Philippine trade year-on-year performance
THE Philippines’ trade deficit continued to widen in January with imports rising by double-digits amid flat exports growth. Read the full story.
BRF execs barred from returning to chicken exporter
BRASILIA — Executives of major food processor BRF SA who were released by police on Friday will not be able to return to their posts at the company, the world’s largest poultry exporter, Brazil’s public prosecutor’s office said on Saturday.
A Brazilian judge ordered their suspension from their activities in the company to avoid the risk of them interfering with an ongoing investigation that they engaged in fraud to evade food safety inspections.
They were ordered to stay away from the company and any establishments BRF dealt with, including labs.
Police arrested former BRF chief executive officer Pedro Faria, the company’s former vice-president Helio dos Santos and other executives on Monday on charges that they knew the company engaged in fraud to evade food safety inspections.
All six people were set free on Friday.
BRF shares posted their biggest loss ever on the Sao Paulo stock exchange after the arrests that compounded concerns about the firm’s leadership following a 1.1-billion reais ($338-million) loss last year in the fallout from the “Weak Flesh” investigation into alleged bribery of food-sanitation inspectors at BRF and other food Brazilian processors.
Major shareholders have been pushing to replace the entire BRF board of directors and Chairman Abilio Diniz, a billionaire retail magnate, in the wake of last year’s scandal.
Faria, BRF’s chief executive between 2015 and 2017, and Dos Santos, who resigned last week as BRF’s vice-president of global operations, spent the week in police custody with four other company officials in Curitiba, Paraná state.
In last year’s “Weak Flesh” probe, police accused scores of people, mostly inspectors, of taking bribes in exchange for allowing the sale of rancid meat products, falsifying export documents or failing to inspect meatpacking plants at all.
The scandal prompted several export markets to temporarily close their doors to Brazil, the world’s largest exporter of beef as well as chicken.
Brazil’s Agriculture Minister Blairo Maggi said on Wednesday there was no risk of countries applying new bans on Brazilian meat due to the new phase of the investigation. — Reuters
How PSEi member stocks performed — March 9, 2018
Here’s a quick glance at how PSEi stocks fared on Friday, March 9, 2018.
San Miguel pulls rug from under Barangay Ginebra to go up 2-0
THE San Miguel Beermen did a solid “salvage” job in Game Two of their PBA Philippine Cup best-of-seven semifinals against the Barangay Ginebra San Miguel on Sunday night, claiming a 104-102 overtime victory to move 2-0 up in the series.
Played catch-up for much of the contest, the Beermen used a ferocious charge in the end to pull the rug from under the Kings to stay undefeated in their Philippine Basketball Association semifinal affair.
The two teams opened the match with their guns firing from all cylinders, fighting to a 10-all count in the first five minutes of the opening canto.
Prince Caperal then would lead the Kings in outscoring the Beermen, 14-5, in the next four minutes to build a nine-point cushion, 24-15, by the 3:05 mark.
San Miguel, however, would regain its footing as the period wore on, with Alex Cabagnot leading the charge, cutting down their deficit to just five points, 30-25, at the end of the first 12 minutes.
In the second quarter, the Kings pounded on the Beermen anew, stretching their lead to 13 points, 42-29, with a little over seven minutes remaining, and extending it further to 15 points, 53-38, with 2:19 to go.
When the opening half smoke cleared, Barangay Ginebra continued to hold control, 55-42.
The Beermen came out in the third quarter with more energy, angling to get back some lost real estate.
But Mr. Caperal and the rest of the Kings continued to keep San Miguel at bay, keeping a 14-point lead, 63-49, with 7:54 left on the clock.
Chris Ross, June Fajardo and Marcio Lassiter though would pull San Miguel to within three points, 73-70, at the 1:10 mark.
The score would stay stuck as the quarter drew to a close with the Kings still on top.
Recognizing that the Beermen were already too close for comfort, the Kings, led by Japeth Aguilar, began the payoff quarter with a 12-4 run to stretch their lead back to 11 points, 85-74, in the opening four minutes.
Mr. Lassiter waxed hot as the quarter progressed, bringing his team within four, 91-87, with 3:31 to go in the contest.
A basket by Mr. Aguilar gave the Kings more breathing room only to be answered by San Miguel’s Arwind Santos with a triple to push his team to come closer to three points, 93-90, at the 1:32 mark.
Joe Devance made it a five-point lead anew, 95-90, for the Kings with a basket off an offensive rebound.
Mr. Fajardo was fouled in the ensuing play and converted two free throws and pulled San Miguel to three once again, 95-92.
The Kings failed to score in the play after which San Miguel capitalized on as Mr. Santos drained a three-pointer to tie the count at 95-all with 11 ticks left.
Barangay Ginebra set up a play to win the game by Mr. Devance’s drive to the basket as time expired failed to produce the game-winner, setting up the extension.
Mr. Caperal opened the scoring in the extra period with a jumper.
A floater by LA Tenorio with two minutes remaining gave Barangay Ginebra a three-point lead, 99-96.
But Mr. Fajardo pulled San Miguel closer, 99-98, with two free throws that were answered immediately by Mr. Devance with a triple, with 62 seconds to go.
Mr. Lassiter followed up on a Fajardo miss to make it a 102-100 count, with 50 seconds remaining.
The sharp-shooting guard pulled his team even with two free throws at the 15-second mark.
San Miguel thereafter forced a five-second inbounds violation on Barangay Ginebra, setting up the winning play that had Mr. Lassiter once again starring as he converted the go-ahead, tip-in basket with three seconds to go.
The Kings had no timeouts left and were forced to make a play in the backcourt but to no avail as the final buzzer sounded.
Mr. Fajardo led the Beermen with 33 points and 19 rebounds while game hero Lassiter finished with 25 points and eight boards.
Messrs. Ross and Cabagnot had 13 points each while Mr. Santos had 11 points and 10 rebounds.
Mr. Aguilar, meanwhile, led the Kings with 28 points while Mr. Caperal had a career-high 26.
“We knew it was going to be a tough fight. We just kept coming back in the game and it paid off,” said Mr. Lassiter after the game.
“This is not over though. We need to win two more. It’s first to four just like them,” he added.
Game Three of the San Miguel-Barangay Ginebra series is on Wednesday at the Smart Araneta Coliseum. — Michael Angelo S. Murillo
NAIA rehab bidder cites project urgency amid rising demand
THE CONSORTIUM bidding to rehabilitate the Ninoy Aquino International Airport (NAIA) for P350 billion said the government could speed up the process of approving its proposal, to keep up with the number of passengers set to use the terminal by 2020.
In a statement issued over the weekend, the consortium composed of seven of the country’s largest conglomerates noted how the current processing time for unsolicited proposals takes more than a year to complete. With this, NAIA will still be accommodating passengers well past its capacity in the next two years.
“The government can expedite the approvals allowed under existing rules. That will be the best scenario. Once we complete our short-term expansion and upgrading plans, passenger convenience will be immediately felt. There will be more space for everybody and that is just the first step,” Jose Emmanuel P. Reverente, the spokesperson for the consortium, was quoted as saying in a statement.
The Department of Transportation said in February that it will decide on the consortium’s proposal by April. The department could award the original proponent status (OPS) to the group, or reject its offer.
The seven-conglomerate consortium includes Aboitiz InfraCapital, Inc., Ayala-controlled AC Infrastructure Holdings Corp., Andrew L. Tan’s Alliance Global Group, Inc., Lucio C. Tan’s Asia’s Emerging Dragon Corp., Filinvest Development Corp., JG Summit Holdings, Inc., and Metro Pacific Investments Corp.
Should the group bag the OPS for the project, the government will invite other bidders to improve on the offer through a Swiss challenge. The consortium will then be given the chance to match the offer, an advantage of OPS.
There are currently two proposals to rehabilitate the country’s premier gateway, with the other headed by Megawide Construction Corp. and India’s GMR Infrastructure Ltd. The Megawide-GTR consortium’s proposal to spend $3 billion for NAIA’s rehab, with the concession period to run for 18 years, around half of the first group’s proposed 35 years.
The bidding war for NAIA’s rehabilitation comes as the government seeks solutions for congestion at the airport. In 2017, NAIA’s four terminals served around 42 million passengers, beyond their designed capacity of 31 million.
“By 2019, the projection is we will have 47 million passengers. And the NAIA terminals will still have the same 31-million passenger capacity. So it is urgent for the country to get this project going because doing nothing as a result of a long approval process will set all of us back,” Mr. Reverente said.
The consortium said the first phase of the expansion will take 48 months, set to double NAIA’s capacity to 65 million passengers per year. The first of two phases will include the improvement and expansion of existing terminals. The second phase will depend on necessary capacity upgrades upon consultation with the government, which will further expand the airport’s capacity to 100 million passengers annually.
It has tapped Changi Airports International Pte. Ltd. as the technical partner for the rehabilitation.
“But if we can have our first wave completed by, say, 2020, tourism can become so much stronger that it can be a third economic pillar after the BPO (business process outsourcing) and OFW (overseas Filipino worker) remittances,” Mr. Reverente said. — Arra B. Francia
RCEP framework deal seen by end-2018
TRADE ministers have reached a consensus to complete a basic framework for the Regional Comprehensive Economic Partnership (RCEP) within the year, though the members are under pressure to approve a document because of limited time to meet and forge a deal.
“There was general consensus among Ministers to conclude the RCEP negotiations within the year,” Department of Trade and Industry (DTI) Secretary Ramon M. Lopez said in his report on the 4th ASEAN Economic Minsters’ Retreat held in Singapore between Feb. 23 and March 3.
“The target is to finalize all issues by the October meeting. I impressed the need for swift conclusion but at the same time, maintain the high quality that was initially agreed on,” Mr. Lopez said.
With only two RCEP ministerial meetings scheduled for 2018, Mr. Lopez said the members need to conduct “extra” dialogue around end-June, at a meeting to be hosted by Japan.
The minutes, as sent to reporters over the weekend, noted that ministers have set target discussions for each negotiating round in the following months to fast-track the process.
Mr. Lopez noted that prospects for agreement with two or three non-ASEAN dialogue partners are uncertain.
“We have not yet obtained agreement from the non-ASEAN partners,” Mr. Lopez told reporters on Friday. He did not provide details, though he has said that differences remain on the degree of liberalization to be adopted in the trade in goods.
Members are required to submit a new round of counter-offers and proposals on April 13.
Since 2012, the 10 ASEAN member states — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — have been trying to conclude negotiations on RCEP. The pact involves free trade agreements with Australia, China, India, Japan, South Korea and New Zealand.
If concluded, RCEP members, whose GDPs will make up a third of the global economy, will account for close to half of the world’s population.
Mr. Lopez hopes that prospects of sealing the final RCEP terms will improve by June or July.
Elswhere, the ASEAN and the European Union (EU), during consultations held alongside the ASEAN retreat, agreed to continue pursuing a framework for a possible trade agreement between the two blocs, with a decision on the matter expected next year.
“I supported the continuing engagement with the EU as this will serve as an alternate avenue for increased market access of Philippine goods to the country’s 4th top export destination and possible expanded working opportunities for Overseas Filipino Workers,” Mr. Lopez said.
Mr. Lopez said he also raised the country’s need to adopt a “special safeguard mechanism” to protect farmers from the influx of agricultural imports.
“This was well received by ASEAN and the EU,” Mr. Lopez added. — Janina C. Lim
DoE touts benefits of hosting power facilities on IPs’ ancestral land
THE Department of Energy (DoE) said a circular recently signed by the secretary has assured indigenous communities “tangible financial benefits” as their share of the funds from the energy infrastructure and facilities that they host.
“With this policy, we establish our commitment to boost the inclusion of our indigenous kababayans in the development power projects and the hosting the power generation facility,” said DoE Secretary Alfonso G. Cusi in a statement during the weekend.
The circular — DC2018-03-0005 — is meant to enforce compliance with Section 66 and Rule 29(A) of the implementing rules and regulation of Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA). The provisions provide benefits to power infrastructure host communities.
“Primarily, this policy recognizes the rights of the Indigenous Cultural Communities and Indigenous Peoples in their ancestral domains and the other benefits that goes with it under the EPIRA and the Indigenous People’s Rights Act,” Mr. Cusi.
The DoE said the policy supports its mandate to ensure direct benefits to the people and communities, cities, municipalities and provinces up to the regional level that host an energy resource or an energy-generating facility.
The policy will strengthen the cooperation among the energy resource developers or power producers and the host local communities. It will also fast-track the process of providing direct benefits to the indigenous cultural communities and indigenous peoples, it added.
Under EPIRA, host communities are entitled to receive from the “one centavo per kilowatt-hour (P0.01/kilowatt-hour) of the total electricity sales” trust fund that is owned by the power generators and the recipient communities.
The fund is allocated for development and livelihood, reforestation, watershed management, health and or environment enhancement fund, and electrification initiatives.
The policy covers all legitimate and bonafide indigenous cultural communities and indigenous peoples that are recognized and accredited by the National Commission on Indigenous People, and issued with Certificates of Ancestral Domain Title that hosts the generating facilities or energy resources.
Under the policy, development and livelihood fund and reforestation, watershed management, health and or environment enhancement fund are allocated the following:
• designated resettlement area (5%);
• host barangay (20%);
• host municipality (35%);
• host province/s (30%);
• host region/s (5%); and
• host organized indigenous cultural communities and indigenous peoples (5%) for non-highly urbanized cities.
The sharing for highly urbanized cities is as follow:
• designated resettlement area (10%);
• host barangay (30%);
• host cities (55%); and
• host organized indigenous cultural communities and indigenous peoples (5%). — Victor V. Saulon
ADB to provide technical aid, $5M for Marawi rehabilitation
By Carmelito Q. Francisco
Correspondent
DAVAO CITY — The Asian Development Bank (ADB) said it will provide technical assistance and $5 million worth of funding to support the rehabilitation of Marawi City following last year’s five-month siege.
Kelly Bird, ADB country director for the Philippines, said experts will help evaluate the needs for the rehabilitation and reconstruction phase.
The bank “will provide technical staff support to the government to produce the needs assessment… and we’ll be providing staff support to provide inputs to the government’s reconstruction and rehabilitation program,” Mr. Bird said in an interview with BusinessWorld Friday, on the sidelines of the regional press launch here of the Philippines’ hosting in May of the 51st Annual Meeting of the ADB Board of Governors.
He said the technical experts will coordinate with the National Economic and Development Authority (NEDA) in the assessment process.
The other component is a $5-million grant for urban planning initiatives and “small scale infrastructure projects.”
Mr. Bird said the ADB assistance is targeted for rollout in the “next few months.”
Socioeconomic Planning Secretary Ernesto M. Pernia earlier urged the bank, among other international financial institutions, to provide the Philippine government technical and financial assistance for rebuilding Marawi and helping its more than 200,000 displaced residents.
Officials have estimated that at least P50 billion is needed to rehabilitate Marawi, the country’s leading Islamic city and the capital of Lanao del Sur province.
The Marawi siege prompted government to declare martial law on Mindanao, which remains in effect until end-2018.
Finance Secretary Carlos G. Dominguez III, this year’s chair of the ADB Board of Governors, said in a statement Friday that Mindanao will be among the primary beneficiaries of an inclusive approach to growth in the Asia-Pacific region, citing the government’s strong partnership with the ADB to bring peace and prosperity to the southern island.
Japan to supply equipment
JAPAN is set to turn over heavy equipment and electric vehicles this month to support the rehabilitation and reconstruction of Marawi City.
In a statement from the Finance Department, the agency’s International Finance Group (IFG) reported that Japan will turn over 27 units of heavy machinery and other equipment to the Philippine government this month.
Tokyo’s donation of heavy equipment is part of its ¥2.5-billion (P1.22 billion) grant under the Philippine-Japan Economic and Social Development Program, which includes support for the reconstruction of the city as well as the provision of coastal monitoring radars to the Philippine Coast Guard.
Aside from this, the IFG also reported that 200 electric vehicles from the Energy Department’s project funded by Asian Development Bank will also by turned over to “help provide livelihood opportunities for residents in the conflict-torn city.”
During a Feb. 12 meeting between Japanese and Philippine representatives in Cebu City, Hiroto Izumi, who chaired the Japanese delegation, said the turnover of heavy equipment “would be a symbol of Japan’s strong commitment for the reconstruction of Marawi and demonstrate the robust bond between our two countries.”
Mr. Izumi also confirmed that Japan will be constructing shelter and community infrastructure for Marawi City residents.
The Philippine delegation, led by Finance Secretary Carlos G. Dominguez, III and Socioeconomic Secretary Ernesto M. Pernia, thanked the Japanese government, both “for its enduring support for Mindanao and for its strong commitment to the rehabilitation and reconstruction of Marawi City.”
The five-month battle between the military and Islamic State-linked militants left Marawi City in ruins and 168 members of the security forces and 87 civilians dead, displacing 1.1 million residents. — Karl Angelo N. Vidal
Shaping tomorrow’s professionals
Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF), said: “we stand on the brink of a technological revolution that will fundamentally alter the way we live, work and relate to one another.” The WEF calls this evolving paradigm the Fourth Industrial Revolution. Based on the World Economic Forum Report issued in 2016, concurrent with this technological revolution are a broader set of related socioeconomic, geopolitical and demographic developments.
While these notable developments will result in job creation, they also present major challenges that will require businesses, governments, and individuals to proactively adjust and transform their work force strategy. The reality today is that the accelerating pace of how these factors drive change is transforming the skills that organizations need and shortening the shelf-life of existing employee skill sets.
IMPACT OF DISRUPTIVE CHANGE ON EMPLOYMENT
Technological disruptions (i.e., Big Data, crowdsourcing, robotics, artificial intelligence, etc.) are viewed as very significant drivers of industrial change while demographic and socioeconomic shifts (i.e., changing work environments and flexible working arrangements, rise of the middle class in emerging markets, climate change, rising geopolitical volatility, young demographics in emerging markets, women’s economic power, changing aspirations, among others) are forecast to have an influence on the changing business and organizational structures nearly as strong as technological disruptions.
The World Economic Forum Report identified job families, which are job groupings that tend to require similar types of knowledge, skills and competencies, have a distinct compendium of knowledge, skills and abilities, and a defined career progression. Disruptive changes may have a significant impact on such job families.
Some of the job families that will benefit from greater efficiencies and reduced man-hours include computer-related and mathematical industries, architecture and engineering, sales-related functions, business and financial operations, management, education and learning. On the other hand, disruption and automation may reduce the need for manpower in areas such as office and administration, manufacturing and production, construction and extraction, arts, design, media and entertainment, legal, installation and maintenance.
The rise of technology is also expected to dramatically influence traditional work force roles. For example, process automation, robotics, and artificial intelligence will eventually be able to substitute for or make office and administration job roles redundant. Resource efficiency and workplace flexibility may also undermine the need for maintaining large work force complements within these roles. Increasing use of new technologies, such as 3-D printing, may result in a decline in manufacturing and production as it replaces more traditional labor-intensive manufacturing processes.
As companies continue to navigate their way through the Fourth Industrial Revolution by heavily investing in new technologies and in Big Data analytics, more organizations will require skilled science, technology, engineering and math (STEM) talent. Other factors that contribute to the increasing demand of STEM-skilled individuals are the rapid urbanization in developing countries and rising geopolitical and privacy issues in emerging markets.
Two job groups that are foreseen to have flat employment outlooks are business and financial operations and management. Both will be impacted by various drivers of change, therefore whether employment will be positively or negatively impacted will depend on the scale of transformation and the upskilling needs these industries will undergo over the coming years.
It is clear from the World Economic Forum Report that these changes are well underway and that the future of our work force depends on how we proactively manage near-term and long-term talent management transition requirements.
UNDERSTANDING OUR WORK FORCE SKILL SETS
People as assets are at the core of almost every business. It is imperative that we understand the future requirements of our operations and bridge the gap of our existing talent skills against future requirements. This means looking beyond the existing job descriptions and roles of our people and looking at how we can upskill or reskill to adapt to future requirements.
Based on the results of a WEF survey conducted across global Chief Human Resource Officers, more than one third of all jobs across industries will require complex problem-solving core skills by 2020. Also, social skills such as emotional intelligence, persuasion, and coaching ability will be in higher demand across industries. Content skills (Information and Communications Technology literacy, active learning, etc.), cognitive skills (creativity and mathematical reasoning) and process skills (active listening and critical thinking) will be a growing part of the core skills required in the future.
UPSKILLING AND RESKILLING A DIVERSE WORK FORCE
Because businesses may eventually require skill sets that may not even exist in our organizations today, it is critical to prepare our existing work force for future demands through highly relevant fit-for-purpose learning and development programs using the latest technologies.
Learning and development specifically aligned to job families and employee roles and responsibilities will become more effective. There are also various training channels that are now available such as mobile learning, online courses, and even streaming YouTube videos. These new modes of learning are important channels that can help employees understand, accept and comply with the rigorous continuous learning requirements that are now a part of today’s work conditions.
Other ways of learning are capability uplift through collaboration with professional services or consulting firms. This allows for flexibility learning through combined teaming and peer coaching. In these cases, consultants can help the business identify their capability gaps, develop a learning module that would meet their specific requirements and be ready to coach the employees through learning sessions.
RECOMMENDATION FOR ACTION
In order to meet the talent and skills gap driven by disruptive changes, businesses would need to place talent development and future work force strategy at the front and center of their growth. Businesses cannot remain complacent, i.e., taking a passive approach and assuming that they can just recruit new talent to supplement their existing skills and capabilities.
Businesses should also consider uplifting and prioritizing their HR function by providing HR with the right tools that will help them align their future business operations with their talent management strategies.
Moreover, businesses should encourage their work force to take on an attitude of continuous pursuit of knowledge through the various channels of learning available to them.
Progressive and dynamic organizations need to foster a collaborative mind-set that would allow them to engage with other businesses, professional firms, educational institutions and government bodies in building and upskilling talent capabilities. In SGV, for example, we have transitioned from a traditional accounting firm into a multi-disciplinary company that recruits skill sets to meet our digital strategy platforms. We have also embarked on upskilling programs to help our people attain the right level of technical skills relevant to their roles. We in the process of automating certain processes and robotizing certain functions. It would also be beneficial for companies and industries to partner more closely with educational institutions in order to catalyze necessary revisions to current curriculum to help future professionals adapt to evolving business requirements.
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.
Adeline G. Lumbres is a Partner of SGV & Co.
ConCom set to vote on anti-dynasty provisions
By Arjay L. Balinbin
PRESIDENT Rodrigo R. Duterte’s Charter review body is set to decide on Monday, March 12, on the final “architecture” of the anti-dynasty provisions.
“The Consultative Committee (ConCom) to Review the 1987 Constitution is set to vote at its en banc meeting on Monday on a set of self-executing constitutional provisions that could spell the doom for political dynasties in the country,” said the office of ConCom Chairman Reynato S. Puno in a statement on Sunday.
The Committee will vote on provisions covering a ban on relatives up to the second-degree of consanguinity and affinity; the extent of prohibition on the holding of or running for multiple simultaneous positions at the national, regional (or constituent state), local and barangay levels; and the extent of prohibition on the succession of an incumbent public official by a relative.
As for the proposed ban on relatives up to the second-degree of consanguinity and affinity, Mr. Puno’s office said it “will affirm a consensus arrived at last week in a committee-of-the whole deliberation on the extent of the domination by political dynasties and how they have led to bad governance, created (a) monopoly of political and economic power, bastardized democracy, stunted socioeconomic development, and contributed to poverty.”
On the extent of prohibition on holding or running for multiple simultaneous positions, the Committee will decide “whether or not two or more relatives to the second degree may be allowed to simultaneously hold or run for positions at the national, regional, local, or barangay levels or any combination.”
On the extent of prohibition on the succession of an incumbent official by a relative, ConCom will vote “whether or not a relative (in) the second degree may be allowed to run for an office to be vacated by the incumbent at the national, regional, local or barangay levels.”
A second-degree ban, the Chairman’s office said, covers politicians’ relatives “by consaguinity: (1) parents, (2) grandparents, (3) children, (4) grandchildren, (5) brothers/sisters, and (6) nephews/nieces; by affinity: (1) spouse, (2) parents and siblings of the spouse (parents-in-law, brothers/sisters-in-law), (3) grandparents-in-law, (4) spouses of the politician’s siblings and their spouses; and step relatives: step brother/sister, step parents, etc., which are considered the same as blood relationship.”
A study led by Mr. Puno and former Budget secretary Salvador M. Enriquez showed that there are at least “295 political families who control power in various regions — with Metro Manila having the most number, 31 in all.”
“The regions with the most number of dynasties apart from NCR are Central Luzon with 21, Calabarzon with 20, Bicol Region with 15, Western Visayas with 12, Mimaropa with 11 and Central Visayas with 10.”
A study by the Asian Institute of Management (AIM)-Policy Center showed that “in the 2013 elections, 50% of the positions for governor were contested by political dynasties; in another 11%, the dynasties had no opponent.”
It added: “In the same year’s elections for the House of Representatives, 43 seats were won by dynasty over another dynasty while 71 seats were won by a dynasty over a non-dynasty.”
The sin of health alarmism in TRAIN sin tax hike
“When a new source of taxation is found it never means, in practice, that the old source is abandoned. It merely means that the politicians have two ways of milking the taxpayer where they had one before.”
— H. L. Mencken,
American journalist, satirist
As the public still has to adjust to the inflationary pressures of the new law called Tax Reform for Acceleration and Inclusion — Package 1 (TRAIN 1), TRAIN 2 is already in Congress. Among the targets are further tax hikes in “sin” products, and some NGOs that speak, write, and argue like government have been calling to further raise alcohol and tobacco taxes.
Such calls are based on certain premises and hypothesis like: (1) Philippines tobacco and alcohol consumption per capita is among the highest in Asia and the world; and, (2) the overall health of Filipinos is stagnating if not deteriorating because of high alcohol and tobacco use. Thus, consumption of sin product must be discouraged further via higher taxes plus other measures like graphic warnings.
How true are such premises and hence, how valid is the more-taxes-please measure as the purported solution?
The good news is that some basic data — like smoking incidence — are available and can be found at Our World in Data, a project of the University of Oxford. The bad news is that the data does not seem to support or corroborate those two premises and hypothesis (see table).
The numbers in the table show the following:
1. Philippines tobacco use as of 2012 was not that high and was lower than tobacco use of our richer and healthier neighbors like Japan and South Korea. Alcohol use in 2015 was lower than the global average of 6.3 liters per person per year.
2. Philippines life expectancy keeps rising, not falling or remaining steady, although it is among the lowest in the region.
3. People in countries with a high incidence of smoking also have high life expectancies. Brunei, Taiwan, South Korea, Japan, China, the Philippines, and Singapore have high cigarette use — at least 18 sticks per day per smoker in 2012 — and their life expectancy was at least 76 years in 2015 — except in the Philippines where it was only 68 years.
4. People in countries with low cigarette use (less than 12.5 sticks per smoker per day) also have low life expectancies of only 69 years or less.
These observations tend to contradict the two premises and hypothesis mentioned above. There are many possible explanations for this, two of which would be the following:
1. People in rich countries can afford to buy more tobacco and alcohol products despite the rise in prices due to rising sin taxes; and,
2. People in poorer countries consume “less tobacco” referring to the legal and branded products, but in reality, they consume “more tobacco” from illegal, illicit, and fake/counterfeit products and suppliers. And such consumption is not captured by official government data.
So the statement “more sin taxes = less alcohol and tobacco use” can be wrong.
Another possibility is that higher sin taxes can lead to more smuggling, more illicit trade of counterfeit products that are cheap and more affordable to more people, which can lead to more smoking and drinking.
Even rich and developed Australia, which has more strict regulations against tobacco use, has experienced a rise in cigarettes smuggling. In a KPMG report in March 2017 entitled “Illicit Tobacco in Australia, 2016 Full Year Report,” the estimated share of illicit and smuggled tobacco was 10.8% of total tobacco consumption, average for 2007-2012. This rose to 14% average for 2013-2016.
Instead of calling for higher sin tax rates, the government should focus on significantly controlling smuggled and illicit products that are cheap and readily available. This alone will significantly reduce the incidence of smoking and drinking.
Another compromise would be a rise in sin taxes but income tax rates (personal and corporate) and/or VAT rates should go further down. The people should be spared from government’s policy and mentality of endless tax hikes, regardless of administration.
Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.