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DTI touts TRABAHO bill’s ₱5-B training fund amid job-loss fears

THE Department of Trade and Industry (DTI) said workers from the business process outsourcing (BPO) industry will receive aid in upgrading their skills from a P5 billion fund to be set up under the latest tax reform legislation.
Trade Undersecretary Ceferino S. Rodolfo said the Tax Reform for Attracting Better and Higher-Quality Opportunities (TRABAHO) bill approved by the House provides for a P5 billion annual fund to be allocated to the skills upgrade program of the IT-BPO industry, helping ensure that BPO workers remain competitive in the job market.
Section 312 of House Bill 8083 provides that “the fund shall be used to pay for formal academic or training programs of accredited private or public schools and training centers.”
The structural adjustment fund will be distributed within five years after the law is implemented.
“Workers are worried they might be displaced. This fund will address those fears with training,” Mr. Rodolfo told reporters last week in Makati City.
The bulk of the BPO firms in the Philippines are registered with the Philippine Economic Zone Authority (PEZA), and moves to rationalize investment incentives are thought to make the Philippines less attractive as an investment destination.
Of the 380 PEZA-registered locators, 263 are in the IT-BPO sector and are currently enjoying the perpetual 5% gross income earned tax incentive.
The IT-BPO industry has said the removal of this incentive under the second package of the tax reform policy overhaul would lessen the competitiveness of the Philippines in the global market.
Under the 2022 road map of the Information Technology and Business Process Association of the Philippines (ITBPAP), the sector aims to create 1.8 million direct jobs by that year. This is in addition to the 7.6 million Filipinos employed either directly or indirectly by the industry.
ITBPAP companies also target $40 billion in revenue by 2022. — Janina C. Lim

Energy dep’t to identify competitive areas for renewable projects

THE Department of Energy (DoE) has issued a circular that seeks to identify what it calls competitive renewable energy zones (CREZ), which will become the guide in directing the country’s power transmission development to reach areas with potential indigenous energy resources.
Published during the weekend, department circular DC2018-09-0027 seeks to identify the renewable energy zones to help in overcoming development obstacles, including constraints on transmission as well as regulatory barriers that hinder the entry of private sector investment.
The DoE first presented the circular to industry participants in July for their comment. It is in part among the provisions sought by Republic Act 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) for the government to assure socially and environmentally compatible energy sources and infrastructure, while promoting indigenous and new RE resources.
In the circular the department said that in planning for new transmission infrastructure and/or upgrades to existing transmission infrastructure, the DoE deems it necessary to ensure the cost-effective delivery of electricity generated in regions with abundant RE resources in order to attain sustainable, stable, secure, sufficient, accessible, and reasonably-priced electricity supply and services.
The Philippine CREZ is intended to enhance the planning process and strengthen the implementation of the DoE’s various development plans for energy, distribution, transmission and renewables.
The DoE said the ideal candidate area for CREZ are “geographic areas characterized by high-quality, low-cost RE potential in addition to high levels of private-sector developer interest.”
In the selection process, the department will also identify a set of transmission or upgrade scenarios that will enhance the delivery of energy from the candidate RE zones.
The process will include an analysis of the “economic, operational, environmental, and other costs and benefits associated with the required transmission enhancement scenarios.”
It will also specify the cost-effective transmission line enhancements proposed to be included in the transmission development plan, as reviewed and approved by the DoE.
The DoE said the focus areas of the CREZ analysis are the power interconnections in Luzon, Visayas and Mindanao.
Under the circular, the DoE will create a technical advisory committee, which is chaired by the Energy secretary or a designated representative. Its members include directors of some of the department’s bureaus, along with the heads of the National Renewable Energy Board, National Transmission Corp., National Electrification Administration, and National Grid Corporation of the Philippines. — Victor V. Saulon

Maternity leave bill bicam targets ratification before Congress recess

THE Bicameral Conference Committee tasked to reconcile versions of the increased paid maternity leave bill will begin its work on Monday with a target to ratify the bill ahead of the congressional break.
“I’m hoping, I’m hoping (to finish the bicameral conference) because we want it ratified before we go on a break,” Bagong Henerasyon (BH) Representative Bernadette Herrera-Dy, chair of the House Committee on Women and Gender Equality, told BusinessWorld in a phone interview, Sunday.
House Bill 4113 and Senate Bill 1305 both increase the current 60-day paid maternity leave, though they are 20 days apart at 100 days and 120 days, respectively. Both versions also provided an optional 30-day extension without pay.
“We’re going to push for the 100 days because that is what we feel is acceptable to everybody (including the) business sector,” she said.
The House version also limits the grant of the maternity leave benefit only to four deliveries, unlike its Senate counterpart, which proposes to grant the benefit for all pregnancies.
“The business sector requested a limit of four and I agree to that… we’re also encouraging family planning,” she said.
The Senate version also gives pregnant female workers the option to pass on up to 30 days of leave credit to the child’s father or an alternative caregiver.
“If the Senate will insist on it, I have no problems,” Ms. Dy said, adding that the caregiver role is the mother’s choice.
Gabriela Rep. Emmi A. de Jesus, also among the members of the Bicameral Conference Committee, said regardless of what leave provision the final version adopts, the bill in itself is a “big step.”
“Either 100 or 120 is one big step forward from 60 (days) for normal (delivery) and 78 (days) for C-section,” she said.
She said the 120-day leave credit was originally proposed by the Gabriela Women’s Party (GWP) in the 15th Congress, but now the GWP agrees to 100 days which is viewed as more “doable.”
The Senate provision also allows qualified solo parents to avail of 150 days paid maternity leave.
Ms. De Jesus said the provision could be adopted by amending Republic Act 8972, the “Solo Parent Welfare Act,” instead of including it in the maternity leave bill.
“I don’t think (it will be adopted),” Ms. De Jesus said. “But I think it may pass as an amendment of the Solo Parent Act.”
The increased maternity leave bills both grant the benefit to all covered female workers in government, private sector and informal economies, regardless of civil status and legitimacy of the child. The availment of the benefit cannot be deferred and must be used continuously, either before or after the delivery.
Female workers are also protected by the security of tenure provision of the bills, which prohibits employers from terminating or demoting beneficiaries for availing of maternity leave. — Charmaine A. Tadalan

Flood-control study for Central Luzon to start by Oct. 11

THE Department of Public Works and Highways (DPWH) is expected to launch a feasibility study for the Pampanga Delta Development Program (PDDP) by Oct. 11, Speaker Gloria Macapagal-Arroyo said.
“I was informed by the DPWH that the feasibility study for the Pampanga River will be opened on Oct. 11,” Speaker Arroyo said in a statement Sunday.
The Speaker, who represents the second district of Pampanga, met with the DPWH on Friday to discuss the flood control master plan.
Ms. Arroyo said the feasibility study will focus on the second phase of the PDDP, since the first phase was completed in 2002.
She said Phase 2 covers parts of neighboring provinces, including the river section between Mt. Arayat to Calumpit, Bulacan. “The feasibility study will start by Oct. 11 when a winning bidder is declared,” Ms. Arroyo added.
Phase 3 covers upstream areas in Gabaldon and Rizal, Nueva Ecija, she added, and will begin by 2019.
Also among those present in the coordination meeting were local officials and Representatives of Pampanga, Nueva Ecija, and Bulacan. — Charmaine A. Tadalan

DoF may tap Israel for agri-economics training

THE GOVERNMENT hopes to set up an exchange program with Israel for Finance department officials, the Department of Finance (DoF) said in a statement over the weekend.
“I want to step up our scholarship program… to send our students abroad. So far we have sent them to the US, Australia and the UK. We also sent them to Japan and South Korea. I want to expand. We will explore that with your staff. I want to look at an agri-economics program, finance and economics for DoF personnel who can be sent to Israel,” Finance Secretary Carlos G. Dominguez III was quoted as saying.
The statement was issued after his meeting with Israeli Ambassador to the Philippines Ephraim Ben Matityau last month, with the DoF saying that he “expressed openness” to the idea.
According to the DoF, Mr. Matityau said the proposal was “very good,” pointing out that Israel’s high-technology financial system “is probably the most significant contribution we can give in a manner of exchange and partnerships.”
Mr. Matityau said that Israel has been conducting the exchange program with the Philippines’ private sector.
He said that about 12 operators of start-up firms went go Israel to learn about the country’s Fintech system.
The DoF also said that Israel also invites students of agriculture from Mindanao and other parts of the country to on-the-job-training programs to learn about the country’s advanced farming and production technologies.
Mr. Dominguez meanwhile said Israel can send their treasury personnel here to train with the Philippines’ Bureau of the Treasury (BTr).
Earlier, DoF personnel were invited to apply for the Knowledge Co-Creation Program (KCCP) of the Japan International Cooperation Agency (JICA), which offers Master’s and Doctorate degree scholarships in seven Japanese universities.
The DoF was also among the beneficiaries of postgraduate studies programs under the Australia Awards Scholarships, and several scholarship grants from the United States and the United Kingdom. — Elijah Joseph C. Tubayan

Revenue growth in financial inclusion

Traditionally, banks operating in emerging markets (EMs), including the Philippines, did not consider financially excluded individuals as profitable target customer segments. These financially-excluded sectors included micro and small to medium enterprises (MSMEs).
However, technological advances are greatly reducing the cost of serving these customers. Such opportunities are now opening doors for banks to reach a whole new portfolio of clients. We at SGV believe that driving greater financial inclusion will not only generate sizable economic benefits for banks, but could also generate incremental annual revenue of up to $200 billion by better serving financially-excluded MSMEs in 60 emerging countries. Specifically, 44% or $88 billion of such incremental annual revenue could be generated from the Asia Pacific region.
Improving financial inclusion will be easier in some markets than others, and are largely dependent on the types of available market infrastructure, as well as clear and supportive government policies.
In the Philippines, expanding the breadth and depth of financial inclusion is a policy priority of the Bangko Sentral ng Pilipinas. Some examples of policy and systemic drivers that spur financial inclusion include strong customer safeguards, responsible financial literary programs, bankruptcy regimes, regulatory incentives for banks, diverse financial ecosystems, and interoperable financial systems.
According to the World Bank Group, financially excluded MSMEs are predominantly located in EMs. More than 40% of MSMEs in the least developed countries reported challenges in obtaining financing, compared to 30% in middle-income countries, and just 15% in high-income regions. What is interesting to note is that 75% of the financially-excluded respondents reside in just 25 countries, with 2.2% of them in the Philippines.
Specifically for banks, the growth opportunities brought about by financial inclusion will yield a large impact on markets that are active and progressive with technology-led innovation.
The combination of these new technologies can significantly advance the financial inclusion agenda, particularly for countries with high levels of mobile adoption, e-payments, national digital identity systems, credit data infrastructure, and currency digitization. Much of this, of course, also relies on new technology and systems to safeguard banking systems and customer data. The more these digital applications progress, especially in the areas of cybersecurity protocols for banks and other financial institutions, the better the ability to securely exchange up-to-date, and even real-time customer information.
These are important features that can help MSMEs find consistent and simplified ways to identify and verify themselves with various parties, including credit providers. In fact, some markets are already using Digital Passports, which uses a secure and trusted system for multiple providers to exchange information, identify and scrutinize customers, and help build credit histories. Such a system would also facilitate Know Your Customer (KYC) and onboarding processes for customers who are switching between providers.
Assuming the presence of the right infrastructure and policies, banks can then adapt their operations to achieve profitable financial inclusion. We believe that focusing on the following three actions will be most successful:
1. Create offerings that are more relevant to customers and deepen account adoption
For banks to drive financial inclusion, they should develop relevant, affordable, and simplified financial solutions that meet the specific needs of their customers. This will require deeper customer understanding and a compelling customer proposition. These can include savings accounts with insurance coverage, personalized credit facilities, affordable trade financing, equipment purchase facilities, or unsecured loans for MSMEs. By developing a wider range of innovative products in their customer portfolios, banks can further engage and earn loyalty with newly on-boarded customers, and leverage on their growing relationships to drive cross-selling and up-selling opportunities.
2. Identify innovative channels to reach customers more effectively
In recent years, more and more banks have been looking at digital channels to enhance customer convenience without incurring significant costs. Digital assets can help banks overcome challenges caused by infrastructure and geography in developing countries, and can even enhance the lending process. These assets can also enable direct origination of loans and greatly reduce decision waiting times while delivering higher transaction volumes at the same time.
3. Find creative ways to manage risks brought about by a lack of credit history
One of the main issues faced by financially excluded individuals and MSMEs is the lack of a financial track record – which is what banks traditionally rely on to make lending decisions. Another issue is the inability to prove identity, address, and security details. To illustrate, loans granted to China’s agriculture sector account for just 1% of commercial banking credit portfolios. Farmers’ access to conventional bank loans are limited by the lack of typical credit scoring data. Consequently, many are forced to secure credit from “shadow banks” or moneylenders, leading to exorbitant interest rates. If banks can develop more creative credit profiling techniques, they could boost lending to a sector that sorely needs financial support.
Ultimately, a financial institution’s business model will identify the route it must take to achieve financial inclusion. Some may choose to develop innovative products or credit-scoring techniques, others may choose to evolve and upgrade delivery channels. Case in point, a microfinance institution is already aligned to meet the needs of small customers, which makes it easier for them to customize products. Meanwhile, telecommunications or Financial Technology companies are probably better placed to use innovative delivery channels, or to create alternative credit scoring techniques.
Given the current economic status of emerging countries, the time seems ripe to drive revenue growth through financial inclusion. Forward looking banks that take the opportunity to tailor customer offerings, develop innovative channels, and manage systemic risks to build market share early, may reap significant rewards and become big players in the development of EMs in the future.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
 
Vicky L. Salas is a Partner and the head of the Financial Services Organization service line of SGV & Co.

‘Weaponized’ Incentives and TRAIN 2

Most of the time, when passions are high it is because conflicting greeds are involved. Some rare times, when passions are high it is because conflicting principles are involved. Among the promontories of contention in the proposed TRAIN 2 or its TRABAHO version is the shift from gross income taxation and other “forever incentives” to net income taxation (e.g., CIT) and time-bound incentives for PEZA locators. Since the government is switching policy lanes, this question is a propos: “Is the old system broke?” By “broke” it means wasteful.
As I have previously observed, dismal scientists (economists) are drilled to confront a policy initiative with the question, “What is the market failure?” A market failure is economist-speak for a status quo that is broken because productive of net social waste. A government that intervenes without there being a market failure produces a government failure – a state of greater waste than before intervention. In real economies such as the Philippines, governments routinely violate the market failure canon in either of two ways: (i) by intervening despite there being no broken status quo; or (ii) by failing to lift an extant intervention that has become over time unproductive and wasteful because conditions have changed: either the market has grown and/or the technology has improved. Subsequent well-meaning administrations can try to clean up the mess left behind by past administrations and recoup the foregone welfare. This is what the Duterte DoF aims to do with TRAIN 2.
Past administrations adopted and grew the status quo fiscal incentives system now enjoyed by corporations in PEZA largely to induce entry. The rationale was that foreign investors deterred by institutional or market deficits were shying away from the Philippines. For example, the extant market may be too small for current fixed capital investment requirement, or the peso was too strong and thus wages too high to attract export platform investors – a ‘missing market’ failure. An analogous idea in trade policy is the “infant industry argument.” No firm – not even a monopolist – will break even let alone realize a profit under laissez faire in a missing market failure. But a direct or indirect subsidy or a tax holiday from the government can push firms to profitability and induce entry. If so, such a subsidy or tax holiday could eliminate the missing market and its social waste. The extent of required subsidy depends on the severity of the hurdles that have to be overcome. For example, a jurisdiction beset by small internal markets, high power cost, high logistics and transport cost, etc., will need more incentives to compete with another jurisdiction with better endowments.
incentive
An incentive frequently foisted to induce entry into a missing market is a franchise. The entrant loses money in the first few years and recoups in the subsequent years when the market has grown sufficiently. The franchise acts as an indirect subsidy in the form of future profits protected by the franchise in the subsequent years when the market has grown and matured sufficiently to allow two or more firms to be viable under market conditions alone. When initial losses of the pioneer have been sufficiently recompensed, the franchise becomes overstaying and wasteful. A sunset clause in the franchise contract – say, 25 years – specifying the number of years of its effectiveness usually limits the social cost. Unfortunately, many of the so-called pioneer or infant industry contracts did not have sunset clauses, thereby becoming endless dispensers of “forever incentives.”
The Duterte government is right to want to be rid of these legacy cash burns. We have done this to good effect in the past. The NASUTRA sugar monopoly, the coconut levy and the Oil Price Stabilization Fund (OPSF) were government failures that impoverished farmers and nation and when lifted brought great relief to suffering Filipinos.
That the discussion of incentives to correct a missing market failure has gravitated around incentives to attract entry is natural. But sometimes, entry is only one part of the equation. The incentives to stay is another. Where locators can decide whether to stay put or walk away from one jurisdiction to join another more clement one, the game changes. This happens when there is intense inter-jurisdiction rivalry for locators. As long as the jurisdictional rivalry persists, certain incentives for entry also serve as incentives to stay: as such, they remain useful as long as locators are highly mobile and rival jurisdictions keep knocking on their doors. Furthermore, many PEZA firms are subsidiaries of multinational companies whose factories straddle several competing locations at once. These can quickly reassign production volumes to the most favorable locations even without physically moving a factory. Vietnam has just raised the ante on the incentives tussle for bigger share of investor dollars. Under these circumstances, incentives become, as it were, “weaponized.”
Weaponized incentives resemble military spending for national defense against threats of outside invasion; as Adam Smith told us, national defense is a public good as long as the outside threat remains. In Manufacturing, the outside threat from our regional rivals never sleeps. You treat Tradables the same way you do Non-Tradables at your peril. “Weaponized incentives” is the idea underpinning the popular refrain, “We are not the only game in town.”
TRAIN 2, though overall in the right direction and should be supported, can make use of some tweaking; especially as it touches mobile Manufacturing and tradable services. Passions are high, yes, but it may not be because of greed but because of a conflict of principles.
 
Raul V. Fabella is a retired professor of the UP School of Economics and a member of the National Academy of Science and Technology. He gets his dopamine fix from hitting tennis balls with wife Teena and bicycling.

Improving passenger convenience and safety, innovation vs regulation

People are rational, they seek convenience and safety for themselves, their families and friends. Thus, if it is very inconvenient and unsafe to take multiple rides from house to work and vice versa, say tricycle from house and village, jeepney or bus, MRT/LRT, jeep again to office, repeat the 4 rides going back home, then people would rather drive their cars or motorcycles even if they have to endure heavy traffic, high parking fees, and occasional street flooding during the rainy season.
But when it is easy, safe and inexpensive or competitively-priced to get a ride-sharing vehicle, taxi or transport network companies (TNCs), people would leave their cars or motorcycles and relax or do work while inside the taxi or TNCs, which increases their productivity per day and hence, their income while reducing vehicle volume on the roads.
It is important therefore, that government regulations like those implemented by the Land Transportation Franchising and Regulatory Board (LTFRB) should expand and not restrict the supply of competing ride-sharing vehicles so that passengers will have more choices.
In a paper, “Innovation Versus Regulation: An Assessment of the Metro Manila Experience in Emerging Ridesourcing Transport Services” (2017) published in the Journal of the Eastern Asia Society for Transportation Studies, Vol. 12, authors Ma. Sheilah G. Napalang (UP School of Urban and Regional Planning) and Jose Regin F. Regidor (UP College of Engineering) cited the result of a survey made by Uber Philippines in 2016 that covered 1,450 respondents.
They also cited a study by de la Pena and Dizon (2016) on passenger preference between Grab taxi vs regular taxi. The two results are shown in table 1.
Table 1
There, the two surveys show that people’s trips are work- and household-related and they value a lot convenience, reliability and safety.
In addition to the above-stated convenience, the presence of multinational players like Grab and previously Uber also enable the passengers to use their account whether they are in the Philippines or Malaysia, Singapore, Indonesia, Thailand, other ASEAN countries. That is one advantage of multinationals compared to country-specific services and companies like regular taxi and buses.
The Metro Manila Development Authority (MMDA) also made a study last year on the busiest and often most congested roads in the region, and composition of traffic volume by type of vehicles. EDSA is the busiest and 67% of all vehicles there are private cars. These are people whose houses and offices are far from EDSA and hence, must take multiple rides if they do not drive their cars or motorcycles (see table 2).
Table 2
So when the LTFRB further bureaucratizes and makes it difficult for existing and new players in ride sharing to expand their services, people will experience (a) longer waiting time to get a TNVS or taxi, and (b) higher prices as these vehicles and drivers deal with high demand but supply is limited. And so many of them will have to drive their cars more often. Which further worsens the traffic congestion in EDSA and many other roads in Metro Manila.
The LTFRB and other government agencies (MMDA, city governments, LTO, etc.) must realize that their eagerness to “protect the commuters” and “reduce traffic volume” very often result in more bureaucracies, less players and hence, an outcome opposite to what they wish to achieve.
Competition leads to innovation – in pricing, convenience, safety — and hence, better choices for customers and passengers. But some players lobby for more regulations that tend to disadvantage new players, like big taxi operators who dislike the competition by new TNCs.
From the perspective of consumers and passengers, more players, more competition via innovation is better than regulations that limit competition. Limited competition means limited innovation, and hence, limited passenger choices.
 
Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers, a member of Economic Freedom Network (EFN) Asia.
minimalgovernment@gmail.com.

What if most want political dynasties?

At last Wednesday’s forum at the University of the Philippines BGC, “Understanding Federalism and its Implications (Part Two), two of the most knowledgeable speakers on Federalism, Dr. Ronald U. Mendoza, Dean, Ateneo School of Government, and Atty. Florin T. Hilbay, Associate Professor, University of the Philippines (UP) College of Law, lectured to members and guests of the sponsors: the Institute of Corporate Directors (ICD), with the Financial Executives Institute of the Philippines (FINEX) and Judicial Reform Initiative (JRI).
Dean Mendoza stressed on the three emerging issues on Federalism: first, can we afford the cost? And inversely, can we not afford the reform? The National Economic and Development Authority (NEDA) said the first year of implementing a federal form of government will cost up to P253.5 billion, versus the P82.3 billion projected to be brought in by the Tax Reform for Acceleration and Inclusion Act (TRAIN) during its first year. Can we gamble with the P170 billion shortfall, at this time of high inflation and the falling peso?
The second issue is Trust. Dr. Florangel Rosario-Braid deplores that with 67% of the people surveyed as not in favor of federalism — debates are just academic exercise as the administration appears to be dead-set on target dates to approve and implement its “Bayanihan federalism.” She warned of the possibility of Congress deleting or diluting many provisions pertaining to human rights and social justice, as the present Duterte draft now shows. Braid and other former 1987 constitutional drafters contend that the administration’s context and process, and politicians and people with vested interests pushing for it cannot not be trusted,.
And the third issue proceeds from the question of trust, according to Dean Mendoza: if the rush to federalism is not a sincere effort at reform, is this then the ultimate power grab? He recalled the 1972 charter change in the martial law of Ferdinand Marcos, where massive revisions in the 1935 Constitution were made to suit the “New Society.” Changes were ratified by the people in a plebiscite. The Marcos script can be reprised, today.
Atty. Hilbay, Solicitor-General in the term of President Benigno Simeon Aquino III, said, Yes, Federalism can be installed in a dictatorship — no need for academic discussion on the pros and cons, on the why’s and how’s. Precisely, the present administration does not like the 1987 Constitution because it is anti-dictatorship. The US Constitution is 200 years old, Atty. Hilbay said, and instead of junking it for the benefit of the incumbent governance, it has been amended 27 times to adjust to changes in the needs and ways of the American people over the years.
Federalism is a concept, Atty. Hilbay emphasized. Look for details — what do you want? Is it only decentralization, and weaning from Imperial Manila? But decentralization and empowerment of the regions are already in the 1987 Constitution, and further directed by the Local Government Code. Why don’t we be patient and change weak points in these, amend piecemeal. We don’t need a totally new Constitution!
And Atty. Hilbay, like Dean Mendoza, warned of martial law being “easier” to slide into, under the cunningly-crafted “lawless violence” clause added to justify dictatorship in the proposed new Federal Constitution.
With 18 regions and their self-contained bureaucracies in federalism, political dynasties will thrive and truly entrench, both academics lamented. “We’re talking here of 12 members of a political clan holding elected office, or 20 of them in elected office. For example, the governor and vice governor, and three out of the five mayors in a province are relatives,” Dean Mendoza said. The Anti-Dynasty Law must be passed, before Federalism is installed, if ever. But although The 1987 Constitution states in Article II Section 26, “The State shall guarantee equal access to opportunities for public service, and prohibit political dynasties as may be defined by law,” the enabling law has been passed over by each Congress since 1987. At the UP-BGC forum, a question was asked from the floor: what if most Filipinos want political dynasties?
President Duterte’s consultative committee in its draft federal constitution has agreed to allow relatives within the second degree of consanguinity to run only for two positions in the same election. But Duterte who has his own dynasty said while he was “for” abolishing political dynasties, he doubts whether the people will want this.
“A few of the principled men, I would say, want this kind of thing about dynasty abolished. I am for it. Ang problema lulusot ba ‘yan?” Duterte said in a speech during the General Assembly of the League of Municipalities of the Philippines. Duterte said some voters elect the relative of an outgoing official because they want continuity of policies, alluding to his own experience as 23 years mayor of Davao City succeeded by his daughter, Sara, Mayor since 2016, and his Vice-Mayor 2007-2010, and Mayor when he (Duterte) had to take the legal term- “rest” from mayorship 2010-2013. Son Paolo Duterte was Vice Mayor to Mayor Sara since 2013 until he resigned in 2017 after a very viral social media spat with his teen daughter (the one who had a controversial lavish pictorial at Malacanang Palace), who hinted that he had beaten her, according to a report (nypost.com/2017/12/26).
With population growing at the rate of about 2.34% per year since the early 2000s, there are now 100.98 million Filipinos (as of 2015) according to the Philippine Statistics Authority (PSA). Of these 53.85% were registered voters for the 2016 elections, of whom 81.95% or about 44.5 million actually voted (www.comelec.gov.ph). Roughly interpolating that half of those who actually voted were lower-middle class to poor (20.5% of population), and less-educated than the upper crust of rich and/or more elevated in status because of talent and capability, then we can understand Duterte’s smug confidence that most Filipinos want dynasties. “Sa atin, pagkatapos mo, they would ask for your son, or your wife,” he said. (ABS-CBN News Mar 20 2018).
In a study by Dr. Clarissa C. David, UP College of Mass Communication, she concluded that “after incumbency, dynasty is best predictor of votes gaining on average 11% more votes than another candidate and first-time candidates of political families have 8% advantage. Dynastic candidates are 3.6 times more likely to win an election (http://ateneo.edu). Dr. David added that as a group, the highly educated elite is not a big enough bloc to change the outcome of an election; it is more likely the social class “D” (the poor) who will sway the votes to their envisioned and expected “padron” in the dynasties of political patronage.
The general conclusion and recommendation at the UP-BGC forum was for Filipinos to be watchful about the widely-suspected moves towards the declaration of martial law, and to try and stop railroading into approval of charter change and the installation of federalism as our national government. The administration’s P100 million nationwide pro-federalism info campaign, approved and led by Duterte himself, must be matched in volunteer efforts by concerned citizens and organizations to “shore up political and electoral knowledge through the formal education system and the media system” (http://ateneo.edu, op. cit.).
And the country looks to the Legislature, particularly the more-dependable Senate (so far) to pass the Anti-Dynasty Law.
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com

2022 elections will decide Philippine history’s heroes and villains

August and September usually mark the peak of the Marcos martial law debates.
On August 21, 1971, the Liberal Party political rally in Plaza Miranda was bombed. The blast hurt scores and killed two. Among the injured were several LP senatorial candidates. It led President Ferdinand Marcos to suspend the writ of habeas corpus, which essentially justified arbitrary arrests. Several protest leaders were imprisoned. Others went underground. A surge in mass protests and opposition activities ensued.
On September 23, 1972, Marcos declared martial law; closed down the Senate, the House of Representatives, major newspapers, and radio/TV stations; and arrested opposition and protest leaders. The exodus of activists to the countryside rejuvenated the armed struggle for power by the Communist Party of the Philippines. This armed struggle has smoldered ever since.
On August 21, 1983, former Senator Benigno Aquino Jr. arrived in the Philippines, after deciding to come home from his US exile. He was shot dead at the Manila international airport, right on the tarmac. The assassination was traced back to the Marcos military. The ensuing massive protests culminated in the 1986 EDSA Revolution and installed the slain senator’s widow, Cory Aquino, as the new president.
Every year, these events are recalled by the generations of Filipinos that went through them, triggering similar debates between pro- and anti-Marcos sides among the millennial generation.
In the coming years, these martial law debates will rise in intensity, as the 50th anniversaries of events that happened in 1969 to 1972 are commemorated.
2019 will be the 50th anniversary of the 1969 presidential elections that saw Marcos reelected for a second term. It was an election marked by the widespread deployment of “guns, goons, and gold”. It will also be the 50th anniversary of the New People’s Army, the communist party’s armed force for winning political power.
2020 will be the 50th anniversary of the First Quarter Storm of 1970, which marked the momentous upsurge in student activism that changed the lives of an entire generation.
2021 will be the 50th anniversary of the 1971 Plaza Miranda bombing and the suspension of the writ of habeas corpus. It will also be 50th anniversary of the 1971 Constitutional Convention, which eventually allowed Marcos to stay in power beyond the two-term limit imposed by the old constitution.
In 2022, these will culminate in the 50th anniversary of the 1972 declaration of martial law itself.
We can therefore expect in the coming years a crescendo of debate on martial law fueled by unsettled issues about those historical events as well as revisionist efforts to change history.
But 2022 will also be a national election year, when we will elect a new president. Or perhaps a prime minister, if a new charter changes the designation of the national leader.
I see an interesting scenario for the national leadership contest in 2022.
A Marcos will definitely run, to rehabilitate the family name. Ferdinand Marcos Jr. presumably, but Imee is also a possibility. Note that a group of justices in the Supreme Court almost always votes as a bloc on major issues, such as the Marcos burial, martial law in Mindanao, and the quo warranto petition versus Chief Justice Sereno. They have enough votes for a decision in favor of vice-presidential candidate Marcos Jr.’s electoral protest.
If Marcos Jr. becomes VP and Duterte resigns in his favor before the 2019 elections, the new president cannot run for a second term anymore. (This is where Imee may come in.) He still can, if Duterte resigns after the elections. This is how Gloria Macapagal-Arroyo got to be president for nine years.
Speaking of GMA, her hunger for power remains insatiable, it seems. She wanted to become Speaker of the House so badly, that she couldn’t even wait after the President’s SONA to go for it. She claims she’s not interested in the presidency anymore. This was exactly what she said in 2003, that she was not running for reelection. Reneging on her promise, she declared her presidential candidacy in 2004. In the counting, she gained more votes than Fernando Poe Jr., with the dubious help of Comelec Commissioner Virgilio Garcillano and his “one million” votes. Practically everyone wanted to kick GMA out for cheating. But former president Fidel Ramos inexplicably rescued her crumbling administration after she said “I’m sorry!” on prime-time TV, and she survived what should have been another EDSA revolution. Wily and lucky, GMA is definitely a potential contender.
With Pres. Duterte himself chummy-chummy with Sara Duterte-Carpio’s Hugpong, is there any doubt that the Duterte family have their sights on 2022? Can Sara turn her back on a presumed filial duty to shield her father from the court cases that will surely hound him after his term ends? There’s your third potential contender.
Speaking of presidential daughters, don’t forget another one — Kris Aquino. She has the charisma, and enough of a rebellious streak in her, to run against a Marcos. After all, the 2022 election results will be the millennial generation’s historical judgment not only on the Marcos martial law regime but also on the 1986 EDSA revolution, her mother’s presidency, and her father’s status as national hero. The election results will define Philippine history’s textbook heroes and villains and what tomorrow’s children will learn in their history classes. With such huge stakes, how can Kris refuse?
A run by Kris will truly make the 2022 elections a battle royale between pro- and anti-martial law sides.
Among these presidential offsprings, except GMA, running will almost be a family obligation. An Erap son may also run for similar reasons, but he will be a weak contender.
Others may throw their hats into the ring, like Pacquiao, or VP Robredo. But given the tight field, if you don’t have a presidential parent to defend and a version of history to fight for, you’d probably be treated as a spoiler and told to get out of the way.
While anything can happen in Philippine politics, events seem to be leading inexorably towards a historical reckoning in 2022.
It is my hope that millennials will study Philippine history with utmost seriousness. They must prepare themselves for the unique historical privilege of rendering judgment through their votes on the main Philippine political players in the past fifty years.
Then, perhaps, we can move forward as a people and face climate change, microplastics in our water and the food web, the sixth global wave of species extinctions, the accelerating collapse of the Earth’s life support systems, and all the new 21st century problems that confront our children and grandchildren.
 
Roberto Verzola is a Senior Fellow of Action for Economic Reforms. He is currently president of the non-profit Center for Renewable Energy and Sustainable Technology (CREST).

IMF cuts Philippine growth forecast for 2018 amid new challenges

By Elijah Joseph C. Tubayan, Reporter
THE INTERNATIONAL Monetary Fund (IMF) lowered its gross domestic product (GDP) growth projection for the Philippines this year, amid downside risks from “rising inflation, continued rapid credit growth, higher US interest rates and US dollar, volatile capital flows, and trade tensions.”
The IMF expects Philippine GDP to grow 6.5% this year, a downward revision from the 6.7% estimate recorded in its July report. It kept the 2019 forecast steady at 6.7%.
“The economy continues to perform well but is facing new challenges,” the IMF said in its Article IV consultation staff report published on Friday, following discussions with local authorities here in July.
“However, short-term risks have risen, including inflation and overheating risks, and greater external uncertainty,” it added.
The IMF said rising inflation and inflation expectations, high and sustained credit growth, and the expansionary fiscal policy until 2019 “point to the risk of overheating.”
This is on top of external risks such as the global monetary policy tightening, global trade tensions, higher oil prices, a widening current account deficit, and portfolio outflows, which have put downward pressure on the peso.
“Nonetheless, the medium-term economic outlook remains favorable, placing the Philippines in a good position to tackle still-elevated poverty and inequality,” the IMF said.
The IMF said “strong” domestic demand will lead economic growth, supported by the government’s infrastructure spending and stable foreign direct investment inflows.
In a press briefing at the Bangko Sentral ng Pilipinas (BSP) complex on Friday, IMF country representative Yongzheng Yang said the downward revision of the 2018 growth forecast takes into account the slower-than-expected second quarter figures.
Mr. Yang said the second quarter slowdown — which was due to the weak performance of agriculture and exports — was only “temporary.” He expects “a rebound during the second half of the year,” driven by stronger household consumption due to increasing dollar remittances from overseas Filipino workers.
The economy grew by 6% in the second quarter, slower than the 6.6% a year ago and in the first quarter this year. For the first semester, GDP growth stood at 6.3% versus 6.6% in the same period in 2017.
The IMF’s GDP forecast compares with World Bank and Organisation for Economic Co-operation and Development’s estimate as of July at 6.7% for 2018 and 2019, and the ADB’s 6.4% and 6.7% projections for both years. The United Nations Economic and Social Commission for Asia and the Pacific expects GDP at 6.8% for 2018 and 6.9% for 2019.
TIGHTEN MONETARY POLICY
Mr. Yang said the government needs to further tighten monetary policy, while easing fiscal pressures to mitigate the risk of overheating.
The IMF “urged” the government to have a “neutral” fiscal deficit position at 2.4% this year and 2.5% next year, lower than the 3% and 3.2% programmed deficit cap for 2018, and 2019, respectively, but slightly higher than the 2.2% shortfall recorded in 2017.
“We fully support infrastructure investment. But we think it’s very desirable and very helpful to keep the fiscal stance neutral. That will reduce the risk of overheating. We have a monetary policy tightening, and that is a good move. But the monetary policy cannot do it alone. It needs the support of a more moderate fiscal stance,” said Mr. Yang.
The IMF report noted the government could ease the fiscal deficit by “intensifying efforts on the revenue side,” such as improving tax administration, and enacting the succeeding packages of the tax reform program.
It also recommended “further reduction” in non-priority spending, such as those unrelated to flagship infrastructure projects and social protection, when tightening of global financial conditions “engenders a surge in borrowing costs.”
The IMF said the central bank’s move to raise benchmark rates is “appropriate,” but noted that it “should look to do more.”
The BSP hiked interest rates by 150 basis points so far since May, in a bid to rein in inflation expectations, and mitigate second round effects, amid broadening price pressures.
“Higher rates will also mitigate inflation risks from the expected fiscal stimulus, weaker currency, and help anchor inflation expectations. The exact pace of monetary tightening should depend on evolving external and domestic conditions,” the report read.
The IMF sees inflation to average 4.9% this year and 3.9% in 2019, higher than the 4.7% and 3.8% forecasts for both years in its previous report.
Inflation in August accelerated to 6.4% from 5.7% a month ago and 2.6% a year ago. The eight-month average in the rise in prices stood at 4.8%, above the central bank’s 2-4% target range.
Also among the IMF’s recommendations to support growth include: the implementation of banks’ countercyclical capital buffer requirement; the approval of the amendments of the BSP charter to narrow data gaps from persons and financial institutions; replacing the rice import quota system with a tariffication scheme; further lifting restrictions on foreign investment; improving the ease of doing business; and promoting financial inclusion through digital innovations.

BSP sees Sept inflation at 6.8%

THE BANGKO Sentral ng Pilipinas (BSP) expects inflation to have further accelerated in September, due to higher oil and food prices, it said in a statement on Friday.
The central bank’s Department of Economic Research gave a September inflation forecast of 6.8%, with a range of 6.3% and 7.1%.
If realized, it would be the highest since February 2009’s 7.2% print, and is faster than the 6.4% recorded in August.
Headline inflation averaged 4.8% in the eight months to August, well above the 2-4% target band for 2018.
“(This is due to) higher domestic petroleum prices, higher prices of rice and other agricultural commodities due to typhoon Ompong, and the peso depreciation contributed to the upside price pressures for the month,” the BSP said.
Typhoon Ompong (Mangkhut), which hit northern Luzon earlier this month, caused P7- billion worth of damage on public infrastructure, according to the Department of Public Works and Highways. The Department of Agriculture on Monday meanwhile said that the typhoon wiped out P26.7 billion worth of crops.
“However, these could be partly offset by the downward adjustment in Meralco power rates,” the BSP added.
Manila Electric Company (Meralco) announced that overall electricity rates declined by P0.1458 per kilowatt hour (kWh) to P10.0732 per kWh this month, or a P29 cut in households’ bill consuming about 200 kWh.
“Looking ahead, the BSP will continue to remain on guard to evolving inflationary conditions to ensure that the monetary policy stance remains consistent with our price stability mandate,” the statement read.
The central bank has so far raised interest rates by 150 basis points since May.
The BSP said on Thursday that inflation may average 5.2% this year and 4.3% in 2019, well above the 2-4% target band. It also sees inflation to average at 3.2% in 2020.
Meanwhile, the Department of Finance (DoF) said inflation may have already peaked, estimating inflation rate at 6.4%, steady from the previous month.
“In September, month-on-month (MOM) price increase decelerated from 0.9% in August to 0.6%. September year-on-year (YOY) inflation is seen at 6.4%, unchanged from August,” the DoF said in its economic bulletin on Friday.
It noted price increases in food continue to push up headline inflation, but concurred with the BSP that the lower power rates could minimize the impact.
“Price increases in food items are the main drivers of inflation. The decline in power rates, however, moderated the inflationary pressure from non-food items,” the Finance department said.
“Strong BSP monetary action backed by two successive 50 bp policy rate hikes and the President’s support to administrative measures proposed by the Economic Development Cluster to remove non-tariff barriers on major food items will moderate food inflation in the short run. Policy reforms including rice tariffication and budget support for agricultural productivity programs will stem similar inflation episodes in the future,” it said.
President Rodrigo R. Duterte on Monday issued administrative orders to boost food supply and ease its distribution, such as lifting non-tariff trade barriers, cutting red tape in importation, setting up of public outlets and cold storage facilities, and the tight monitoring of market prices.
Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement on Friday that Mr. Duterte’s proclamation of a state of calamity in Ompong-affected areas should help manage inflation.
“We are getting ready to respond to the possible impact of the calamity on our macroeconomic targets. The declaration of a State of Calamity in the affected areas is one measure that will enable the government to use contingent credit lines and mitigate rising inflation,” he said.
Mr. Duterte signed on Thursday Proclamation Number 593 s. 2018, declaring a State of Calamity in Regions I, II, III and the Cordillera Administrative Region, which enables price control measures, unlocking funds for recovery and rehabilitation efforts, delivery of basic needs and services. — Elijah Joseph C. Tubayan

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