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The Internet even slower down South

The government is working to improve information and communication technology (ICT) in Mindanao, but challenges remain.

In its Philippine Economic Update report published in October, the World Bank said Mindanao continues to lag behind Luzon and Visayas in terms of Internet speed.

One main barrier to ICT development in the region is slow Internet speed, compared to Metro Manila and other developed regions, which also remain below the global average.

In Cagayan de Oro, for example, the recorded speed is 2.4 megabits per second (Mbps), compared to 3.6 Mbps in Makati City. In Marawi City, the recorded speed was a very low 141 kbps.

“It appears that Davao users have to pay about 1.5 times more to get the same speed as in Makati, and Marawi users have to pay 26 times more. A dedicated line can cost up to P20,000 per month for each additional 1 mbps of speed, compared to P700 for a residential line with no speed guarantee,” the World Bank added.

FREE WI-FI
To address this, the Department of Information and Communications Technology (DICT) plans to build 250,000 Wi-Fi access points nationwide, before the end of President Rodrigo R. Duterte’s term in 2022. This is in accordance with  Republic Act No. 10929 governing the Free Internet Access Program, signed by Mr. Duterte in August.

DICT Officer-in-Charge and Undersecretary for Special Concerns Eliseo M. Rio previously said people can connect to the Wi-Fi access points without having to link to congested, limited cell sites. Around 67,000 cell sites are needed to meet the country’s Internet connection needs, but there currently only over 20,000.

The government will bid out the subscription to an Internet service provider (ISP). After three years of contracting with the ISP, the access points will then serve as end points of the National Broadband Network, which aims to provide connections to all government offices, down to the local government units.

“Mindanao will get its fair share of access points. Definitely, all barangays by 2022 will be covered. We’ll have all barangays connected to the Internet. All public places, all parks, where people gather like bus stations, piers, airports will have free Wi-Fi access,” Mr. Rio said in an interview.

DICT said it has completed 86 project sites across 16 provinces, all of which are operational as of Nov. 27.

For Mindanao, the DICT will establish access points in an estimated 11,475 public places by 2022. Every municipality will be covered and there will be a minimum of eight sites per municipality.

However, the DICT will only enter areas where the telecommunications players are not present, particularly in the less developed areas in Mindanao.

The World Bank noted there is lack of incentive for telecommunications firms to invest in remote areas given high capital spending required.

PLDT, Inc. in October completed its the P1-billion expansion of the domestic fiber optic network (DFON) in Mindanao, for what the company says provides more reliable connectivity to its home and enterprise customers.

The fiber optic cable link directly connects the provinces of Agusan to Davao, spanning 230 kilometers. The network runs through four provinces in Mindanao — Agusan del Norte, Agusan del Sur, Davao del Norte and Davao del Sur.

In partnership with the local government of General Santos City, PLDT has also established fiber-to-the-home (FTTH) facilities in General Santos, the first “Fibr City” in Mindanao.

For its part, Globe Telecom, Inc. said it has already deployed around 3,000 long-term evolution (LTE) sites in Mindanao, covering almost 60% of the physical sites in the region. — Patrizia Paola C. Marcelo

Mr. Rio said the DICT’s policy is the government will not try to establish itself as the third telco player, given previous failures, but rather, provide services in areas telcos do not serve.

“Where the telcos do not go, we will enter,” Mr. Rio said in an interview.

Mr. Duterte earlier offered China the “privilege” of being the third telecoms operator in the Philippines, in order to break the long-standing duopoly of PLDT Inc. and Globe Telecom, Inc.

Mr. Rio said on Dec. 20 that companies from Japan, South Korea, Australia, China, and the United States are also interested in entering the Philippine market. The Constitution limits foreign ownership in certain industries, including telecommunications, to only 40%.

IT-BPO SKILLS
For information technology — business process outsourcing (IT-BPO), Davao City has emerged as the primary outsourcing destination in Mindanao. It joined Manila, Cebu, Bacolod and Sta. Rosa as on the list of outsourcing destinations in the Tholons Services Globalization Index for 2017.

As the only city in Mindanao, Davao ranked 85th on the list, down from 69th last year.

With slow Internet a hindrance, another setback is the low level of ICT skills among workers in the region.

Citing a study in 2014 done by the IT and Business Process Association of the Philippines (IBPAP) and TeamAsia, the World Bank said in its report that most applicants in Davao were rejected for lack of both soft and technical skills, resulting in a supply gap of 70% in Davao’s ICT sector and 40% in Davao’s BPO industry.

One way the government is trying to address the shortage of ICT skills in the provinces, including Mindanao, is the implementation of the  Rural Impact Sourcing (RIS) Program. The government says this program “is intended to create meaningful ICT-enabled jobs in socio-economically disadvantaged areas in the country.”

The program’s objectives are to: increase the ICT technical skills of the talents in the countryside; increase hiring potential of the people to land a job in the field of ICT; and promote local talent and local businesses; and enhance the ICT technical skills of in-house participants, like DICT personnel and Tech4ED Center Manager as potential trainers.

The program specifically focuses on areas with high population but low employment due to lack of investors, and It also aims to promote ICT-enabled jobs as an economically viable activity in rural communities that are not yet ready to host Information Technology-Business Process Management (IT-BPM) operations.

The training also targets to provide employment opportunities, particularly for micro small medium enterprises (MSMEs).

In the conduct of these trainings, special technology empowerment for economic development (Tech4Ed) Centers will be established and utilized to serve as training centers in selected communities.

The Tech4ED Centers are shared facilities that provide access to ICT-enabled contents and services. These centers also serve as RIS hubs where beneficiaries, after the training, can do jobs online with its free facilities.

The DICT said it has conducted seven RIS Advocacy Workshops, which promote the RIS training, conducted in Tagum City in Davao del Norte, City, Mati City in Davao Oriental, Sindayan in Zamboanga del Norte, Tawi-Tawi Province, Bislig in Surigao del Sur, San Jose in Dinagat Island Province, and Nabunturan in Compostela Valley. Two more are expected to be completed in Digos, Davao del Sur, and Basilan province.

The Tech4Ed centers aimed to provide ICT services for education, employment, and entrepreneurship. “These are small BPOs [business process outsourcing] [centers] spread throughout the country especially in rural areas,” Mr. Rio said.

For Tech4Ed, 588 centers have been established, composed of 19 library partners, 295 school partners, 48 national government agency partners, 29 private partners.

The goal for next year is to establish another 316 centers, 263 of which will be established with equipment donation, while 53 will be hosted by partners; three training centers; and eight Tech4ED-RIS hubs.

OUTLOOK
With the continued rollout of programs by the DICT, particularly in skills training, the outlook for ICT in Mindanao is much brighter.

However, much of the potential remains to be seen, particularly in opening the market, which can deliver more options, healthy competition, and better services, particularly in Mindanao.

Providing cost-effective Internet connection can — just as with the rest of the country — foster economic development in particular in Mindanao.

It remains to be seen whether the Duterte government can maximize the opportunity and bring development in the island where he promised change and prosperity. — Patrizia Paola C. Marcelo

DoE to seek SC guidance on retail competition

THE Department of Energy (DoE) will ask the Supreme Court  (SC) for guidance after the issuance of a new department circular that seeks to restart the stalled rules calling for greater competition in retail electricity sales.

“We are going to petition, make a manifestation before the court that there are two circulars that [Energy Secretary Alfonso G. Cusi] has signed and what will the effect be if it will be rendered moot already on the side of the DoE,” said Energy Undersecretary Felix William B. Fuentebella.

He said the department had been talking to the Office of the Solicitor General on the matter to “clarify” the DoE’s representation before the high court or whether the agency will handle the petition on its own.

However, the Energy Regulatory Commission (ERC) is set to wait it out until the Supreme Court decides whether to lift the temporary restraining order (TRO) on provisions on retail competition and open access (RCOA).

Philippine Electricity Market Corp. (PEMC), the governance arm of the country’s wholesale electricity spot market (WESM), is likely to wait for lifting of the TRO.

Towards the end of last year, the DoE signed a new circular that will reverse contentious provisions of a previous circular as well as resolutions from the ERC requiring contestable customers — or those whose electricity consumption for the past 12 months has reached the thresholds set by the regulator — to move away from being part of the captive market of a distribution utility.

The switch to a licensed retail electricity supplier is meant to allow greater participation from new players, thus spurring competition and lowering power costs. RCOA is called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), the law that restructured the power sector, as well as its implementing rules and regulation.

The new circular will also allow the ERC to continue issuing licenses to retail electricity suppliers, which was among the provisions placed on TRO as sought by a number of educational institutions and a business group. The TRO was issued by the high court in February.

ERC Chairperson Agnes T. Devanadera said there is indeed a conflict between the DoE’s two circulars, specifically the mandatory provision in the old rules, which the new one set aside in favor of voluntary compliance.

“It’s a fact that they have issued a circular but the Supreme Court (SC) case is also a fact so do I have a say there? None. SC does),” she said, adding that the subject circular is already with the court.

“So all matters, whether direct or allied matters, we will defer to the SC. We are represented by the solicitor general,” she said.

Francis Saturnino C. Juan, PEMC spokesperson, said the electricity market operator remains uncertain about what is required of it under the new circular.

“While we have already the DoE circular, when we were discussing the circulars, we would need additional guidance and clarifications if we are expected already to implement at least in terms of the customer switching as the CRB (central registration body),” he said.

Mr. Juan said PEMC is dependent on the ERC as far as determining which customers fall under the contestable market.

“Even if we want to implement RCOA, the switching, who will be the contestable customers? We can’t for sure determine that ourselves,” he said. — Victor V. Saulon

Koi story: priceless Japanese fish make a splash

KAZO, JAPAN — Hand-reared for their color and beauty, koi carp have become an iconic symbol of Japan that can sell for hundreds of thousands of dollars and even participate in fishy beauty contests.

The nation’s koi carp were brought to the world’s attention when visiting US President Donald Trump was snapped unceremoniously dumping the last of a box of feed into a palace pond in Tokyo.

But the fish have for decades been popular in Japan, where top breeders take their most prized specimens (known as nishikigoi) to highly competitive “beauty parades.”

At one such competition in Tokyo, judges in sharp suits, notebooks in hand, stride around tanks lined up along a pedestrian street where the valuable koi strut their stuff.

They come in all the colors of the rainbow: pearly white, bright red, cloudy-gray, dark blue, gleaming golden yellow.

But it is the curvature of the fish that accounts for 60% of the final score, explained competition organizer Isamu Hattori, who runs Japan’s main association for breeders of koi carp.

Color and contrast make up another 30%, he told AFP.

And the final 10%? “Hinkaku” — a concept that is tricky to define and even harder to judge, best translated as the “presence” or “aura” of the fish.

‘EVERYTHING MATTERS’
“Hinkaku. It’s either there in the genes at birth, or it’s not,” mused Mikinori Kurikara, a koi breeder in Saitama, north of Tokyo, who says he can spot it in fish when they reach eight or nine months old.

“Put it this way, it’s like looking after your own children every day. You care for your kids and want them to grow healthy. In the same way, you take care of these fish, appreciate them and adore them,” he told AFP.

At his farm, thousands of tiny nishikigoi (colored carp) dart around deep basins of carefully purified water, meticulously divided by age and color.

A less glorious fate awaits the other koi who have not been fortunate enough to catch the eye of the breeder: they are sold off as feed for tropical fish.

“It’s a really delicate job, really difficult. Everything matters: the ground, the water quality, the food,” explained the 48-year-old, who took over the farm from his father and is training his son, half his age, in the subtle arts of koi breeding.

“We have many secrets,” he adds mischievously. “But even if we let them slip, it wouldn’t work. You have to be able to feel it.”

‘SOCIAL LADDER’
These days, any self-respecting traditional Japanese garden has plenty of colorful koi gracing its ponds, but it is a relatively recent tradition.

Koi 2
Koi carp displayed in plastic bags during a “nishikigoi (colored carp) contest” in Tokyo on Nov. 24, 2017. — AFP

Around 200 years ago, villagers in the mountainous region around Niigata (in the north-west of Japan) started to practice genetic engineering without knowing what they were doing.

For the first time, they began to cross-breed rare colorful carp, not for food but for pure aesthetical value.

The craze for nishikigoi gradually took over the whole of Japan and then spread into other parts of Asia.

They are especially popular in China, where carp swimming against the tide symbolizes the idea of perseverance leading to riches — rather like people climbing the social ladder, said Yutaka Suga, professor at the Institute for Advanced Studies on Asia at Tokyo University.

Today, koi is big business and Japanese exports are booming — 90% of domestic production is exported and sold at auction.

In 2016, Japan exported a record 295 tons of koi carp, generating turnover of ¥3.5 billion ($31 million), an increase of almost 50% from 2007, according to Japan’s agriculture ministry.

As for individual carp, “the prices have become insane,” said carp association boss Hattori.

“Today, a two-year-old carp can sell for ¥30 million each ($265,000) whereas 10 years ago, ¥2 million was already a very good price,” he told AFP.

Like racehorse owners, many foreign owners leave their prized possessions in their home Japanese farms so they can compete in the most prestigious fishy pageants, which are only open to domestic rearers.

One such owner, Chinese koi collector Yuan Jiandong, was in Tokyo to cheer on some of his own carp.

“It’s not a way of making money. It’s a way of spending it for fun,” laughed the pharmaceutical boss from Shanghai.

But owning koi is so much more than a vulgar display of wealth, he said.

“When you see these beautiful fish gliding around in your pond, you forget the stresses of daily life and you find peace of mind.”

And you can’t put a price on that. — AFP

Much of Europe casts a wary eye on China’s Silk Road plans

PARIS — Depending on who you ask in Europe, China’s colossal East-West infrastructure program is either an opportunity or a threat — and when French President Emmanuel Macron visits this week, Beijing will be watching to see how keen he is to jump on board.

Since China launched the New Silk Road plan in 2013, the hugely ambitious initiative to connect Asia and Europe by road, rail and sea has elicited both enormous interest and considerable anxiety.

“It’s the most important issue in international relations for the years to come, and will be the most important point during Emmanuel Macron’s visit,” said Barthelemy Courmont, a China expert at French think-tank Iris.

The $1-trillion project is billed as a modern revival of the ancient Silk Road that once carried fabric, spices, and a wealth of other goods in both directions.

Known in China as “One Belt One Road,” the plans would see gleaming new road and rail networks built through Central Asia and beyond, and new maritime routes stretching through the Indian Ocean and Red Sea.

Beijing would develop roads, ports and rail lines through 65 countries representing an estimate 60% of the world’s population and a third of its economic output.

Macron, who headed to China for a three-day state visit on Sunday, will notably be accompanied by some 50 company chiefs keen to do business with the Asian powerhouse.

So far France has been cautious on the Silk Road plan, but Courmont said Chinese leaders were “waiting for a clear position” from Macron at a time when they view the young leader as an “engine” for growth in Europe.

“If Macron takes a decision on how to tackle the Chinese initiative, all of Europe will follow,” Courmont predicted.

But, as Courmont acknowledges, Europe is divided on what to make of China’s ambitions.

The continent could potentially benefit handsomely from increased trade over the coming decades, but in some corners there is suspicion that it masks an attempted Beijing influence grab.

“They are notably asking themselves about the geopolitical consequences of this project in the long term,” Alice Ekman, who covers China at the French Institute of International Relations, said of France and Germany.

WIN-WIN?
In Central and Eastern Europe the program has been met with altogether more enthusiasm, given the huge infrastructure investment that China could bring to the poorer end of the continent.

“Some consider the awakening of China and Asia as a threat,” Hungary’s Prime Minister Viktor Orban told a summit in Budapest in November which gathered China with 16 Central and Eastern European countries. “For us, it’s a huge opportunity,” he said, with Beijing using the summit to announce €3 billion of investment in projects including a Belgrade-Budapest railway line.

Bogdan Goralczyk, director of the Center for Europe at the University of Warsaw, noted there were divisions even within eastern Europe, with Poland hesitant due to its right-wing government’s “strong anti-communist stance.”

Others to the west have made little effort to hide their concern.

Former Danish premier Anders Fogh Rasmussen fretted in a column for Germany’s Zeit newspaper that “Europe will wake up only when it’s too late, and when swathes of central and eastern Europe’s infrastructure are dependent on China.”

The former NATO chief noted that Greece — a major recipient of Chinese largesse — had in June blocked an EU declaration condemning Chinese rights abuses. It came just months after Athens’ Piraeus port, one of the biggest in the world, passed under Chinese control.

Germany, Europe’s biggest economy, is favorable to Chinese investment, but has reservations. “If we do not develop a strategy in the face of China, it will succeed in dividing Europe,” Foreign Minister Sigmar Gabriel warned in August.

France is meanwhile seeking to “rebalance” relations with China during Macron’s trip, according to his office — eyeing a trade deficit of €30 billion, its biggest with any partner.

“Our Chinese partners would prefer a win-win situation. Why not? On the condition that it’s not the same party that wins twice,” French Foreign Minister Jean-Yves Le Drian said Thursday.

“It is not France’s intention to block China,” he said.

“But we should establish a partnership based on reciprocity when it comes to the opening of markets.” — AFP

Gilas resumes work for World Cup qualifiers

THE Philippine national men’s basketball team gets back to work for the FIBA World Cup qualifiers with weekly practices resuming today.

Currently undefeated in its grouping with a 2-0 record after defeating Japan and Chinese Taipei in the opening window of the home-and-away tournament in November, Gilas Pilipinas now focuses on the second window happening next month.

In a tweet last week, national team coach Chot Reyes said that upon clearance from Philippine Basketball Association officer-in-charge Willie Marcial, the Monday-only practices for Gilas players were about to begin.

He initially short-listed 15 players for training, namely Jayson Castro, Roger Pogoy and Troy Rosario of TNT KaTropa, Kiefer Ravena and Kevin Alas of the NLEX Road Warriors, Jio Jalalon of the Magnolia Hotshots, Matthew Wright of the Phoenix Fuel Masters, Allein Maliksi and Mac Belo of the Blackwater Elite, Gabe Norwood and Raymond Almazan of the Rain or Shine Elasto Painters, Calvin Abueva and Carl Bryan Cruz of the Alaska Aces, Japeth Aguilar of the Barangay Ginebra San Miguel Kings and June Mar Fajardo of the San Miguel Beermen.

In the opening window in November, Gilas got their World Cup qualifiers to a good start, beating Japan, 77-71, in Tokyo and then downing Chinese Taipei, 90-83, here at home.

Mr. Reyes said the wins did not come easy for them and that they are hoping to perform far better in the second window.

“Obviously we are happy to have ground out two Ws despite not being 100% in our game,” said Mr. Reyes after their two-game assignment.

Gilas next faces also undefeated Australia on Feb. 22 in Melbourne before coming back home to take on Japan. — Michael Angelo S. Murillo

Court junks raps in P6.4-billion shabu smuggling; DoJ appeals ruling

THE Department of Justice (DoJ) has asked the Valenzuela Regional Trial Court (RTC) to reconsider the dismissal of the criminal case against Chinese businessman Richard Tan and several others in connection with the P6.4-billion shipment of illegal drugs last year. — PNA/interaksyon.com

See full story https://goo.gl/qSEG4x

Wishes for the economy in 2018

Happy New Year, dear readers!

We start 2018 on a positive note: My wishes for the economy in January 2017 were largely realized. (To read my wishes last year, please visit http://bit.ly/2017wishes).

1 Passage of Package 1 of TRAIN. Check, after a hard slog.

2 Appointment of a qualified, credible governor for the Bangko Sentral ng Pilipinas, preferably an insider. Check, and with an excellent outcome.

3 Efforts to change the Constitution and shift to federalism would be pursued responsibly, giving time for deeper study, informed debates, and awareness activities. The third, however, is a work in progress. Hopefully, future efforts to pursue extra-constitutionally (via a “revolutionary government” initiative or similar railroad variations) have been shelved for good. (See FEF Press Statement on Talks for a Revolutionary Government: http://bit.ly/FEFRev)

Allow me now to share our wishes for 2018, as posted on Global Source Partners, a subscriber-based network of independent analysts (globalsourcepartners.com). My colleague Christine Tang and I are its Philippine advisors.

Here are my three wishes for the economy in 2018:

1. MUCH MORE ACTIVITY UNDER BUILD-BUILD-BUILD.
The government’s massive P8.1- trillion medium-term infrastructure program has been likened to a battleship that will be hard to stop once it has gathered momentum. The passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act puts some P80 to P90 billion in new money in the hands of government in 2018 that people expect will largely be used for upgrading and expanding the country’s networks of water, power, road, rail and air/seaports. Government is targeting to increase its investments in infrastructure from 5.4% in 2017 to 7.3% of GDP by 2022, to help ease supply bottlenecks and allow the economy to scale a higher growth path.

However, despite assurances from the Department of Budget and Management of improving disbursement rates overall, the 50% disbursement ratio as of November 2017 of the Department of Transportation leaves much room for improvement.

2. PASSAGE OF PACKAGE 2 OF THE DUTERTE ADMINISTRATION’S COMPREHENSIVE TAX REFORM PROGRAM.
Package 2 seeks to lower the corporate income tax rate (CIT), currently at 30% and higher than the statutory tax rates in most ASEAN economies. To compensate for expected revenue losses, the Finance Department wants to remove a plethora of fiscal incentives that costs government about 1% of GDP annually. The plan is to calibrate CIT cuts so that revenue losses will be roughly offset by revenue gains from removing fiscal incentives. While Package 2 will not be a revenue measure, it is expected to (a) make the economy more competitive and attractive to foreign investments with a lower CIT and (b) widen the tax base with fewer activities given tax incentives.

3. MODERATE INFLATION PRESSURES THAT WILL GIVE THE BSP MORE FREEDOM TO MANAGE DOMESTIC AND EXTERNAL RISKS.
This includes tightening global financial conditions expected to accompany a wider current account deficit. Local prices are expected to rise in 2018 due to higher consumption taxes from the TRAIN Act, adding roughly one percentage point to the headline rate per BSP estimate. One policy response to tame inflation that local economists have long pushed for is freer importation of rice, which account for close to 9% of the CPI basket. Local rice prices have remained elevated in recent years despite softer world prices, an oddity tied to the fact that rice imports are subject to quantitative restrictions (QR). While removing the QR would require a change in law, experts think that with enough political will, government can administratively ease up on imports, e.g., by setting a high, non-binding import volume, and improving the handling of import permits.

Given that wishes are free, I would add two more:

4. FAVORABLE RESOLUTION OF DISPUTES ARISING FROM FAILURES OF THE LAST ADMINISTRATION TO COMPLY WITH LONG-STANDING PPP OBLIGATIONS.
These include:

a) the arbitrary interpretation of MWSS concession agreements with Manila Water and Maynilad. We need to restore a working two-decade old concession model that was broken by the last administration.

b) non-adjustment of toll road tariffs of NLEX, Cavitex, and Star Tollways, and

c) the contractual tax issue with the Malampaya consortium.

If these fester much longer in one venue or another, the current administration’s no-nonsense image will suffer, dampening private investments in needed public goods and services, not to mention wasting public funds to pay for costly international litigation.

5. IMMEDIATE IMPLEMENTATION OF A COMPREHENSIVE PROGRAM TO REHABILITATE MARAWI CITY.
The plan will incorporate the cultural aspects important to the Maranaos such as preservation of heritage and Islamic sites. While reconstruction of infrastructure is critical, such a program should prioritize the provision of services to allow over 200,000 refugees to return to normal life such as education, particularly literacy for the adults and technical training for livelihood and employment as well as loans and capital infusion for the business sector.

Marawi City has become a fertile ground for violent extremism, a justification used for Martial law extension.

Addressing the needs of the population, majority of whom have been displaced for over six months and brought to new lows of poverty, is critical if government is to prevent the spread of extremist sentiment. Business progress in Mindanao and the nation requires peace and stability. Armed conflict is the major roadblock on the road to development. To remove this barrier, not only is the rehabilitation of Marawi essential but the passage of the long-awaited Bangsamoro Basic Law as well.

Devoting government resources and political capital to address this political problem soonest to preserve our economic momentum is non-elective. In contrast, headline news for a change in government to one version or another seems like needless distractions from the economic managers’ agenda of improving our people’s lives.

Finally, allow me to echo a New Year’s toast from Benjamin Franklin. “Be at war with your vice, at peace with your neighbors, and let every new year find you a better man.”

 

Romeo L. Bernardo is a board director of the Institute for Development and Econometric Analysis. He was undersecretary of Finance during the Corazon Aquino and Fidel Ramos administrations.

Assessing TRAIN

The first package of the comprehensive tax reform, also known as TRAIN (Tax Reform for Acceleration and Inclusion), was the most significant yet very controversial piece of legislation in 2017.

Those who oppose TRAIN label it as pro-rich and anti-poor. Thus is the position of diverse Left-oriented groups like the Ibon Foundation, Bayan, and Freedom from Debt Coalition. And it is the same view articulated by liberals like Florin Hilbay. What is evident though is that those who are fully opposed to the Rodrigo Duterte administration do not spare TRAIN from harsh criticism either.

But as Vice-President Leni Robredo once said in an interview with Rogue (Special Collectors’ Issue, July 2017), the proper opposition is “one that doesn’t oppose for the sake of opposing.” Incidentally, the Vice-President is supportive of the Department of Finance’s version of TRAIN, which she says, “even if it isn’t perfect, it’s for the greater good.”

Thus, we ask: Is Ibon Foundation’s or Hilbay’s assertion that TRAIN is anti-poor an apt description?

Like the Vice-President, we at Action for Economic Reforms (AER) have taken a more nuanced position on TRAIN. That is to say, we see its imperfection but we likewise recognize the gains from it.

To say that it is anti-poor and pro-rich is an over-simplification. Those who dismiss TRAIN as such, without a deeper explanation and a reasonable justification, are ideologically driven, are opposing for the sake of opposing, are misinformed, or are not equipped with the analytical tools to dissect TRAIN.

Here thus is an attempt to have a sober if not unprejudiced assessment of TRAIN.

The legislated TRAIN yields significant revenue, amounting to an additional P90 billion in the first year. This is nothing to sneeze at, considering that the first package of TRAIN includes income tax relief, which will result in revenue loss. TRAIN will provide sustainable revenues to finance AmBisyon 2040, whose goals are to make the Philippines a high middle-income country, eradicate poverty, and create a stable middle class, in a period of one generation.

Furthermore, the increase in tax effort arising from TRAIN strengthens the macroeconomic fundamentals, necessary for sustained growth and employment. In fact, Fitch Ratings, Inc., anticipated TRAIN’s passage and upgraded the country’s credit rating from BBB- to BBB (investment grade) in early December 2017. In this sense, by creating jobs through new and increased investments, TRAIN is helping the poor.

TRAIN also gives significant income tax relief to the working classes and the middle class as well as sections of the rich. However, the richest earning a monthly compensation of P666,667 and (or P8 million and above annually) will have to pay a higher marginal tax rate of 35% (compared to 32% before). To give an example, the overwhelming majority of those employed in the business process outsourcing (BPO) industry — or those receiving a monthly salary of P20,833 and below — will no longer have to pay income tax.

But what about the poor? They have not been paying income taxes. Won’t they be hurt by TRAIN because of the increase in the excise taxes on consumption, particularly fuel?

Let’s explain the fuel tax issue, and it can be a bit complicated. Fuel taxes have not been adjusted to inflation since 1997. Thus, in real terms, excise taxes from fuel have been declining. Worse, under the Gloria Arroyo administration, the excise tax on diesel was even removed. It is but reasonable to keep the fuel tax rates in tune with inflation. This is no different from increasing wages and salaries to at least adjust to inflation or having income tax levels re-bracketed and lowered to prevent inflation creep.

The fact is, fuel is mainly consumed by the well off, not the poor. Scrutinize the data from the Family Income and Expenditure Survey (FIES). The households that constitute the richest 10% of the population consume 3.7% of their consumption spending for fuel. In contrast, the poor’s fuel consumption is equivalent to 1.1% of their total household expenditure. The richest 10% accounts for 51% of total fuel consumption. Some economists have thus argued that the fuel tax is “moderately progressive.”

Yet, it cannot be denied that the consumption taxes will increase prices, thus affecting the poor. The effective response is that government will provide unconditional cash transfers to those households from the first to seventh deciles that will not gain from the income tax relief but will be affected by the consumption taxes. The amount of transfer for the household beneficiary — P2,400 in the first year and P3,600 in the second and third years — more than offset the higher spending resulting from the higher consumption taxes.

Further, the independent Bangko Sentral ng Pilipinas and economists from various quarters project that the inflation growth that can be attributed to the new taxes will be low. Inflation rate for 2018 can peak at below five percent, which is quite tolerable.

To be sure, TRAIN is a product of compromise. The outcome would have been bad, if the President did not veto several items, including perks for economic zones and free ports.

TRAIN has removed 56 lines of exemption from the value-added tax (VAT), another significant reform towards improving efficiency and tax administration. But note that from before, the Philippine tax regime had 143 lines of VAT exemption from the tax code and special laws, with some overlap). From an equity perspective, only the essential goods and services consumed or used by the poor are justifiably exempted. TRAIN’s package 1 has failed to remove the exemption for some vested interests like the housing sector, but the compromise of having a threshold level for exemption is acceptable.

Vested interests are still protected in aviation fuel, luxury cars that enjoy a lower effective tax rate than the lower-end automobiles, dividends (the 10% rate being retained), among other items. The rich people benefit from these types of protection.

The excise tax on sugar-sweetened sweetened beverages is welcome for health reasons, but the law fails to earmark the revenue for health programs, particularly to finance nutrition programs. The absence of that can aggravate malnutrition in the country, given that it is a bigger problem than obesity.

The new excise tax on tobacco for the medium term will not address a significant reduction of smoking prevalence. Neither will it yield adequate revenue for the forthcoming expansion and strengthening of the universal health coverage (UHC) program. Nevertheless, at least for the first year, the increase of P2.50 in the tax rate for the first semester and another increase of P2.50 in the second semester can deter new smokers from acquiring the habit. In that sense, it is a gain for health, but it remains urgent to press for further increases in 2019 and beyond.

Thus, we cannot oversimplify our description to assess TRAIN. Gains have been secured, but serious problems remain and still have to be addressed through continuing advocacy.

From a long-run perspective, TRAIN will be good for the country, for AmBisyon 2040. Even those strongly opposing Duterte should be thankful for TRAIN’s passage.

The post-Duterte administration, hopefully one that is truly progressive and democratic, will benefit from TRAIN. At least, the post-Duterte reformers will no longer worry about having such a hard economic reform passed and thus can focus on rebuilding political institutions.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

Al-Attiyah takes Dakar opener; Loeb finishes sans brakes

PISCO, PERU — Two-time winner Nasser Al-Attiyah stunned defending champions Peugeot when he steered his Toyota to victory on the opening stage of the 9,000-km. Dakar Rally on Saturday.

The Qatari driver, who took the title in 2011 and 2015, swept across the short 32 km. Peruvian desert stage between Lima and Pisco in 21 minutes 51 seconds.

However, it was a miserable first day for nine-time world rally champion Sebastien Loeb who is bidding for a maiden Dakar win.

The Frenchman’s hopes were hit when his Peugeot developed brake problems which left him 5 minutes 37 seconds off the lead and down in 29th place.

“Happily, it was only 31 kilometers!” said Loeb who is bidding to become just the fourth man to win both the world rally title and Dakar after Finnish duo Ari Vatanen and Juha Kankkunen and Spain’s Carlos Sainz.

“I made it without brakes! Zero brakes!,” he added before admitting he had no idea where the problem originated and that his car’s brake lights had not provided any warning. The car’s handbrake also failed the Frenchman.

“Without brakes, it’s really shit.”

South Africa’s Bernhard Ten Brinke (at 25 seconds behind Attiyah) and Peru’s Nicolas Fuchs, in a Borgward (34 seconds) filled out the podium.

Peugeot, who swept the podium in 2017 with Stephane Peterhansel taking a 13th overall title, endured a day to forget with their cars struggling in the sand and wind of the desert.

Peterhansel, who has won the last two car titles, lost 2 minutes 15 seconds and is 11th overall while teammate Cyril Despres is 2 minutes 36 seconds behind and in 15th.

“I didn’t have a good feeling,” said Peterhansel. “The sun was high and I couldn’t see the other sides of the dunes. So I preferred to be safe. We will have to wake up.”

Al-Attiyah admitted that Sunday’s stage will be a challenge as he starts first, therefore acting as a pathfinder for his rivals.

“I know it will be very difficult, but I’m just really happy for today, tomorrow’s another day. We try to do our best,” he said.

Britain’s Sam Sunderland got the defense of his motorcycling title off to a winning start.

Sunderland, on a KTM, finished ahead of France’s Adrien Van Beveren, on a Yamaha, and Pablo Quintanilla of Chile on a Husqvarna.

The British rider finished the desert sprint in 20 minutes 56 seconds with his rivals 32 seconds and 55 seconds further back.

The second stage of the two-week event takes place in and around the town of Pisco on Sunday. — AFP

Trump willing to talk to North Korea’s Kim on phone

CAMP DAVID — US President Donald Trump said on Saturday he would “absolutely” be willing to talk on the phone to North Korean leader Kim Jong Un and that he hopes a positive development results from talks between North Korea and South Korea. North Korea agreed on Friday to hold official talks with South Korea next week, the first in more than two years, hours after Washington and Seoul delayed a military exercise amid a standoff over Pyongyang’s nuclear and missile programs. Trump, answering questions from reporters at the presidential retreat at Camp David, Maryland, expressed a willingness to talk to Kim but not without preconditions. “Absolutely, I would do that,” Trump said. “I have no problem with that at all.” Trump and Kim have exchanged insults ever since Trump took office, with Trump repeatedly calling Kim “rocket man” for testing nuclear weapons and ballistic missiles. Early last week Trump dismissed Kim’s taunt that the North Korean leader has a nuclear button on his desk, saying he has a bigger button. Trump suggested the talks might lead to an easing of tensions and took credit for the diplomatic breakthrough, saying it was a result of his steady pressure. “Look, right now they’re talking Olympics. It’s a start, it’s big start. If I weren’t involved they wouldn’t be talking at all right now,” he said. Kim “knows I‘m not messing around. I‘m not messing around. Not even a little bit, not even one percent. He understands that,” said Trump. “If something can come out of those talks, that would be a great thing for all of humanity, that would be a great thing for the world,” he said. On Sunday, North Korea announced a list of five officials who will represent Pyongyang, a day after South Korea confirmed its representatives, the South’s unification ministry said. — Reuters

Public warned against mall smoke

THE SMOKE from the fire that hit Metro Gaisano at Ayala Center Cebu has become an additional problem to authorities. As of last night, 23 hours after the fire broke out, the third floor of the building where the fire originated continued to emit thick smoke, which has spread to establishments and residences nearby and triggered coughing and even dizzy spells. Yesterday morning, the area of the Ayala Business Park where the Metro Gaisano wing is located was engulfed in haze. People working or living at the Cebu Business Park and in nearby areas were advised to wear protective masks to avoid inhaling the harmful smoke. — The Freeman

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Bangsamoro: Beyond the combat zones

MORO ISLAMIC Liberation Front (MILF) Chairperson Al-Haj Murad Ebrahim, speaking at the 1st Bangsamoro Assembly on Nov. 27, 2017 held in Maguindanao, waxed sentimental on the years of armed struggle, of days lived in remote areas of Mindanao fighting for deeply-rooted grievances that go as far as five centuries.

“We cannot help but remember the vivid memories of the past — youthful memories spent not in the cafes of the metropolis but in the ever-changing rugged fields, mountains and marshlands,” Mr. Ebrahim said.

“We are proud heirs to a history of freedom and of the zealous struggle of our forebears for liberty, justice and peace for centuries amidst the onslaught of colonialism and conquest,” he continued.

The remembrance, however, was not meant to incite hostility at the event, a multi-stakeholder gathering prescribed under President Rodrigo R. Duterte’s Executive Order No. 8 expanding the composition of the Bangasamoro Transition Commission (BTC) to include representatives from the Moro National Liberation Front (MNLF), indigenous peoples (IP), and Christian settlers.

Rather, Mr. Ebrahim was putting into perspective the MILF’s resolve to pursue the peace process alongside Mindanao’s diverse communities and rally a united front for the passage of the Bangsamoro Basic Law (BBL).

“I say, let us work and contribute in determining our future with security and succor, a future of peace and plenty that harnesses the potentials of our people whose new skills and talents will be needed for a new age and era in the Bangsamoro. While we shall remain faithful and grateful to our brothers and sisters in struggle, let us tap into the vital energy of our youth and women, whose skills and enthusiasm in pursuing the Bangsamoro dream have kept my confidence in a more secure and certain future for our people,” Mr. Ebrahim said.

That future will largely be determined by the revised BBL proposal, which, for the second time around, lies in the hands of Congress.

The Senate and the House of Representatives, whose leaders are both from Mindanao and are allied with the administration, demurred from the President’s call during the Bangsamoro Assembly to hold a special session at the end of last year to tackle the BBL.

However, legislators in both chambers vowed that the proposal will be among the top priorities at the beginning of 2018.

None among the expanded circle of Bangsamoro stakeholders, over the past year, has publicly made threats of returning to arms if the BBL is not passed.

But Mr. Duterte himself has warned that a protracted legislative action, or worse another congressional bypass, would spell “trouble.”

“If we do not act on it expeditiously, I think that we are headed for a trouble. We must continue to talk and I will urge Congress to fast-track it because they (Bangsamoro stakeholders) are getting impatient,” Mr. Duterte said in a press conference in Davao City on Oct. 29, just before leaving for an official visit to Japan — a trip planned earlier in the year but was postponed in view of the Marawi City crisis.

“And I told them of the wages of how to negotiate peace. Sabi ko, ‘Sandali lang (I told them, just wait a bit), but we (government) will comply on our side what we have promised… that is a commitment eh. Not even a promise, but a commitment to the Moro people,” he added.

Dr. Aboulkhair S. Tarason, chairperson Basilan Ulama Supreme Council and the Basilan Inter-faith Council of Leaders, said in a phone interview, “We are in full support for the passage of the BBL as it will give fruition to the quest for peace of the Moro people.”

One expansion made in the new BBL draft, submitted to Mr. Duterte on July 17 and transmitted to Congress on Aug. 7, is the addition of seats in the council of leaders and sectoral representatives for the youth, traditional leaders, and the ulama, or those considered as scholars or learned of Islam. There are also seats allocated for IPs, settler communities, and women.

OLD AND NEW
BTC Chairperson Ghazali Jaafar, a top MILF official who headed the group’s peace negotiating panel from 1996-1997, explained that the BBL is about resolving the very old “Bangsamoro Question” and addressing a new threat, the emergence of violent extremism.

“Summing up all the number of years since 1521, it means that the Bangsamoro Question has been present for almost 500 years. Parallel to this is the rise and fall cycle of peace negotiations… Consequently, the trust of some Bangsamoro groups on the peace process faded away. These groups started to become radicalized and developed the mindset that the only solution to the Bangsamoro issue is through the use of force,” Mr. Jaafar said in a speech at the Dec. 4, 2017 forum “Way Forward: Beyond Peace in Mindanao” organized by the  Japan International Cooperation Agency (JICA) and the Ateneo de Manila University.

“They started gathering strength even to the point of disregarding the sources and the means just to develop their fire-fight capability. Because of frustration, they do not even mind if the source of the support they receive are from what others refer to as extremists or ISIS (Islamic State of Iraq and Syria),” said Mr. Jaafar, noting that these local armed groups “in a strict sense, are not ISIS themselves.”

“They are local armed groups that have been organized with the objective of resolving the Bangsamoro Question,” he added.

Conflict Alert, the monitoring system developed by International Alert Philippines, has noted “the growing strength of the local extremists” since 2015.

In its 2017 Report titled Guns, Drugs, and Extremism: Bangsamoro’s New Wars, launched Nov. 29, Conflict Alert said “Rebellion-related violence increased by 19% from 144 incidents in 2015 to 171 incidents in 2016.”

More than half of these incidents were in Maguindanao, accounting for 96 in 2016, up from 71 the previous year.

The province is a known lair of the Bangsamoro Islamic Freedom Fighters, also referred to as the Bangsamoro Islamic Freedom Movement, a group that broke away from the MILF at the height of the peace negotiations with the government, and has since pledged allegiance to ISIS.

Conflict Alert, in it’s 2016 Report, also noted “the growing strength of the Maute Group, which is at the core of Dawlah Islamiya.”

It said that “judging by the number of conflict deaths (86) from only six incidents involving the Maute Group that were monitored at that time, it demonstrated it had the resources and capacity to launch large-scale and deadly attacks.”

Their rampage in Marawi last year showed just that — a five-month long battle against government forces that left in its wake deaths, diaspora, and harrowing destruction in what is recognized as an “Islamic City”, the only one in the country.

Mr. Ebrahim calls these groups the “new enemies”, whom he described as followers of a “perverted ideology devoid of a national agenda… without regard to the rules of war and the welfare of the people.”

Mr. Duterte, unlike his stance on the communist movement, wants a comprehensive, inclusive and firm end to the Bangsamoro struggle through the BBL.

“So let us work on the historical issues. Land, the social injustices that were committed since then,” he said at the Nov. 27 assembly, even as he hinted on what he anticipates to be a battle in Congress.

“Alam ko realist kayo (I know you are realists),” he told the crowd.

“If it’s (BBL provisions) not in consonance… then we work it out, but at least Congress and the Filipino people should be given a day to hear you out on what we intend to do… I will impress upon them that you have to devote even one day or two days. Hear them out, hear us from Mindanao,” he said.

Professor Ali T. Yacub, Al-Hj, president of the Golden Crescent Consortium of Peace Builders and Affiliates, said the BBL is the “hard work of the Moro people” that should not be delayed in consideration of the proposal to shift to federalism.

Another Muslim leader, Sheikh Zayd Ocfemia, president of the Assunah Foundation and a member of the Ulama Council for Zamboanga Peninsula, expressed the same sentiment, saying: “Federalism takes a longer time before it will pass, while the BBL it’s already there.”

The bottomline, Mr. Duterte said, is to find a meeting point for two factors relating to the Bangsamoro Question: “Correct the injustice committed against the Moro people and all of the lumads (IPs) here. Second is to preserve the Republic… there has to be a condition that is for all.” — Marifi S. Jara, Arjay L.  Balinbin, Rosemarie A. Zamora, Andrea Louise E. San Juan, and Albert F. Arcilla

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