DICT launches redundant system for national broadband network

September 27, 2021 | 8:06 pm

computer internet wires cables — REUTERS

THE DEPARTMENT of Information and Communications Technology (DICT) launched Monday a redundant system designed to make the first phase of the government’s National Broadband Program (NBP) more resilient.

“Today, your Department of Information and Communications Technology launches the supplemental infrastructure or resiliency route for Phase 1 of the NBP as part of our ongoing efforts to future-proof the program,” DICT Secretary Gregorio B. Honasan II said during the ceremony.

“Providing fast, reliable, and affordable digital connectivity to our country’s centers of economic activity is central to our efforts to rebuild the economy, which has been severely affected by the pandemic,” he said.

The department said the so-called “resiliency route” is supplemental infrastructure that will serve as a redundancy and protection loop connecting to the international gateway access through Singapore.

“This will play an integral role in the continuity of internet connectivity to the busiest areas of Metro Manila, Metro Cebu, and Metro Davao, and soon every Filipino, bridging the digital divide,” the DICT said in a statement.

The NBP seeks to trigger policy and regulatory reforms, investing in broadband infrastructure such as the national fiber backbone, and stimulate broadband demand.

The national fiber backbone component has three phases: lighting up fiber on the national electrical transmission system, constructing domestic submarine fiber to connect Luzon to the Visayas and the Visayas to Mindanao, and completing the national fiber backbone with multiple loops. — Arjay L. Balinbin

Proposed wealth tax seen generating over P467B

September 27, 2021 | 8:06 pm

PROCEEDS FROM a proposed tax on wealthy individuals’ assets have been estimated at P467.1 billion, with the exercise in “redistribution” holding the potential to fund health and social welfare programs, according to a left-wing think tank.

IBON Foundation said in a statement Monday that the proposed wealth tax on individuals with taxable assets exceeding P1 billion will affect about 2,919 people.

“At the very top are around 2,919 Filipino billionaires with some P8.1 trillion in wealth. They comprise less than 0.003% of the population but hold 16% of the nation’s wealth,” IBON said.

The estimated revenue would be “more than enough” to provide P10,000 in emergency aid to 18.6 million vulnerable households, subsidies for micro, small, and medium enterprises to support a wage increase of P100 per day for three months, and hiring additional health workers, among others.

“Collecting just a fraction of the huge wealth of the few is a step to redistributing wealth towards the working people who did so much to create it,” IBON said.

Legislators from the minority Makabayan bloc filed House Bill 10253 or the proposed Super-Rich Tax Act of 2021 that will impose a tax of 1-3%, depending on the extent the assets exceed P1 billion.

As drafted, the bill proposes a 1% rate on taxable assets exceeding P1 billion; a 2% rate on assets above P2 billion; and a 3% rate on assets above P3 billion.

The bill proposes an effectivity date for the tax of Jan. 1, 2022, if passed.

According to the bill, revenue from the tax is to be used for medical assistance and investment in education, employment, social protection, and housing for poor families.

Finance Secretary Carlos G. Dominguez III said that the proposed tax will drive capital out of the Philippines.

Albay Rep. Jose Ma. Clemente S. Salceda, chairman of the House Ways and Means Committee, proposed instead to tax the inefficient use of land, including golf courses and low-density subdivisions. — Russell Louis C. Ku

SINAG says palay farmgate price at P10-13

September 27, 2021 | 8:06 pm

THE Samahang Industriya ng Agrikultura (SINAG), an agriculture industry association, said the farmgate price for palay, or unmilled rice, is at P10-13, well below production costs of about P15, and blamed the rice import policy for depressing farmer incomes.

SINAG Chairman Rosendo O. So said the low prices farmers receive for their crop “is the Department of Agriculture’s failure. As if this is not enough, the DA even pushed for the eventual reduction of rice tariffs this year,” Mr. So said in a statement Monday.

President Rodrigo R. Duterte signed Executive Order No. 135 in May which reduced the most favored nation tariff rates on rice imports, both in-quota and out-of-quota, to 35% for one year.

Previously, in-quota rice imports were charged 40% while out-of-quota rice imports paid 50%.

“How can millers or traders afford to buy the fresh harvest of palay at P16/kg or P19/kg for dry palay, which would mean an operating cost of P32/kg of milled rice, versus the P23/kg landed cost of imported rice from China and Myanmar?” Mr. So said.

Citing data from the Bureau of Customs, Mr. So said rice import shipments since 2019 have topped 7.2 million metric tons (MT).

He said rice shipments during the nine months to September of 2.1 million MT have surpassed the import volume for 2020, which totaled 2.06 million MT. A total of 3.13 million MT of rice imports arrived in 2019.

Mr. So added that the retail price of regular milled rice ranges from P38 to P42/kg, higher than the P27 to P30/kg recorded five years ago.

Meanwhile, Mr. So said the DA, along with the National Economic and Development Authority and Malacañang’s economic team, should organize a purchasing drive for the domestic harvest.

“There is no other way. The DA should buy the palay. It cannot just let the local government units (LGUs) buy the palay from farmers in order to address low farmgate prices,” Mr. So said.

“The DA’s actions are bordering on criminal neglect. It should not burden other government agencies for their anti-farmer, anti-consumer and anti-Filipino stance in the past years,” he added.

Agriculture Secretary William D. Dar recently called on the LGUs of top rice producing provinces to purchase palay directly from farmers to address low farmgate prices.

Under Republic Act No. 11203 or the Rice Tariffication Law, the limits on rice imports were removed in exchange for importers paying a 35% tariff, the proceeds of which were to fund the rice industry’s modernization.

Asked to comment, Agriculture Undersecretary Fermin D. Adriano said in a mobile phone message that the money used to import rice has come from the private sector since the rice tariffication law was passed, “unlike before… when government through the National Food Authority (NFA) had incurred a total debt of P170 billion.”

“The Rice Tariffication Law liberalizes trade to stabilize rice supply and temper prices, and imposes tariffs which are plowed back via the P10-billion Rice Competitive Enhancement Fund (RCEF) to enable farmers to increase their productivity and incomes,” he added. — Revin Mikhael D. Ochave

ERC orders two electric co-ops to halt collection of charges for reinvestment fund

September 27, 2021 | 8:05 pm

THE ENERGY Regulatory Commission (ERC) has issued two separate orders to electric cooperatives (ECs) based in Camiguin and Bukidnon to stop collecting additional charges related to the reinvestment fund for sustainable capital expenditures (RFSC).

The fund seeks to finance the amortization or debt incurred by power providers in expanding, restoring or upgrading their power systems in line with their capex plans approved by the regulator.

In a statement Monday, the commission said Camiguin Electric Cooperative, Inc. (Camelco) did not comply with an earlier order to submit a third-party audit report on its additional RFSC fees, while Bukidnon Second Electric Cooperative, Inc. (Buseco) has yet to submit an update on its additional RFSC collected from August 2014 up to the present.

“In view of the said directive… Camelco’s RFSC rate shall be pegged at P0.5324 per kilowatt-hour (/kWh), while Buseco’s RFSC shall be pegged at P0.2508/kWh until further notice of the Commission,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said.

Under an ERC resolution issued in 2009, ECs are required to collect their member-consumers’ contributions which will cover their respective RFSCs.

Ms. Devanadera said the commission will closely monitor Camelco and Buseco’s compliance.

“Their failure to comply with the said directives shall constrain the commission to impose the appropriate sanctions, if warranted,” she added.

Earlier this year, ERC announced it has hired professional services firm Reyes Tacondong & Co. to conduct an independent audit on how ECs are collecting and disbursing the RFSC.

Reyes Tacondong & Co. previously won the ERC’s bid for consulting services on the fund. — Angelica Y. Yang

Of ATP and VAT Refunds

September 27, 2021 | 8:05 pm

Last month, there was a long, funny Twitter thread that reimagined “The Office” in the COVID-19 era. There can be no doubt about it — the pandemic has ushered in a new reality of work. For one, reconfigurations in the office have become so common as to become the norm.

Our firm opened a new satellite office at Vertis North in Quezon City to be more accessible to employees and clients with offices in that area. Others have downsized their office space, with some shifting to virtual offices instead. There are also others that moved out of PEZA zones to be able to implement a 100% work-from-home arrangement.

In the Philippines, moving to new offices or changing business addresses is no mean feat. It requires updating various government registrations, such as those with the Securities and Exchange Commission, local government units, and various social welfare agencies. Arguably, the most important and tedious step is updating the company’s records with the Bureau of Internal Revenue (BIR).

Updating BIR records can be tricky if the move is from one Revenue District Office (RDO) to another. There will be a need to deregister with the old RDO, and request for migration or transfer to the new RDO. Original BIR documents, including unused invoices and receipts, would have to be surrendered to the old RDO. The taxpayer would then need new invoices and receipts, for which it has to secure an Authority to Print (ATP) from the new RDO, prior to actual printing.

Sometimes, amidst all the ruckus, the new ATP gets delayed. Hence, there can be an intervening period — from surrender of old invoices or receipts to the old RDO to issuance of a new ATP by the new RDO — when the taxpayer does not have invoices or receipts in its possession. It can happen that only after the ATP is issued and the new invoices or receipts are printed that the taxpayer can issue invoices or receipts for sales made during the intervening period.

An unfortunate, overlooked consequence of this is that it can be grounds for denial of value-added tax (VAT) refund applications. That is, whenever the date of the ATP on the invoices or receipts is later than the date of the transactions covered by the VAT refund, the BIR denies the application. It cites the case of Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue (G.R. No. 172378, January 17, 2011) which held that a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts. In the case, the ATP was not indicated in the invoices or receipts and the taxpayer was also unable to present the ATP, and so the Supreme Court ruled that without this proof, the invoices would have no probative value for the purpose of a refund.

It is to be conceded that the Tax Code expressly requires persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts. However, unlike the situation cited in the Intel case, taxpayers moving to new offices had already secured a prior ATP. It’s just that at the time of the sale, the invoices or receipts printed under that ATP were surrendered to the old RDO. The facts are not really entirely the same to warrant the application of the Intel ruling.

In theory, it does sound simple enough — the new ATP should be dated prior to the date of the transactions. But the reality is that applying for RDO transfer can sometimes take a while — and it is not always the fault of the taxpayer. The BIR system tends to capture open cases from so long ago (sometimes, beyond the retention period set by the rules), such that settling the open cases can be a challenge. Delinquency verification can take some time too. Meanwhile, the taxpayer can only wait before it can file an application for ATP with the new RDO.

Some companies transferring business addresses may retain a booklet or so of their invoices or receipts, and request permission from the BIR to allow them to use the old invoices or receipts until the new ATP is issued. However, this work-around is not explicit in regulations and an ordinary taxpayer may not be able to get the necessary work-around permissions from the BIR.

It is a fact that VAT refunds in the Philippines are a difficult process. The proper substantiation of sales (output tax) and purchases (input tax) is critical, including compliance with invoicing requirements. However, does a delayed ATP bearing the new address really translate to non-compliance with invoicing requirements?

If it is, then it would make a VAT refund almost unattainable for those who transferred offices or changed their business addresses. Delayed ATP is very common. This will then make denials of VAT refunds all the more common too. Really, our hope is for this issue to be further clarified by the BIR. Clearer and simpler rules need to be provided to guide both the BIR and taxpayers to ensure that business is not unnecessarily disrupted due to transfer of business address.

VAT zero-rating is a tax characterization of the transaction based on the law relied upon by the investors. When we initially enticed them to do business in the Philippines, they were basically promised to get back the VAT they paid on their purchases to produce the zero-rated or effectively zero-rated sales. If their VAT refund applications are denied, the VAT becomes a real cost affecting not just their cash flows, but their P&L and financial ratios.

More importantly, capricious denials affect investor confidence in doing business in the Philippines. Before we know it, they might be packing up and moving offices not from one RDO to another, but out of the Philippines. Now, let’s admit that when Michael Scott left Dunder Mifflin, we were saddened. The Office was never quite the same.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Diana Elaine B. Bataller-Simbulan is a senior manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Sustainability is the ‘new’ language of business

September 27, 2021 | 7:55 pm

woman-showing-man-finance-diagrams-table-laptop-papers — FRIMUFILMS-FREEPIK

Over the years, sustainability has become an important global issue and an emerging policy priority for many countries and organizations. There has been a strong push to disclose data on this subject through various forms of public reports. A particular and increasing interest has been placed on the Environmental, Social, and Governance (ESG) Standards — the three broad areas used by companies, mostly publicly listed, to measure their ethical impact and to take accountability and responsibility for non-financial performance. Such standards are widely used as a key consideration for decisions made by investors, suppliers, and consumers, hence the increasing importance to better manage, measure, and communicate sustainability efforts.

As early as 1987, the UN Bruntland Commission Report defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Fast forward, the UN Sustainable Development Goals (SDGs) were adopted in 2015. The 17 SDGs recognize that action in one area will affect outcomes in others, thus there needs to be a balance between economic, social, and environmental development. The attainment of these Global Goals is a call to action for peace, prosperity, and progress by 2030.

But what exactly does sustainability mean for a company and its stakeholders? Did the COVID-19 situation “intensify” the social responsibility of corporations and individuals? How can we better understand sustainability and gender equality as important elements in identifying risks and opportunities?

FROM ‘A NICE TO HAVE’ TO ‘THE RIGHT THING TO DO’
A strong ESG proposition can create value and every business is deeply intertwined with these standards. In 2019, the Securities and Exchange Commission (SEC) took a further step in embedding sustainability reporting in the business culture. Per the SEC, all efforts to promote sustainability reporting as a business practice are intended to hopefully incentivize companies into working on their own measures, as well as to make them aware of the reputational risks and benefits.

The data and information that companies generate and report through sustainability reporting are quite unique. Risks concerning the environment, particularly climate change and greenhouse gas emissions, were the flag bearers of most sustainability reports. At present, sustainability should go beyond environmentalism and it is timely to give equal importance to Social and Governance Goals.

THE SUSTAINABILITY AGENDA
On July 28, the Philippine Business Coalition for Women Empowerment (PBCWE), together with Investing in Women and WeEmpowerAsia Program of the UN Asia and the Pacific, organized the “WEE Mean Business Roundtable Dialogue: Sustainability as the New Language of Business.” The resource speakers were two PBCWE Member Companies who demonstrate the “gold standard” when it comes to sustainability and gender diversity initiatives — the Philippine National Bank (PNB) and Meralco.

Represented by Leia Teodoro, Senior Assistant Vice-President and Head of Marketing and Intelligence, Analytics, and Performance Group, PNB’s sustainability pillars are anchored on EESG — Economic being the other “E.” As a pioneer in the banking industry, PNB proudly commits to gender-responsive sustainability reporting through the collection and reporting of gender data in its 2018, 2019, and 2020 Sustainability Reports. PNB is the first universal local bank in the country to receive the first level of the EDGE Certification through PBCWE. Until 2021, the Bank was chaired by a female who held the post for the last 15 years.

Meralco’s Chief Sustainability Officer, Raymond Ravelo, shared that their sustainability agenda is anchored on four pillars — Power, Planet, People, and Prosperity, hence the theme #PoweringTheGoodLife. “Good life” means providing energy for all, always; protecting and preserving the planet by lowering greenhouse gas emissions and minimizing waste; nurturing sustainability from within, while ensuring the holistic well-being of all Meralco employees in safe and inclusive workplace; and, creating better lives for all, ensuring that no one is left behind. Similar to PNB, Meralco embeds UN SDG #5 (Gender Equality) and #8 (Decent Work and Economic Growth) in their Sustainability programs, such as its #Mbrace Diversity and Inclusion Program, which seeks to build a more gender-balanced and inclusive Meralco. Quoting Meralco, “True sustainable progress undoubtedly requires a shared vision and collective earnest action.”

For both PNB and Meralco, regular and consistent data collection is the best practice to accurately measure trends and form evidence-based policies. Shifting systematic barriers need to be identified and analyzed. Tracking the right indicators can help Philippine businesses build a clear pathway to maximizing the competitive advantage that workplace gender equality offers. This is a key moment of opportunity for economic and business growth, especially at this time where companies are doing their best to recover from this pandemic.

MOVING FURTHER, NOT FARTHER
The golden rule is that if an organization cannot create value, it should try to at least minimize harm — not only to stakeholders but also to employees down to the community where it operates. Companies do have an obligation to make a positive contribution to the broader community — and this is why organizations should adopt the best practices of sustainability reporting. Being sustainable means ensuring the longevity of business by maintaining profitability in the market achieved through compliance with all applicable laws, rules and regulations, and alignment with local and international best practices and standards.

Other countries have done it, and we can definitely do it too! The government, private sector, and individuals — basically everyone — have a collective responsibility for adopting sustainable practices, including the creation of gender-equal workplaces. Much has been said but, in many respects, there is still much that can be done for meaningful and measurable progress.

Sustainability is the “new” language of business and indeed “what gets measured, gets acted upon.”

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is member of MAP Corporate Governance Committee and MAP Arts & Culture Committee. She is President of MAGEO Consulting Inc., a company providing corporate finance advisory and consulting services. She is also Chair of Philippine Women’s Economic Network (PhilWEN) and Co-Chair of PBCWE. Antoinette Santos is the Policy and Communications Specialist of PBCWE. Feedback at <map@map.org.ph> and <magg@mageo.net>. For previous articles, please visit <map.org.ph>)

map@map.org.ph

magg@mageo.net

map.org.ph

Dinky Soliman, a true public servant

September 27, 2021 | 7:50 pm

There is a Chinese idiom known as “riding the tiger.” It says he who rides the tiger stays on the back of the tiger because he is afraid to dismount as getting off it could be detrimental to his aspirations or career, even threatening to his life. John F. Kennedy, President of the United States, had a word of advice though for riders of tigers. At his inauguration, he warned, “Remember that in the past those who foolishly sought power by riding the back of the tiger ended up inside.”

There are several chapters in Philippine history that tell the story of such tiger riders. There were the Supreme Court justices, generals, provincial politicians, and technocrats who rode the Marcos tiger. When Marcos placed the country under martial law and went on a rampage of plunder and viciousness, the lackeys stayed on the back of the tiger to continue to enjoy power, privilege, and perks.

When the people decided they have had enough of pillage and brutality, they chased Marcos out of the country. The subservient Supreme Court justices, bootlicking generals, backslapping politicians, and the slavish technocrats found their lavish careers abruptly terminated, their reputation shattered. Branded as “mga tuta ni Marcos” they were ostracized by civil society.

There were the fawning senators during the presidency of Joseph Estrada. To retain their influence and enjoy the favors of Estrada, they chose to stay on the back of the Estrada tiger even when his extensive involvement in illegal gambling had been exposed. History has labeled them the Craven Eleven, most of them suffering the end of their political life when Estrada was ousted from the presidency.

But there were also who dismounted the tiger before the tiger could bring them to perdition. Among the technocrats President Marcos recruited from the academe to serve in his government was University of the Philippines Law Professor Rafael Salas. He appointed him as executive secretary and as chief action officer of the National Rice Sufficiency Program.

But after serving for three years with distinction. Salas resigned due to irreconcilable differences with President Marcos. His dismounting the Marcos tiger did not hold back his career and aspirations, nor did it threaten his life. He took on a better job somewhere, the newly created position of executive director of the United Nations Population Fund, a job he held until his death.

Like Marcos before him, President Estrada brought into his Cabinet brilliant men with extensive experience and creditable performance in their respective fields — foreign relations, education, banking, labor, energy, and governance. Among them was another academic, Aprodicio Laquian, professor emeritus at the University of British Columbia. President Estrada named him his chief of staff in an attempt to counter Cabinet infighting and bring direction to the fumbling administration.

Just weeks into his job, Laquian said in jest before the members of the Manila Overseas Press Club that President Estrada decided government policy while stone drunk every night with his so-called “midnight Cabinet.” Laquian was fired hours after he cracked the joke.

Maybe there was some truth to Laquian’s joke as Estrada’s Cabinet secretaries, many of them his former high-school classmates, left his government one by one. Perhaps, in order not to give the impression they were resentful of Estrada’s favoring his midnight drinking buddies over them when it comes to government policies, the men gave as their reasons for resigning “failing health, family demand, call of private sector, or to ride into the sunset,” avoiding drawing the spiteful reaction that Laquian got.

Like her predecessors, President Gloria Macapagal Arroyo brought into her Cabinet the best and the brightest. One of them was Simeon Marcelo. She first appointed him Solicitor General, then Ombudsman.

As Ombudsman, Marcelo supervised the prosecution of major high-profile cases before the Sandiganbayan. After successfully handling before the Supreme Court other major cases. Marcelo, surprisingly tendered his irrevocable resignation as Ombudsman.

In his letter to President Arroyo, Marcelo said his seven-day workweek since he joined the government had left him “physically and mentally exhausted.” But rumor had it that Marcelo got off the Arroyo tiger, so to speak, not for reasons of health, but because he had had enough of Arroyo telling him to go easy on the prosecution of some cases.

But then there were the Hyatt 10 — 10 members of the Arroyo Cabinet who gathered together in Hyatt Regency Hotel to declare their collective resignation without couching their reason in polite and cordial terms. They broke away from her when her attempt to influence the results of the 2004 presidential election was exposed. And they told her why in no uncertain terms, unmindful of the spite expected from a known vindictive woman.

In a statement, the Hyatt 10 said they were not making any judgments on the Hello Garci and jueteng controversies as the law provides a proper forum to resolve those issues. Instead, they focused on Arroyo’s leadership and credibility.

They declared: “The President can be part of the solution to this crisis by making the supreme sacrifice for God and country to voluntarily relinquish her office and allow her constitutional successor, the Vice-President, to assume the Presidency. Resignation is a legitimate constitutional option for effecting leadership change. Given the crisis in the Presidency, this is the least disruptive and painful option that can swiftly restore normalcy and eventually bring us to prosperity.”

The voice and face of the Hyatt 10 was Corazon “Dinky” Juliano Soliman, Arroyo’s Secretary of the Department of Social Welfare and Development. When the opposition forces gathered together at the Club Filipino in 2007 to form a united senatorial ticket for the general elections that year, someone nominated Dinky, who was presiding over the meeting.

She declined, saying “GMA would have me killed.” As if to clarify that she was just being rhetorical, she said she knew that GMA would use all in her power to prevent Dinky from holding any position in government. Besides she was not interested in any job other than serving the poor and the underprivileged, she told the assembly.

Dinky went to the University of the Philippines, Diliman to earn a Bachelor’s degree and a Master’s degree, both in Social Work. And she went into social work after earning those degrees. That is how Arroyo got to know her. As President Estrada’s Secretary of Social Welfare and Development, Arroyo got exposed to Dinky’s work. I remember her telling reporters right after she was sworn in as president, “I have not told Dinky Soliman this, but I am appointing her as Secretary of the Department of Social Welfare and Department.”

And when Benigno Aquino III became president, he gave Dinky back her former job in the Arroyo government. When the PNoy administration completed its term, Dinky went back to community service.

As the Senate resolution honoring Dinky, said: “Sec. Dinky left nothing materially but so much in the respectful affection of all who worked, dreamed and fought with her causes and advocacies. Her passing ends a chapter in the country’s civil society sector. Her untimely death as an exemplary public servant and social worker, the first responder on the ground and the last person to leave the disaster-stricken area, is a great loss to the Filipino people and the nation as well, particularly in this time of crisis and upheaval.”

I say AMEN.

Oscar P. Lagman, Jr. is a retired corporate executive, business consultant, and management professor. He has been a politicized citizen since his college days in the late 1950s.

Evergrande and China’s energy crisis are two sides of one coin

September 27, 2021 | 7:48 pm

CHINA’S DATA on economic growth is man-made, and therefore unreliable.

That’s not the opinion of a provocateur, but the reported views of the country’s own Premier. During a dinner with US Ambassador Clark Randt in 2007, Li Keqiang — then party secretary of Liaoning province and a rising star in the Communist Party — said that official data on gross domestic product was less reliable than a mix of electricity consumption, rail cargo volumes, and loan growth. Those three figures were harder to fudge to produce a politically convenient result, he said, according to a memo from the US embassy released by Wikileaks in 2010.

That assessment has proved a pretty good guide to Chinese growth for the 14 years since, with an index weighted 20% to rail freight and 40% each to electricity and lending tracking official GDP data quite closely. That’s a troubling result right now, though — because two of the key indicators are under critical pressure at exactly the same moment.

There’s obvious reasons why loan growth may be heading for a rough patch. The crisis that’s left China Evergrande Group struggling to fund its $300 billion in liabilities may well be resolved without creating a systemic crisis. Should that happen, though, the fact the company is having such trouble getting access to fresh credit from state banks in itself indicates how the headlong pace of lending is starting to trouble Beijing.

A Lehman-style shock could see an actual reduction in credit within the system, like the 4.6% annual decline experienced by US lending in the wake of that 2008 crisis. Even a reset to more normal levels of growth would be troubling for an economy where lending has grown by at least 12% a year for decades, double the rate seen in the US.

No other major emerging economy has debt levels relative to GDP comparable to China’s, and most of the developed countries with yet-higher leverage had been reducing their indebtedness for years before COVID-19 struck, whereas China has accelerated its borrowing.

The situation with energy is oddly similar. Power rationing has spread across many of China’s economic powerhouse provinces as local governments risk missing targets for reducing the emissions intensity of their economies, with smelters in Yunnan, textile plants in Zhejiang, and soybean crushers in Tianjin all reported to have halted to prevent power cuts to non-industrial users.

For years, China’s electricity consumption has grown at a rate scarcely slower than the economy itself. That model is running into problems as President Xi Jinping’s ambitions to hit an emissions peak by 2030 start to translate into policy objectives. If China was to keep growing electricity demand at 5% a year from current levels without burning more coal, it would need to be building in the region of 100 gigawatts of solar and 50 gigawatts of wind every year — but the pace of growth being targeted is closer to half that level.

Provincial officials are thus faced with irreconcilable mandates: Keep the supply of electricity flowing to juice the economy, but keep a lid on carbon emissions, even as high-level plans for the power sector aren’t promising sufficient zero-carbon power plants to stop them falling back on a glut of coal-fired capacity to keep the grid running. The record prices seen for Chinese coal futures over the past week are the sign of a system that’s struggling to cope with the contradictory requirements placed on it.

Rail freight, the last part of the Li Keqiang Index, has performed better — but if you’re thinking of it as a measure of general activity within the economy, there’s troubling signs. China’s high-speed rail network, barely conceived of at the time Li met with the US ambassador, was in part designed to free up space on the conventional tracks so that cargo could be shifted that way, rather than by road. It’s no surprise, then, that rail has held up pretty well — but freight volumes as a whole have looked weak since before COVID-19 hit, and seem stuck at the levels of about 4.3 billion metric tons a month they hit around three years ago.

That’s concerning. One striking thing about the memo that inspired the Li Keqiang Index is how little domestic policy concerns have changed in 14 years, with much of the discussion focused on the problems of corruption and how to balance growth with income inequality. The economic model that Li described, however — where officials will stop at nothing to achieve GDP targets — is drifting toward bankruptcy.

China’s growth has been fueled for decades by credit and carbon, and Beijing finally seems to be getting serious about changing that. Whether its economy can sustain such a drastic intervention remains to be seen.

BLOOMBERG OPINION

Energy prices, GDP projections, the ERC, and hydro development

September 27, 2021 | 7:48 pm

Among the big surprises this year has been the huge spike in global prices of fossil fuels as the favored renewables wind and solar continue to produce intermittent, unstable, even declining output.

These news headlines last week look like the papers are describing some Third World countries and not UK and Europe: “British Steel warns of up to 50-fold increase in power prices” (Financial Times, Sept. 21), “Energy price rises: Dozens of firms will be left to collapse” (The Times, Sept. 21), “‘Absolutely no question of lights going out’ this winter over hike in energy prices, cabinet minister says” (The Independent, Sept. 21), “Europe’s energy crisis: A switch back to coal is on the cards” (The National, Sept. 24), “Starved of Gas, European Electricity Producers Snap Up Coal” (Bloomberg, Sept. 25).

HUGE SPIKE IN FOSSIL FUEL ENERGY PRICES
I checked commodity prices as of the end of last week, Sept. 24. Aside from lithium — used mainly for batteries in cell phones, laptops, and electric vehicles — and soda ash, the fossil fuels coal, natural gas, and propane have had very high rises in prices year to date (YTD) or from Jan. 1 to Sept. 24.

For a price index, despite the huge spike in EU’s carbon permits that are supposed to favor wind and solar energy and penalize fossil fuel energy, wind and solar are not attractive as they suffered price contractions (see Table 1).

INDEFINITE LOCKDOWN, POWER DEMAND, AND GDP PROJECTION
The Philippines’ GDP size (at constant 2018 prices) in 2020 was P17.5 trillion, lower than 2019’s P19.38 trillion and 2018’s P18.2 trillion, and nearly touched 2017’s P17.3 trillion. That is the impact of government lockdown and -9.6% GDP contraction.

This year, the quarterly GDP performance were -3.9% in the first quarter (Q1), and 11.8% growth in Q2 mainly because of the very low base in Q2 of 2020.

I made my own projection for Q3 this year based on electricity demand which is sensitive or responsive to government lockdown policies. I included data on electricity prices like the customers’ Effective Spot Settlement Price (ESSP) and producers’ Load Weighted Average Price (LWAP).

From the Independent Electricity Market Operator of the Philippines (IEMOP) data, power demand grew 6.6% in the first half of 2021, GDP growth over the same period was 7.9%, again due to very low base in Q2 last year. Power demand growth in Q3 decelerated to only 1% because of ECQ-MECQ in August and the equivalent “level 4” restrictions in September. The Philippine Statistics Authority (PSA) will officially release GDP figures for Q3 2021 in the first week of November, but from initial power data and also low base in Q3 2020, my estimate is 4%-5% growth in the next quarter.

ERC FAVORITISM OF NGCP MONOPOLY
Consider these three reports last week involving the Energy Regulatory Commission (ERC):

“Power providers gave back almost P20 billion to consumers — ERC” (BusinessWorld, Sept. 23).

“P16-M fine imposed vs. 8 GenCos over violations; won’t be passed on to consumers” (PDI, Sept. 23).

“Stop Collection of Congestion Charges in Panay and Negros — ERC” (Energy Regulatory Commission press release, Sept. 22).

Decentralized distribution utilities (DUs) and electric cooperatives which have been technically demonopolized via retail competition and open access (RCOA) provision of the EPIRA law are penalized by the Energy Regulatory Commission (ERC).

Decentralized, demonopolized and competitive power generation sector is also penalized by the ERC.

The national monopoly, zero competition National Grid Corp. of the Philippines (NGCP), with many delays and unfinished work in transmission nationwide, is not penalized and is even shielded by the ERC.

Cute investigator ERC, that regularly harasses decentralized power generation and distribution sectors, should be investigated by Congress for its consistent shielding of the only remaining national monopoly in the country, the NGCP.

HYDRO POWER RECOVERY
The share of hydro power (big and run-of-river) to total power generation this year in the Luzon-Visayas grids has been rising due to the rainy season. From only 3.3% of the total last May, it went up to 4.4% in July and 7.7% in August.

The current double-dip La Niña that started around September 2020 is projected to continue until about April 2022, said US NCEP-CPC-NOAA projections as of Sept. 25. See also “La Niña: Globe Expected to Continue Cooling into Next Year, Extending Cooling Streak To 7 Years” (No Tricks Zone, Sept. 24, 2021).

Last weekend, my family visited Villa Escudero in Tiaong, Quezon. Its small dam or weir created a lake upstream for bamboo rafting/tourism and fishery, and a 70-kw hydroelectric plant. The weir was built in 1872 for irrigation. Fast forward today, it achieves four useful socio-economic goals with that single project — power generation, tourism, irrigation, and fishery.

The Departments of Energy and Tourism should jointly promote nationwide small but many dams or weirs of the Villa Escudero style. Our problem in the tropics is not lack of water but too much water, too much flooding during the rainy season. That excess water should be stored in many impounding lakes and rivers and, in the process, create more indigenous power generation, irrigation, eco-tourism, and fishery.

Bienvenido S. Oplas, Jr. is the Director for Communication and Corporate Affairs, Alas Oplas & Co. CPAs,

nonoyoplas@alasoplascpas.com

Barangay Ginebra looking to dig deep against TnT Tropang Giga

September 27, 2021 | 7:31 pm

THE number eight seeds Barangay Ginebra San Miguel Kings collide with the top-seeded TnT Tropang Giga in the PBA Philippine Cup quarterfinals with a twice-to-win disadvantage. — PBA IMAGES

By Michael Angelo S. Murillo, Senior Reporter

THEY may be the defending champions, but the Barangay Ginebra San Miguel Kings know they are in for a tough battle against the top-seeded TnT Tropang Giga in the quarterfinals of the Philippine Basketball Association (PBA) Philippine Cup this week.

Barely made it to the playoffs, the number eight seeds Kings will collide with the Tropang Giga facing a twice-to-win disadvantage.

Making it tougher for them is they are set to miss the services of athletic big man apeth Aguilar, out for the rest of the tournament because of a knee injury, and possibly do-it-all guard Scottie Thompson, who entered the league’s health and safety protocols and has yet to be cleared to play.

But the Kings are not allowing the daunting task to weigh on them too much, and instead looking to dig deep and work with the cards they are dealt with the best way they can.

“We could quit or we could stand up and continue to fight,” said Barangay Ginebra coach Tim Cone after their 95-85 victory on Saturday in their do-or-die match for the last quarterfinal ticket with the Phoenix Super LPG Fuel Masters.

The many-time champion PBA coach was describing how things have gone for them in the season-opening Philippine Basketball Association tournament, particularly in the “semi-bubble” in Pampanga.

Since the league relocated to the Don Honorio Ventura State University Gym in Bacolor from the Ynares Sports Arena in Pasig City on Sept. 1 because of the coronavirus disease 2019 (COVID-19) situation in Metro Manila, the Kings hardly made strides, winning only two of their seven matches to finish with a 4-7 record.

It forced them to nearly miss the quarterfinals, risking being the first defending champions to miss the playoffs since the Shell team in 2000.

Compared that to their quarterfinal opponent TnT, which has been steady throughout the eliminations, finishing with a nearly unblemished 10-1 record to secure the top seed and seemingly not about done in dominating.

“They (Tropang Giga) are playing extremely good basketball. They’ve hardly been touched,” Mr. Cone said.

“Aside from that, they pretty much dominated just about everybody. We know our road is tough, there is no doubt about it. But our guys will battle,” he added.

And the “mission” is not lost to the Barangay Ginebra players.

“Coach Tim keeps telling us that if there is a player down, we should have a next-man-up mentality. We have to step up and play as a team,” said big man Prince Caperal, who was named best player of the game in their win-or-go home match against Phoenix.

In their lone encounter in the elimination round on Sept. 12, TnT defeated Barangay Ginebra, 88-67.

It was a convincing win that saw the Tropang Giga take control of the opening half and check any fightback attempts by the Kings the rest of the way.

Rookie Mikey Williams led the way for TnT in the win, finishing with a game-high 27 points, with Troy Rosario and Jayson Castro adding 14 points apiece.

Mr. Aguilar, meanwhile, paced the Kings with 18 points.

The date and time of the TnT-Barangay Ginebra quarterfinal joust will be known on Tuesday when the league releases its schedule for the week.

Fil-Japanese Yuka Saso finishes at joint fourth in Arkansas event

September 27, 2021 | 7:30 pm

FILIPINO-Japanese golfer Yuka Saso finished tied for fourth in the Walmart Northwest Arkansas Championship on Monday (Manila time).

She fired a 65 on the final round of the 54-hole tournament at the Pinnacle Country Club in Rogers to finish with a 14-under 199 total.

Ms. Saso, the reigning US Women’s Open champion, was tied with Daniella Kang of the United States.

Japan’s Nasa Hataoka bagged the title with a total of 16-under 197.

The Philippine bet, who represented the country in the Tokyo Olympic Games in August, entered the final day off a strong second round, where she fired a 6-under 65 to move into contention at joint ninth place after settling for the 44^th spot in the opening round.

Ms. Saso, 20, tried to make her way to the top in the final round, scoring an eagle in the seventh and 18^th hole, but it was not enough.

For her efforts, she received $104,506, or around P5.2 million. — Michael Angelo S. Murillo

Tropang Giga rookie Mikey Williams in running for BPC award

September 27, 2021 | 7:29 pm

TNT TROPANG GIGA ROOKIE MIKEY WILLIAMS — PBA IMAGES

TNT Tropang Giga rookie Mikey Williams has been making waves in his debut Philippine Basketball Association tournament and is in the running for the best player of the conference (BPC) award.

In the official list released by the league at the weekend, Mr. Williams, 29, the fourth overall pick in this year’s rookie draft, ranked second in the BPC race at the end of the elimination round, behind Magnolia Hotshots Pambansang Manok do-it-all forward Calvin Abueva.

Mr. Abueva churned out an average of 35.36 statistical points, with Mr. Williams closely behind with 35.30 average SPs. Third running is Northport Batang Pier’s Robert Bolick with 35.27 SPs.

The TnT rookie is his team’s leading scorer, producing 18.4 points per contest, second league-wise, after the 19-point average of San Miguel Beermen’s Terrence Romeo.

Mr. Williams is also producing 4.2 rebounds, 3.7 assists and 1.2 steals in 10 games to date in the Philippine Cup for TnT, which ended the elimination round with a 10-1 record.

The steady play of Mr. Williams has afforded TnT the flexibility to manage the minutes of veteran Jayson Castro, which is proving to be beneficial for the latter as he does need to do much heavy lifting for his team game in and game out.

Mr. Williams, too, has complemented the play of the other young guns of the team like Roger Pogoy and Troy Rosario.

Completing the top 10 BPC contenders are Jamie Malonzo (31.5) of Northport at fourth, followed by Magnolia’s Ian Sangalang (31.3), San Miguel Beer’s CJ Perez (30.7), Rain or Shine’s Javee Mocon (31.1), San Miguel’s Arwind Santos (29.6), Phoenix Super LPG’s Jayson Perkins (29.4), and Ginebra’s Scottie Thompson (29.4).

Incidentally, Mr. Williams topped the rookie race after elimination play, ahead of Mr. Malonzo, Meralco’s Alvin Pasaol (20.6), NLEX’s Calvin Oftana (19.1), and Rain or Shine’s Leonard Santillan (15.6). — Michael Angelo S. Murillo

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