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France offering €400,000 grant for Metro Manila cable car feasibility study

THE Department of Transportation (DoTr) said it may tap a grant from France amounting to €400,000, or about P25 million, to conduct a feasibility study on a cable car route in Metro Manila.
“There is a grant from the French Embassy, and we are waiting for approval from the Office of the President,” Transportation Undersecretary for Administration and Finance Garry V. De Guzman said in a recent interview.
The study will evaluate the suitability of cable cars for Metro Manila’s transport needs, though other locations may be considered such as Baguio and Boracay.
Mr. De Guzman said France wants to focus on urban centers, adding that the Metro Manila project is not limited to EDSA. He said the cable car may also connect main lines to make it easier for passengers to move around.
Transportation Secretary Arthur P. Tugade said in May the DoTr is finalizing details on the cable car plan, subject to a reasonable fare that will make it competitive with other modes of transportation.
The government first floated the idea of installing cable cars a month after President Rodrigo R. Duterte took office in 2016. It is meant to augment existing traffic solutions, especially in highly-congested areas of Metro Manila.
In March 2017, Megawide Construction Corp. and GMR Infrastructure Ltd. also expressed their intent to explore a cable car route linking the Mactan-Cebu International Airport to major drop-off points in Cebu City. — Denise A. Valdez

PHL, Indonesia hold talks to revive Mindanao RoRo

THE Philippines and Indonesia held talks to revive a cargo service connecting Mindanao and Bitung, Indonesia, which was suspended shortly after its launch last year due to lack of demand.
In a statement, the Philippine Embassy in Jakarta said Ambassador Leehiong Tan Wee met with his counterpart, Indonesian Ambassador to Manila Sinyo Harry Sarundajang on July 13, in part to discuss the revival of the Davao City-General Santos City-Bitung roll-on, roll-off (RoRo) cargo service.
The RoRo service is intended to spark trade between the two countries by bypassing the usual Manila-to-Java trade routes, which are more expensive and indirect. Instead it hopes to build up direct trading links between Mindanao and regions of Indonesia near it, such as the island of Sulawesi across the Celebes Sea.
The RoRo service was launched by President Rodrigo R. Duterte and Indonesian President Joko Widodo on April 30, 2017, between Davao City and General Santos and Bitung in North Sulawesi.
In the statement, the embassy said Philippine-Indonesia trade was $7 billion in 2017, with Indonesia rising to the Philippines’ 9th-leading trading partner from 11th in 2015, when trade was $4 billion.
Following the meeting between the ambassadors in Manila, Mr. Wee consulted with stakeholders including the Management Association of the Philippines, the Philippine Chamber of Commerce and Industry, and the Federation of Filipino-Chinese Chambers of Commerce.
He also met with airlines to explore the establishment of a direct air route between Davao and Manado, the capital of North Sulawesi.

World Bank rates progress on rural projects ‘satisfactory’

THE WORLD Bank said it views progress to be “satisfactory” on the Department of Agriculture’s (DA) rural infrastructure projects that it funded.
In its Implementation Status & Results Report dated July 17, the World Bank said that the progress of the Philippine Rural Development Project (PRDP) “continues to be rated satisfactory.”
“An assessment of project impacts records increases in real household income, increase in value of marketed output, reduction in input and output hauling costs, increases in farmed area, increase in production volume, reduction in travel time from farm to market, increase in traffic density, and increase in school attendance,” the bank said.
“In addition, broader outcomes are being realized via the country-wide institutionalization and acceptance of the PCIP (Provincial Commodity Investment Plan) as a technically based planning platform for convergence between programs of the DA, LGUs (local government units), and other national government agencies,” it added.
The PRDP, which began in 2014, provides funding and technical support for building provincial roads, bridges, communal irrigation systems, potable water supply, solar dryers, greenhouses, and composting facilities.
The World Bank rated the project’s overall risk as “substantial.”
According to the report, results of the bank’s household survey for the project’s beneficiaries show a 15.20% increase in their annual household income in June, compared with December 2014, a slight improvement from the 15.16% increase recorded in December 2017.
This marks about half of the 30% increase targeted by May 2021.
The bank also reported that the income of beneficiaries involved in enterprise development grew 27% over the same period, little changed from the end of 2017, but approaching the 30% target.
Roads completed totaled 269 kilometers as of June, about 11.7% of the 2,300 kilometer targeted for May 2021.
Some 50%, or $249.54 million of the $501.25 million loan has been disbursed, while $3.54 million of the $7 million worth of trust funds have been spent.
In January, the World Bank opened an additional $170 million worth of funding for the project, but is has yet to be tapped. — Elijah Joseph C. Tubayan

Economists, technocrats signal in-principle support for TRAIN 2

ECONOMISTS signed a joint statement of support in principle for the Department of Finance’s (DoF) second tax reform package overhauling the corporate tax system and the investor incentives regime.
“As Congress deliberates on the second package of the reform, we express our support for the main principle of a corporate tax system that is broad-based and competitive relative to our peers in the region. More importantly, lowering the corporate income tax rate will help entrepreneurs and small and medium enterprises thrive. However, in the interest of fiscal prudence, the lowering of rates should be in conjunction with the rationalization of fiscal incentives,” the economists said in their joint statement of support.
The second tax reform package, filed as House Bill No. 7458, and known as TRAIN 2, after the name of the tax reform law (Tax Reform for Acceleration and Inclusion) is currently being considered by the House ways and means committee.
The measure primarily seeks to lower the corporate income (CIT) tax rate gradually to up to 20% from the current 30% to be competitive with peer economies in Southeast Asia, while streamlining fiscal incentives to grant them only to those who need them.
It hopes to streamline and remove some redundant incentives granted by 123 laws under 14 investment-promotion agencies, but retain those consistent with the government’s medium-term Strategic Investment Priority Plan, and those that are deemed contributing to the economy.
However, the government will replace the existing 5% gross income earned tax incentive, turning it into a 15% tax on net income but removing the “in lieu of all national and local taxes” provision of the tax code. The proposal also seeks to cap incentives at five years; disallow the use of value-added tax as an investment incentive; establish the Fiscal Incentives Review Board to administer tax perks; and expand the coverage of the Tax Incentives Management and Transparency Act.
The DoF’s version of the bill, meanwhile, seeks to raise revenue equivalent to 0.15% of gross domestic product (GDP) before cutting one percentage point off the CIT.
“We stand with the Department of Finance and the Department of Trade and Industry that tax incentives should be performance-based, time-bound, targeted, and transparent,” the economists said.
“We affirm the need for this reform and we call on Congress to take urgent action to ensure its timely passage,” they added.
The DoF hopes to have the second tax reform package within this year, in time for its implementation in 2019.
“Tax incentives that are given permanently discourage firms from becoming self-sufficient and stifle our ability to align incentives with strategic priorities as they evolve over time,” the economists said.
“Incentives are not the be-all and end-all of investment promotion. For our country to be truly attractive to investors in the long-run, the government needs to improve public infrastructure, human development, and the ease of doing business as long-term solutions to development and competitiveness,” they added.
The statement was signed by former Finance Undersecretary Romeo L. Bernardo; Professor Dante B. Canlas of the University of the Philippines (UP) School of Economics and President and Chief Executive of the Philippine National Oil Co. Alternative Fuels Corp.; Gerardo P. Sicat, professor emeritus at the UP School of Economics and former director-general of the National Economic and Development Authority; Gilberto M. Llanto, board member and former president of the Philippine Institute of Development Studies; Renato E. Reside, assistant professor of the UP School of Economics; Monetary Board members Felipe N. Medalla and Bruce J. Tolentino; and Arsenio M. Balisacan, chair of the Philippine Competition Commission. — Elijah Joseph C. Tubayan

What’s next after FDDA?

All things come to an end. The question is: when? As for everything else, we also seek closure in tax assessments. The decision to end the tax assessment sooner or later depends on us.
A taxpayer subject to a tax assessment may exhaust all efforts to answer the Bureau of Internal Revenue (BIR)’s allegations. These include the timely filing of a reply to the Preliminary Assessment Notice (PAN) and the request to reinvestigate or reconsider the Final Assessment Notice (FAN). At this stage, the BIR has to decide.
According to the National Internal Revenue Code of 1997 (Tax Code), as amended, after filing an administrative protest (i.e., a request for reinvestigation or reconsideration) to the FAN, the BIR may deny such a protest in whole or in part. The decision of the BIR is embodied in a Final Decision on Disputed Assessment (FDDA).
An FDDA can either close a burdensome tax audit or start another complex legal journey. If a taxpayer receives an FDDA, he needs to decide which path to take. The taxpayer may either end the assessment by paying; or he may choose a longer route by requesting a reconsideration from the Commissioner of Internal Revenue (CIR) or by filing a petition for review before the Court of Tax Appeals (CTA).
If the taxpayer chooses to pay the amount stated in the FDDA, he must do so within the period stated in the FDDA using Payment Form No. 0605. After paying the amount, he needs to transmit a copy of the payment form and the proof of payment to the signatory of the FDDA (usually the Regional Director or the Large Taxpayers Services Assistant Commissioner). He also needs to send copies of the documents to the assessment and collection divisions of the Revenue Region and the revenue district where the taxpayer is registered or assessed. Under Revenue Memorandum Order No. 33-2018, the BIR is required to issue an Authority to Cancel Assessment (ATCA) as proof of cancellation of the tax assessment.
If the taxpayer chooses to protest the FDDA, however, he may do so administratively or judicially. As provided under Revenue Regulations (RR) No. 18-2013, if the protest or administrative appeal is denied in whole or in part by the CIR, (i) the taxpayer may appeal to the CTA within 30 days from receiving the said decision; or (ii) elevate his protest through a request for reconsideration to the Commissioner within 30 days of the decision. Otherwise, the tax deficiency shall be final, executory, and demandable. Note that the remedies discussed are mutually exclusive.
In a request for reconsideration, the taxpayer hopes that the CIR will overturn his own or his authorized representative’s decision. The taxpayer must consider that a request for reconsideration is indirectly telling the BIR that it failed to fully consider all the circumstances of the case or that the BIR committed an error. Although a request for reconsideration will allow the BIR to rectify its mistakes, there are cases when the BIR will insist on its position and to deny the request for reconsideration. If this happens, the assessment could drag on for a bit longer and that the taxpayer’s only remedy will be the Courts.
In anticipation of the issuance of an FDDA, the company should also consider preparing to go to court if an unfavorable decision is issued by the CIR. The option to appeal the case to the CTA is open after receiving the FDDA or upon denial of the request for reconsideration before the CIR. In this case, the taxpayer should consider the following key decision points:

* Filing before the CTA has certain costs, such as filing fees, lawyer’s fees, hiring of an independent certified public accountant, and other incidental fees. It is, therefore, important that the cost-benefit of seeking judicial relief is one of the basic considerations.

* Seeking judicial relief takes a long time. If the taxpayer does not get a favorable judgment, he will still pay the interest on the tax that accumulated while the case was pending;

* Consider the legal and factual strength of the taxpayer’s case. The taxpayer must have a good legal basis before deciding to go to the CTA. An equally important aspect in going to the CTA is that the taxpayer must be able to support his legal arguments. Supporting documents must address all points in substance and form.

* The case may involve gray areas of the law, which will result in recurring exposure for the taxpayer. As the final arbiter of a tax controversy, the Court (CTA and Supreme Court) can shed light on unclear interpretations of the law, particularly when the BIR’s interpretation is not equitable and fair to the taxpayer.

Under RR No. 18-2013, the failure of the taxpayer to administratively or judicially elevate his protest to the FDDA will open up a remedy for the government — to collect the tax. Section 205 provides for civil remedies for collecting delinquent taxes; Section 207 provides for several summary remedies, such as the distraint of the personal property and the levy of the taxpayer’s real property.
If the amount is fully paid, pursuing a request for reconsideration or filing a case with the CTA are not viable options under the taxpayer’s current circumstances. The taxpayer may pursue a compromise settlement, abatement, or cancellation of tax liability.
Section 204(A) of the Tax Code provides that the CIR may compromise on the payment of internal revenue tax on grounds such as doubtful validity of assessment or when the taxpayer shows financial incapacity to pay the assessed tax. Section 204(B) of the Tax Code also provides that the CIR may abate or cancel a tax liability when (1) the tax or any portion thereof appears to be unjustly or excessively assessed; or (2) the administration and collection costs involved do not justify the collection of the amount due.
However, the CIR has the sole discretion to grant the offer of compromise settlement or abatement of taxes. The CIR’s denial of these remedies is not subject to judicial review. Also, interest on the tax deficiency continues to run while the application for compromise settlement or abatement is pending, and should be paid if the application is denied.
The choice of how to end the tax assessment is primarily with the taxpayer. There are shorter routes and there are longer routes. Some routes may be costlier than others. Whatever the action taken after receiving the FDDA, taxpayers must carefully weigh their options based not only monetary considerations, but on principles of equity as well.
 
Eliezer P. Ambatali is a manager 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.
Butch.Ambatali@ph.gt.com,
+63(2) 988-2288.

Unintended consequences and the proposed federal government

It cannot be said that the federal proposal is new to the country’s political landscape. In the past, this has been discussed as a stand-alone proposal, but more often in tandem with a shift to a parliamentary form of government. Debates run from the academic to the national government-led proposals. Not one has prospered because of, among other things, the hesitancy with revising the 1987 Constitution.
The current administration, however, has thrown caution to the wind and presented via “Consultative Committee to Review the 1987 Constitution,” and the federalism-inclined “Draft Constitution for a Strong, Indissoluble Republic,” which goes further than any attempt prior.
Beyond reservations on revising the 1987 Constitution, the other question is the success of a federal set up in the Philippine context. While there is some basis to support a shift to federalism (among them, the need to break away from “Imperial Manila” and develop the rest of the country in equal measure), many experts feel that these claims are not enough to hold up the costly experiment that may come with “unintended consequences.”
Recently, and not so recently, experts have given their own versions of the “unintended consequences” of a shift to a federal form.
Former Commission on Elections Chair Christian Monsod has said, “Since federalism reflects the history, sociopolitical, economic, and cultural characteristics of its context and there are existing inequalities, it tends to serve the interest of existing dominant groups in the federated states…it may not lead to “unifying communities, but to their unraveling because self-determination has its domino effect, such as the existence of minorities within a minority.” (http://www.gmanetwork.com/news/news/nation/585840/christian-monsod-shift-to-federalism-not-necessary/story/)
UP Political Scientist Gene Pilapil specifically calls out possible “unintended consequences” along with the “dangers of overreforming,” “hyperrationality” and “excessive optimism.” He is also not keen on undertaking key reforms “at one go.” (http://news.abs-cbn.com/blogs/opinions/07/19/18/opinion-heed-this-constitutional-experts-warning)
Ateneo de Manila Political Scientist Millard Lim also sees the scenario similarly: “the federalization project, because it will entail changing the republic’s political institutions, as something that should not be taken lightly. It is a serious undertaking because it is unwise to experiment with political institutions as this makes them hollow, unstable, and ultimately not duty-worthy.”
How much will this experiment cost? The Philippine Institute for Development Studies (PIDS) estimates conservatively anywhere from P44 to 72 billion in additional costs, not counting additional costs to other departments and the judiciary. (https://www.rappler.com/nation/198040-pids-cost-shift-federalism-senate-hearing-charter-change)
Previous debates have stressed the importance of taking more prudent routes of incremental reform, or as Pilapil puts, it “sequencing of reforms based on the “un-simultaneous time horizons.”
For example, when the Charter Change debate centered on issues such as ownership of land for foreigners along with the liberalization of other features of the economy to increase foreign investments, critics pointed out that “foreign investors are more concerned with non-constitutional issues — peace and order, the remittances of their earnings, infrastructure, the consistency of government policies, sanctity of contracts, graft and corruption, pollution and traffic — and what government does to address them…the investors are concerned with ‘security of land tenure’ or the assurance that they can continuously use the land they are occupying rather than in land ownership (not necessarily land ownership).”
The current debate carries the same line of thinking on several fronts including the inclusion of the Bangsamoro region and other reform agendas that may be pursued independent of a Charter Change and shift in the form of government.
Finally, the country may also take its cue from the experience of Latin America and importing institutional models (Weyland, 2009): “As these examples suggest, the import of institutions that do not “fit” well is frequently driven by high ambition. Political actors are eager to imitate foreign models that they perceive as successful; their quest for improvement makes them downplay the internal preconditions for replicating this success.” The authors points out that “early experience with over-ambitious, problematic institutional imitation…cannot effectively fulfill their tasks, guarantee compliance from office holders and regular citizens, and reliably guide behavior.”
The article encourages the examination of two factors: “the gap between domestic experience and expertise and the availability of external ideas and models” and “the magnitude of the (perceived) institutional task matters as well…where relevant actors merely seek to modify existing institutional patterns, the perceived need for external inputs is much lower, especially because local knowledge, namely an understanding of the context of gradual reform, becomes more important.”
 
Maria Elissa J. Lao is an Assistant Professor of Political Science at the Ateneo de Manila University where she is currently the Director of the Institute of Philippine Culture.

Corporate governance for GOCCs and listed firms

In the private corporate sector as currently governed by common law developments under the Corporation Code, the “business judgment rule” pervades in defining the duties, responsibilities, and liability of directors, trustees and officers. The rule proceeds from the corporate set-up of Centralized Management which grants to the Board the sole authority to determine policy and conduct the ordinary business of the corporation within the scope of its charter. As long as the Board acts honestly and in good faith, the courts will not interfere in their judgments and transactions; and that minority members of the Board and the stockholders cannot come to the courts to change the course of the administration of the corporate affairs.
In the Law on Private Corporations, it has been well-established that when resolutions or transactions are “passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or decrease the profits of the [company], the court has no authority to review them. … It is a well-known rule of law that questions of policy or management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment [for that] of the board of directors; the board is the business manager of the corporation and so long as it acts in good faith its orders are not reviewable by the courts.”
For purpose of corporate governance, it should be noted that the second part of the business judgment rule provides that directors, trustees, and officers cannot be held personally liable for corporate losses sustained and liabilities incurred by the corporation in the exercise of their business judgment. This principle of “non-personal liability” is now embodied in Section 31 of the Corporation Code which provides that directors or trustees shall be held liable for damages resulting in directing the affairs of the corporation on when the “willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith.” The general rule of “not being personally liable for corporate losses and liabilities,” unless it is proven that a director, trustee, or officer has acted unlawfully, with gross negligence, fraud or bad faith, has been upheld in an unbroken string of decisions of the Supreme Court.
The concept of business judgment rule as to shield directors, trustees, and officers in the private corporate sector from personal liability for the losses sustained by the corporation in the conduct of its affairs is generally inapplicable to their counterparts in the GOCC Sector.
Under the GOCC Governance Act, any form of negligence (not “gross negligence” as required in the private sector) means a breach of the fiduciary duty of GOCC directors, trustees, and officers to act with extraordinary diligence; and that in fact, all that has to be proven is that the GOCC incurred losses or damage in the conduct of its affairs, and the presumption is that the acting directors, trustees or officers have not discharged their obligations to “Act with due care, extraordinary diligence, skill and good faith in the conduct of the business of the GOCC.”
Section 21 of the GOCC Governance Act requires that “The members of the Board and the Officers must exercise extraordinary diligence in the conduct of the business and in dealing with properties of the GOCC. Such degree of diligence requires using the utmost diligence of [a] very cautious person with due regard for all circumstances.”
GOCC DIRECTORS/TRUSTEE AND OFFICERS ARE ‘PUBLIC OFFICERS’
It is not the GOCC Governance Act that raised for the first time the standard of diligence for directors, trustees, and officers of GOCC to the “extraordinary diligence,” since it is the Code of Conduct and Ethical Standards for Public Officials and Employees that expressly includes within its coverage officials in GOCCs, which under the aegis of “Professionalism,” provides that “Public officials and employees shall perform and discharge their duties with the highest degree of excellence, professionalism, intelligence and skill.”
GOCC
Prior to the enactment of the GOCC Governance Act, while there was little doubt that all members of the Governing Boards of Chartered GOCCs were deemed to be public officers as they were expressly covered by the Civil Service system under the 1987 Constitution, those in the nonchartered GOCCs considered themselves and were treated to a great extent as private sector directors/trustees and not as public officials. This practice was borne out of the understanding that nonchartered GOCC are “private corporations” and not government corporations, having been organized under the Corporation Code, and that the members of their Boards of Directors/Trustees were nominated and elected into office by the stockholders, and do not receive any appointment from the government that would make them public officers or government appointees.
To remove all doubts as to the status of Board Members of GOCCs as public officials, Section 15 of R.A. 10149 mandates that every “Appointive Director shall be appointed by the President of the Philippines from a short list prepared by the GCG.” In other words, no Appointive Director in the GOCC Sector covered by R.A. 10149 would enter upon his duties except pursuant to an appointment from the President of the Philippines. Furthermore, R.A. 10149 unified the duties, obligations and responsibilities of all Directors and Officers, as public officials, in all GOCCs, chartered and nonchartered, and made a single standard applicable to all as provided in Section 12 of the Act.
While breaches of the fiduciary duties of directors, trustees, and officers in the private corporate sector would expose them to civil liabilities, those in public corporate sector are liable to criminal prosecution as well.
To illustrate, when through gross negligence, fraud, or bad faith, a director/trustee or officer in the private sector causes losses to the company, Section 31 of the Corporation Code simply makes them personally liable for the losses sustained by the corporation or the damages incurred to person who deal with the corporation. In contrast, that same situation makes the GOCC director, trustee or officer criminally liable under Section 2 of the Anti-Graft and Corrupt Practices Act, falling in either of the following punishable acts:
(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative . . . functions through manifest partiality, evidence bad faith or gross inexcusable negligence. …
(g) Entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.
GOCC Directorship Raised to the Highest Order of Fitness and Qualifications
The GOCC Governance Act provides that “All members of the Board, the CEO and other officers of the GOCCs including appointive directors in subsidiaries and affiliate corporations shall be qualified by the Fit and Proper Rule to be determined by the GCG in consultation and coordination with the relevant government agencies to which the GOCC is attached and approved by the President.” The Fit and Proper Rule was duly promulgated as one of the organic documents in the GOCC Sector, and provides for the qualifications and disqualifications for nominees or appointees to the Governing Boards of GOCCs.
The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP
 
Cesar L. Villanueva is the Vice Chair of the Corporate Governance Committee of the Management Association of the Philippines (MAP), the former Chair of the Governance Commission for GOCCs and the Founding Partner of the Villanueva Gabionza & Dy Law Offices.
cvillanueva@vgslaw.com
map@map.org.ph
http://map.org.ph

President Duterte failed to do the impossible: end contractualization and ‘endo’

As this is being written (hours before the State of the Nation Address), a massive protest rally is being mounted to denounce President Rodrigo Duterte for failing to fulfill his campaign promise to put an end to contractualization and “endo.”
“The moment I assume the presidency, contractualization will stop,” promised presidential candidate Rodrigo Duterte in 2015. When President Duterte had not put an end to contractualization after six months in office, Budget Secretary Benjamin Diokno said: The candidate Duterte is different from President Duterte. You make campaign promises but when you see the data you realize it’s impossible to fulfill.” Any voter can say that of any candidate for president.
In fact, all five presidential candidates in the 2016 general elections promised to put an end to contractualization if elected. Yet none of them, not candidate Duterte, had a good grasp of the crux of contractualization and its ramifications as none of them had substantive experience in running a business that employs a large number of workers. Nay, none of them had run a business. Except for Grace Poe, they spent much of their adult life in government service.
President Duterte did try to end contractualization upon his assumption of the presidency. He warned employers: “Stop contractualization. It will not do good to our country. Don’t wait for me to catch you because I will be unforgiving. If I find you out, I’ll just simply close your plant. I can always find a thousand reasons to do it, believe me.”
Contractualization continues to this day, first because the Department of Labor and Employment allows it. Contractualization is generally understood in the business sector as the arrangement by which a principal (owner or chief executive officer of an enterprise) farms out to a contractor the performance or completion of a specific job within a specified period. This is the arrangement preferred by industrialists whose business operations peak and ebb depending on the season.
There are also projects such as those in construction that require companies to hire workers only for a specific period, like two years, the estimated length of time to complete the project. Construction would slow down to a snail’s pace as construction companies would build with regularized workers only. The over-hyped “Build, Build, Build” program of the Duterte administration would practically grind to a halt.
In fact, the government is one of the biggest buyers of outsourced labor in the country. Civil Service Commission (CSC) data show that last year, more than 27% of the 2.4 million government workers or almost 700,000 were “job order” or “contract of service” employees. Of the almost 120,000 new hires last year, 65,200 were taken as contractual workers.
The CSC allows the hiring of people on the basis of job orders if the jobs are of short duration such as the hiring of secretarial staff when the country hosts an international conference or for a specific piece of work like the collection of garbage after a big event such as the celebration of Independence Day.
Secondly, stopping contractualization will not do the economy any good. It would stunt the growth of small and medium entrepreneurial ventures which hire workers on short-time basis.
Export companies whose demand for their products are seasonal, such as Christmas décor, would lose their buyers if they cannot produce the volume ordered on time, due to a small work force.
There is much confusion on what “endo” is. Businessmen differentiate “endo” or end of employment contract from contractualization. “Endo” is the practice of hiring personnel on a temporary basis, usually for five months only, to avoid making them regular employees.
Under the Labor Code, an employee who remains employed after the probationary period of six months automatically becomes a regular employee entitled to the usual fringe benefits.
A regular employee is also commonly referred to as a permanent employee because that is virtually what he becomes — a permanent feature in the workplace. “Endo” is the work arrangement favored by many small-scale entrepreneurs, not because it avoids giving fringe benefits, as politicians and labor leaders mistakenly think, but because it makes it easy for the employer to terminate an employee performing badly.
Philippine labor laws are extremely protective of the employee. In fact, the Labor Code says that any question on the meaning of labor laws shall be resolved in favor of the employee. According to our labor laws an employee may be terminated, dismissed, or fired for just cause. Just causes include serious misconduct, habitual neglect of duties, breach of trust, and commission of a crime.
The words “serious” and “habitual” are relative adjectives while the words “misconduct,” “neglect,” and “trust” are abstract nouns. They are all subject to various interpretations. DoLE arbiters and officials will invariably interpret those words favorable to the employee.
In the service industry, prompt, courteous, and correct service is of utmost importance. In the fiercely competitive fastfood business it could be the competitive edge. Rudeness to customers or serious misconduct, indolence, or habitual neglect of duties, and sloppy handling of food are intolerable in the restaurant business. Errant personnel must be replaced right away to protect the reputation of the place. But it is virtually impossible to terminate a regular employee. That was my frustration when I was in the business of ice cream parlors (Coney Island Ice Cream).
On Labor Day, the President signed Executive Order No 51 supposedly ending “endo.” What the executive order really did was merely make direct hiring the norm in employment. The companies who farmed out to service contractors or labor providers the performance of certain jobs merely terminated their contracts with the service or labor providers. The result was the mass layoff of as many as 200,000 workers.
“Endo” is not entirely eliminated as direct employers can still dismiss directly hired personnel before their completion of six months of employment or before they are regularized in accordance with labor law.
The President has given up on ending contractualization and “endo.” He has “farmed out” that complex job to Congress. He had coming to him the anger of organized labor for promising, in the words of Secretary Diokno, to do the impossible.
 
Oscar P. Lagman, Jr. is a member of Manindigan! a cause-oriented group of businessmen, professionals, and academics.
oplagman@yahoo.com

A leader’s responsibility with words

It was the first-ever formal one-on-one summit between a US President, Donald Trump, and the Russian President, Vladimir Putin, held July 16 in Helsinki. At the joint news conference afterward, the final question from the US went to Jonathan Lemire from the AP (www.washingtonpost.com, July 16, 2018, transcript courtesy of Bloomberg Government):
“Just now, President Putin denied having anything to do with the election interference in 2016. Every US intelligence agency has concluded that Russia did.
What — who — my first question for you, sir, is who do you believe?
My second question is would you now, with the whole world watching, tell President Putin, would you denounce what happened in 2016 and would you warn him to never do it again?”
Trump’s short answer: “My people came to me, Dan Coats came to me and some others, they said they think it’s Russia. I have President Putin; he just said it’s not Russia.”
“I will say this: I don’t see any reason why it would be.”(Ibid.).
Bipartisan outcry furled and rose like a tornado in the US why Trump would cling to Putin’s denial and embarrass the US and its intelligence agencies internationally. The US Director of National Intelligence himself, Dan Coats, whom Trump publicly disbelieved, issued a statement saying that the intelligence community had been clear about Russia’s “ongoing, pervasive attempts” to undermine US democracy (BBC News, July 16, 2018).
Still, in Helsinki, Trump was asked from the floor:
US House Speaker Paul Ryan (Republican) said Mr.Trump “must appreciate that Russia is not our ally…There is no moral equivalence between the United States and Russia, which remains hostile to our most basic values and ideals,’ he said, adding that there was ‘no question’ Moscow had interfered in the 2016 election.”
At the end of that disastrous Q&A with media in Helsinki, Putin ceremoniously rewarded Trump with a tournament football, a symbolic “turnover” of the successful hosting of Russia of the recently played FIFA World Cup football tournament to the US co-hosting with Canada and Mexico of the 2026 games. Could be, or couldn’t be (who knows?) — a symbolic “carrot” reward for good behavior by Trump at the now-notorious Helsinki summit.
An article in the New York Times alleged that Trump’s fear (according to one of his closest aides who spoke on the condition of anonymity) is that any admission of even an unsuccessful Russian attempt to influence the 2016 vote raises questions about the legitimacy of his presidency (nytimes.com, July 18, 2018). Two weeks before his inauguration, Trump was shown highly classified intelligence indicating that President Vladimir V. Putin of Russia had personally ordered complex cyberattacks to sway the 2016 American election (Ibid.).
That Trump had “misspoken” on loyalties deemed traitorous and pathetically tried to backtrack on demonstrated bespoken allegiance sends a chill to the democratic world. But the real sting comes from Putin: “I believe that Russia is a democratic state, and I hope you are not denying this right to your own country, you’re not denying that United States is a democracy. Do you believe United States is a democracy? And if so, if it is a democratic state, then the final conclusion in this kind of a dispute can only be delivered by a trial, by the court, not by the executive, by the law enforcement.” This alludes to the rule of law in democratic countries that should have by now settled the politically-clouded issue of foreign meddling in the US elections, and the participation of schemers and victims (Washington Post, July 16, 2018, from Bloomberg transcript of Helsinki summit).
Inevitably, and quite instinctively, the rest of the world watching this most disturbing tableau of changing leadership styles directed by changing principles must anticipate coming pain from disenchanted expectations.
“I simply love Xi Jinping,” President Rodrigo Duterte said at a press briefing just before leaving for China, referring to his Chinese counterpart. “He understands my problem and he’s willing to help. And I’d like to say, ‘thank you, China.’” (The Philippine Star April 10, 2018). The declaration of love for Communist China sounds so much in line with the “sleeping with the enemy” romantic hero that Trump sees himself to be, vis-à-vis Russia.
“Don’t believe that I didn’t do anything about the (West Philippine Sea) issue, that I just let it be. I told him (Xi) this straight the first time I said, ‘I’m going there to dig my oil.’ And then he said… ‘We have just become friends and we have just begun to get to know each other. Let’s not ruin the relationship that we have,’” Duterte said, quoting the Chinese leader (The Philippine Star, May 21, 2018). Analysts have stressed that the United Nations-backed 2016 arbitral tribunal ruling allows the Philippines to assert its sovereign rights in the South China Sea, with international support, without resorting to war.
Xi sounds so like Putin, and Putin like Xi, as Duterte sounds so like Trump and Trump like Duterte — spoken, misspoken, and bespoken.
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com

Investors dig in ahead of State of the Nation speech

By Arra B. Francia, Reporter
THE MAIN INDEX slipped on Monday as investors positioned their bets ahead of President Rodrigo R. Duterte’s State of the Nation address (SONA).
The bellwether Philippine Stock Exchange index (PSEi) slipped by 22.81 points or 0.3% to end at 7,376.8 while the broader all-shares index added 6.62 points or 0.14% to finish at 4,473.32.
“Investors placed bets ahead of the SONA on varied expectations of what President Duterte is expected to tackle later this afternoon. Value turnover was still weak… it picked up when compared against the last few trading days,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile message on Monday.
Value turnover accelerated to P5.08 billion after some 657.02 million issues switched hands, compared with 568.58 million worth P3.43 billion on Friday.
Papa Securities Corp. trader Gabriel Jose F. Perez said value turnover would have amounted to P4 billion, were it not for P1.1 billion in block sales.
Without the block sales, Mr. Perez said, “PSEi ended the day just 22.81 points down…as investors anticipated President Duterte’s SONA.”
“The hesitation was felt throughout as the index ended with a low value turnover of only P4.0 billion,” he said in an e-mail.
Regina Capital’s Mr. Limlingan noted that investors also digested the release of data on the country’s budget deficit, which widened to P193 billion last semester after registering some P54.3 billion for the month of June alone. The January-June deficit is 27% short of program.
Sectoral indices were equally split between those that gained and losers. Industrials led the day’s gains with an uptick of 104.82 points or 0.99% to finish at 10,638.66, followed by mining and oil which increased by 45.99 points or 0.47% to 9,742.74 and financials which went up by 4.08 points or 0.22% to close at 1,836.31.
The three other sub-indices that lost consisted of property which gave up 25.14 points or 0.68% to 3,631.88, services which slumped by 6.62 points or 0.45% to 1,441.57 and holding firms which dipped by 19.49 points or 0.27% to 7,151.92.
Foreigners turned buyers, with net inflows of P195.99 million versus net sales of P445.20 million on Friday.
“Notably, today’s net foreign buying figure of P196M also failed to prop up the index. Recall that previous net foreign buying days don’t tend to last for more than a few days so we shouldn’t be immediately optimistic that the net foreign selling has already stopped,” Papa Securities’ Mr. Perez said.
Half of Monday’s 20 most active stocks finished with losses, led by the 2.48% decline in Puregold Price Club, Inc. to P45.25 apiece and PLDT, Inc.’s 2.04% drop to P1,344. The eight that gained were led by San Miguel Food and Beverage, Inc. (up 12.9% to P70) and Metropolitan Bank & Trust Co. (up 4.14% to P72.90).

Peso inches up versus US dollar

THE PESO climbed slightly as the dollar continued to decline amid ongoing trade tensions between the US and China.

THE PESO strengthened slightly on Monday as the dollar weakened amid sustained concerns over the trade spat between the United States and China.
The local unit ended Monday’s session at P53.48 versus the greenback, stronger by three centavos from the P53.51-per-dollar finish on Friday.
The peso strengthened immediately Monday, July 23, as it opened the session at P53.41 versus the greenback. It climbed to its intraday high of P53.39, while its worst showing stood at P53.49 against the US currency.
Dollars traded declined to $399.6 million from the $474.05 million that exchanged hands the previous session.
A foreign exchange trader said the peso strengthened slightly as the dollar continued to decline due to ongoing trade tensions between the US and China.
“The dollar-peso opened the session at P53.41 as the dollar continued to slip since last Friday,” the trader said in a phone interview, noting the dollar index traded lower.
Reuters reported that the dollar index was down 0.1% at 94.327, slipping further from a one-year high of 95.656 touched on July 19, on the back of the remarks made by US President Donald J. Trump.
In an interview with CNBC aired on Friday, Mr. Trump said he was ready to slap tariffs on all Chinese imports worth $500 billion, escalating trade policy tensions.
Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, said the weakness of the dollar may have come from lingering concerns over the impact of the trade war.
“This weakness may have come from the perception on the impact of the trade war on the world economy with major players calling out the US for restraint and urging talks to resolve issues,” Mr. Asuncion said in a text message.
Meanwhile, another foreign exchange trader attributed the slight strengthening of the peso to the remarks made by the Bangko Sentral ng Pilipinas (BSP) of a possible interest rate hike at its monetary policy meeting next month.
“The peso strengthened following the hawkish tone of the BSP last Friday,” the trader said.
“Let me say that the BSP is considering strong follow-through monetary adjustment at the next meeting of the Monetary Board in August,” BSP Governor Nestor A. Espenilla, Jr. said in a speech on Friday.
For today, the first trader expects the peso to move between P53.40 and P53.55 versus the dollar, while the other trader as well as Mr. Asuncion gave a P53.40-P53.60 forecast range. — Karl Angelo N. Vidal

Arroyo takes over as new leader of the House

REP. GLORIA MACAPAGAL Arroyo waves during the third session of the 17th Congress ahead of the State of the Nation Address. — AFP

By Charmaine A. Tadalan
FORMER PRESIDENT and Pampanga Rep. Gloria M. Arroyo, within the hour before the 4 p.m. scheduled delivery of the State of the Nation Address (SONA), walked up the Speaker’s rostrum and took an oath, officiated by Ang Kabuhayan Rep. Dennis C. Laogan.
But Speaker Pantaleon D. Alvarez remained at his House leadership post as President Rodrigo R. Duterte delivered his 3rd SONA on Monday.
The House of Representatives as of writing was holding a special session in an attempt to make Ms. Arroyo’s speakership official.
2018 SONA logo“Certainly it was different. It was not regular. There was no roll call. There was no mace; so, how do you determine whether there was quorum or not,” Rep. Romero S. Quimbo told reporters.
“But the vote showed… majority, if you look (if) there’s any rule in Congress, the most basic is majority always rules.”
A manifesto supporting Ms. Arroyo as Speaker, replacing Mr. Alvarez, was circulated among members, garnering a total of 161 signatures.
Among those who abstained were Reps.: Romero S. Quimbo, Jorge B. Banal, Francis Gerald A. Abaya, Jose Christopher Y. Belmonte, Teddy B. Baguilat, Jr., Kaka J. Bag-ao, Jocelyn S. Limkaichong, Gary C. Alejano, Josephine R. Sato, and Christopher V.P. de Venecia.
House Minority Leader Danilo E. Suarez explained majority of the House members recognized Ms. Arroyo as the Speaker of the House, but the President allowed Mr. Alvarez to stay as the Speaker for the SONA.
There was an appeal for a status quo, Mr. Suarez said, because if no one gave in, there would not have been a House Speaker during the SONA.
Surigao del Sur Rep. Prospero A. Pichay Jr., said it was Mr. Duterte who requested that “former Speaker Alvarez be allowed to preside.”

CHARTER CHANGE
Mr. Alvarez, in his speech at the opening of the session, pushed for a “self-executory anti-political dynasty provision” in his bid to amend the 1987 Constitution.
He said that while he is amenable to anti-dynasty provisions, imposing term limits have an “unintended effect,” which results in the proliferation of political dynasties.
“Let’s push for the self-executory anti-political dynasty provision… but I propose that term limits be removed.”
Political analysts, however, do not share his view, maintaining that a term limit is vital in keeping a democratic nation.
“The purpose of term limits was to enhance democracy, to give others a chance to govern or to represent constituents. It also is a good way of encouraging innovation in governance,” University of the Philippine (UP) Law professor Antonio G. La Viña told BusinessWorld in a text message.
“Term limits did have the effect of giving incentives for family members to run to protect the family interest. The rationale (all) together of the anti-dynasty provision is to prevent that travesty. In any case, term limits and prohibition are both good for democracy,” Mr. La Viña added.
Also sought for comment, Dr. Perlita M. Frago-Marasigan, UP Political Science assistant professor, said, “Politicial dynasties thrive not because of term limits but because of the greed of political dynasties for power.”
She noted that term limits enable democracy in a country as it allows others to have a chance to rule.
“If you eliminate political dynasty by removing the very mechanism (having term limits) that prevents self-perpetuation of power, then you can have an elected official that can rule as long as he/she pleases,” she said.
Mr. Alvarez further asserted that the stumbling block to the country’s full realization of “its potential for growth and development” has been the Constitution, and not the political leaders.
In contrast, Senate President Vicente C. Sotto III emphasized the importance of keeping the 1987 Consitution in place.
“Tradition is also a useful guidepost to temper our desire for novel adventures and experimentation. To do otherwise is to court disaster,” Mr. Sotto said as he opened the session in Senate.

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