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Rome’s ancient Colosseum turned red to protest Pakistan blasphemy law

ROME — Rome’s ancient Colosseum was lit in red on Saturday in solidarity with persecuted Christians, particularly Asia Bibi, a woman condemned to death under Pakistan’s blasphemy laws.

Hundreds gathered on a rainy night outside the Roman amphitheatre that is a symbol of the martyrdom of early Christians to hear the husband and daughter of Asia Bibi.

The Catholic woman has been living on death row in Pakistan since 2010, when she was condemned for allegedly making derogatory remarks about Islam after neighbors objected to her drinking water from their glass because she was not Muslim.

Human rights groups such as Amnesty International say the blasphemy law is increasingly exploited by religious extremists as well as ordinary Pakistanis to settle personal scores.

“The aim of the blasphemy laws is crush people who believe differently,” Archbishop Nunzio Galantino, secretary-general of the Italian bishops conference, told the gathering.

The law does not define blasphemy and evidence might not be reproduced in court for fear of committing a fresh offense. There are no penalties for false accusations. Asia Bibi’s case drew international attention after the murder of two politicians who tried to intervene on her behalf.

At the Rome gathering, her husband Ashiq Masih said his wife was innocent of blasphemy. “This is just hate against Christians, who are considered impure,” he said. The husband and daughter, who broke down in tears as she addressed the group, were earlier received by Pope Francis, who told her: “I think often of your mother and I pray for her.”

European Parliament President Antonio Tajani, who has been tipped as a possible Italian prime minister after next week’s election, said that persecution of Christians was “a genocide.”

“A message must be sent from this place. It is the duty of Europe to defend these values (of religious liberty) wherever on earth they are trampled on,” Mr. Tajani said. — Reuters

Pyongyang’s high-level delegates cross DMZ

SEOUL — A blacklisted North Korean general arrived in the South on Sunday for the Winter Olympics closing ceremony, which will also be attended by US President Donald J. Trump’s daughter Ivanka.

The visit by Kim Yong Chol, who led an eight-member high-level delegation that crossed the Demilitarized Zone (DMZ) in the morning, is the final piece of the Games-led diplomacy that has dominated headlines from PyeongChang.

The nuclear-armed North has gone on a charm offensive in connection with the Olympics, sending athletes, cheerleaders and performers to the Games, with leader Kim Jong Un’s sister Kim Yo Jong attending the opening ceremony.

Analysts say it is seeking to loosen the sanctions imposed against it over its banned nuclear weapon and ballistic missile programs, and trying to weaken the alliance between Seoul and Washington.

But Kim Yo Jong had no interaction with US Vice-President Mike Pence at the opening ceremony, even though the two were sitting just a few seats apart in the same VIP area, and according to the US, a planned meeting between the delegations from Washington and Pyongyang the following day was canceled at short notice by the North Koreans.

South Korean President Moon Jae-in — who has long pushed for engagement with the North to bring it to the negotiating table — also did not immediately accept an invitation passed on by Kim Yo Jong from her brother to go to Pyongyang for a summit, saying the right conditions needed to be created.

Washington, which describes its approach to Pyongyang as “maximum pressure and engagement,” announced a raft of new sanctions against it on Friday.

Mr. Pence also condemned Kim Yo Jong as part of an “evil family clique” and “murderous regime,” prompting a denunciation from Pyongyang on Sunday, which said it would not talk to the Trump administration for “even 100 years or 200 years.”

Kim Yong Chol’s delegation crossed the heavily-fortified border into the South on Sunday morning, a spokesman for Seoul’s unification ministry said.

Television footage showed Kim Yong Chol, wearing a dark long coat, being greeted by Seoul’s vice unification minister Chun Hae-sung before getting into a black sedan prepared by the South, while others boarded a bus and a van.

Mr. Kim’s nomination as the leader of the group is controversial in the South, where he is widely blamed for a spate of attacks including the torpedoing of Seoul’s Cheonan warship in 2010, with the loss of 46 lives. Pyongyang denies responsibility.

Conservative lawmakers staged an overnight protest near the border with the North, joined by hundreds of other activists.

Images showed the protesters waving banners including “Arrest Kim Yong Chol!” and “Kim Yong Chol should kneel in front of the victims’ families and apologize!”

Mr. Kim is blacklisted under Seoul’s unilateral sanctions against the North — meaning he is subject to an assets freeze — although he is not named in the UN Security Council’s measures.

Officials from both Seoul and Washington say there will be no meeting between Kim Yong Chol and Ivanka Trump — who is traveling with Korea specialists from the US administration and White House spokeswoman Sarah Sanders. — AFP

UN backs Syria cease-fire as death toll tops 500

UNITED NATIONS — The United Nations (UN) Security Council on Saturday unanimously demanded a 30-day cease-fire in Syria, as new air strikes on the rebel enclave of Eastern Ghouta took the civilian death toll from seven days of bombing to more than 500.

With support from Russia, the Security Council approved a resolution calling for a cease-fire “without delay” to allow for humanitarian aid deliveries and medical evacuations.

After the council vote, Syrian warplanes backed by Russian air power launched new raids on Eastern Ghouta, the Syrian Observatory for Human Rights said.

At least 127 children are among the 519 dead in the bombing campaign that the regime launched last Sunday on the rebel enclave, just outside Damascus, the British-based monitor said.

At least 41 civilians were killed in Saturday’s strikes, including eight children. Russia has denied taking part in the assault.

The UN vote was initially expected to be held Thursday, but was repeatedly delayed as diplomats were locked in tough negotiations to avoid a veto from Russia, which is militarily supporting President Bashar Al-Assad.

“Every minute the council waited on Russia, the human suffering grew,” US ambassador Nikki Haley told the council after the vote, accusing Moscow of stalling.

“As they dragged out the negotiations, the bombs from Assad’s fighter jets continued to fall. In the three days it took us to adopt this resolution, how many mothers lost their kids to the bombing and the shelling?”

Russian Ambassador Vassily Nebenzia rejected accusations of foot-dragging, saying that negotiations were needed to arrive at a demand for a cease-fire that was “feasible.”

To win Russia’s approval, language specifying that the cease-fire would start 72 hours after the adoption was scrapped, replaced by “without delay,” and the term “immediate” was also dropped in reference to the aid deliveries and evacuations.

In another concession to Moscow, the resolution said the cease-fire will not apply to operations against the Islamic State group or Al-Qaeda, along with “individuals, groups, undertakings and entities” associated with the terror groups.

That would allow the Syrian government offensive to continue against Al-Qaeda-linked jihadists in Idlib, the last province in Syria outside the control of Damascus.

French Ambassador Francois Delattre said it was now important to work to ensure that the ceasefire turns into reality on the ground, vowing to be “extremely vigilant… in the hours to come and the days to come.”

“Nothing would be worse than seeing this resolution remain a dead letter,” he said.

UN Secretary-General Antonio Guterres, who has described Eastern Ghouta as “hell on earth,” is to report to the council in 15 days on the cease-fire.

Russia has vetoed 11 draft resolutions throughout the Syrian conflict to block action that targeted its ally. In November, it used its veto to end a UN-led investigation of chemical weapons attacks in Syria. — AFP

Senate panel to hold hearings on inflation, mitigation measures

THE SENATE committee on economic affairs has summoned the government’s economic managers to discuss today rising inflation and possible measures to mitigate its impact.

Senator Sherwin T. Gatchalian, who chairs the committee, expressed concern over rising food prices, which are the main component of the inflation basket.

“We need to identify and implement a strong plan-of-action to get this inflation under control and make sure our countrymen have enough food to put on the table for their families,” he said in a statement.

According to the Philippine Statistics Authority (PSA), the inflation hit 4% in January primarily due to a 4.5% price increase in food and non-alcoholic beverages.

Among those invited to the hearing are National Economic Development Authority (NEDA) Director-General Ernesto M. Pernia and Department of Finance (DoF) Undersecretary Karl Kendrick T. Chua.

Also invited were academic economists Dr. Christina M. Bautista of Ateneo De Manila University, Dr. Alvin P. Ang and Dr. Cielito F. Habito of the Ateneo Center for Economic Research and Development (ACRED), University of the Philippines School of Economics (UPSE) Dean Dr. Orville Jose C. Solon as well as National Scientist Dr. Raul V. Fabella.

Susan T. Bulan of the Foundation for Economic Freedom (FEF) as well as Jenina Joy Chavez and Karla Michelle Yu of the Action for Economic Reforms (AER) are also expected to attend.

Mr. Gatchalian said he will also ask for updates on the effects of Republic Act 10963 or the Tax Reform Acceleration and Inclusion (TRAIN) law on the purchasing power and behavior of consumers.

He will also seek updates on the status of the expanded cash transfer program intended for the 10 million poorest families in the country to keep up with the higher daily expenses as a result of the TRAIN law. — Camille A. Aguinaldo

Consumer spending seen driving GDP growth to 7%

By Melissa Luz T. Lopez
Senior Reporter

THE PHILIPPINE economy is expected to grow by 7% this year led by stronger consumer spending with Filipinos expected to have more take-home pay as a result of lower income tax rates, a consulting firm said.

Gross domestic product (GDP) will likely be higher in 2018, hitting the low end of the 7-8% growth target set by the government, according to the Wallace Business Forum (WBF).

“Favorable global environment… and increased government revenue from tax reform indicate a brighter outlook for the Philippine economy in 2018,” WBF said in its economic outlook as published in the Philippine Analyst.

“There will be multiple drivers of growth.”

If the growth forecast pans out, GDP will pick up from 2017’s 6.7%, and would be the highest since 2013’s 7.1%.

Household consumption is poised for robust growth according to the Forum’s estimates, with spending growth to accelerate to 6.5% from 5.5% in 2017. Stronger spending will be fueled by higher levels of take-home pay for a majority of Filipinos as a result of the tax reform law, which reduced the tax rates imposed on those earning less than P2 million annually.

The consultancy expects tax adjustments to add some P140 billion to household budgets.

“An additional push to private consumption will come from subdued inflationary expectations and the increased peso value of transfers to the families of overseas Filipino workers due to the modest peso depreciation,” the report added.

The peso last week hit 52.34 against the dollar, which is its weakest showing in nearly 12 years. At weak rates of exchange, families receiving remittances will see their peso spending power increase.

Domestic employment prospects are likewise expected to improve, with the robust economic activity expected to open more job opportunities.

Meanwhile, investment growth is expected to pick up by 12.3% in 2018 from 9.3% previously, largely supported by increased infrastructure spending. Public spending growth is also poised to rise to 6.7% from a 6% in 2017.

The government is looking to spend P8.13 trillion for 75 big-ticket infrastructure projects until 2022 under its Build, Build, Build initiatives, which will improve mass transport and the ease of doing business in the Philippines.

In particular, the construction and manufacturing sectors will remain the “growth pace-setters” in this year, the firm said. For the services sector, those engaged in banking, transport, trade and health care will see employment and revenue growth, which will likely offset weaker growth in the business process outsourcing industry.

Expansion plans among exporters will also support increased capital inflows by a tenth, which is slower than the previous year’s pace. Still, outbound shipments of goods will keep growing to match rising global demand, the WBF said.

Imports are also expected to grow by a tenth.

Looking ahead, the WBF flagged the succeeding tax reform packages, proposals to ease foreign ownership limits under the Constitution, and the rebuilding of Marawi as the three key policy developments that would affect the Philippines in 2018.

“Generally, these are positive influences, although their impact on the economy could vary in significance depending on how they play out,” the report noted.

Energy dep’t seeks comment on off-grid renewable draft rules

THE DEPARTMENT of Energy (DoE) has given power industry participants until Feb. 28 to submit their comments on a draft circular covering renewable portfolio standards (RPS) for off-grid areas or those that are not connected to the national power transmission network.

“The RPS Off-Grid Rules are hereby adopted in order to contribute to the growth of the RE industry in off-grid and missionary areas by mandating electric power industry participants to source or produce a specified portion of their electricity requirements from eligible RE resources,” the DoE said.

The rules also seeks to rationalize the efficient use of the universal charge for missionary electrification (UC-ME) and improve self-efficiency in power generation through integration of RE in the supply mix in off-grid areas.

Based on the draft rules, the National Power Corp.’s small power utilities group or its “successors-in-interest” — or entities that take over the generation function of the company — are to generate, procure and subsequently maintain a minimum percentage of RE share in its portfolio consistent with the optimal supply mix prescribed in the missionary electrification development plan.

The optimal supply mix is derived from various fuel technologies that provide the supply of electricity reliably at least cost.

The minimum percentage RE share should consider the generation of all existing identified RE resources in an area; adoption of hybrid or distributed RE generation systems, whenever feasible; stable operation of existing generating units and reliability of the grid with entry of an RE generation facility consistent with existing and applicable performance standards.

The DoE said the capacity corresponding to the minimum RE generation should ensure highest penetration of RE generation while maintaining stable, reliable and adequate supply of electricity.

In the draft rules, the eligible RE facilities are those using these technologies: biomass; waste-to-energy; wind energy; solar energy; run-of-river hydroelectric power systems; impounding hydroelectric power systems; ocean energy; hybrid systems as defined in the Renewable Energy Act with respect to the RE component; geothermal energy; and other RE technologies that may be later identified by the DoE.

Annually, the minimum RE share is mandated to increase based on a simplified tool or any internationally accepted optimization software as approved by the DoE.

The DoE said resulting difference between the annual incremental RE generation for the succeeding year and the preceding year’s actual RE generation should not be lower than 1%. — Victor V. Saulon

DA points to Iloilo co-op as model for cheap rice

AGRICULTURE Secretary Emmanuel F. Piñol said international cooperation and government support for a rice-growing community in Iloilo has helped its farmers supply the area with inexpensive rice, and held up the town of Dingle as a model for the rest of the country.

In a social media post, Mr. Piñol said on Sunday said that the Dingle Multi-Purpose Cooperative (DMPC) in the municipality of Dingle, Iloilo is able to sell rice at P33 per kilo, with well-polished rice commanding P37. This compares favorably with other areas, he said, where commercial rice can fetch P35 per kilo or higher.

“If the farmers of Dingle can sell locally produced rice for P33 to P37 per kilo, I do not see any reason why this could not be replicated in other parts of the country,” he added.

Mr. Piñol noted that DMPC received a rice processing complex from South Korea’s International Cooperation Agency during the last government’s term and was provided working capital of P5 million by the Department of Agriculture (DA).

DMPC was also a recipient of the DA’s Corporate Rice Farming Program which turns farmers into direct suppliers for large institutions. In August, DMPC signed a deal to supply rice to Seda Atria Iloilo, a hotel company, through Ayala Multi-Purpose Cooperative.

University of Asia and the Pacific Center for Food and Agribusiness Executive Director Rolando T. Dy, however, said low prices for rice are possible if the area it is consumed is near the production center and the area itself has a surplus.

“If dry palay is bought at P17 then rice can be retailed in Iloilo at P34. This is true for Panay which has a large surplus. In rice-deficit islands, it could be another story,” Mr. Dy told BusinessWorld in a text message on Sunday.

Mr. Piñol claims a 96% rice self-sufficiency rate for the Philippines after meeting with the International Rice Research Institute and the Philippine Rice Research Institute. Production was 19.4 million metric tons of palay in 2017.

The DA believes the trend may be unsustainable due to the limited land for planting rice and the increasing growth of the population.

Mr. Dy said that another reason for high prices is lack of mechanization.

“The Philipines is a high-cost producer compares to India, Vietnam and Thailand even at the same yields. [That’s because] rice here is not mechanized,” Mr. Dy said. — Anna Gabriela A. Mogato

As volatility returns, this is how to be more selective with emerging markets

THE SPECTER of volatile financial markets is prompting investors to be more selective in emerging markets and Asia is stacking up to be among the most resilient when it comes to economic measures.

Among the 22 developing economies, Taiwan and Thailand come out on top in terms of current-account balances, while Brazil and Hungary are projected to have the largest debt pile, data compiled by Moody’s Investors Service show.

“Emerging-market assets have been bought as a bulk, but not every economy will continue to attract foreign investors from here,” said Tsutomu Soma, general manager of SBI Securities Co.’s Independent Financial Advisor department in Tokyo. “Asia stands out both politically and economically. Latin America and Europe face political issues, while the Middle East’s got geopolitical risks.”

While emerging-market assets have recovered some of their losses from the February rout, another bout of volatility could be just around the corner as US benchmark Treasury yields rise to near 3% amid prospects for tighter monetary policy by the Federal Reserve. The MSCI Emerging Markets Index of shares is headed for a second weekly gain, rising 1% so far this week.

Read what emerging-market bulls are saying about a 3% Treasury yield

Here’s how the 22 developing countries compare in terms of economic data.

CURRENT-ACCOUNT POSITION
Turkey will have the widest current-account deficit this year at 4.5% of gross domestic product, followed by Argentina and Colombia, according to Moody’s. By contrast, Taiwan, Thailand and South Korea will have the biggest surpluses, exceeding 5% of their GDPs.

When it come to currencies, those with a combination of solid current-account surpluses, ample foreign-exchange reserves and relatively light foreign investors’ positioning are likely to perform well even in an environment of increased market volatility, according to Divya Devesh, a Singapore-based Asian currency strategist at Standard Chartered Plc.

Standard Chartered maintains a positive view on the baht, while it expects the Philippine peso to continue to underperform due to “a modest current-account deficit and a relatively hands-off central bank,” he said.

FISCAL POSITION
Looking at the fiscal standing may give clues to bond investors. Brazil will have the biggest budget deficit in 2018 at 8% of GDP, while only the Czech Republic and South Korea will post surpluses, according to Moody’s.

“Sovereigns that have stronger fundamentals are likely to be best positioned to capital flow volatility,” said Anushka Shah, a Moody’s sovereign analyst in Singapore. “Some features that raise vulnerability to such flows include wider financing needs as reflected in fiscal and/or external imbalances, as well as relatively high degrees of leverage.”

DEBT PILE
Brazil also stands out as the nation with the heaviest government debt burden at almost 80% of GDP this year, according to Moody’s. At the other end of the spectrum is Russia, with debt at just 14% of GDP.

RESERVES STRENGTH
Countries with stronger reserve standing will be more resilient to external shocks, a reason for investors to be bullish on their assets. Governments that rely on cross-border, foreign-currency sources of financing to fund their overall debt — such as Indonesia, Peru, Argentina, and Turkey — would be vulnerable to sudden stops or outflows of capital, according to Moody’s Shah.

Sovereigns that run sizable current-account deficits, or whose external debt servicing obligations over the next year are higher than their present stock of foreign-exchange reserves — such as Chile, Argentina, Malaysia, Hungary, Romania, Turkey — would be most impacted, Shah said. — Bloomberg

Digitalization of government

(Second of two parts)

In last week’s article, we introduced “digital” as the hot buzzword for businesses in the private sector, but not as much in the public sector or government service. We discussed how some governments have applied digital innovations and the value that these have brought to government services and to the quality of life of their citizens in general.

We will now continue our discussion on the various platforms and areas that government can consider.

DISTRIBUTED LEDGER TECHNOLOGY AND SMART CONTRACT
[In this article, we are interchanging the terms between distributed ledger technology or DLT and Blockchain.]

Digital transformation efforts across government agencies will be ineffective if they are not integrated and connected. Both interoperability and integration are important when completing a digital road map. There must be a common platform or a series of Application Programming Interfaces (APIs) that can integrate IT systems for all government agencies. Distributed Ledger Technology (DLT), which offers a solution for the former, is an immutable database that is shared across institutions with consensus. The technology is another name for the blockchain concept that some of us may have already heard of, which is the same technology powering the bitcoin virtual currency.

DLT can be used to store information, provide timestamps and controllable security log access to see who created, submitted, and modified any information so that no one can access or change data without being logged (not even system administrators). In addition, it can also provide automation/auto execution by a smart contract.

A smart contract refers to a fully automated set of instructions that is capable of facilitating, executing, and enforcing the negotiation or performance of an agreement (i.e. contract) using blockchain technology.

Estonia is the first country to implement a blockchain named KSI to prevent any compromise to its government networks, systems, and data, while at the same time maintaining absolute data privacy. They have implemented blockchain in their legislative system (e-Law) to track who creates, revises, approves, and shows the public drafts of legislation before they eventually become laws and get published in their open legal library online.

The Estonian government also implemented blockchain in its court system (e-Court) enabling paperless proceedings. Claims can be filed online and the court clerk can immediately confirm and assign the date of the hearing with a randomly assigned judge presiding. Evidence, questions, arguments, and answers related to the case can be submitted online, and in simple cases, proceedings may also take place online (decisions and bailouts, if applicable, are posted online) without the need to personally go to a courthouse. Based on reports, this system has dramatically improved Estonia’s judicial system, sped up legal proceedings, and eliminated “under-the-table” practices that may compromise the legal system.

One potential application of DLT and smart contracts for the Philippine government is in the servicing of the conditional cash transfer program (4Ps). DLT can be used to store the beneficiaries’ names, amount of grant entitled, personal information, and household status. Powered together with smart contracts, it can execute regular payments to beneficiaries on its own with little to zero human intervention. At the same time, it can automatically stop the action (transfer of grants) depending on the criteria set by the government (e.g. children reaching certain age limit, deceased beneficiaries, etc.). Any government official who encodes, modifies, or deletes any data will be logged for accountability and security purposes. DLT can also reduce the chance of corrupt practices, such as creating fictitious 4Ps accounts and tampering with personal information, among others.

Second, DLT can be applied to the registration of intellectual property. The patents filed will be immutable, have a clear trail, and can indicate who registered what (even system administrators). With smart contracts, it can automatically publish the patent once it has expired.

Likewise, this feature can be applied by the Land Registration Authority (LRA) to its land ownership registry system. No official can tamper with or modify the records without being identified, and the technology may allow faster and more efficient tracking of who has the economic ownership of the property and its proper value for tax purposes. As a result, data manipulation over gratuities can be minimized and the number of court disputes may decrease.

In the area of customs, DLT, combined with analytics, can achieve seamless automated tariff valuation and/or collection from the importers.

These are but a few of the potentially beneficial applications of DLT in government services.

LOCAL APPLICATIONS
Several proofs of concept (POCs) and prototypes for the technology mentioned above have been created for Philippine organizations. For example, for big data and analytics, a crowdfunding platform has been developed to provide an alternative avenue for low-cost funding for entrepreneurs and SMEs in the agricultural sector. This program was designed to support SMEs (including agribusinesses), which matches SMEs with investors who are deemed a fit with their risk appetite to the nature of the enterprises (seed stage, stable cash flow, governance, etc.).

In other areas, spatial analysis has been used to simulate a path for the proposed Mindanao railway system, one of the priority infrastructure projects of the Duterte government. It considers the spatial relationships between observations and takes into account characteristics based on distance, thus allowing for a more robust and practical analysis of spatial information.

For AI, a chatbot is being developed for basic inquiries on tax information and functions. For blockchain, in the works is a prototype that will aid local government units in handling and issuing business registration permits, which can improve the process and increase efficiency and transparency.

PHILIPPINE GOVERNMENT: CURRENT STATUS
The Philippines has attempted to embrace digital with some success. The former Commission on Information and Communications Technology (now the Department of Information and Communications Technology — DICT) established the Philippine Digital Strategy in 2011, where it envisioned the Philippines as an e-Government which provides greater efficiency and effectiveness in social services delivery, fewer opportunities for corruption, and enhanced transparency for greater citizen engagement. In addition, it aimed to achieve integration and interoperability across all government agencies.

The Bangko Sentral ng Pilipinas (BSP), National Bureau of Investigation (NBI), and the Bureau of Internal Revenue (BIR) are but some agencies that have conducted early adoption of digital tools. The BSP planned to lessen the exchange of cash transactions and promote interoperability among financial institutions by establishing the National Retail Payment System. The NBI made it a necessity for its clearance applicants to provide their details online and choose an appointment time for biometrics enrollment and picture taking. The BIR has been given the support to apply digital in all of its tax administration functions, an initiative that is now legislated in the newly-passed tax reform (TRAIN) law.

CHALLENGES
Traditionally, government agencies are used to working independently from each other. One example is the existence of various types of government identification (ID), all of which are independent of each other. If a person uses his or her government ID to open a bank account, the bank will not necessarily know the person’s tax identification number unless he or she provides it. In other words, there is no integration to provide a single identity to a citizen (e.g. a national ID that will contain all information on the individual including other government IDs) although a bill on a national ID was approved by the House (HB 6221) and is pending for Senate action in the first quarter of 2018.

An efficient and transparent government will not only benefit its citizens, but also have a significant impact on government’s operations. While the immediate benefits will be the notable improvements in public service and quality of life, government should also consider that an efficient and effective digital strategy can only redound into more foreign investment.

While the government is currently enjoying sound economic fundamentals — the economy is one of the fastest-growing in the region — its effects have yet to cascade down to the common Filipino. Perhaps, in alleviating some of the pressing issues closest to the Filipino’s daily life, they will be able to experience a real and measurable difference, which, in many cases, could be as simple as spending less time in road traffic or queuing for government services.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

 

Christian G. Lauron is a Partner and Irsyad Stamboel is an Associate of SGV & Co.

Opportunities from the Tobacco Tax Inclusion in TRAIN

One unexpected development in the passage of Republic Act (RA) 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law was the last-minute addition of a tobacco excise tax increase. Health advocates were surprised by this sudden inclusion because neither the House version nor the Senate version of the bill included such a provision. Many feared that this could have adverse effects on the economic and health gains obtained from the Republic Act (RA) 10351 or the Sin Tax law of 2012.

A crucial point of contention is that the newly legislated tobacco tax rates are lower than the rates proposed in the bills of Senator Manny Pacquiao and Senator JV Ejercito. The bill of Senator Pacquiao proposes to increase the tobacco excise tax by at least 100% in 2018 and raise the succeeding annual increases from 4% to 9%. The Ejercito bill contains a higher tax rate, by tripling the rate from P30 in 2017 to P90 in 2018.

Health advocates support these proposals because they, with the Pacquiao bill as example, will prevent one million Filipinos from smoking by 2022.

However, the approved tobacco excise tax in the first package of TRAIN has increased the rate by P5 or 17% in 2018 (P2.50 in the first half and another P2.50 in the second half), followed by a series of lower rate increases until 2024. After this period, the annual 4% increase mandated by RA 10351 becomes operational again (see table).

Aside from the low rates approved for the next few years after 2018, some are disappointed that the opportunity to pursue changes to replace the lower rates might no longer come. They fear that the legislators will use the new law as an excuse not to approve any further rate increases in the short and medium terms.

I would like to argue, however, that the inclusion of the tobacco tax in package 1 of TRAIN is actually a victory for health, though a modest one.

First, the approved rate has retained the unitary system. Reverting to a two-tiered system (as stated in House Bill 4144 that the House approved in 2016) would have resulted in lower cigarette prices, lower revenue, and a bigger administrative burden, borne out by the sad experience prior to the passage of RA 10351.

Third, while not on a par with the Pacquiao and Ejercito proposals, the approved rates in TRAIN are still higher than status quo (retaining what RA 10351 mandates).

And the most important point is that the rate increase in 2018 is quite significant, equivalent to a 17% increase. It definitely makes tobacco less affordable. This meets the health objective at the same time that such an increase will provide considerable new revenue, of which a big portion will continue to be earmarked for health.

Besides these gains, the unfinished TRAIN process still provides an opportunity for health and economic reform advocates to continue pushing for higher tobacco taxes in 2019 and beyond.

For one thing, there remains a compelling need to increase the tax effort. The revenue target of the Department of Finance (DoF) from TRAIN has not been met because of the compromises in package 1. The final version of the tax reform law is only expected to generate P90 billion, as opposed to the original goal of P140 billion. As a relatively popular tax, the excise tax on tobacco is a viable and effective option for DoF to boost the revenue yield. Finance Secretary Sonny Dominguez has expressed his position to increase the excise taxes for alcohol and tobacco products.

Also, one of the priority pieces of legislation of the Duterte administration is the Universal Health Care (UHC) Bill. The UHC Bill will expand the coverage of the country’s health insurance system and will significantly reduce the out-of-pocket expenses of Filipinos on health services. For this bill to materialize, however, the government will need a minimum of P90 to P100 billion every year. The estimated P50 to 60 billion from the Pacquiao or Ejercito bills will be the main source to realize this.

The year 2017 proved to be a difficult year for tobacco control advocates. The industry-backed lobby is stronger than ever as proven by how a weak bill was railroaded in the House in late 2016.

However, the next stage of TRAIN provides an opportunity for reformers. Whether one sees TRAIN as an obstacle or a gain to health, one thing is certain: The fight for a higher tobacco tax rate and a better universal health care system is far from over.

 

Arjay Mercado, a former student leader and a former student (with honors) at the University of the Philippines School of Economics, is the researcher of the Tax Team of Action for Economic Reforms.

A bad joke

Jaws dropped when President Duterte said that China should turn the Philippines into a Chinese province. These words were said during the President’s speech before the Chinese Filipino Business Club last week.

As expected, the spin doctors of Malacañang went into overdrive to “contextualize” the situation. They claimed that the President’s remarks were simply meant to “underscore the Philippines’ warming relations with China.”

Executive Secretary Bingbong Medialdea, the Presidential Communications Operations Office and their mouthpiece, Harry Roque, should really be given a medal for having to save the President from his many inappropriate and impulsive utterances.

Unfortunately, this time, mere contextualization won’t do.

The President’s comment stung acerbically, especially since China continues to rob us of our territories by threat, if not by force. The situation is akin to a young lass being violently raped repeatedly by the playground bully and the father of that lass telling the perpetrator that he would gladly offer his daughter to him in marriage.

Joke or not, it was a sick statement and no one is laughing.

Not the troops risking their lives to defend the nation’s sovereignty in the West Philippine Sea, not our patriotic lawyers who defended and won our sovereign claims at the Hague, nor the patriots among us. The President’s remark was unacceptable by its very context and by the fact that it came from the mouth of the leader of the land. Said seriously or in jest, what the President says reflects the sentiments of the nation. China must be laughing at what a good “ambassador” they have created.

For the record, I speak for myself and all those for whom I am responsible for. We will never, never accede to being a province of China, in actuality or theoretically — at least not without a fight to the death. Moreover, we will always hold Philippine interest primordial before that of China and will call-out anyone, especially those in government, who does otherwise.

This declaration is not meant to be dramatic. Rather, it is to tell China that they don’t have civil society in its pocket.

BUSINESS CONFIDENCE
Like clockwork, members of the several business organizations called me the following day to explain the implications of the President’s remarks and what it could mean for their businesses. They questioned whether they should invest more in our shores, take their money out, or put their projects on hold.

I agreed to address their concerns through a proper presentation. As I prepared my material, I was lead to reflect on similar statements made by the President in the last 18 months and what has become of it.

This is not the first time the President has made inappropriate remarks to pander to the crowd.

We still recall how he proposed to form a tri-axis of power spanning China, Russia, and the Philippines, how he threatened to have the Philippines leave the United Nations and how he would expel the ambassadors of the European Union from the country. To our jeepney drivers, he said he would have them arrested if they fail to comply with the PUV modernization program by Jan. 1.

Despite the forcefulness of the President’s numerous threats, nothing has been made into policy, nor materialized.

What I, and most political observers have come to realize is that behind the President are the best minds of the land and true patriots who guard the gates of national policy. People like Secretaries Sonny Dominguez (DoF), Mon Lopez (DTI), Ben Diokno (DBM), Art Tugade (DoTr), and Ernie Pernia (NEDA) distill what among the President’s directives (or threats) actually become policy and what are simply “contextualized” and written off. While their loyalty to the President is beyond reproach, they have always done what is best for the country.

With these men behind the President, I am fairly certain that government will continue to uphold Philippine sovereignty against China’s creeping invasion, albeit with cushioned gloves. Having said that, it does not minimize the gravity of the President’s latest “joke.” It was amusing. It was not funny.

RESTING ON SOUND ECONOMIC FUNDAMENTALS
Like Malaysia and Thailand in the ’80s, the Philippines is now in the cusp of an economic renaissance like we have never seen before. Our demographic advantage, manufacturing resurgence, record-breaking foreign direct investments, and commitment to upgrade our infrastructure are all working in concert to achieve successive years of GDP growth beyond six percent.

All this is new to us. During Marcos’s 20-year rule, GDP grew by an average of only 4.1%. The Cory years were difficult as the country had to grapple with massive debt amid a low revenue base. Average growth was just 3.3%. FVR realized 3.1% growth as he was stymied by the financial crisis of 1997. Erap’s three-year reign was the least impressive with growth of only 2.9%. Arroyo’s 10 years in office yielded an average growth of only 4.8%. It was a decade of missed opportunities.

Tides began to turn during the six years of president Benigno S. C. Aquino III. Not only did he manage to raise public revenues and amass Gross International Reserves of more than $80 billion, he began the transformation of the economy to one that is investment lead. Average growth during president Aquino’s era was 6.3%.

The Duterte administration stands on a strong foundation and it is ticking all the right boxes to make the economy fundamentally stronger. Among the many economic reforms being put in place, addressing the infrastructure backlog will yield the greatest impact. For those unaware, the Philippines spent less than 2.5% of GDP on infrastructure from 1980 to 2009 while our neighbors spent more than 5%. This has caused us to lose our competitiveness over three decades. The Duterte administration, with its intent to accelerate infrastructure investments to as much as 7.4% of GDP or P8.13 trillion over five years, will restore our competitive edge.

In addition, relaxing the prohibitive laws that govern foreign direct investments, comprehensive tax reform, a commitment developing our manufacturing industries and allotting 40% of the national budget to social services like education and health care will all work together to achieve sustained high growth.

Analysts project that with sustained growth above 6.5%, the Philippines will become an upper middle income economy with per capita income of more than $5000 by the year 2025 and a high income economy with per capita income of $12,000 by the year 2040. Incidence of poverty will be reduced from 21.6% in 2015 to 12% in 2025.

Some quarters question whether the massive spending on infrastructure will hurt our financial position. See, government decided to maintain a budget deficit of 3% of GDP up until 2022, the balance of which will be filled by debt. Many fear that this may put us in a debt trap similar to what Spain and Greece went through in 2008.

As I analyze the numbers, I can say with reasonable confidence that this will not happen.

With the economy growing in good pace and increased government revenues resulting from TRAIN, our debt to GDP ratio will in fact decrease from a low 45% in 2015 to an even lower level of 36% in 2022.

All things considered, the economy is in good stead, not withstanding the political noise arising from bad jokes and grand threats. We can rest assure that within he halls of Malacañang, a wise and discerning team guards the gates of national policy and protects our interest.

 

Andrew J. Masigan is an economist.

Solar insecurity, energy stability, and affordability

“When PV Solar rely on up to 67% of revenues from subsidies, the state becomes a counter-party that is critical to sustaining the firm’s financial viability. Vagaries of politics imply constantly changing priorities, making for a fickle advocate.”

— Ricardo Barcelona,
author of Energy Investment: An Adaptive Approach to Profiting from Uncertainties (2017).

This is a lesson and reality that will be hard to appreciate for solar energy advocates and developers, that without politics, without forcing and coercing energy consumers to subsidize, directly or indirectly, solar, wind, and other renewables, their advocacy is a losing proposition.

Last Thursday, Feb. 22, I attended the Energy Policy Development Program (EPDP) lecture at the UP School of Economics (UPSE), my alma mater. The speaker was Mr. Leandro Leviste, president of Solar Philippines and his presentation was “Cheap Electricity for a First World Philippines: The 24/7 Solar-Storage Revolution.”

Mr. Leviste boldly declared in his presentation that “Solar is now the least cost for all peaking, mid-merit and baseload requirements, and will thus comprise the vast majority of additional power generation capacity from hereon in the Philippines.”

This is simply not true. If solar is indeed “least cost,” solar developers should have stopped asking for rising feed-in-tariff (FiT) or guaranteed high price for 20 years under the Renewable Energy (RE) law of 2008.

FIT rates for solar batch 1 (2015 entrants) were P9.68/kWh in 2015, P9.91 in 2016 and P10.26 in 2017. For solar batch 2 (2016 entrants), P8.69/kWh in 2016 and P8.89 in 2017. Solar and wind developers are feasting on billions of pesos of additional, expensive electricity slam-dunked on hapless consumers on top of the 11-12 different charges in their monthly electricity bill.

During the open forum, I asked Mr. Leviste two questions:

(1) Will you support the abolition of RE law of 2008 since your presentation shows plenty of improvements and cost reduction for solar, meaning they can survive without FiT, RPS, other subsidies and mandates?

(2) You advocate large-scale solar development in the Philippines, therefore you advocate large-scale deforestation of the country? You showed a big picture of your solar farm in Batangas, zero tree there, anti-green. Solar hates shades – from clouds and trees.

His response to #1 was Yes, we can abolish the RE law but we should also abolish the EPIRA law of 2001, the pass-through cost provisions. To question #2, he said that there are trees outside the solar farm and there are moves to plant crops under the solar panels.

Meaning his answer to #1 is No. On #2, precisely that trees are allowed only outside the solar farm because solar hates shades from trees. While many environmentalists including Sen. Loren Legarda repeatedly say “Plant trees to save the planet,” solar developers like Leandro Leviste are implicitly saying “remove and kill all trees (in solar farms) to save the planet.” The irony of green environmentalism.

The call for “green, environmentally-sustainable energy” is repeatedly echoed in the Philippines and other countries. And many of these advocates are unaware that in the annual report, “World Energy Trilemma Index” by the World Energy Council (WEC), the Philippines is #1 out of 125 countries for several years now in environmental sustainability.

WEC is a UN-accredited global energy body composed of 3,000+ organizations from 90+ countries (governments, private and state corporations, academe, etc) NGOs, other energy stakeholders). The Trilemma index is composed of three factors, briefly defined as:

Energy security: effective energy supply from domestic and external sources, reliability of infrastructure and ability of energy providers to meet current and future demand.

Energy equity: accessibility and affordability of energy supply across the population.

Environmental stability: achievement of energy efficiencies and development of energy supply from renewable and other low-carbon sources (see table).

(The indicators represent economies as follows, from left to right: Singapore, Japan, Hong Kong, South Korea, Malaysia, Thailand, Indonesia, China, Vietnam, and India)

The Philippines is #1 out of 125 countries covered in Environmental Sustainability. There is high reliance on conventional renewables like big hydro and geothermal, plus newly added variable renewables. There is no need to aspire for rank #0.5 worldwide

Ranking 95th, we are low in energy equity because of our expensive electricity, which is 3rd highest in Asia, next to Japan and Hong Kong.

We place 63rd in energy security — in the middle — and we still need to add big conventional plants like coal to give us 24/7 stable, dispatchable energy to meet demand.

To conclude, these words from Ric Barcelona resonate:

“When subsidies are set as the costs differences, the ‘correct’ level is indeterminate. As power prices increase, renewables need lesser subsidies but nevertheless continue to collect. When this happens, consumers would coax regulators to claw back the subsidies because renewables are raking it in at consumers’ expense.”

 

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

minimalgovernment@gmail.com.

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