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PhilHealth ‘idle funds’ to support infra — DoF

THE Department of Finance (DoF) said P89.9 billion in “idle funds” returned to the Treasury by the Philippine Health Insurance Corp. (PhilHealth) will be used for infrastructure and other social programs.

“That is the farthest from the truth,” Finance Secretary Ralph G. Recto told a forum on Wednesday, referring to allegations that the PhilHealth funds are a form of “pork barrel.”

“Unprogrammed funds are not pork barrel, most of them will be used for foreign assisted projects, international commitments,” he said.

Pork barrel refers to the traditional Congressional practice, since declared illegal by the Supreme Court, of allocating government projects and funding in such a way as to win favor from voters.

The administration has instructed government-owned and -controlled corporations (GOCCs) to remit funds deemed idle to the Treasury, raising fears that the President will have his own war chest to distribute to supporters.

Mr. Recto noted that the unprogrammed funds will help support several foreign-assisted projects including the Bataan-Cavite Interlink Bridge, the Metro Manila Subway, the Panay-Guimaras-Negros Island bridges, the Davao City Bypass, and the Salary Standardization VI for government employees.

The funds will also support the North-South Commuter Railway System, the Philippine National Railways South Long Haul line, and other big-ticket infrastructure works.

It will also help fund the Support to Parcelization of Lands for Individual Titling program and the Philippine Fisheries and Coastal Resiliency project.

Other programs to be funded are the Philippine Multi-Sectoral Nutrition project, Supporting Innovation in the Philippine Technical and Vocational Education and Training System, the Mindanao Inclusive Agriculture Development project, the Philippine Rural Development project, and other development initiatives.

In Circular 003-2024, the DoF asked PhilHealth and the Philippine Deposit Insurance Corp. to remit unutilized funds worth P89.9 billion and P110 billion to the Treasury.

Mr. Recto has said that the fund transfers were legal and conducted after consulting the Governance Commission for GOCCs, Office of the Government Corporate Counsel, and the Commission on Audit.

He also noted that the remitted funds include a portion of the government subsidy to GOCCs and not from PhilHealth members’ contributions.

In a Senate hearing last week, Mr. Recto said projects funded by unprogrammed appropriations will increase gross domestic product growth by 0.7%, provide up to P24.4 billion in additional revenue, and create jobs.

Meanwhile, Mr. Recto said he would prefer better health benefit packages and to reduce PhilHealth members’ out-of-pocket expenses, but said he would leave it to its board to cut premium contributions if deemed necessary.

Republic Act No. 11223 or the Universal Health Care Act authorizes a yearly increase of PhilHealth members’ contributions until 2025. — Beatriz Marie D. Cruz

June manufacturing output growth slows to 2.5% from previous month

PHILIPPINE STAR/KRIZ JOHN ROSALES

FACTORY output growth slowed in June, with the 2.5% increase led by food and fabricated metal products, the Philippine Statistics Authority (PSA) said. 

Output growth weakened from 3.2% growth in May but accelerated from 2.1% a year earlier, according to preliminary results of the PSA’s Monthly Integrated Survey of Selected Industries.

Factory output is measured by the volume of production index (VoPI).

Month on month, the manufacturing sector’s VoPI contracted 3.9% in June after posting 0.8% growth in May. Stripping out seasonal factors, factory output that month declined 1.3%.

In the year to date, factory output growth averaged 1.3%, slowing from 5.61% a year earlier.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) eased to 51.3 in June from 51.9 in May, pointing to further slowdowns going forward.

PMIs are a leading indicator for factory activity, reflecting the volume of materials purchased in advance of manufacturing operations weeks or months down the line. A reading above 50 marks increased purchasing activity for materials that will later be transformed into goods, while a reading below 50 means reduced purchasing.

Growth in the VoPI was led by food products (8.8% in June from -0.9% in May) and fabricated metal products, except machinery and equipment (19.6% from -8.8%).

However, slower growth in three categories impacted overall output: basic metals (-17.7% from -2.8% in May), transport equipment (-8.8% in June from -1.2% in May), and coke and refined petroleum products (46% in June from 52.7% in May).

Average capacity utilization stood at 75.3% in June, against the 73.3% posted a year earlier and 75.6% in May.

All industry categories reported average capacity utilization rates exceeding 60% for the month, with paper and paper products recording the weakest capacity utilization of 61.9%.

Leonardo A. Lanzona, who teaches economics at the Ateneo De Manila, said the lack of investment to support the manufacturing sector may have been behind the slowdown.

“During the time when the economy was still on an upward trajectory, there was no strategy to rescue the sector which had not received substantial investment. The government should have (undertaken) the necessary steps to lower cost of production, especially in energy. Instead, they had been pushing for more infrastructure that apparently had no effect on manufacturing,” he said via Messenger. — Beatriz Marie D. Cruz

Batangas municipalities to get ASF vaccine faster if emergency declared

REUTERS

THE Department of Agriculture (DA) said on Wednesday that Batangas municipalities may need to declare an emergency to facilitate the release of funds to obtain African Swine Fever (ASF) vaccines.

“Local government units may need to declare a state of emergency to enable the DA to respond swiftly to the situation and release funds for the urgent purchase of vaccines,” Agriculture Secretary Francisco P. Tiu Laurel, Jr. said in a statement.

The DA noted that active ASF cases have been recorded in Lobo, Lian, Rosario, Calatagan, and Lipa City, Batangas.

Constance J. Palabrica, assistant secretary for Poultry and Swine, said that the DA estimates the need for vaccines at about 10,000 doses.

The DA’s Bids and Awards Committee and Bureau of Animal Industry will draft the resolution which will set in motion the emergency procurement process, shortening the regular procurement period to around two weeks.

The DA is currently collaborating with local officials in enforcing movement restrictions to prevent the spread of infected animals.

The DA has said that it is planning a limited rollout of the AVAC ASF Live Vaccine from Vietnam by the third quarter.

It has allocated P350 million for the trial, funding about 600,000 vials. — Adrian H. Halili

Gen Z now seen as heavily favoring online shopping

PHILIPPINE STAR/ WALTER BOLLOZOS

ONLINE RETAILERS will need to rethink how they advertise to Gen Z consumers, who are emerging as their most enthusiastic users, according to the results of a study.

In a joint study, The Fourth Wall and Uniquecorn Strategies concluded that Gen Zs (born between 1997 and 2012) are now solidly in favor of online shopping.

“Almost all the respondents (92%) use their own mobile phones for purchases and prefer cashless methods (53%),” they said.

The study, which surveyed 400 people, found that three out of four Filipino Gen Z consumers in urban areas shop online because they believe they deserve it, which the study referred to as the “Deserve ko ’to” mentality.

“The young generation is rapidly becoming a significant portion of the consumer market and is already shaping market trends, especially in the e-commerce space,” according to John Brylle L. Bae, research director at The Fourth Wall.

“This self-rewarding behavior among Filipino Gen Zs stems from their growing self-awareness, driving them to seek rewards that affirm that sense of self-worth,” he added. 

The Philippine Statistics Authority (PSA) estimates that Gen Zs account for 38% of the population, or 41 million.

Uniquecorn Strategies founder and CEO Dean Bernales said that it is important for retailers to “pay close attention to the shopping desires and needs of Filipino Gen Zs.” 

“Brands need to reassess their supply chain strategies and enhance their social commerce platforms to build trust, create personal connections, and develop a relatable image to capture the young market,” he added.

According to the study, brands face challenges in establishing trust due to the prevalence of scams and paid endorsements, in establishing personal affinity, and in creating an immersive customer experience.

The study concluded that brands must develop tailor-fit marketing strategies.

The study said partnering with podcast creators may help boost brand awareness and conversion, describing podcasting as an emerging medium for sharing more “personal yet credible brand reviews.”

It added that brands could also encourage thorough and well-crafted reviews left by customers to build trust and drive conversion.

The study said that brands need to focus on the Gen Zs’ entrepreneurial mindset, “Deserve ko ’to” mentality, and emotions.

“Emphasize how your products can support Gen Zs in their side hustles or hobbies, which some also turn into their side businesses,” according to the study.

“For local brands, highlight the process or journey of how the products were sourced, crafted, and transported to reach consumers,” it added. — Justine Irish D. Tabile

House think tank says 2024 revenue target within reach

People line up to file their income tax returns at the Bureau of Internal Revenue office in Intramuros, Manila, April 18, 2022. — PHILIPPINE STAR/ RUSSELL A. PALMA

THE National Government is on track to achieve its revenue target of P4.27 trillion, judging from the pace set by first-half collections, a Congressional think tank said.

The Congressional Policy and Budget Research Department (CPBRD) noted, however, that first-half revenue was driven by non-tax collections, casting doubt on the sustainability of recurring tax collections.

“The revenue performance for January-June 2024 suggests that the government is on track to meet its full-year revenue target,” the CPBRD said in a report.

“The first half performance, however, shows a notable divergence between tax and non-tax collections when compared to programmed targets,” it added.

Total government revenue for the first half of 2024 amounted to P2.15 trillion, according to Finance Secretary Ralph G. Recto’s Monday presentation to the House of Representatives appropriations panel.

Of the first-half collections, P1.83 trillion came from tax revenue, up 10.8% from a year earlier. The total missed by 2.8% the first-half revenue target.

“Tax revenue underperformed, with the actual collection of P1.83 trillion falling short of the P1.86 trillion goal. This shortfall was primarily due to (the performance of) BIR collections (P1.36 trillion as against P1.40-trillion target),” the CPBRD said.

The Bureau of Customs, whose collections are also classified as tax revenue, exceeded its first-half target with P455.5 billion collected in the first half, beating its target by 3%.

Non-tax revenue generated P314.2 billion during the same period, 46% higher than target. The surge in non-tax collections is due to higher collections by the Bureau of the Treasury (BTr) and other revenue streams, the CPBRD said.

The BTr said income rose 76% to P163.9 billion in the first half of 2023.

“Bureau of the Treasury income…  is P71 billion higher compared to the same period in 2023; and other non-tax revenues… doubled from P62.1 billion to P121.1 billion in the same period,” the CPBRD said.

The CPBRD noted that the BTr took in more dividends from government-owned and -controlled corporations (GOCCs), after the Department of Finance ordered an increase in GOCC dividend payouts to the government to 75% from 50%.

The remittance of unutilized funds from GOCCs also boosted the BTr’s holdings, it added.

In May, the Philippine Health Insurance Corp. and Philippine Deposit Insurance Corp. remitted P20 billion and P30 billion respectively to the BTr.

“The government’s fiscal strategy to optimize existing financial resources through the mobilization of non-tax revenue represents a pragmatic approach to fiscal management and aligns with its commitment to increase funding for priority programs without enacting new taxes or resorting to additional borrowing,” it said.

While unutilized funds from GOCCs could be a potential source of funding for the government, it should address potential tax collection issues, the CPBRD said. “Sustained revenue growth is largely contingent on brisk growth in tax revenue.”

The CPBRD report was prepared by Novel V. Bangsal, David Joseph Emmanuel Barua Yap, Jr., Jhoanne E. Aquino, Rutcher M. Lacaza, Edrei Y. Udaundo, Pamela Diaz-Manalo, Julius I. Dumangas, Ricardo P. Mira, Arlene L. Tuazon, Lawrence B. Dacuycuy, Byron M. Bicenio, Christine Marie A. Mendoza-Walog, Noel Belarmino H. Sempio, Ray Leonard D. Denolo, Alexiz S. Taaca, and Romulo E.M. Miral, Jr. — Kenneth Christiane L. Basilio

Sugar industry wants other sweeteners to be regulated

REUTERS

SUGAR PRODUCERS said on Wednesday that the Department of Agriculture (DA) needs to regulate imports of other sweeteners that compete with cane sugar.

In a statement, the United Sugar Producers Federation of the Philippines (UNIFED) said the entry of glucose, sucrose, maltose, dextrose, maltodextrin and lactose is currently unregulated.

UNIFED added that the volume of other sweeteners being shipped amounts to 100,000 to 200,000 metric tons per year.

“This volume of sugar premixes (is equivalent to) about 4 million bags of sugar (valued at) roughly P10 billion, and the continued lack of regulation for these sugar-based products is highly detrimental to the sugar industry,” UNIFED President Manuel R. Lamata said.

Mr. Lamata added that the increased shipments of these products may have caused the stagnation in sugar prices.

“This is probably why demand for sugar has remained constant in the last 10 years or so despite the growth of the population,” he said.

Agriculture Secretary Francisco P. Tiu Laurel, Jr. has ordered an investigation after meeting with the sugar industry.

He ordered the Sugar Regulatory Administration to look into the actual volumes of other sweeteners and, if warranted, require them to acquire clearances as well.

“If this is not addressed, then the sugar industry will be paying a hefty price along with the five million Filipinos dependent on the industry,” Mr. Lamata said.

Code 17.02 of the Asean Harmonized Tariff Nomenclature sets tariffs only for high fructose corn syrup. — Adrian H. Halili

Navigating VAT recovery under the EoPT Act

In an effort to make doing business easier, the government introduced significant changes to the Value-Added Tax (VAT) provisions through Republic Act (RA) No. 11976, known as the Ease of Paying Taxes (EoPT) Act. In today’s article, I would like to focus on the revisions to the VAT refund process and the VAT credit for uncollected receivables, examining their implications for businesses.

RISK-BASED VAT REFUND PROCESS
The EoPT Act introduces a risk-based approach to the verification and processing of VAT refund claims. These changes are poised to have a substantial impact on the way businesses manage their VAT refund claims, and promote a more streamlined and taxpayer-friendly approach.

Under the EoPT Act, VAT refund claims are categorized into low, medium, and high risk. This new framework aims to streamline the verification process, with medium- and high-risk claims subjected to more rigorous audits. Furthermore, the Commissioner now has the authority to issue refunds without requiring a countersignature from the Commission on Audit (CoA). However, these refunds will be subject to post-audit by CoA. Any amounts disallowed by the CoA will be the taxpayer’s responsibility, and BIR employees may face administrative liability for gross negligence in the refund process.

Revenue Regulations (RR) No. 5-2024 elaborates on the risk-based framework introduced by the EoPT Act. Complementing this, the BIR issued Revenue Memorandum Order (RMO) No. 23-2024, which provides comprehensive guidelines, policies, and procedures for verifying VAT refund claims.

RR No. 5-2024 defines the three risk levels. Low-risk claims are where all required documentation is complete, and will be processed without the need for further verification of sales or purchases, minimizing the administrative burden for these claims. Medium-risk claims require verification of at least 50% of both sales transactions and purchases, including supporting documents such as invoices and proof of VAT zero-rating. High-risk claims are subject to a comprehensive verification of 100% of sales and purchases, reflecting the higher risk associated with these claims and ensuring thorough examination.

The risk classification process considers factors such as the size of the claim, frequency of filing, and tax compliance history. Specific conditions are imposed to maintain the integrity of the verification process. Claims from first-time applicants are automatically deemed high risk and continue to be classified as such for their subsequent three claims. If a claim is fully denied, the following claim will also be categorized as high risk. Medium-risk claims can be escalated to high-risk status if a Revenue Officer has a 30% disallowance rate on the VAT refund claim. Claims that have been classified as low risk for three consecutive filings will undergo full verification on the fourth filing, regardless of the current risk classification. Claims related to VAT credits or refunds from canceled registrations or status changes are also classified as high risk. Risk classifications are reviewed for each filing, and the Commissioner of Internal Revenue may impose additional limitations through further issuances.

The verification and processing of VAT refund claims are distinct from regular audits of internal revenue taxes. Findings that do not affect the refund amount may be forwarded for further review or incorporated into existing audits based on whether the processing and auditing offices are the same. All required documentation must be submitted by taxpayers, regardless of the risk level, and will be subject to post-audit by CoA. The BIR may also utilize data from the Electronic Invoicing/Receipting and Sales Transmission System (EIS) to aid in the verification process.

Verification procedures for low- and medium-risk claims focus on the completeness and authenticity of documentation, while high-risk claims undergo thorough verification. This structured approach allows for necessary adjustments based on findings, to help ensure well-documented and justified risk assessments.

Ultimately, however, the success of a VAT refund claim hinges on the documentation of the input VAT credits. Since the same documents are required for all VAT refunds, regardless of the risk level classification, it seems prudent for taxpayers to prepare their refund claims assuming a high-risk review, ensuring complete compliance, to increase the likelihood of a favorable outcome in their VAT refund claims.

VAT CREDITS FOR UNCOLLECTED RECEIVABLES
The EoPT Act also introduced the use of output VAT credits for uncollected receivables in the subsequent quarter after they become overdue. This measure benefits taxpayers who have reported receivables for VAT purposes in a prior quarter but have yet to collect them. For example, if output VAT is paid on a sale made in Q2 2024, but the receivable on the sale remains uncollected by Q3 2024, the seller may deduct the VAT previously paid from the Q3 2024 output VAT due.

Under Revenue Memorandum Circular (RMC) No. 65-2024, the following conditions must be met to qualify for the VAT credit:

1. The sale or exchange occurred after April 27, 2024.

2. The sale was on credit or account.

3. There must be a written agreement specifying the payment period, such as a credit term indicated in the invoice or another document. Loan Agreements are considered sufficient if they state the credit terms.

4. The VAT should be separately itemized on the invoice.

5. The sale must be specifically reported by the seller in the Summary List of Sales for the period when the sale occurred, and not included under “various” sales.

6. The seller must have declared the corresponding output VAT in the quarterly VAT return (BIR Form No. 2550Q) within the prescribed period.

7. The agreed payment period between the seller and the buyer, whether extended or not, must have lapsed.

8. The VAT component of the uncollected receivable must not have been claimed as a deduction from gross income (i.e., bad debt) under Section 34(E) of the Tax Code.

If the uncollected receivables are later recovered, the related output VAT must be included in the taxpayer’s output VAT for the recovery period. Failure to declare this will result in penalties.

Therefore, it is crucial to track uncollected receivables to determine if VAT can be carried over or if VAT should be paid for amounts previously used as credit upon recovery. Under RMC No. 65-2024, claiming output VAT credit is optional; sellers may choose not to claim it if the receivables are likely to be collected.

These amendments are a significant shift in the VAT recovery process. While these changes aim to streamline compliance and enhance efficiency, taxpayers are likely to face difficulties navigating the new requirements, especially the application of output VAT credits on uncollected receivables. The handling of receivables that are eventually collected but were previously deducted could also pose issues, as the VAT deducted would eventually need to be remitted again upon collection. The subsequent monitoring of VAT credits creates a particularly onerous challenge to taxpayers.

The authorities could consider addressing the administrative burden associated with the uncollected receivables. Perhaps establishing clear guidelines and thresholds for when receivables are considered “uncollectible” can also reduce ambiguity. Simplifying this aspect would align with the EoPT Act’s objective of easing compliance and reducing administrative burdens for businesses.

In summary, the changes brought by the EoPT Act constitute a significant advancement in regulatory reform. However, their implementation is not without difficulties. Certain provisions may require additional refinement to effectively achieve its objectives. Addressing these birth pains is essential for the Act’s successful execution.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Aubrey Gayle T. Diaz is an assistant manager at the Tax department of Isla Lipana & Co., a Philippine member firm of the PwC network.

aubrey.gayle.diaz@pwc.com

Philippine shares rebound on bargain hunting

REUTERS

PHILIPPINE SHARES rebounded on Wednesday, snapping a three-day losing streak, on bargain hunting and following Wall Street’s recovery.

The bellwether Philippine Stock Exchange index (PSEi) rose by 1.58% or 101.93 points to end at 6,535.17 on Wednesday, while the broader all shares index climbed by 1.22% or 43 points to finish at 3,563.94.

“The local market bounced as investors hunted for bargains after a three-day decline. Along with our regional peers, the bourse tracked Wall Street’s rebound overnight,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message. “Also, the strengthening of the local currency against the US dollar boosted sentiment.”

“Philippine shares made a furious comeback following the rally of Asian and US markets, as investors start to make bets ahead of the gross domestic product (GDP) release [on Thursday]. Wall Street snapped its three-day losing streak as investors took a break from recession fears, buoyed by a rally in Japanese equities,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Asian share markets extended their rally on Wednesday, led by another bounce in the Nikkei, as the Bank of Japan unexpectedly turned cautious on rate hikes amidst market volatility, which led to a sharp fall in the yen, Reuters reported.

The Nikkei’s 2.3% rise followed Tuesday’s 10% rally, suggesting investors were finding their footing after the recent market rout. The index slumped 13% on Monday. MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.4%.

The S&P 500 and the Nasdaq ended 1% higher on Tuesday as investors jumped back into the market a day after a dramatic sell-off, with recent comments by US Federal Reserve officials easing US recession worries. The Dow rose as well, but all three major stock indexes pared gains heading into the close and ended well off their highs of the day.

Meanwhile, the peso ended at P57.515 per dollar on Wednesday, strengthening by 29.5 centavos from its P57.81 finish on Tuesday, Bankers Association of the Philippines data showed. This was its best close since the P57.465 on May 16.

All sectoral indices closed higher on Wednesday. Property gained by 3.25% or 81.52 points to end at 2,590.11; services went up by 1.9% or 37.82 points to 2,021.24; mining and oil jumped by 1.61% or 129.72 points to 8,153.81; industrials climbed by 1.24% or 109.48 points to 8,911.29; financials rose by 0.88% or 17.42 points to 1,980.70; and holding firms increased by 0.53% or 29.83 points to 5,657.72.

Value turnover went down to P4.91 billion on Wednesday with 543.36 million shares changing hands, from P5.12 billion with 419.01 million issues traded on Tuesday.

Advancers outnumbered decliners, 98 versus 81, while 54 names were unchanged.

Net foreign selling dropped to P511.99 million on Wednesday from P635.78 million on Tuesday. — R.M.D. Ochave with Reuters

Peso extends rally as BSP turns cautious

BW FILE PHOTO

THE PESO continued to rally versus the dollar on Wednesday amid bets that the Philippine central bank would cut rates gradually to keep a healthy differential with the US Federal Reserve.

The local unit closed at P57.515 per dollar on Wednesday, strengthening by 29.5 centavos from its P57.81 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s best finish in more than two months or since its P57.465-a-dollar close on May 16.

The peso opened Wednesday’s session stronger at P57.70 against the dollar. Its intraday best was at P57.495, while its weakest showing was at P57.85 versus the greenback.

Dollars exchanged went up to $1.76 billion on Wednesday from $1.21 billion on Tuesday.

The peso strengthened further against the dollar as Finance Secretary Ralph G. Recto signaled that the Bangko Sentral ng Pilipinas (BSP) prefers to keep a healthy differential with the Fed, a trader said in a phone interview.

Mr. Recto, who is a member of the BSP’s policy-setting Monetary Board, said on Wednesday that he sees at least 50 basis points (bps) worth of local rate cuts this year, although this could be bigger if the Fed slashes borrowing costs more than expected.

Global stock markets plunged on Monday amid concern the US central bank has waited too long to begin cutting interest rates. Interest rate futures contracts at the day’s end reflected overwhelming bets that the Fed will start cutting borrowing costs next month with a bigger-than-usual 50-bp reduction to its policy rate, Reuters reported.

The Fed kept its benchmark interest rate unchanged in the current 5.25%-5.5% range last week and signaled it was on course to begin cutting rates in September, but that decision was followed by worrying signs the labor market might already have turned.

“The peso strengthened significantly after the upbeat Philippine labor reports released today,” a second trader said in an e-mail on Wednesday.

The Philippine jobless rate in June dropped to 3.1%, lower than the 4.1% recorded in May and 4.5% in the same month last year.

This was the lowest unemployment rate seen since April 2005.

For Thursday, both traders said peso-dollar trading will be driven by second-quarter Philippine gross domestic product data.

The first trader sees the peso moving between P57.20 and P57.70 per dollar, while the second trader expects it to range from P57.35 to P57.60. — A.M.C. Sy with Reuters

Philippines, US, Australia, Canada hold first joint war games in SCS

PHILIPPINE COAST GUARD FACEBOOK ACCOUNT

By Kyle Aristophere T. Atienza, Reporter

THE PHILIPPINES, Canada, United States and Australia kicked off their first joint military exercise in the South China Sea (SCS) on Wednesday, according to their military, amid China’s increased military buildup in the waterway.

The two-day exercise, which will involve naval and air force units, is the first among the four countries, and follows the first Philippine-Japan joint exercise in the disputed South China Sea last week.

The war games are meant to enhance interoperability among their forces, they said in a statement signed by Armed Forces of the Philippines Chief of Staff Romeo S. Brawner, Jr., Australian Defense Force Chief David Johnston Ran, US Indo-Pacific Command Chief Samuel Paparo and Canadian Chief of Defense Staff Jennie Carignan.

“The activity will be conducted in a manner that is consistent with international law and with due regard to the safety of navigation and the rights and interests of other states,” they added.

The Chinese Embassy in Manila did not immediately reply to a request for comment.

The United States, a treaty ally of the Philippines, has held similar exercises with other countries in the waterway, having carried out drills with Manila and Tokyo in June.

The four nations said they uphold the right to freedom of navigation and overflight in the South China Sea, adding that naval and air force units would operate together in Manila’s 200-nautical mile exclusive economic zone (EEZ) to improve cooperation and interoperability.

“We stand together to address common maritime challenges and underscore our shared dedication to upholding international law and the rules-based order,” they said.

China claims as its territory much of the South China Sea, a conduit for roughly $3 trillion in annual ship-borne trade, despite competing claims from Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

Manila and Beijing have repeatedly clashed in the South China Sea, accusing each other of aggressive behavior involving their ships and of damaging the marine environment.

In 2016, the Permanent Court of Arbitration in The Hague said China’s claims had no legal basis, a decision Beijing has rejected.

‘DUAL EFFORTS’

The joint drills, which now include Canada, are part of the Marcos government’s efforts to gather support from democratic nations amid China’s military expansionism, Chester B. Cabalza, founder of Manila-based International Development and Security Cooperation, said in a Facebook Messenger chat.

The Philippines has been holding maritime exercises since last year and has vowed to work with like-minded nations in protecting its exclusive economic zone in the South China Sea.

The country recently held two separate joint sails with the US and Japan. The three countries along with Australia held similar sails last year.

In June, Canada joined a maritime cooperative activity with the Philippines, the US and Japan, which sealed a reciprocal access agreement with Manila in July. The Philippine Senate has yet to ratify the deal.

Canada, which has given the Philippines access to its dark vessel detection technology, is also eyeing a military deal with the Southeast Asian nation.

Mr. Cabalza said Canada could play a bigger role in Philippine efforts to deter Chinese aggression at sea.

Gary Ador Dionisio, dean of De La Salle–College of Saint Benilde’s School of Diplomacy and Governance, noted that Canada, which is part of the Indo-Pacific region, wants unhampered trade in the region.

Lucio B. Pitlo III, a research fellow at the Asia-Pacific Pathways to Progress Foundation, said Canada, along with other G7 members, has criticized China’s behavior in the South China and has upheld the 2016 arbitral award.

“The joint maritime drills demonstrate international pushback against Beijing,” he said. “These exercises help enhance the training and readiness of Filipino sailors.”

Mr. Dionisio said the four nations represent middle to super power forces.

“The drills signaled the dual efforts of our military and diplomatic agencies in exposing the bankrupt narrative of China with regard to the 10-dash line,” he said, adding that more countries might hold similar drills with the Philippines in the coming months.

The announcement comes days after the Philippine military said at least 122 Chinese ships including a research vessel and the world’s largest coast guard ship had been operating in Philippine waters from July 30 to Aug. 4, up from 104 a week earlier.

Philippine Navy spokesman Roy Vincent T. Trinidad on Tuesday said China had reclaimed 3,000 hectares within the Philippine EEZ. He added that it has transformed Subi, Mischief, and Johnson reefs into major military bases.

“They have airstrips, they have harbors for warships, there are structures on land that we can only surmise are aircraft hangars, and they have military grade communications equipment,” he told a news briefing.

The Philippines’ Fishery bureau earlier this week held aerial inspections of the China-occupied Subi Reef, detecting several high-rise buildings and an airstrip.

Subi, which is just 12 nautical miles away from Philippine-occupied Thitu Island, is one of the three largest man-made islands illegally built by China within the Philippine EEZ. The others are Fiery Cross Reef and Mischief Reef. — with Reuters

Marcos rejects Senate push to suspend jeep modernization plan

PHILIPPINE STAR/ MICHAEL VARCAS

PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday rejected a proposal to suspend the government’s jeepney modernization program, denying criticisms that the plan had been rushed.

About 80% of public utility vehicle (PUV) operators have consolidated their franchises under cooperatives or corporations so they can buy new transport vehicles, he told reporters in Pampanga.

“I disagree with them because they said this was rushed,” the President said. “This has been postponed seven times… Those who have been objecting or have been crying out and asking for suspension are in the minority.”

“Are we going to allow the remaining 20% to decide the life of everyone?” he said in Filipino.

Twenty-two senators last week filed a resolution calling for the suspension of the modernization program, saying it had been rushed.

The consolidation rate has hit 83.38%, with the Office of Transport Cooperatives accrediting 1,781 cooperatives with 262,870 members, according to data from the Department of Transportation.

The government is now finishing the route rationalization component, which will determine the number of PUV units to serve on every route.

“Ignoring the Senate’s call for the suspension of the Public Transport Modernization Program reveals a deliberate refusal to acknowledge the suffering caused by this program,” PISTON National President Mody T. Floranda said in a statement.

“It seems this regime’s priorities lie in benefiting businesses and bureaucrats, even if it means burdening hardworking citizens with excessive debts and fares.”

He said the modernization program “can only be truly progressive” if the National Government prioritizes local manufacturers.

“In the face of growing poverty, unemployment and the soaring cost of living, we cannot achieve genuine modernization as long as our leaders prioritize foreign and corporate interests over the well-being of the people,” he added.

Also on Wednesday, Senate President Francis G. Escudero said the chamber is not against the jeepney modernization program, adding that they sought its suspension to prevent ruining the livelihood of drivers and operators.

“Perhaps some sectors have misinterpreted the Senate’s appeal… What we want is for this to be implemented properly and honestly, according to the intention of the modernization itself,” he told a news briefing in Filipino.

Mr. Escudero said there is nothing alarming about the Executive and legislative branches having differences in opinion. “This is our perspective and view… This is called democracy.”

“This is how the relationship between the Executive and legislative branches should be, it cannot be one-sided all the time,” he added.

At the weekend, Transportation Secretary Jaime J. Bautista said suspending the modernization program would waste investments that have been made to roll out the plan.

Mr. Escudero earlier sought to halt the program since operators are finding it difficult to buy expensive modern jeepneys that cost at least P2.6 million.

The deadline for jeepneys to consolidate into cooperatives lapsed on Dec. 31, but public utility vehicles were allowed to keep operating until Jan. 31. The President later extended the deadline to April 30.

The modernization program started in 2017, aiming to replace traditional jeepneys with units that have at least a Euro 4-compliant engine to cut pollution.

Transport groups have asked the Supreme Court to halt the modernization program, which they said is illegal.

“The request for postponement is to revisit the process and determine when it can be implemented comprehensively,” Mr. Escudero said.

“The Senate’s intention is not to stop the program, but to ensure it is executed properly and fairly without harming our drivers who are already struggling.” — Kyle Aristophere T. Atienza and John Victor D. Ordoñez

Philippines cuts housing target due to slow private financing

PHILIPPINE STAR/ BOY SANTOS

THE GOVERNMENT has cut its housing target to 4 million from 6 million units until 2028 due to slow private financing, Philippine President Ferdinand R. Marcos, Jr. said in a Facebook post on Tuesday night after a meeting with housing officials.

“To ensure that the Pambansang Pabahay para sa Pilipino Housing (4PH) program is successful and sustainable, I have directed the concerned agencies to adjust housing targets based on need and demand until 2028,” he said.

Meanwhile, the state would issue funding guarantees for the mass housing program, the Department of Human Settlements and Urban Development said on Wednesday, citing slow private funding.

The sovereign guarantee would cover the P1.65-trillion funding needed to build 1.2 million housing units in the pipeline under the state program, Human Settlements Secretary Jose “Jerry” Rizalino L. Acuzar told a news briefing.

“We had been using private money, but the funding was so slow,” he said in Filipino.

The agency has cut its 6-million target through 2028 due to construction issues and delayed loans.

“I’m optimistic that this guarantee will make a difference in finally addressing homelessness in our country,” Mr. Acuzar said.

The Human Settlements department has 53 projects under the mass housing program.

It said its target of 1.2 million housing units yearly would only be met by 2028 through the guarantee, which may be increased to P4 trillion if the agency manages to build 3.2 million housing units in four years.

In a statement, the presidential palace said that through the sovereign guarantee, government financial institutions (GFI) could extend developmental loans to the National Housing Authority (NHA) and Social Housing Finance Corp.

The loan evaluation process could be fast-tracked, he added.

The Home Development Mutual Fund or Pag-IBIG Fund would take care of beneficiaries’ housing loans.

“Pag-IBIG shall then release the loan proceeds directly to the GFIs that granted the developmental loans,” it said. “Upon payment to the GFIs, the loan obligation is fulfilled, and the guarantee is extinguished,” it said.

The cancelation rate for socialized housing loans is 9.11%, the palace said, citing Pag-IBIG data.

But rising property values could outpace holding costs, “such that Pag-IBIG still stands to gain upon resale of the property.”

Mr. Acuzar said the President has approved the sovereign guarantee in principle, but the target amount is yet to be decided.

The Human Settlements department would propose the amount to President Ferdinand R. Marcos, Jr. and his economic team would evaluate the recommendation.

Mr. Acuzar said the government guarantee would be less costly for the state since it would eliminate the cost of doing business with contractors.

He said his agency is set to turn over 12,000 housing units this year. — KATA

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