How PSEi member stocks performed — June 19, 2018

June 20, 2018 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Tuesday, June 19, 2018.

BCDA to take over Mile Long; revenue to fund AFP upgrades

June 19, 2018 | 11:22 pm

THE GOVERNMENT will set aside revenue generated by the redevelopment of the Mile Long property in Makati to the military modernization program, the Department of Finance (DoF) said.
At the economic managers’ meeting with President Rodrigo R. Duterte last week, it was decided that the 2.9-hectare Mile Long property currently held by the Privatization Management Office (PMO) be transferred to the Bases Conversion and Development Authority (BCDA) so the proceeds can be used for the Armed Forces of the Philippines (AFP) Modernization Program.
“I told the president, it will be easier for us to do it through a GOCC (government-owned and -controlled corporation) to go into a joint venture with the GOCC,” Finance Secretary Carlos G. Dominguez III told reporters.
“So what we are contemplating is to transfer the property to BCDA and have them do the joint venture but we will have a special approval committee for the design of the joint venture,” he added.
He said that the transfer of the property can be done through an Executive Order.
“And also we want to make sure the funds for this will be allocated as the President requires 100% for the military” said Mr. Dominguez.
The BCDA is primarily tasked to convert former military bases into commercial areas. It has a mandate to remit 32.5% of its earnings to AFP programs, 50% to development efforts in Clark and Subic bases, 5% to housing loans for those affected, and the balance remitted to the Bureau of the Treasury.
The Mile Long property was the subject of a long-running legal dispute between the government and Sunvar Realty Development Corp., until a Makati court ruled in favor of the government in August 2017. Mr. Duterte characterized the episode as “economic sabotage” after the alleged illegal occupation of a government-owned property for nearly 50 years.
Mr. Dominguez said that there are back payment issues as the case is unde appeal.
“But those are not major issues,” he said.
According to Mr. Dominguez, a part of the property will be redeveloped into a high-rise mixed-use building that is “large enough to have three elements: commercial, office, and residential.”
“We have also gone to Makati and said we would like to change the floor area ratio (FAR). We want it to be as high as possible. The mayor said that it should be no problem. So the value of the land goes up if you have a higher FAR there,” he said.
However, he said that the valuation has yet to be finalized, but noted that it will be based on a new FAR assumption.
Mr. Dominguez said that the current FAR is at 8, but the government is seeking approval for a ratio of around 16-20.
He added that the redeveloped complex may include a bus terminal, due to its strategic location near the Metro Manila Skyway.
The concept for the project was developed by architect Felino Palafox, Jr. — Elijah Joseph C. Tubayan

Taxation by LGUs emerging as a key TRAIN concern

June 19, 2018 | 11:20 pm

ECONOMIC zone investors want to continue being exempt from local government taxes, amid plans to modify the investor incentives regime as part of the second tax reform package, a request which the government has promised to review.
In the meantime, it will retain the One Stop Shop system for investors to help the latter in dealings involving the permit process with local government units (LGUs), the Department of Finance (DoF) said.
Economic zone locators have asked the DoF and Congress to continue shielding them from local government taxes.
Finance Undersecretary Karl Kendrick T. Chua told reporters on the sidelines of a conference yesterday that he is “always open to ideas and suggestions,” adding that the DoF will review the investors’ request.
He said, however, that the government will retain the One Stop Shop Centers attached to investment promotion agencies, which will continue to help businesses processing their respective permits with other national government agencies as well as LGUs.
“We are not changing the One Stop Shop. We are amending the incentives, not the process and procedures. The One Stop Shop of PEZA (Philippine Economic Zone Authority) will remain and that is something we think is good, and will continue,” Mr. Chua said.
According to the Special Economic Zone Act of 1995, a one stop-shop center is mandatory in all ecozones to facilitate the registration, licensing and issuance of permits to locators.
Currently, locators enjoy a 5% gross income earned tax in lieu of all other national and local taxes.
The second package of the tax reform program aims to replace that scheme with a preferential 15% tax on net income while removing the “in lieu” provision, as it undermines the autonomy of LGUs to impose their own taxes.
Semiconductor and Electronics Industries in the Philippines Foundation, Inc. and the Philippine Association of Multinational Companies Regional Headquarters, Inc. are among the business groups that are seeking to remain shielded from LGU taxes, while others are pushing for maintaining the status quo.
Asked whether the DoF will move to retain the “in lieu” provision, Mr. Chua said: “We are in discussions on all proposals but we’re reviewing them… we’ll study it seriously.”
“Everything is possible but we think our proposal is better. But we will see,” he added.
Mr. Chua said PEZA will remain the main liaison between investors and LGUs.
“PEZA can still implement whatever the LGUs want to be implemented. Instead of businesses talking to each and every LGU, the businesses can continue talking to PEZA and the PEZA will coordinate with other offices to simplify the process,” he said.
Mr. Chua also noted that with the passage of the Ease of Doing Business Act, businesses can expect streamlined government processes.
Aside from replacing the preferential rate, the second package of the tax reform program hopes to withdraw some “redundant” incentives, while retaining those consistent with the government’s medium-term Strategic Investment Priorities Plan (SIPP) to be administered by the Fiscal Incentives Review Board (FIRB), while capping them for five years.
It also proposes to reduce the corporate income tax rate from 30% to 20%, subject to certain conditions.
Mr. Chua also disputed PEZA’s claim that the drop in approved foreign investment pledges was due to uncertainty generated by reforms to the corporate incentives regime.
He said that approved investment pledges do not necessarily determine the actual foreign direct investment inflows.
He said that investment pledges typically fluctuate, with tax reform not the only reason for the variation in approval levels. — Elijah Joseph C. Tubayan

Foreign chambers blame TRAIN uncertainty for flat FDI outlook

June 19, 2018 | 11:19 pm

FOREIGN investors said the uncertainty generated by the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law’s second phase is behind the leveling off of foreign direct investment (FDI) forecasts for 2018.
“The flattish estimate on FDIs can be attributed to the wait-and-see behavior of companies who are considering the Philippines as an investment destination,” European Chamber of Commerce of the Philippines President Guenter Taus said in an e-mail message late Monday.
“Until CTRP [comprehensive tax reform package] 2 is finalized, it could be risky for companies to invest in the Philippines, which currently has the highest corporate income tax (CIT) in the region,” Mr. Taus added.
The EU accounted for nearly a fifth of FDI in 2017, or $1.68 billion. While the EU’s investment in the Association of Southeast Asian Nations rose last year, only 2.3% went to the Philippines, according to Mr. Taus.
Last week, the central bank raised its 2018 FDI inflow projection to $9.2 billion — higher than the January forecast of $8.2 billion but still lower that 2017’s record $10.05 billion.
“It is to be expected that investors will await the actual effects as a new tax reform package is being implemented,” Nordic Chamber of Commerce of the Philippines President Bo Lundqvist said in an e-mail, also late Monday.
“As the new tax reform will have a permanent positive impact on the market, it can be expected that FDI will continue growing, provided the economic agenda of the administration is kept on track,” he added.
The Nordic Chamber noted that the information technology–business process outsourcing sector, where growth is currently flat, is expected to pick up this year.
The Canadian Chamber of Commerce (CanCham) in the Philippines, Inc. welcomed the central bank’s forecast, which it said pointed to “the continued strength of the Philippine economy,”
However, CanCham President Julian H. Payne said in mobile message on Monday that midyear factors should also be taken into account “with caution as much can change either up or down, depending on both internal and external factors.”
According to BSP Deputy Governor Diwa C. Guinigundo, the key sectors for this year’s FDI inflows are manufacturing, utilities, real estate, information and communication, as well as financials and insurance. — Janina C. Lim

DA focused on fixing supply-chain issues to address shortages

June 19, 2018 | 11:18 pm

A NEWLY appointed undersecretary said the Department of Agriculture (DA) is currently focused on improving the supply chain for farm produce to address complaints by manufacturers of inadequate raw materials, which is forcing them to resort to imports.
Undersecretary for Agribusiness and Marketing Jose Gabriel M. La Viña told reporters late Monday that Secretary Emmanuel F. Piñol’s marching orders for him include addressing supply chain problems in agriculture.
“The manufacturers say that we do not have enough raw materials, that’s why we have to import. The producers say that we don’t have enough people to sell to,” he said.
“We have to map out the needs of the manufacturers here and somehow, match that with the producers,” he said.
Mr. La Viña said his mandate also includes the development of rubber production in the Philippines, which is the sixth-largest producer of natural rubber. The rubber industry is poised to serve a proposed tire factory in Mindanao.
Mr. La Viña said that Mr. Piñol also told him to set up more outlets under the TienDA Para sa Bayani program, a “farmer’s market” style initiative which enables growers to sell their produce directly.
The DA is set to inaugurate the fourth TienDA Para sa Bayani in Camp Evangelista, Cagayan de Oro, by next week. The department hopes to have about 10 to 20 such outlets. He added that he has special instructions to set up such outlets for military pesonnel at bases nationwide.
“There are still some problems that we need to resolve such as the cost of the goods. These are the things we’re looking at — how to bring the prices down so that the soldiers will really decide to go there rather than the markets.”
He added he has instructions to ensure that producers can supply agricultural goods to South Korean supermarket chain E-Mart.
Mr. Duterte signed a P28-million agricultural supply agreement during his visit to South Korea earlier this month. — Anna Gabriela A. Mogato

Oil explorers bat to retain perks under service contract system

June 19, 2018 | 11:14 pm

THE petroleum exploration industry needs to retain incentives that the tax reform law may seek to eliminate in order to encourage risk taking, and added that removing these perks will stifle investment.
“Nobody is investing now, nobody is exploring now, nobody is looking for the next Malampaya and if you ask them, it’s all because of the instability of government policies,” said Rufino B. Bomasang, chairman of the Philippine Petroleum Association, in an interview on Tuesday.
“No one is interested. Foreign companies are not coming in,” he added.
He said the current incentive system works, and its elimination goes against the direction taken by regional neighbors who have been overhauling their rules to attract more foreign direct investment (FDI).
He was referring to the service contract scheme, which was introduced with the issuance of Presidential Decree (PD) 87 in the 1970s at the onset of the first global oil crisis in 1972, he said. At that time, the Philippines was fully dependent on imported oil.
Mr. Bomasang said PD 87 was patterned on the production-sharing system in Indonesia and other countries. The scheme was found to be successful for those that wanted to assert ownership and control of their petroleum resources while attracting capital and technological know-how, he added.
He said PD 87 stayed intact under succeeding administrations, especially after the validity and effectiveness of petroleum service contracts were reaffirmed in the 1987 Constitution through Financial and Technical Assistance Agreements (FTAA) that allowed up to 100% foreign participation.
In a speech delivered at the Fourth Joint Economic Briefing on Tuesday, Mr. Bomasang described the system as having succeeded in attracting technically and financially qualified companies, while eliminating speculators.
“From 1973 to 1987, 134 wells, mostly offshore, were drilled, all based on a lot more adequate sub-surface information, especially from the extensive seismic surveys. Furthermore, most wells were drilled beyond 2,000 meters, unlike previous wells, which were all less than 1,000 meters in depth,” he told participants of the conference that focused on foreign direct investment in the Philippines.
Mr. Bomasang said PD 87 offers attractive financial incentives, including tax-free importation of equipment and supplies, exemption from all taxes except income tax, and income tax assumption — or the payment of income tax out of the government’s share. It also provides for accelerated depreciation, free-market determination of crude oil prices, and easy repatriation of investments and profits.
With the risks it takes on, the service contractor is entitled to full recovery of capital and operating costs and a service fee of 40% of the net proceeds. For the government, the share is at least 60% of the net proceeds.
The recoverable operating costs are also capped at 70% of gross proceeds in a year. The government is assured of its share from the start of commercial operations, whether or not the company is making money.
“Unfortunately, in the last four to five years, petroleum exploration in the Philippines has practically stopped with no major foreign oil and gas company coming in,” Mr. Bomasang said, pointing to the perceived instability of government policy.
He cited the Commission on Audit (CoA) ruling against the government’s income tax assumption of the Malampaya gas-to-power project that provides a stable supply of energy for a number of power plants in Luzon.
“And now the proposed TRAIN (Tax Reform for Acceleration and Inclusion) II, which seeks to remove most of the incentives under PD 87,” Mr. Bomasang said.
He said considering the “importance and urgency of finding indigenous petroleum and given the current lack of active exploration activities due to apparent policy instability, this is certainly not the time to remove the incentives for the upstream petroleum industry.”
“This is a very high-risk industry which is different from all others, but of vital and strategic importance to national energy security. It definitely needs these incentives more than ever before,” he said.
Mr. Bomasang said on behalf of the Philippine petroleum association he is suggesting that PD 87 be excluded altogether from the second tranche of the TRAIN law.
“Excluding it and hopefully a favorable resolution of the CoA case will definitely result in important strategic and economic benefits for the country,” he said. — Victor V. Saulon

Our Solid Waste Dilemma

June 19, 2018 | 11:04 pm

After the intense summer heat, Typhoon Domeng ushered in the rainy season with the then seemingly benign effects given its projection of not making landfall. Perhaps, said storm was a welcome event as it cooled down the heat-weary homes, especially in urban centers.
Lo and behold, Typhoon Domeng appeared to be a reminder of the bitter reality we are in — extreme weather as the new normal.
Although easily explained by scientists or weather meteorologists, the fact that the monsoon rains of the past several days caused so much flooding still baffles. One has now been accustomed to rainfall alerts with the qualification of no storm signal. In particular, Typhoon Domeng already exited the Philippine Area of Responsibility, yet still threatened Luzon with heavy rains due to the enhanced southwest monsoon.
The incessant rains of the past week or so likewise served as a grim wake-up call to our mounting solid waste management problem. Yes, rains kept pouring, but that exposed our cities’ vulnerability to flooding mainly because of clogged waterways and esteros. Thus, news reports which accompanied Typhoon Domeng and the monsoon rains included huge volumes of garbage dumped into creeks and rivers, as well as hardened residue from cooking oils constricting drainage flow.
In the last couple of months, the country’s problem on solid waste management has once again taken center stage. This was triggered by headlines pointing to the Philippines as the third biggest contributor of plastic pollution to the world’s oceans. Although the study where the findings are based on was published a few years back, and questioned by concerned agencies for its veracity, these did not stop civil society organizations or policy makers to trigger a renewed focus.
Of course, the immediate reaction, or proposed solution, is to ban a general class of plastics.
This has been the sentiment of legislators for a time now as several bills advance the prohibition against plastic packaging, one way or another. Currently, beverage containers or plastic bottles have caught attention, as if they are the poster boys of plastic pollution.
Looking deeper into the issue, however, are plastics really the root cause of the problem?
Certainly, plastics in the oceans and waterways pose a grave threat to marine species and public health, but any solution must be based on data, science and facts. One fact for sure is that the emergence of plastic use was driven by market demand, and to offer a better, which back then was supposed to be a more environmental friendly alternative to paper bags. To this point as well, a good policy addressing our solid waste problem should at the minimum reflect or consider an accurate waste characterization and analysis of tons of garbage lying on our shores and blocking our waterways. This way, we will know the composition of garbage that was not properly disposed and get a good sense of the leakages.

Moreover, a good starting point in addressing our solid waste problem is to go back to the basic law, which was supposed to deal with it in the first place. Republic Act No. 9003 or the Ecological Solid Waste Management Act of 2000 has many issues such as the Not-In-My-Backyard (NIMBY) attitude against landfills, technical and financial capacity to engineer sanitary landfills, and the lack of budget of the National Solid Waste Management Commission (NSWMC). What is sticking out, however, common to environmental laws, is the issue of enforcement and implementation.
To illustrate, the Ombudsman, in coordination with the NSWMC, is swamped with cases against local government units that continue to operate illegal dumpsites. Also, the compliance with the establishment of a Materials Recovery Facility (MRF) in every barangay, or at least in a cluster of barangays, has remained very low.
Interestingly, a study on the marine plastic pollution by the McKinsey Center for Business and Environment revealed that: “The Philippines has remarkably high collection rates; the nationwide average is roughly 85% — and near 90% in some dense urban areas, such as Metro Manila. Rates are 80% or lower in less dense areas, such as the Autonomous Region in Muslim Mindanao, but even some very rural areas have collection rates above 40%.”
In assessing various solutions for the different solid waste scenarios for the subject countries, the same study presented that: “For instance, the Philippines, with high collection rates, benefited the most from improving open dump sites or finding alternative treatment options such as gasification facilities.”
But are we even open to these “alternative treatment options,” such as waste-to-energy technologies, as another policy intervention?
Lastly, it seems that we miss, or we choose not to discuss, the point that our solid waste problem is mainly caused by our behavior.
Simply look at ATM areas, especially during paydays, where receipts are cluttered around the waste bin, to relate to this fact.
In shaping behavior to address the solid waste problem, we now turn to Republic Act No. 9512 or the Philippine Environmental Education Act, and not just RA 9003. RA 9512 clearly mandates government to “integrate environmental education in its school curricula at all levels, whether public or private.”
What ever happened to this law?

Lysander N. Castillo is an Environment Fellow of the Stratbase ADR Institute and Secretary-General of the Philippine Business for Environmental Stewardship.

China mercantilism in the Belt and Road Initiative and the US free trade challenge

June 19, 2018 | 11:00 pm

There seems to be a predominant sentiment to demonize the United States.
These sentiments are variations of a theme, which include: a) “US protectionism” vs G7 nations, the European Union (EU) and China; b) US is a declining power while China is now the “new vanguard” of globalization; and (c) US withdrawal from the Paris Agreement is adverse unilateralism while China or Germany is the new leader of the “save the planet” movement.
These sentiments are based on illusion and emotionalism than hard data and propelled more by anti-Trump hysteria and pro-China wishful thinking in its Belt and Road Initiative (BRI).
Here are the numbers that show why these assertions are based on illusion than reality. These data sources are (a) GDP: IMF, World Economic Outlook database, April 2018; (b) Tariff rates: Fraser Institute, Economic Freedom of the World (EFW) 2017 Report; (c) Coal use in million tons oil equivalent (mtoe): BP, Statistical Review of World Energy, June 2018.

Tariff rates’ standard deviation of tariff rate means the degree of tariff variation, the higher the standard deviation, the more protectionist an economy is for certain merchandise goods and commodities.
Covered here are the world’s six biggest economies in terms of GDP size, current or nominal prices. The Philippines is added to help compare our GDP size, trade and energy/climate policies.
These numbers show the following:
One, the US remains the biggest economy in the world despite anemic growth over the past decade (for instance, not one of the eight years of “hope and change” that the US economy grew 3% or higher). Its GDP size is nearly equal to the combined size of China, Japan, and Germany, the second-, third-, and fourth-largest economies.
Thus, to say that the US is a declining anchor of globalization is based on illusion.
Two, the US has the lowest average tariff rates in the industrialized world, has much lower rate, nearly one-third (1/3) that of China. Thus accusing “US protectionism” and implying that the rest of G7, EU, and China are non-protectionist is again based on illusion and not hard data.
Three, US withdrawal from the Paris Agreement is a wise move as China and India are the world’s biggest consumers of coal power, a favorite whipping commodity of the “save the planet” movement.
In 2017, China’s coal consumption was more than five times larger than the US; even India’s use was larger than the US.
On a related note, it is wrong for the anti-coal groups in the Philippines to call for further coal restriction since our coal use is very small even compared to “green” Germany and Japan, and much smaller than those of India and China.

China’s BRI can be considered more as a mercantilist project than a free trade project. Mercantilism is a 16^th to 18^th century economic policy that viewed more exports and less imports — more wealth accumulation via protectionism while having aggressive exports — as good policy.
Check China’s BRI information and these terms stand out:

• push further exports amidst slowdown in global trade;

• assist and promote troubled State-Owned Enterprises (SOEs) via lucrative projects abroad;

• enhance the absorption capacity of export markets in the emerging world;

• access to resource-rich nations in Central Asia, Middle East, Africa and Southeast Asia;

• globalize Chinese technological and industrial standards across emerging markets.

Dutertenomics’ build-build-build (BBB) with high involvement of China banks and contractors is falling along the China BRI mercantilism. This means the government’s build-build-build requires lots of loans-loans-loans from China and necessitates tax-tax-tax via TRAIN and succeeding tax laws.
The US’ zero tariff, zero subsidy challenge during the G7 Summit in Canada early this month is somehow addressed to China. As shown by the numbers, China is far out from going to zero and thus the Trump administration’s policy is equalized high tariff with China. Judging from current movement in global stock markets, China stocks in Shenzhen and Shanghai are experiencing heavy beatings. Very likely Xi Jinping will blink first.
Meanwhile, this June 20, the Stratbase ADR Institute, Inc. (ADRi) is hosting a roundtable discussion on “The 21st Century Silk Road: Perils and Opportunities of China’s Belt and Road Initiative” with Mr. Richard Heydarian as main speaker, with yours truly as one of the three reactors. Venue is the Tower Club, Makati City.

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

Trump declares war on allies, befriends foes

June 19, 2018 | 10:57 pm

President Donald Trump has been all praise for North Korea’s Kim Jong Un and has yet to say anything negative about Russia’s Vladimir Putin. On the other hand, Trump was the classic contrarian in the recently concluded G7 Summit in Canada and he has engaged in a war of words with Canadian Prime Minister Justin Trudeau.
That war of words has fanned the beginning of a trade war between Canada and the US, initiated by Trump and responded to by Trudeau.
Actually, it’s not just with Canada that Trump has started what could escalate into tit-for-tat retaliatory measures by other countries, specifically traditional US allies that are members of the G7, as well as Mexico and China.
During his presidential campaign, Trump severely criticized America’s trading partners and military allies for “ripping off” the US. According to him, the balance of trade tilted heavily in favor of other countries, because of subsidies and currency manipulation, and the US had been footing too much of the bill for the security alliances with Western Europe.
Trump also attacked China for unfair trade practices that gave China a huge trade balance over the US. In truth, in America, one has to dig deep into a display of consumer products to find the ones that are “made in USA” and not made in China.
American industries have bristled at this trade imbalance, even while US consumers have benefited from cheap Chinese-made goods.
Over two months ago, Trump announced that he would unilaterally impose tariffs on steel and aluminum exports to the US. When this set off loud protests from America’s trading partners, Trump backed off and declared that Canada and Mexico had been granted a “temporary reprieve” from the tariffs. But after the G7 summit, Trump announced the lifting of the reprieve and the imposition of a 25% duty on steel and a 10% duty on aluminum imports into the US.
Canada is the biggest steel exporter to the US, accounting for some 17% of American steel imports. South Korea, Mexico, Brazil, and China are also major exporters to the US. But what is more telling is that nearly 90% of Canada’s steel and aluminum production go to the US.
And yet the US also exports steel and aluminum to Canada and enjoys a trade surplus of $2 billion. According to Trudeau, Canada buys more steel from the US than any country in the world and half of US steel exports go to Canada.
One of the reasons given by Trump for the stiff tariffs is that Canada poses a “security threat to the United States.” In this regard, Trump made the historically inaccurate claim that the Canadians had burned the White House during the revolutionary war (in fact, the British did).
Said Trudeau, “That Canada could be considered a national security threat to the United States is inconceivable.” Trudeau pointed out the many wars and international conflicts where Canada and the US have fought side by side.
He added, “These tariffs are an affront to the long-standing security partnership between Canada and the United States and, in particular, an affront to the thousands of Canadians who have fought and died alongside their American comrades in arms.”
Having said that, Trudeau announced some $16.6 billion in retaliatory tariffs to be imposed on American steel and aluminum exports to Canada, along with a list of US-made consumer and durable goods. According to him, his government has made sure that the products in the list can be substituted with those made in Canada or imported from other trade friendly countries, so as not to negatively affect Canadian consumers.
At a press conference after the G7 summit, while Trump was meeting with North Korea’s Kim Jong Un, Trudeau declared:
“It would be with regret, but it would be with absolute certainty and firmness that we move forward with retaliatory measures on July 1^st, applying equivalent tariffs to the ones that the Americans have unjustly applied to us. I have made it very clear to the president that it is not something we relish doing but it is something we absolutely will do, because Canadians are polite and reasonable, but we also will not be pushed around.”
For Trump, those were fighting words. He immediately responded by calling Trudeau “dishonest” and by pledging to “punish the people of Canada.”
The rhetoric was even more strident from Trump’s chorus line, with economic and trade advisers Larry Kudlow and Peter Navarro hurling personal insults at Trudeau on network television. Navarro went as far as to declare that “there is a special place in hell” for people like Trudeau.
This prompted senior Republican Senator Orrin Hatch to snap that Navarro should have kept his big mouth shut. Chastened, Navarro apologized.
But the war has just begun.
What are the implications? If the trade war with China also flares up, as well as with Mexico and the European Union, US companies doing business overseas could find themselves losing out to their foreign competitors. European retaliation against the US could hit consumer goods to the tune of $4.4 billion in annual sales, according to analysts.
Trump’s economic advisers have dismissed the fear of increased prices in consumer goods, pointing out that the higher cost of aluminum will be insignificant in the case of a can of Campbell soup. But that argument may not apply in the case of big items like automobiles. The cost of manufacturing cars in the US could significantly go up. Furthermore, according to one analyst, “Any foreign company that competes with American manufacturers in international markets may benefit. Why? Their business would get a boost if it is targeted primarily at European customers or other countries that retaliate against the US.”
On the other hand, while the US steel industry may have a virtual dominance of the US market, it may have to cope with unintended consequences. Already operating at 75% capacity, the steel manufacturers may be unable to meet domestic demand even at 100% capacity — that aside from suffering in the Canadian market where half of US steel and aluminum exports go.
And then there is the underground economy. It is said that when taxes hit the roof, the economy goes underground. During the period of Prohibition, when liquor sales were banned in America, Canada was a major source of smuggled liquor and spirits. These were sold and consumed in illicit bars called speakeasies. Then there is the possibility of smuggled pharmaceuticals. Anything is possible.
In 1995, prize-winning documentarist-satirist Michael Moore wrote, produced and directed the film, Canadian Bacon, a parody on a “war” between Canada and the US.
It started with the US president wanting to revive the cold war with Russia in order to create a crisis that could boost his diminishing public approval rating. But when the Russians decline, the president’s national security adviser exploits a violent brawl over a game of hockey between Canadians and Americans.
The White House aide mounts a media propaganda blitz, ferociously attacking Canada. Unintentionally, the sheriff of a US city near the border with Canada mistook this for an actual declaration of war and began to make preparations for battle.
Like all Hollywood films, this one had a happy ending. The misconstrued “war” was averted.
But the trade between the US and other countries is just beginning to heat up — and like any war, the principal casualties will be the civilians, average consumers like ourselves.

Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.
gregmacabenta@hotmail.com

On-call work schedules make it hard to have a life

June 19, 2018 | 10:55 pm

By Noah Smith
IN RECENT MONTHS, a number of big, bold proposals have been advanced to relieve economic pressure on the poor, including a federal job guarantee, a universal basic income and single-payer health care. But a lot of more modest but still important ideas are being overlooked. One of these is the idea of stable work scheduling.
Over the years, many employers, especially retailers, have moved away from reliable, fixed schedules where workers have the same hours every week. The initial reason they did this was to meet demand — when there are lots of customers in a store, you need lots of workers to serve them, but when the store is almost empty, paying a lot of staff to stand around simply hurts the bottom line.
But variable work schedules have gone well beyond simply matching staffing levels to customer numbers. Companies realized that they could eke out improvements to their bottom lines by keeping low-paid, insecure workers on call at all times, desperately hoping to be given the chance to work. The horror stories abound. Some workers are inexplicably not given hours for an entire week. When others request scheduling changes, they are answered with dramatic cuts in their hours. Still others have on-call scheduling, where they are forced to sit by the phone waiting to see if they’ll be given paid work.
This sort of insecure scheduling, which now applies to about 10% of the US work force, hurts workers in a number of ways.
First, being on call constrains a worker’s unpaid hours, preventing them from getting another job, completing various types of chores, managing child care or enjoying many leisure activities.
Second, income uncertainty makes it harder for people to plan their consumption and save money. Surveys find that unpredictable schedules are a significant source of stress.
A number of Democratic legislators, including Massachusetts Senator Elizabeth Warren, have been pushing for a fix. Their bill would set minimum weekly hours, require two weeks’ notification of scheduling changes, ban employers from retaliating against workers who request different schedules, and implement a number of other changes. But the effort is sure to see plenty of pushback from retailers, who will claim that the proposed regulations will hurt their profits.
Enter academics.
In 2015, an interdisciplinary team of researchers led by University of California, Hastings legal scholar Joan C. Williams conducted experiment with Gap, Inc. to see how more regular scheduling would really affect a retailer. Their results demonstrated that if done right, established schedules aren’t just good for workers, but for corporate profits as well.
After a seven-month pilot study at three stores, Gap decided that it would eliminate on-call scheduling and implement two weeks’ notice for changes to working hours at all of its stores. The full experiment, which included 28 stores and ran for nine months, went further. At those stores, workers were given an app that let them swap shifts without manager approval, and allowed managers to post new shifts as the need arose.
Core employees were offered a soft guarantee of 20 hours a week. Managers attempted to maximize the consistency of hours for employees, and the stores were paid to add staff at times when demand was predicted to be high — a practice known as targeted additional staffing.
The changes had a number of positive effects — not just for the workers, but for managers and for the company as a whole. The workers who received the soft guarantee of 20 hours a week saw this promise honored, and their extra hours didn’t come at the expense of other employees. All employees saw the consistency of their hours increase. This didn’t hurt sales or productivity — it led to increases.
The median store where the experiment was carried out saw a 7% increase in sales, and generated an additional $6.20 of revenue per hour per employee. Since this is a very large increase in sales and productivity, and the only cost associated with the program was the modest expense of targeted additional staffing, the researchers estimate that the company’s return on investment was high — in other words, regular schedules almost certainly help the bottom line as well as the top.
Why did these stores make money instead of lose money? Any lost flexibility from consistent scheduling was more than made up for by other factors.
One of these was reduced turnover costs — more consistent hours meant that fewer employees quit, reducing the need to spend money hiring and training new people. Also, surveys indicated that morale improved at the stores — happier workers tend to be more productive. Finally, managers simply wasted less time planning schedules, allowing them to do more important work.
This study has several important lessons.
First, legal efforts to mandate and/or reward regular work scheduling shouldn’t be viewed as helping workers at the expense of employers, but as a way to help both at once.
Second, the solution to the problem of irregular scheduling requires a multipronged attack — banning certain practices, using innovative new technologies and changing corporate culture.
In an age of big ideas, regular work scheduling may not seem Earth-shattering, but it’s a low-cost way to make the lives of the US’s precarious service-worker class a lot less painful.

BLOOMBERG

Electric scooters come of (volt)age

June 19, 2018 | 10:50 pm

Text and photos by Bjorn Biel M. Beltran

WITH the launch of the production models of its new Ionex electric scooter line, it is clear that Taiwanese motorcycle manufacturer Kwang Yang Motoring Co. (KYMCO) is gunning for a spot alongside the leaders of the global electric vehicle (EV) movement.
Unveiled by KYMCO in Taipei, Taiwan, on June 12 were two of the 10 planned models under the Ionex line, namely the Many 110 EV and the Nice 100 EV. The introduction of the Ionex production models followed the scooters’ world preview program at the Tokyo Motorcycle Show held at the Japanese capital in March.
The Ionex is not only a new electric scooter line, but is also a mobility concept in which features like fast charging and easily detachable batteries are supported by a comprehensive network of power outlets and energy stations across Taiwan — addressing EVs’ range anxiety issues. Plus, the bikes are lighter and sleeker compared to their competitors.
The Many 110 EV, which has a top speed of 59 kph, sports retro styling suitable for younger riders while the Nice 100 EV, which can reach speeds of up to 45 kph, aims to attract a wider audience of electric scooter converts. Both bikes have a range of around 60 kilometers when fully charged.
‘ELECTRIC WITHOUT COMPROMISE’
At the Ionex Taipei International Conference, where the new scooters were unveiled, KYMCO general manager Danny Wang said the company is targeting an over 50% share of the electric vehicle market in Taiwan, and added KYMCO intends to become the “pioneer of the green movement so everyone can embrace electric without compromise.”
The Many 110 EV and Nice 100 EV each has a core battery and a five-kilogram “swapping battery,” which can be taken out of the scooter so this can be recharged while the core battery powers the vehicle. Further simplifying the process are sensor-based battery boxes that allow the bikes’ 50-volt lithium-ion batteries to be fully charged in as little as one hour.
These capabilities are backed by 1,500 Ionex fast-charging stations — where riders can easily rent swappable batteries for long-distance travel — that began operations in Taiwan on the day the Ionex scooters were launched. KYMCO promised to deploy 2,000 more Ionex energy stations by the end of 2019. In two more years, KYMCO targets 30,000 shared outlet spots to further eliminate riders’ concerns over electric scooters’ range.
Another smart feature of the Many 110 EV and Nice 100 EV is KYMCO’s proprietary Noodoe Navigation app, which simplifies and makes navigating streets safer for riders.
PRACTICAL ALTERNATIVE
“If there’s a phone today that you would only have to charge once a week, what would it be like?” asked Allen Ko, KYMCO chairman, in an interview.
“First, it’s going to [cost] double the price. Second, it will be bigger and it will be heavier. Will you buy it because you only have to charge [it] once a week? I don’t think people will buy it. But for electric scooters, this is exactly what everybody is doing,” he said.
The executive noted EV manufacturers tend to make vehicles with longer distance capacities, but which become heavier and more expensive as a result.
This is not the case with the Ionex line, according to Mr. Ko, who — believing the world is at “the junction of the most important transformation of personal transportation” — aims the Ionex to be seriously considered as a practical alternative to conventionally fueled vehicles.
“We want the electric scooter to be in a way superior to a gasoline scooter,” he said, adding KYMCO does not target people who want to get an electric scooter for its environment-friendly quality.
“That’s not going to work. It’s not going to make electric scooters popular. While other electric scooters compromised their under-seat storage space for battery installations, we used innovative design to make it larger than ever. While others require tedious processes to remove the batteries, we made it not only delightfully easy, but also cool to watch. While other scooters can’t be ridden once the battery is removed, we let you continue riding and going about your business while you charge your battery. And while others suffer from the lack of proper charging infrastructure, we give [users] the power outlet network, charge point network and energy stations, so [they] never have to worry about range,” Mr. Ko said.
Though no commitment was made, Ionex scooters may soon be sold in the Philippines as KYMCO plans to unveil eight more Ionex models in the next three years.
“We will introduce regular-duty electric vehicles, as well as heavy-duty [models]. By the end of this year, we expect to have Ionex projects in more than 10 cities all over the world,” Mr. Ko said.

Mazda’s ‘quest to make the best ICE’

June 19, 2018 | 10:49 pm

BESIDES presenting the prototype version of its SkyActiv-X gasoline engine (along with other systems being developed related to this) Mazda Motor Corp. on May 27, at its proving ground in Mine, Japan, also discussed launch schedules of what it said are its “next-generation technologies.”
And while the car maker stressed electrification is a part of its strategy in reducing carbon dioxide (CO₂) emissions, it was also apparent Mazda is not giving up — just yet — on the internal combustion engine (ICE).
“[An] ICE can have lower well-to-wheel emissions depending on the energy source,” said Hidetoshi Kudo, Mazda Motor’s executive officer in charge of research and development, and product strategy.
Mr. Kudo was referring to the path fuel or electricity takes to get to a vehicle; the extracted oil from a well travels to either a refinery (to produce fuel) or a power plant (to produce electricity), then to dispensing outlets (service or charging stations), until both energy sources reach an ICE-propelled car or an EV.
Mazda said its development of technologies meant to reduce emissions consider every aspect along the path from well to wheel, and not just from tank to wheel, which refers only to CO₂ emitted while driving. This method, the company noted, measures CO₂ emissions more accurately over the life cycle of a vehicle. And, based on this, Mazda has “reconsidered the ecological merits of EV vehicles which consume power generated by using fossil fuels.”
“With two thirds of global electricity production currently relying on the use of fossil fuels, Mazda believes regulations placing the absolute emissions of an EV at zero to be disingenuous,” the car maker said in a statement.
It cited as an example a midsize EV that consumes around 20 kilowatt-hours of electricity per 100 kilometers. According to Mazda, this figure would actually translate into CO₂ emissions of 200 grams per kilometer if the production of the electricity used in charging the EV relied on coal. When converted to a well-to-wheel figure, the average CO₂ emissions of an EV are about 128 grams per kilometer, while that of a current-generation SkyActiv gasoline engine with a comparable power output is 142 grams per kilometer. Mazda said that with as little as a 10% improvement in efficiency, its gasoline engine can achieve an emission level equal to that of an EV’s.

Mazda SkyActiv 2 — Structure of the upcoming Mazda 3 carries the brand’s latest technologies. — *ALL PHOTOS: BRIAN M. AFUANG*

CORPORATE TARGET
A report issued in March by JATO Dynamics, a London-based supplier of data for the auto industry, found the fleet average tailpipe — not well-to-wheel — CO₂ emissions of new cars in the 23 European markets covered by the study in 2017 was 118.1 grams per kilometer. Mazda was found to have a fleet average of 131.2 grams per kilometer.
To reduce this, the brand is partly relying on its upcoming SkyActiv-X engine, which Mazda said is capable of emissions cleaner than those of an EV’s when measured from well to wheel. By combining the combustion methods of gasoline and diesel engines to produce more torque while reducing emissions, SkyActiv-X revolutionizes the ICE.
And the ICE, Mazda asserted, will “power the majority of vehicles globally in many years to come, and can make the biggest contribution to CO₂ reduction.” The car maker estimated that by 2035 only 5% of vehicles worldwide will be powered by fuel cell, 11% by electricity, and the rest by some form of ICE run by gasoline- or diesel-electric hybrid, CNG and LPG.
Still, Mazda said it is not “turning its back” on electric power technologies. It bared that while it would continue upgrading its current gasoline and diesel SkyActiv engines, it would also introduce an EV (with or without a range extender; meaning a small ICE that can recharge the battery) and a mild hybrid in 2019, models with built-in batteries in 2020, and its first plug-in hybrid in 2025.
As Mr. Kudo noted; “Mazda will develop the ICE but will not deny electrification.”
Meanwhile, the new-generation SkyActiv-X engine is set to debut in 2019 under the hood of the next Mazda 3 model, and would eventually be used in other Mazdas. “The SkyActiv-X concept can be applied on any displacement or number of cylinders,” Mr. Kudo said.
Mazda said it would release in 2020 its SkyActiv-D Gen 2 — its next-generation diesel engine. From 2030 to 2035, the car maker sees its product mix will include EVs, but will largely be composed of gasoline or diesel plug-in hybrids, and gasoline or diesel full hybrids. — Brian M. Afuang

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