will urge President Duterte to act on the TUCP P320 wage increase across the board bill filed at the House of Representatives and order the regional wage board to adjust the minimum wage rates of minimum wage earners nationwide,” he said.
Special Assistant to the President Christopher Lawrence T. Go said in a message to reporters that there is no confirmed meeting with TUCP.
“There is no meeting with TUCP,” he said.
Mr. Mendoza, who is also the TUCP Partylist Representative at the House of Representatives, filed House Bill 7805 or “The Living Wage Act of 2018” which provides a P320 wage increase in all regions.
Last month, Department of Labor and Employment (DoLE) secretary Silvestre H. Bello III estimated that the wage adjustment for the NCR will be at least P20.
Mr. Tanjusay said that TUCP’s counter-offer won’t go below P80, adding “Employers are haggling for a P20 wage hike. Our counter offer is that we will not accept the P20. Our final counter offer is P80.”
When asked why TUCP will settle for a minimum of an P80 wage adjustment, Mr. Tanjusay said, “This is the amount in our computation that small enterprises can afford to give to workers.”
IBON Foundation Executive Director Sonny A. Africa said in a briefing on Monday that he prefers a P27 wage increase for minimum wage earners if the minimum wage is to retain the value it had when the year started.
“We think that the population, in order to cope with the high prices since the start of this year, should have a P27 wage hike so that the value of the minimum wage will be restored,” Mr. Africa said.
NCR-RTWPB Workers Representative German N. Pascua Jr., a lawyer, said in a mobile message to BusinessWorld that the board will have a consultation with the labor sector on Oct. 22 and the business sector on Oct. 24.
“Public hearing (will be on Oct.) 26,” he added, saying both labor and management sectors will be present at the hearing.
Section 3 of Republic Act 6727 or “Wage Rationalization Act.” states that a regional wage board “shall conduct public hearings and consultations giving notices to employees’ and employers’ groups, provincial, city and municipal officials and other interested parties” during the process of wage fixing. — Gillian M. Cortez

E-invoicing, electronic sales reporting… and the lottery?

About a month ago, House Bill No. 8083 or Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) was passed on to the Senate. Discussions of its provisions are undeniably necessary so that the Philippines does not end up with hasty-implemented rules that may produce unintended consequences.
Perhaps one of the least talked about, yet highly challenging, provisions of the TRABAHO Bill is the move towards mandatory electronic invoicing and sales reporting.
This initiative was initially introduced in the first package of the comprehensive tax reform program, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The TRAIN Law mandated taxpayers engaged in exporting goods and services, taxpayers engaged in e-commerce, and taxpayers under the jurisdiction of the Large Taxpayers Service to issue electronic receipts or invoices, in lieu of manual receipts. Moreover, they are also required to electronically report their sales data to the Bureau of Internal Revenue (BIR) through the use of electronic point of sales systems.
Sections 17 and 18 of the TRABAHO Bill discuss the same requirements with additional provisions on transmitting electronic receipts or invoices through designated electronic channels with a public certification system accredited by the BIR. As a security measure, digital signatures, electronic tax transaction numbers, and the like are to be put in place to verify the identity of the issuing taxpayer, as well as to verify the information in the invoices. Similar with manual invoices, digital records are also required to be kept and maintained for three years from the close of the taxable year in which they were issued.
Simply put, these taxpayers are required to use a system that is capable of issuing electronic receipts or invoices, collecting transaction records, and transmitting these records to the BIR. Within five years of the Bill being passed into law, and upon establishment of a system capable of storing and processing the required data, the concerned stakeholders are expected to have complied.
The premise is that this system will simplify and speed up not only business transactions but the tax administration procedures of the government as well. Essentially, in an electronic invoicing and sales reporting system, both the issuer and the recipient of the invoice can access and review the invoices generated. On the other hand, tax authorities are also able to collect and analyze the electronically transmitted data in real time.
Consumer behavior nowadays leans towards whatever is the most convenient; suppliers or service providers are also inclined to transact business in the medium of their customers’ choice. The less time spent on processing purchase orders, correcting errors, and filing and archiving paper invoices, the more time and resources can be spent on improving the business and its people. In addition, e-invoicing is a good business practice in terms of environmental sustainability. Although printing one less paper invoice may not clean up the Pasig River, digitizing millions of paper receipts has a significant impact.
As convenient as it may sound, what this regulation also means for businesses, as well as for the government, is an additional expenditure. Setting up, operating, and maintaining an electronic invoicing and sales reporting system will require a huge amount of capital, let alone the tedious approval process required before its implementation. Presently, the Computerized Accounting System (CAS) registration takes several months before it can be approved.
Fortunately, the proposed TRABAHO Bill provides tax incentives to mitigate the cost of transitioning towards e-invoicing. From the first to the fourth year of the implementation period, a taxpayer who adopts the required system shall be granted a tax credit of 0.1% of the purchase value for every electronic receipt or invoice transmitted through the designated electronic channels and issued with an electronic tax transaction number.
In support of electronic sales reporting systems, the BIR may grant allowable deductions equivalent to 10% of the amount of every electronically traceable payment (ETP) made. ETPs refer to payments through debit or credit cards or other methods that may link the specific payment to its payer.
The BIR also has the authority to establish a receipt and invoice lottery program. In Taiwan, for example, each invoice is tagged with a unique government-issued lottery number, which is then used as the basis for a regular draw. This kind of positive reinforcement in the tax system is actually gaining popularity in several countries as a way to increase sales tax collection and to encourage businesses to truthfully report income and pay taxes. Should the Philippines have something like this, one can only hope that the jackpot prize goes as high up as P800 million.
Electronic invoicing, electronic sales reporting, and perhaps even an invoice-based lottery are opportunities for improving the processes in the Philippine tax system; however, these can only be achieved through the cooperation of taxpayers, tax administrators, and lawmakers altogether.
 
Mica Dyan T. Borja is a senior of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.
Mica.Borja@ph.gt.com
+63(2) 988-2288.

Red flags in rice tariffication

The House of Representatives has passed its version of the rice tariffication law. Apparently, they did that to make good (finally after 23 years) the country’s obligation under the WTO’s agreement of agriculture to convert a quantity restriction or QR on rice imports into ordinary tariff protection.
Putting down the current inflation problem is the stronger motive. Inflation rate in September rose to 6.7%, higher by three tenths of a percent a month ago. Food price inflation, says PSA, was 9%. The rate is a five-year high.
Inflation is costing us high in terms of investments forgone, fewer jobs created, and higher economic growth missed.
But most of all, it imposes a very heavy burden on lower income households, which spend about 20% of their meager incomes on rice.
Significant reduction of the rice price cools down inflation. Yes, the problem has other factors, such as the spike of world petroleum prices and the tax reform law, which increased excise taxes. Holding them constant, we can fight inflation if we can just reduce rice prices.
In 2017, the Philippine Statistics Authority reported that the average price of well-milled rice was 39 pesos a kilo. The landed cost of Vietnamese rice, 25% broken, at the exchange rate of 54 pesos, plus the tariff rate of 35% and a 10% marketing cost could bring down local rice prices to only 31 pesos a kilo, or 25 percentage lower than its 2017 level. With its weight of nearly 10% in the CPI, inflation may go down by 2.5 percentage points, and about twice that of the poor’s CPI.
That can be realized if our lawmakers would craft the rice tariffication law right. Consider the following red flags:

• Both House and Senate versions affirm our commitment in ASEAN to import rice at 35% tariff. However, the House version continues to give licensing authority on rice imports to the NFA. This introduces potential quantity constraints to import restrictions depending on how the NFA exercises its licensing power. The antidote for it so we can fight rice price inflation effectively is to take it out.

• The import licensing that is allowed to continue is for protecting us from “bukbuks” and “hanips,” other pests, or pathogens, which imported rice may bring into the country. The Bureau of Plant Industry enforces this measure, called the sanitary and phyto-sanitary (SPS) import measure. However, this can be abused as Senator Villar, the Chairperson of the Committee on Agriculture, knows very well.

Recall the garlic cartel, where few BPI officials were accused of conniving with it to corner the volume of imported garlic and keep garlic prices high? Corrupt BPI officials in charge of SPS could do likewise in rice. When this problem happened, garlic prices increased by 300%.
The remedy is for the law to have a clear provision against abuse of SPS licensing authority to corner the supply of rice in the country benefitting the rice cartel, with penalties meted out for abuses. SPS measures are automatic licenses, i.e. if the importer proves that the imported rice meets the standards and technical regulations of BPI, it should issue the SPS license.

• The role of the public rice stock in food security is less appreciated in the Senate version of the law. The Senate Committee on Agriculture allows direct importation of rice by the NFA, when local supply is not sufficient to ensure rice security. This provision is unnecessary. With rice tariffication, commercial importers can decide on their own to bring in more rice if such a situation occurs in the future. There is no longer a quantity restriction on imported rice, just a tariff measure. So if commercial importers figure out they still can earn after tariffs, they would import rice, closing the deficiency in local rice supply.

rice
But there is another risk that we have to prepare for: what if rice prices in the world market are simply very high and the commercial importers would not import rice because they couldn’t find a supplier.
Remember 2008? Major exporters like India and Vietnam restricted their exports of rice, India to keep their rice only for the domestic market, while their wheat harvest was not good and Vietnam on the belief that its rice crop in the North was destroyed by frost. Both information turned out factually incorrect, but policies to restrict exports occurred and world prices started to surge.
The same contingency may occur if there are major harvest failures in China. China is hardly buying from the world market, but it will be compelled to do so if its rice harvest is below normal.
Without a buffer stock for such contingency, domestic prices have to go up.
We see this now in the case of petroleum markets. World prices go up and the following day domestic prices go up.
The difference between the two is that we don’t go hungry with petroleum, but if that happened with rice, many people would go hungry and would blame the government.
The rice tariffication law has to have provisions for information dissemination and for a contingency public buffer stock.
World market developments would have to be monitored closely by the PSA and information disseminated so private sector importers can adjust to the developing situation. However, holding a good size inventory for this contingency can be costly, and if they are in doubt, if they can pass on to rice consumers the added cost of holding a bigger inventory, they would likely settle for a private commercial rice stock that is less than desired. In other words there is a market failure: country’s rice stock is less than optimal.
This is where we need a contingency buffer rice stock of an appropriate size be maintained, besides that for emergency purposes. There has to be an entity that decides on this and contracts the services of a rice trading company to maintain the buffer stocks.
Currently the Senate Bill is assigning this policy and regulatory mandate to the NFA Council. But if we get to scrapping PD 4, this entity could be called the “National Rice Authority” a la RICOB in the 1960s or the Rice and Corn Board, before former Pres. Marcos created the National Grains Authority in 1972 with PD 4. The authority is not a player in the market, but a regulator created by law to, among other functions, decide on the appropriate size of the contingency buffer stock based on its assessment of the tightness in world rice markets. The commercial/proprietary function may be served by the stripped down NFA or a private commercial trader, contracted by the Authority to provide the service.
The rice tariffication bill articulates the State’s policy of ensuring food security. But what does it mean? Judging from the sentences which follow the Senate’s version of the bill, it means making rice farming viable, efficient, and competitive. We are all for that. But if this is the only meaning of food security then we lose the more important point of tariffying the rice QR to make sure rice, which is our country’s staple, is accessible and affordable to all of us, especially the poor.
 
Ramon L. Clarete is a professor at the University of the Philippines School of Economics.

Is there a silver lining to the gloom and doom?

Filipinos are being destabilized by all kinds of risks — political, safety and security, economic and external. It’s not that we’re new to it but we’ve never been through all that’s happening at the same time in rising intensity, real or imagined. What am I referring to? Hang on to your seats as I run through my list.

• The Trillanes flap — was his amnesty a sham, defective or not?

• Red October — will the CPP-NDF-NPA’s planned chaos and violence in various parts of the country, as revealed by the AFP in a preemptive move, still pan out?

• The President’s health — what is the real state of his health and to what extent could it destabilize the country all the more?

• Election fever — the contending parties are fielding their candidates but are stuck with old paradigms and internal divisions.

• The stock market plunge — we’re just hovering around the 7,000 index down from over 9,000 early this year, and approaching January 2017’s index below 7,000.

• Inflation — the battering continues that’s digging into shallow pockets; it hit 6.7% in September and is the highest in ASEAN.

• The falling peso — as of this writing it’s 54.25 Philippine pesos to the US dollar versus 49.71 a year ago.

• Global recession looming — the International Monetary Fund is warning about a potential global recession due to rising financial risks, trade wars and global debt.

• South China Sea — the US and security allies are increasing the tempo of “freedom of navigation operations” and China is responding aggressively.

• Cybersecurity — the Western world reports increasing cyberattacks by Russia and China that could potentially compromise global safety and security across -the-board.

• Natural and ecological disasters — the recent typhoons took a heavy toll on human lives and the loss of agricultural output

• Reduced economic forecast — from 6.7% to 6.5% for 2018 as a result of the battering from all of the above, still good but with the potential to dive some more by year’s end.

It’s disheartening to see that we’re still rooted to the kind of divisive self-serving personality-oriented politics that has seriously impaired the country’s competitiveness, moral compass and national spirit. Recovering the economy’s attractiveness for profitable long-term investments will largely depend on political stability and predictability. Politicians behaving badly at the national and local level should be charged with national sabotage at this precarious stage, not idolized and given all the time and space in media to wreck the state of the nation.
To its credit, this administration has provided us with silver linings like the 2040 road map to liberate ourselves from unjust exclusionary practices and move us to a national interest-common good mindset; and the all-important National Security Policy and Strategy papers to guide implementation, grounded on firm national values. It must now ensure its proper dissemination to the “whole-of-nation” for us to break free from the gloom and doom blanketing us and rendering us vulnerable to all kinds of risks.
Inflationary pressures can be eased if we take hold of those factors we can control. While we can’t control the oil price hikes, we can opt to withdraw the irrational fuel tax that has raised the cost of electricity, transportation, production and household expenses and, instead, replace it with a defense tax to generate ROI from credible deterrence in our EEZ where we lose billions of dollars to poachers, pirates and other thieves annually. We should also clamp down on hoarding and lingering wasteful, inefficient and corrupt practices that boost the cost and ease of doing business that unjustly burden the tax-paying consumer.
The supply and demand for dollars fundamentally regulates the foreign exchange rate. Capital flight to my mind — from hot money to diverted investments to money laundering — is running at a faster clip than our dollar inflows from exports, OFW remittances and BPO earnings. While the peso’s devaluation is favorable to them, inflation is wiping out the upside. In the meantime, imports are becoming more expensive and pushing up the costs and prices of consumer goods. A better policy environment plus appropriate Bangko Sentral interventions should decelerate, arrest and, hopefully, reverse the trend.
Leading figures in the World Economic Forum and the International Monetary Fund have been warning about a looming global crisis. They say the US failed to fix the problems that triggered the global financial contagion ten years ago, and that the signs are pointing to a repeat. Then there’s the ongoing global trade war being waged by America on both friend and foe, tired of being leeched at its long-term expense, and seen to be going against the very democratic and capitalist values that made it a great nation. On top of that, leading economies are saddled by serious debt problems. The collapse of one could trigger a domino effect.
There are rising security concerns that are complicating the already complex global situation. Strategic rivalries are heating up between the U.S. and its traditional allies on the one hand, and an increasingly belligerent array of foes like China, Russia and Iran (North Korea is still not out of America’s crosshairs) on the other. Strategic national interests remain firm and divergent in the South and East China Seas. Preventive diplomacy is falling on deaf ears. Cyberattacks are exponentially rising to steal data, cripple systems and dominate the information stage. The world is worryingly headed toward a major all-out war at the rate it’s going.
We’re being battered by strong headwinds, but we must steer our ship of state out of trouble, united in common purpose, to survive the serious challenges facing us. National survival depends on decisive leadership and hands-on management to get us out of harm’s way or, at least, mitigate the impact of those risks that could turn into crises and man-made disasters. We have no choice but to close ranks and forge national unity to be a better Philippines for all Filipinos in the crucial days, years and decades ahead.
 
Rafael M. Alunan served in the Cabinet of President Corazon C. Aquino as Secretary of Tourism, and in the Cabinet of President Fidel V. Ramos as Secretary of Interior and Local Government.
rmalunan@gmail.com
map@map.org.ph
http://map.org.ph

Where’s the ‘local’ in federal?

“All politics is local,” so the saying goes. This may give the impression that only the distribution of local goods and services matter to the regular voter. However, the person this is attributed to, the late American Speaker of the House Thomas Philip “Tip” O’Neill, was animated by a larger world view — appealing to local concerns in order to advance a national economic policy agenda.
In the Philippines, this is coupled with the maxim of the pre-Martial Law Nacionalista Party leader Eulogio “Amang” Rodriguez: “politics is addition and not subtraction.” No President (or prospective President) ever reached Malacañang and stayed there without addressing local concerns — while harnessing them to a comprehensive national agenda.
Effective dialogue between local governments and the national state is vital for the pursuit of equitable development throughout the country. Indeed, a national polity with a healthy balance between national responsibility and local affinity relies on this than anything else.
In this, our history is also educative. While Jerrold Tarog’s recent film Goyo: Ang Batang Heneral, focused on the ill-fated Gregorio del Pilar, its background story also emphasizes the myriad failures of the Malolos Republic. Headlined by Emilio Aguinaldo and his largely Central Luzon-based government, it remained unable to unite sections of the nation against the American invasion.
This state of affairs continued to hound us even post-American Occupation and way into the Third Republic. Decisions that affected the entire archipelago were always determined by a Luzon-based government, only placating the desires and priorities of favored local elites.
It is perhaps because of this historical baggage that calls for decentralization (specifically devolution of powers) erupted as early as the 1986 Constitutional Convention. What became the 1987 Constitution was subject to tussling between the demands of local government officials for greater autonomy as well as the prerogative of the national government to rein in the excesses of these same local politicians.
While the Constitution ultimately retained a centralized government, it also expanded the role of local governments in delivering good governance. The content of the Constitution’s Article X delineated the role of local government units.
Their powers were further detailed through Republic Act No. 7160 or the Local Government Code of 1991. It was designed by its sponsor, then-Senator Aquilino “Nene” Pimentel, Jr., as the basis for decentralizing governance away from Manila. It remains his basis for advocating for a federalized government to this day.
The failure of the post-EDSA presidencies to fully implement this catapulted Rodrigo Duterte to the presidency, among many other reasons. His rise also gave nationwide airing to the federalist idea — at least until it was heavily derailed by the ill-conceived campaigning of Malacañang supporters.
To assume pure decentralization and strengthening local autonomy as our panacea is an unsupported idea — despite fervent evangelizing by its partisans. Even just pursuing it as per the mandate of RA 7160 has been a massive challenge under the post-EDSA years.
A 1995 study by Perla Legaspi of the University of the Philippines, entitled “Decentralization, Autonomy and the Local Government Code” concedes that autonomy and participatory governance remain heavily uneven across differing LGUs. Uneven funding concerns and the all too human factor of local political leaders’ priorities (or neglect, in many cases) were pointed to as challenges. Even civil society engagement was seen as contentious, if not unwelcome outright. This year, a more recent study of the Local Development Council (LDC) structure in Bulacan by Yvan Ysmael Yonaha of UP-Los Baños, presented at the recent Philippine Studies Association Conference in Manila, corroborates this.
One gets a sense that while the intentions of decentralization policies were noble, they remained vulnerable to perversion by unchanged political realities on the ground. Philippine political science continues to document the continuing dominion of elite families and alliances in the Philippines.
For my part, I am conducting a closer study of the results of the 2016 elections in partnership with faculty of the Ateneo de Manila’s Mathematics Department. We have preliminary results showing that around 3 out of 5 governors and mayors elected last cycle were elected uncompetitively — that is to say, with a very high margin of victory against their competitors.
This in itself does not mean anything untoward. It does, however, suggest that local politics, precisely because of entrenched political families and alliances, renders communities under such conditions vulnerable not only to normalizing political patronage, but also of undue interference in civil service offices.
One should therefore assess the substance and credibility of the purported Bayanihan Federalism Draft Constitution on whether it accurately responds to the realities and challenges of local governance. Genuine, effective federalizing requires not only the enumeration and delineation of powers between national and local governments. It needs to foster genuine polyarchic, democratic conditions on the local level.
This can only be achieved by cultivating strong, accountable and independent local bureaucracies and political offices. More importantly, engendering genuine popular participation by community-based organizations (not mere “loyalty brigades”) is necessary.
Finally, even when decentralization occurs, we must concede that local politics will still find itself affected by national and international demands. Hence,central government needs to remain capable and authoritative enough to intervene in possible local abuses.
In this, however, the current Bayanihan charter is suspect. Despite repeatedly insisting that it seeks to develop a “federal” government, it has in fact removed and ignored the important role and reforms needed in the local government level.
The 1987 Constitution’s Article X has disappeared from the text, with no equivalent whatsoever. It seems for the federal charter, decentralization and grassroots empowerment stops at the regions — not at the lower local levels where service delivery and access to resources remains most contentious.
We should therefore asks now: was the federalism project under Duterte really about strengthening institutions and governance for the common Filipino, or did it simply use this claim as cover to give a really big carrot to political dynasties?
 
Hansley A. Juliano serves as a part-time lecturer to the Department of Political Science, School of Social Sciences, Ateneo de Manila University. He is also engaged in research and advocacy for various sectoral issues (such as labor rights and agrarian reform).

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