Financial inclusion and financial stability

January 19, 2017 | 9:03 am

The Bangko Sentral ng Pilipinas (BSP) deserves a lot of credit for diligently aiming for financial inclusion in the Philippines. The BSP defines financial inclusion as the process of providing access to financial services for all — savings, credit, investment, money transfers, and other products. The financial inclusion agenda revolves around three pillars: (1) access to financial products and services; (2) financial education and literacy; and (3) financial consumer protection. These objectives are especially critical to the underbanked and unbanked, people who struggle in an uncertain world of financial exclusion and insecurity. The BSP has been at the forefront of developing the National Strategy for Financial Inclusion, which involves private and public sector stakeholders.

We have to remember though that the BSP is also at the center of efforts to promote stability and efficiency in the financial system. In fact, this is the primary reason for being of any country’s central bank. The BSP promotes price stability so that the country’s financial system is conducive to balanced and sustainable growth of the economy. Its monetary policy is conducted using inflation targeting as a primary tool. It exercises effective regulation and supervision over financial institutions under its jurisdiction. The approach is through a risk-based capital adequacy framework using Basel II/III and compliance with best practice financial reporting standards.

Basel III, for example, will provide regulations by way of stricter standards on banks on the levels of capital they maintain. The regulations will improve the quantity and quality of bank capital through mandated capital ratios. It will also redefine what constitutes core (or Tier 1) bank capital and redefine bank liabilities and risk management standards. Liquidity coverage and funding ratios are tweaked to increase capital and improve liquidity, problems that were encountered in previous financial crises.

While stability is enhanced, the cost of raising capital for small business could be affected. The higher capital ratios and compliance costs, together with the higher cost of capital, will impact the viability of smaller banks. Small banks are more inclined to serve and lend to small business entrepreneurs. This is attested to by the banking community’s compliance with the mandatory lending provisions of the Magna Carta for SMEs, where the thrift banks and rural banks are reported to be most compliant in the micro and small business segment. Regulations that will require banks to assign higher risk weights to small businesses will serve as a disincentive to servicing this sector. Customization of loans to a small business’ unique needs also suffers in the process because of the higher costs of doing business. In general, Basel III effects on lending to small businesses are generally expected to be disproportionally negative.

Let’s look at the situation from the other side. A liberal approach to financial inclusion by way of relaxation of credit standards, especially for the underbanked, can backfire. The reason for being underbanked or unbanked is not a simple supply problem, and may be an issue of borrower creditworthiness, the character and capacity to pay external debt. The sub-prime mortgage lending situation in America that led to the global financial crisis is a recent example of an aggressive foray into the underbanked gone awry. This is a classic moral hazard, where both lenders and borrowers behave in accordance with the incentive structure of the liberalized credit environment.

The policy dilemma is clear. These two policy objectives — financial inclusion and financial stability — are both important, but they demand actions that may lead to consequences at cross purposes with each other. And these outcomes may even be totally unintended. The behavioral effects are not necessarily consistent and in harmony.

This is precisely the focus of a recent study by Cihak, Mare, and Malecky. The authors conclude that “on average, financial inclusion and financial stability are negatively correlated, and thus linked more through tradeoffs than synergies… While tradeoffs could dominate the inclusion-stability nexus, synergies could arise with almost equally high probability.” They add, “rapid increases in credit to previously informal firms that enter the formal sector should be monitored for potential threats to financial stability.”

The bottom line here is the need for greater policy coordination and astute management by our BSP leaders in achieving the right balance. In which areas can synergies be achieved? What are the risks and tradeoffs when one objective is pursued at the sacrifice of another?

Aiming for both inclusion and stability is a responsibility in which the BSP, a constitutionally independent body, needs support from a number of other government agencies for effective policy coordination. But since the BSP has assumed a mantle of leadership here, its efforts must be lauded, encouraged, and sustained. The next BSP leader must be cognizant of these tradeoffs and the potential synergies.

Benel D. Lagua is executive vice-president at the Development Bank of the Philippines. With an AIM-MBM and a Harvard-MPA. He is a part-time faculty of the College of Business, De La Salle University.

benellagua@alumni.ksg.harvard.edu

South Korea flags killing of national in PHL drugs war

January 19, 2017 | 9:03 am

PHILIPPINE POLICE kidnapped and murdered a South Korean businessman, then led his wife to believe he was alive for months to extort money from her, authorities said Wednesday.

Seoul authorities are demanding answers and justice for the victim.

The killing is the latest in a long series of criminal acts by members of the Philippine police force, regarded as one of the nation’s most corrupt institutions, and has fueled concerns about its role enforcing President Rodrigo R. Duterte’s deadly crime war.

The man disappeared from his home in the northern city of Angeles in October last year, and his wife initially paid a ransom of five million pesos ($100,000), Philippine National Police (PNP) spokesman Dionardo Carlos told AFP.

However, the man was strangled to death and burned to ashes in a crematorium on the day he was abducted, the South Korean foreign ministry said, citing a Philippine government report.

The crematorium was owned by a former police officer, the foreign ministry said.

The South Korean government identified the man only by his surname of Ji and said he was in his 50s. Philippine media said he was a businessman who had been working in the Philippines since 2008 and had been working for a manpower company.

South Korean Foreign Minister Yun Byung-se demanded answers after receiving a phone call from Philippine Foreign Secretary Perfecto R. Yasay, Jr. to inform him of the murder.

“Minister Yun, expressing grave shock over the implication of Philippine police officers in the case, asked that the Philippine government get to the bottom of the case and bring those responsible to justice,” a foreign ministry spokesman said.

Ricky Santa Isabel, one of the officers accused of going to Ji’s house and abducting him, surrendered this week, according to Mr. Carlos.

He said another two officers who went with him to the house were under investigation.

Mr. Carlos said a retired police officer was also believed to be involved but had fled to Canada.

For his part, Justice Secretary Vitaliano N. Aguirre II said there may be high-ranking police officials involved in Ji’s abduction.

In a phone conference with reporters late Wednesday afternoon, Mr. Aguirre said: “Malalim eh (It’s deep.) Maraming nakapaligid kay [Philippine National Police Director General Ronald “Bato” M. dela Rosa Jr.] na maaaring posibleng kasama (There are other police officers surrounding Mr. dela Rosa who may be involved in the case).”

“Matataas na ang involved (High-ranking officials are involved),” Mr. Aguirre added.

The justice secretary refused to give more details on the suspected personalities as he cited an ongoing investigation.

NO RELATION TO DRUGS WAR
Mr. Santa Isabel and the two other accused officers were from the Anti-Illegal Drugs Group based at PNP headquarters in Manila, according to Mr. Carlos.

He said the three two officers went to Ji’s house on the pretext of a drug raid.

The abductors demanded from Ji’s wife a ransom of eight million pesos on October 30, 12 days after he was killed, according to the Philippine Daily Inquirer, which first reported the news.

It said that she paid five million pesos ($100,000), but the kidnappers then demanded another 4.5 million pesos and continued to say he was alive.

The case has drawn criticism from some lawmakers and media in the Philippines as an example of corrupt policemen expanding their illegal activities after being given freedoms by Mr. Duterte to prosecute his war on drugs.

Mr. Carlos insisted to AFP the abduction of Ji was not related to the drugs war, saying the problem of kidnappings for ransom by corrupt police had existed for a long time.

“It turned out it was an old modus operandi where bad cops claim there is a drug raid and turn it into a kidnap for ransom,” Mr. Carlos said.

At least 167 policemen are under investigation for being involved in various money-making rackets, some of them under the cover of the drug war, Metro Manila Police Chief Oscar Albayalde told reporters.

The police force was among the most corrupt national agencies, according to a 2015 report from the national ombudsman.

A 2013 survey by anti-graft watchdog Transparency International also found that the police force was perceived by Filipinos to be the Philippines’; most corrupt institution. — AFP with Kristine Joy V. Patag

From the Strategic to the Personal: Abe’s Visit to the Philippines

January 19, 2017 | 9:03 am

Japanese Prime Minister Shinzo Abe’s Thursday visit to President Duterte highlights the continuing importance of the Philippines to Japan’s relationships in East Asia. As a long-time partner for the Philippines in areas both political and economic, Abe’s visit to the country is significant to our new government as the first among world leaders. In addition to helping seal the two countries’ deep ties, Japan’s support is especially meaningful as the country takes the stage as the 2017 Chair of the Association of Southeast Asian Nations (ASEAN).

Although the Philippines has pursued friendly relations with all of its regional neighbors this year, the results of elections around the globe last year have introduced new uncertainties in the geopolitical environment. To world leaders, the importance of the Philippines as an active player in the community of peaceful and law-abiding nations cannot be discounted. More than ever, the Philippines is in a position to strengthen its partnerships in pursuit of the national interest.

JAPAN’S ECONOMIC RELATIONSHIP WITH THE PHILIPPINES
During his visit, Prime Minister Abe announced a $8.7-billion aid package. To be delivered over a five-year period, the aid reportedly targets infrastructure improvements across the country. The package is the latest in the sequence of Japanese overtures to the Philippines. Last year, President Duterte returned from his state visit to Japan with $1.8 billion in pledged investments.

Japan has been one of the Philippines’; most important international partners for several years. Historically, there are close economic and political ties between the two countries. Japan is the Philippines’; top trading partner. The government reports that in 2015, two-way trade with Japan accounts for $18 billion, or 14.4% of the country’s total trade. Philippine exports to Japan that year were valued at $12 billion. Most of the country’s exports to Japan are made up of electronic products (30.2%) and woodcraft and furniture (23.2%).

Japan was also the second-largest source of Official Development Assistance (ODA) in 2014, the latest figures available. ODA from Japan makes up 23.15% of the Philippines’ total ODA portfolio, largely coming in the form of low-interest loans for government projects throughout the Philippines. Of course, Japan is also a major donor to the ADB, which is the third-largest source of ODA to the country (19.96% of the portfolio).

In reach of Japan’s ODA extends throughout the Philippines. They underpin projects spanning from hydroelectric and wind power projects in northern Luzon, to geothermal energy and arterial roads in the Visayas, to transmission lines, port terminals, and irrigation lines in Mindanao. Given the depth of Japan’s assistance to and partnership with the Philippines, there is every reason for President Duterte to repeatedly reaffirm the two countries’ strong relationship. In the President’s words, “Japan is a friend closer than a brother.”

THE PHILIPPINES-JAPAN STRATEGIC PARTNERSHIP
Moving beyond the economic backbone to the relationship, the Philippines and Japan elevated their ties into a “strategic partnership” in 2013. Although Japan is not obligated to come to the Philippines’ defense in case of an armed conflict, Japan has nevertheless invested in helping the Philippine government boost its security capabilities. As both countries are archipelagos and have territorial disputes with their neighbors, maritime security has been an important component of the two countries’ cooperation. There is a natural common ground in the two countries’ security objectives.

The Philippines and Japan joint statement on President Duterte’s visit to Tokyo is indicative of the priorities in the relationship. Immediately after reaffirming the two countries’ partnership and basic values, the joint statement makes several points related to maintaining and promoting peace and stability in the region. Japan’s multi-year effort to help the government boost the Coast Guard is a concrete manifestation of the two countries’ cooperation.

Finally, beyond the strategic reasoning, Abe made the effort to show a personal relationship with Duterte. The President is known to have strong personal views on foreign policy, as evidenced by several of his outbursts last year.

With the rise of the term “independent foreign policy,” the Philippines’ traditional partners have had cause for concern for their place in the Philippines’ roster of close friends. For this reason, it has become more important for Tokyo to demonstrate that its relationship with Manila extends beyond diplomatic documents and into real life. It’s hard to beat a visit to the President’s personal bedroom.

Angelica Mangahas serves as the Deputy Executive Director of Stratbase-ADRi.

AFP

DENR cancels ECCs of 6 companies

January 19, 2017 | 9:03 am

THE Department of Environment and Natural Resources (DENR) has canceled the environmental compliance certificates (ECC) of six projects including those of four mining companies, for failing to operate within their certificates’ validity period.

In a press conference on Wednesday, Environment Secretary Regina Paz L. Lopez noted that the validity of the ECCs for these projects have expired, in accordance with existing laws in which a project’s ECC is deemed expired five years after the project’s failure to launch.

These projects with expired ECCs are Intex Resources Philippines, Inc., whose $2.5-billion nickel project in Occidental Mindoro is scheduled for operations next year; Mejore Wood Works, Inc.’s project in Surigao del Sur; Forum Cebu Coal Corp.’s coal mining project in Cebu; CEKAS Development Corp.’s mining projects in Misamis Oriental covering iron, copper, and other minerals; and Eagelerock Mining Corp.’s gold mining and processing project in Zamboanga del Sur.

Alltech Contractors, Inc.’s Coastal Bay Land Reclamation Project Land in Paranaque City also had its ECC canceled. Ms. Lopez said this project may interfere with her agency’s plan on massive mangrove planting.

Speaking with reporters on the sidelines of the press conference, Undersecretary for Legal Maria Paz G. Luna explained that sending out issuance letters to companies on the cancelation of their ECCs serves to remind them of the need to reassess the environmental impact of those projects to their concerned communities.

“The reason the ECC lapses is because it becomes a different environment… so we set the five-year lapse,” Ms. Luna said, adding.

“It’s better to have paper notices because otherwise, bigla silang mag-start up sabihin nila, ‘May ECC pa kami,’; tapos makalimutan nila, five years na pala [they might suddenly start up saying,’ We have the ECCs, and they’ll forget five years have already passed].”

Ms. Luna said the Department of Environment and Natural Resources had sent show-cause orders to these companies as early as last week.

To recall, the agency also affirmed the cancelation of ECCs of five projects last December, also on the same grounds, including that of Global Ferronickel Holdings, Inc.’s Ipilan nickel mine in Palawan.

Earlier this month, the firm said it filed a complaint against the department to reconsider its decision to cancel the ECC of its Ipilan project, saying that the DENR had approved only recently some documents on the operation of the nickel project.

Ms. Luna said she has yet to receive any motion for reconsideration on the matter. — Janina C. Lim

Martial Law will be quiet: Duterte

January 19, 2017 | 9:03 am

CABANATUAN CITY, NUEVA ECIJA — President Rodrigo R. Duterte spoke anew on what has become a frequent theme of his impromptu speeches apart from the drug menace — the option to declare Martial Law.

And in the fashion of the late dictator Ferdinand E. Marcos, Mr. Duterte said if he declares Martial Law, he will do it quietly.

Mr. Marcos enforced Martial Law on a Friday night, Sept. 22, 1972, with residents, particularly of the Greater Manila area, waking up the next day to a quiet metropolis and the media and the legislature shut down.

Mr. Duterte vented his ire anew at the media in his remarks on the occasion of the 20th anniversary of the Premiere Medical Center in this city.

“And media kasi hindi nakikinig (The media do not listen). Ang marinig lang nila (All they hear is), Martial law. Hindi ako stupido (I am not stupid). Mas bright tayo sa kanila (We are brighter than them),” Mr. Duterte said, adding:

“I will not declare Martial Law. At kung mag-declare ako ng Martial Law, hindi ako mag-iingay. At mag-tanong anong basis, P******ina ka, wala kang pakialam. Basta tumahimik kayong lahat. Ganon iyan eh (I will not declare Martial Law. And if I would do it, I would not make any noise. And if you would ask about my basis for declaring it, son of a bitch, that’s none of your business. All of you must shut up. That’s how it is),” he said as his audience cheered for him.

Mr. Duterte also qualified that the President’s power to put the country under martial rule “is a God-given task,” adding that he will not make such a declaration “just [as] a flimsy reason” and to “perpetuate [himself] in power.”

“I feel as the president that I have to preserve my country, I will declare Martial Law,” he said.

PRIESTS SHOULD TAKE DRUGS
Mr. Duterte also reaffirmed anew his war on drugs.

“Drug problem… The killing? It will not stop. Believe me, until the last pusher is out of the streets pati (even the) “yung drug lord(s),” he said.

Mr. Duterte also challenged his critics in the Catholic Church so they can “understand the problem.”

“E itong mga, kaya dapat ang ibang pari, mag-shabu para maintindihan nila. I recommend one or two of the bishops, sa kanila walang shabu pero asawa, meron. Pareho lang kami (These people, that’s why some priests should use shabu [metamphetamine] so they can understand the drug problem. I recommend one or two of the bishops, they don’t have shabu but they have wives. We’re just the same),” he said.

LECTURING ANDANAR
Meanwhile, members of the Malacanang Press Corps (MPC) on Wednesday called out Communications Secretary Martin M. Andanar for accusing the media of “misreporting” Mr. Duterte’s remarks on Martial Law.

In a statement, the press corps said “a review of the President’s speech last Saturday in Davao City would reveal that the media merely paraphrased or translated some of his remarks.”

“The media has no obligation to please or satisfy its sources because its loyalty is to the citizens, those who will be affected by the actions of people who are far more powerful than them,” the statement also read in part.

The Palace journalists likewise urged Mr. Andanar to “read the entire news stories, not just the heads or titles, to get a better picture of the media’s coverage of the President.” — Ian Nicolas P. Cigaral

House committee OK’s proposed traffic powers

January 19, 2017 | 9:03 am

THE HOUSE COMMITTEE on Transportation has approved the proposed Traffic Crisis Act, which is being eyed to address the traffic woes in Metro Manila, Cebu and Davao cities.

The proposed measure will :establish a strong primary policy, planning, programming, coordinating, implementing, regulating, enforcement, and administrative authority” under the control and supervision of the Department of Transportation (DoTr), which will have the exclusive power to control, manage, and regulate land-based traffic and structures in the concerned areas.

It also seeks to “harmonize all traffic rules, regulations, ordinances, issuances, and policies in the Metropolitan Areas to achieve a comprehensive and integrated statutory and regulatory framework for land-based traffic.”

The DoTr Secretary will be designated as the “traffic chief” with “full power and authority to streamline the management of traffic and transportation and control road use in the identified metropolitan areas.”

The traffic chief will also be the alter ego of the President, with the power of supervision over all local government units within the metropolitan areas.

This is different from the Senate version of the bill, which proposes the creation of an office and the designation of a traffic czar.

The bill authorizes the President, through the traffic chief, to enter into negotiated contracts for priority projects for the construction, repair, restoration, rehabilitation, improvement, or maintenance of critical infrastructure, projects and facilities and directly related procurement of goods and services.

In the implementation of this measure, no court, except the Supreme Court, may issue any TRO or preliminary injunction against the government or any of its subdivisions, official, or any person or entity, whether public or private acting under government direction, to restrain, prohibit or compel the following acts related to its implementation:

(a) Bidding out or procurement of the Priority Projects, including infrastructure projects, software or IT components and attendant acquisition of the goods and consulting services, as identified by the Traffic Chief and submitted to the JOC;

(b) Acquisition, clearance, and development of the right-of-way (“ROW”) and/or site or location of any transportation project identified by the Traffic Chief and submitted to the JOC;

(c) Commencement, prosecution, execution, implementation, operation of any transportation project;

(d) Termination or cancellation of any transportation project;

(e) Opening of private village gates necessary to provide alternate routes throughout the effective period of the Act;

(f) Termination or amendment of PUV franchises; and

(g) Undertaking or authorization of any other lawful activity necessary for any transportation project.

A Special Traffic Crisis Court will also be created, which will have jurisdiction to hear and expeditiously resolve all actions related to the implementation of the measure, except those that will be filed against public officials before the Joint Committee of the Commission on Audit, Civil Service Commission, and the Ombudsman. — interaksyon.com

Davao City mixed-use zoning ordinance creating problems for farms caught in residential buildup agriculture Davao farm farms residential CLUP

January 19, 2017 | 6:39 am

DAVAO CITY — The revised Davao City Comprehensive Land Use Plan (CLUP) and Zoning Ordinance, which was approved in 2013, has created confusion and subsequent problems for the agriculture sector.

The unhygienic practices of the various poultry and piggery operations in the city’s third district have been blamed for the fly infestation in the area early this year.

The poultry businesses in Mintal and Calinan have as much right to occupy the area, where their poultry farms are located, as the residents who have started to live in the area despite its being classified as an agricultural zone.

Councilor Mary Joselle D. Villafuerte, chair of the committee on health, said the city is alarmed by the fly infestation as it could cause the spread of disease.

The fly infestation has affected nine barangays in Calinan District and five barangays in Tugbok District.

The over 80 poultry and piggery owners who attended last Monday’s meeting at the City Council pointed out that their farms are located in an agricultural area and yet the construction of residences was allowed.

Elizabeth Banarez, representative of Mercks Poultry Farm, said while they are willing to abide by the laws especially on pollution, housing subdivisions should not have been allowed there in the first place as it has been identified as an agricultural area. While some of the farms have established good agricultural practices, some of the small scale poultry and hog farmers said the mitigating measures required by law are too expensive for them.

We cannot close these poultry farms or stop their businesses. They have been there even before it became a residential area, Vice-Mayor Paolo Z. Duterte said in an interview.

Mr. Duterte said the presence of flies is to be expected when there are poultry farms. However, he said, it is up to the City Health Office and the City Council committee on health to come up with a guidelines to ensure proper sanitary measures are observed.

Mr. Duterte admitted that the city has a problem with its zoning and it is not just in the Mintal and Calinan areas.He said even parts of the second district classified as industrial have become residential areas.

The Davao City Chamber of Commerce and Industry, Inc. (DCCCII) said it is willing to provide training for poultry and hog raisers to introduce best practices in fly control. The Chamber provided similar training during last year’s Davao Agricultural Trade Expo (DATE).

The hog and poultry farmers have agreed to find a solution to the problem by organizing themselves.

Councilor Danilo C. Dayanghirang, chair of the committee on finance, ways and means, said the CLUP is outdated and should be amended. He said the city’s population was reckoned at only 1,000,840 in 1995 but this has increased by 2.52% to 1,363,337 in 2007. Even the city’s urban population has substantially increased from 604,508 in 1990 to about 785,668 in 2007.

population increase will require the allocation of more land for residential,commercial and industrial purposes and this is expected to reduce the area that was once devoted to agricultural production, he said.

The city’s production of agricultural products like coconut, palay, corn and fruit trees excluding bananas have contributed to 4.08% to the aggregate production of the country.

The city has been classified as an agricultural center because of the availability of land that can be devoted to agricultural production. At least 40.23% or 98,151 hectares of the city’s total land was agricultural in 1996.

But while the city’s Development Plan acknowledges the need to steer the city towards agricultural development, there is a need to shift from purely agricultural development to agri-industrial development. — Carmencita A. Carillo

Coffee stakeholders want industry council, pricing system agriculture coffee pricing system DTI

January 19, 2017 | 6:38 am

DAVAO CITY — With the National Coffee Roadmap 2017-2022 in place, stakeholders are now aiming to establish an industry council within the year and begin setting up a pricing system, especially for special varieties.

Department of Trade and Industry (DTI)-Compostela Valley Provincial Director Lucky Siegfred M. Balleque said in an interview that coffee growers have been pushing for the creation of a Philippine Coffee Council to consolidate and coordinate all efforts for the industry’s development.

We have finalized the National Coffee Roadmap and we are working on, hopefully by 2017, on the creation of the Philippine Coffee Council, Mr. Balleque said.

Industry representatives met on Jan. 5, he said, to discuss the council’s establishment and plan for the drafting of an executive order that will create it, to be signed by President Rodrigo R. Duterte.

Existing private groups such as the Philippine Coffee Board and the Philippine Coffee Alliance, which have already been undertaking interventions for the industry, are expected to continue their industry leadership within the council.

The five-year road map was presented during the 2nd National Coffee Congress held in Baguio City on Nov. 23-24, 2016.

Meanwhile, the DTI and the Department of Agriculture, along with economic development organization ACDI/VOCA, are now working on establishing a new pricing system for Philippine coffee, which will be based on international standards of cupping and grading.

That (pricing) will be based on the quality of the coffee, said Thellonius Trimmell, ACDI/VOCA chief of party.

Mr. Trimmel pointed out that quality coffee is known to be growing in the country, but other aspects such as post-harvest handling still need improvement.

We want to convert from commercial grade coffee to specialty grade coffee that will be determined through a cupping process with a standard score of above 80 points for a premium price, he said.

The cupping process will also be used to develop a profile of various Philippine coffee varieties, he added.

The DTI recently introduced four newly licensed coffee graders from Mindanao who could be tapped for cupping. They are: Daniel Byron Pantoja of Coffee for Peace, Omar Santos of Dayaw Coffee and Tea, Franco Roque of Meridian Specialty Coffee, and Pamela Jean Guingona of Imdalsa Cooperative.

ACDI/VOCA, through its US-funded Mindanao Productivity in Agricultural Commerce and Trade (MinPACT) Project, is also helping some 10,600 smallholders of coffee, cacao, and coconut improve output and increase their income.

The coffee program of MinPACT aims to transition Mindanao from a commercial grade coffee grower to a producer of fine Robusta and specialty Arabica coffee.

Mr. Trimmel said demand for high-quality and specialty coffee has been growing in the last decade, especially in the US, Japan, South Korea, Australia, and Europe.

A lot of (operators of) coffee shops travel around the world, in coffee producing countries, to identify the highest quality coffee… They identify the bean being harvested, they make sure that the beans are harvested properly, ensure that the post-harvest processes are properly done and take those good and well-dried beans.

— Maya M. Padillo

ASEAN investments sought for agribusiness, manufacturing agriculture ASEAN investment investments manufacturing DAVAO CITY

January 19, 2017 | 6:24 am

Department of Trade and Industry (DTI) Assistant Secretary Arturo P. Boncato in an interview said with the Philippine chairmanship of ASEAN, it is now the time to promote agribusiness and manufacturing ventures to investors from the region.

Mr. Boncato said Philippines can offer agribusiness, manufacturing and other value-adding activities. He said agri products that are canned or processed are of special interest to DTI.

He also said that all industries in the Philippines are open in Mindanao, including construction, manufacturing, housing materials, medical services, tourism, with not only ASEAN investors welcome to these segments but also investors from the US, Japan, China, and South Korea.

Apart from manufacturing and agribusiness other areas with potential for investment are human resources, engineering, infrastructure and practically all areas that are open to partnerships and investment from foreigners.

“The Philippine is very much open for those and we’re looking for partners, foreign direct investments are also one indicator that we would like to focus on to increase the flow of investments into the Philippines, “Mr. Boncato said.

Mr. Boncato said the department is also focusing on growing micro, small and medium enterprises (MSMEs) and also to push them to grow their businesses through e-commerce.

“We are focused on MSMEs for e-commerce, agribusiness, manufacturing in practically all areas — there are opportunities for growth in Mindanao,” he said.

He said the chairmanship of ASEAN is an opportunity because the Philippines can take the lead in terms of meetings. He said there is a chance to showcase Filipino hospitality and also the country’s determination to grow the economy.

“The ASEAN launch opens a lot of doors because for one year a lot of economic meetings will be happening in different parts of the Philippines. This is a good opportunity for us to show them the physical areas where they can actually invest in and it would be a good opportunity for us to really link with individual and groups and organizations and companies and corporation who want to expand their businesses within the Philippines coming from Japan and many parts in ASEAN as development partners,” he said.

He also said the activities associated with the ASEAN launch are part of DTI’s efforts to share information about the entire Philippines.

“During the visit of the [Japan’s] Prime Minister Shinzo Abe we had the really very successful roundtable discussion in Malacañang among the CEOs of big corporations together with CEOs coming from Japan. It was a very intimate gathering and we were able to talk about specific needs of the Japanese investors and partners who would like to invest more in the Philippines, “he said.

He also said that activities in Davao City focused on the bright spots in Mindanao in terms of investment particularly from Japan. — Maya M. Padillo

NFA seeks tougher import permit regime for agriculture agriculture NFA import imports permit

January 19, 2017 | 6:04 am

THE NATIONAL Food Authority (NFA) and the Bureau of Customs (BoC) have agreed to strictly implement the anti-agricultural smuggling act, and crack down on smuggling opportunities in the import process.

In a news conference yesterday, NFA supervisor and Cabinet Secretary Leoncio B. Evasco, Jr. said that the government will prevent import leakages in accordance with Republic Act 10845, which classifies large-scale agricultural smuggling as economic sabotage.

This followed an emergency meeting last week held by the office of the Cabinet Secretary with the BoC and stakeholders, in which they agreed on new measures to ensure zero smuggling.

Under the law, importers that misdeclare agricultural goods with a market value of P1 million and P10 million for rice, shall face a maximum penalty of life imprisonment and a fine twice the fair value of the smuggled goods.

The Cabinet Secretary said among the measures being considered are a stricter process for issuing import permits. Mr. Evasco said that the Bureau currently allows commodities to be released pending an application for an import permits.

“There should be no exemptions. Violations will merit the seizure of goods”, said Mr. Evasco.

He also proposed that the bureau allow only up to 2% overlanding of rice as allowance for potential leakage and damages. This means that the country can only import up to 2% in excess of the allowed amount.

Also, the NFA supervisor wants the removal of freeport zones as points of entry for agricultural goods. The measures will form part of a draft Customs order promulgating the implementing rules and regulations (IRR) of the anti-agricultural smuggling law, which was submitted to the Department of Finance for final review yesterday.

Mr. Evasco added that the authorities are studying the possibility of donating the seized goods to Department of Social Welfare and Development, to serve the needs of disaster victims rather than auctioning them to the importers who smuggled the goods in the first place. — E.J.C. Tubayan AFP

Land reform rules hamper credit

January 19, 2017 | 6:02 am

IDEA agriculture land reform IDEA RESTRICTIVE conditions set by past agrarian reform laws have prevented farmers from reaping the full benefits of land ownership, according to a group of economists.

According to the Institute for Development and Econometric Analysis, Inc. (IDEA), ample credit remains beyond the reach of agrarian reform beneficiaries (ARBs).

“The presence of a bank facilitates spending through credit [and in turn] spending facilitates growth in a region, province, or town. But this growth may not be inclusive because there may be sectors left behind, especially those who were not able to access credit, “IDEA said.

“The banking industry is hindered by our flawed agricultural and agrarian policies,” the group said.

More than four decades since land reform was first implemented nationwide by the late President Ferdinand E. Marcos, Sr., the government has distributed several million hectares of agricultural land to more than two million farmers.

Following Marcos’ ouster, his successor, Corazon C. Aquino, pushed for the passage of the Comprehensive Agrarian Reform Program (CARP) as her centerpiece social-justice program. The enactment into law of the CARP came more than a year after the fatal shooting of 13 farmers holding a protest rally several meters away from Malacañang on Jan. 22, 1987.

The fatal shooting was dubbed the “Mendiola massacre”, whose 30th anniversary falls on Sunday.

In 2009, President Gloria Macapagal-Arroyo successfully pushed for the extension of CARP, which was renamed CARPer, in line with RA 9700, or the CARP Extension with Reforms Act.

In 2014, the CARPer Law expired after President Benigno S. C. Aquino III failed to push for a second extension of his late mother’s centerpiece program.

Latest data from the Bangko Sentral ng Pilipinas showed that only P29.98 billion or 0.96% of loans in the Philippine banking system went to ARBs, a very small percentage compared to the 10% minimum quota set by the Republic Act (RA) 10000 or the Agri-Agra Reform Credit Act of 2009.

“The limited size of the land owned by the farmers does not help entice the banks to lend to them and it would be imprudent for banks to put their depositors’ money at risk,” IDEA said.

Agrarian reform programs — from Marcos’ Presidential Decree No. 27, s. 1972, to RA 6657 and its extension, RA 9700 — cap land distribution to a maximum of three hectares per ARB.

Landowners, on the other hand, may only retain up to five hectares. IDEA cited several reasons why such an arrangement is a disincentive to bank lending.

“Firstly, these can’t be transferred or sold within 10 years from award, so banks can’t foreclose on them and transfer their titles to them. Secondly, the Landbank (Land Bank of the Philippines) has prior lien on these properties on the basis of the amortizations that farmer beneficiaries must pay Landbank. Thirdly, the market for foreclosed CARP lands is limited since by law, it can only be sold to qualified CARP beneficiaries.”

Farmer beneficiaries shall pay for their land in 30 annual amortizations to Landbank at 6% interest per annum. Meanwhile, if a CARP beneficiary wants to sell or transfer a landholding within the 10-year lock-in period, the only eligible recipients are the spouse or heirs, another qualified beneficiary, or the State through Landbank. After 10 years, the land may be sold to the State or to an individual qualified under CARP, who owns not more than five hectares of agricultural land and must be a direct cultivator.

“Moreover, the fact that the majority of CLOAs or Certificate of Land Ownership Awards are still collective (i.e. not broken down into individual parcels) prevent farmer beneficiaries from accessing credit on an individual basis,” IDEA said.

So far, around 4.7 million hectares of agricultural land has been distributed by the Department of Agrarian Reform to 2.2 million beneficiaries.

Between 1972 and 2015, the agriculture, forestry, hunting and fishing sector’s annual output, as measured by gross value added, has grown 157% but their share of the country’s gross domestic product contracted to 9.5% from 19.6%.

To encourage lending in the rural sector, IDEA suggests amending the Agri-Agra Credit Act while at the same time, addressing property rights restrictions on rural land.

“Allowing the farmers to own lands the size beyond the set ceiling is one condition. There will then be demand from these qualified borrowers with their bankable assets,” IDEA said.

“Another condition is that banks should not be required to hold the foreclosed properties up to five years, as required by the Agri-Agra Law, to make whatever bankable assets the farmers have less risky for banks to accept as collateral.”

— Jochebed B. Gonzales To encourage lending in the rural sector, IDEA suggests amending the Agri-Agra Credit Act while at the same time, addressing property rights restrictions on rural land. — AFP

Davao City mixed-use zoning ordinance creating problems for farms caught in residential buildup

January 19, 2017 | 3:59 am

DAVAO CITY — The revised Davao City Comprehensive Land Use Plan (CLUP) and Zoning Ordinance, which was approved in 2013, has created confusion and subsequent problems for the agriculture sector.

The unhygienic practices of the various poultry and piggery operations in the city’s third district have been blamed for the fly infestation in the area early this year.

The poultry businesses in Mintal and Calinan have as much right to occupy the area, where their poultry farms are located, as the residents who have started to live in the area despite its being classified as an agricultural zone.

Councilor Mary Joselle D. Villafuerte, chair of the committee on health, said the city is alarmed by the fly infestation as it could cause the spread of disease.

The fly infestation has affected nine barangays in Calinan District and five barangays in Tugbok District.

The over 80 poultry and piggery owners who attended last Monday’s meeting at the City Council pointed out that their farms are located in an agricultural area and yet the construction of residences was allowed.

Elizabeth Banarez, representative of Mercks Poultry Farm, said while they are willing to abide by the laws especially on pollution, housing subdivisions should not have been allowed there in the first place as it has been identified as an agricultural area.

While some of the farms have established good agricultural practices, some of the small scale poultry and hog farmers said the mitigating measures required by law are too expensive for them.

“We cannot close these poultry farms or stop their businesses. They have been there even before it became a residential area,” Vice-Mayor Paolo Z. Duterte said in an interview.

Mr. Duterte said the presence of flies is to be expected when there are poultry farms. However, he said, it is up to the City Health Office and the City Council committee on health to come up with a guidelines to ensure proper sanitary measures are observed.

Mr. Duterte admitted that the city has a problem with its zoning and it is not just in the Mintal and Calinan areas. He said even parts of the second district classified as industrial have become residential areas.

The Davao City Chamber of Commerce and Industry, Inc. (DCCCII) said it is willing to provide training for poultry and hog raisers to introduce best practices in fly control. The Chamber provided similar training during last year’s Davao Agricultural Trade Expo (DATE).

The hog and poultry farmers have agreed to find a solution to the problem by organizing themselves.

Councilor Danilo C. Dayanghirang, chair of the committee on finance, ways and means, said the CLUP is outdated and should be amended. He said the city’s population was reckoned at only 1,000,840 in 1995 but this has increased by 2.52% to 1,363,337 in 2007. Even the city’s urban population has substantially increased from 604,508 in 1990 to about 785,668 in 2007.

“Population increase will require the allocation of more land for residential,commercial and industrial purposes and this is expected to reduce the area that was once devoted to agricultural production,” he said.

The city’s production of agricultural products like coconut, palay, corn and fruit trees excluding bananas have contributed to 4.08% to the aggregate production of the country.

The city has been classified as an agricultural center because of the availability of land that can be devoted to agricultural production. At least 40.23% or 98,151 hectares of the city’s total land was agricultural in 1996.

But while the city’s Development Plan acknowledges the need to steer the city towards agricultural development, there is a need to shift from purely agricultural development to agri-industrial development. — Carmencita A. Carillo