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Grayson Allen, Giannis Antetokounmpo power Bucks past Bulls

GRAYSON Allen continued to torture the host Chicago Bulls with 27 points off the bench in 28 minutes, Giannis Antetokounmpo scored 32 more and the Milwaukee Bucks completed a two-game road sweep with a dominant 119-95 victory in Game 4 of their Eastern Conference playoff series on Sunday afternoon.

The third-seeded Bucks, who have won 15 of their last 17 first-round playoff games, own a 3-1 series lead and will go for the clincher in the best-of-seven series on Wednesday night in Milwaukee.

Getting increased playing time in the absence of injured Khris Middleton, Allen shot 10-for-12 overall and 6-for-7 on 3-pointers en route to his second straight postseason career-high.

After totaling just three points in the first two games of the series, Allen exploded for 22 points in Friday’s 111-81 win at Chicago.

Antetokounmpo chipped in with 11-for-22 shooting from the field, helping the Bucks scorch the nets to the tune of 52.3%. The Most Valuable Player candidate completed his third double-double of the series and 44th of his postseason career with a game-high 17 rebounds.

Attempting to rebound from a defeat as they had in Game 2 in Milwaukee to draw even, the Bulls hung within 25-24 into the second minute of the second quarter before falling gradually behind.

The Bucks’ biggest push occurred over the final 2:39 of the period, when Allen contributed two- and 3-point hoops to an 8-2 run that turned a nine-point game into a 56-41 halftime advantage.

Chicago suffered a key blow during that stretch when Alex Caruso took a Jevon Carter forearm in the face and had to leave the game. Caruso had a bloody nose as he went to the locker room, was examined for a concussion and did not return.

The sixth-seeded Bulls got no closer than eight in the second half.

Antetokounmpo also found time for seven assists and two blocks, while Jrue Holiday had 26 points and seven assists and Bobby Portis 14 points to complement 10 rebounds.

Holiday added 5-for-8 accuracy on 3-pointers to Allen’s 6-for-7, helping Milwaukee go 17-for-33 and outscore the hosts 51-27 points advantage from deep.

DeMar DeRozan finished with 23 points for Chicago, while Zach LaVine (24 points, 13 assists), Patrick Williams (20 points, 10 rebounds) and Nikola Vucevic (11 points, 10 rebounds) all recorded double-doubles.

The Bulls have never rallied to win a playoff series after falling behind 3-1. — Reuters

Rublev outlasts Djokovic to claim Serbia Open crown

WORLD number one Novak Djokovic’s barren title spell in 2022 continued as he went down 6-2, 6-7(4), 6-0 to Russian Andrey Rublev in the final of the Association of Tennis Professionals (ATP) 250 Serbia Open in Belgrade on Sunday.

Playing his second tournament on clay this season after being knocked out by Alejandro Davidovich Fokina in Monte Carlo earlier this month, Djokovic was off to a slow start as second seed Rublev broke him twice to clinch the opening set 6-2.

Djokovic had prevailed from a set down in his last three matches and the 20-times major winner, cheered on by a capacity home crowd, raised his game in the second set to take the tie-breaker despite earlier squandering five set points on the Rublev serve.

The Serbian missed a chunk of the early season, including the Australian Open as well as ATP Masters 1000 events in Miami and Indian Wells, due to his refusal to get vaccinated against coronavirus disease 2019 (COVID-19) — and his lack of match practice showed in the deciding set on Sunday.

Rublev galloped to an early lead and barely gave his opponent a chance as he closed out the match with a powerful forehand winner for his first win over Djokovic and 11th career title.

“It was unfortunate that in the third set I really ran out of gas,” Djokovic told reporters. “I couldn’t deliver more of a fight but congratulations to Andrey on another great week.”

The 34-year-old added that his surrender in the final set could have been down to a recent illness that also caused him trouble in the second-round defeat in Monte Carlo.

“I didn’t like the feeling towards the end of the second set, and basically the entire third set was similar to what I was experiencing in Monte Carlo. Whether or not it is due to that illness I had or something like that, I don’t know,” he said, adding that the problem wasn’t related to COVID-19.

“At least this bad feeling came in the fourth match rather than the first. Things are progressing slowly but surely.” — Reuters

I vote for Leni

PHILIPPINE STAR/ MIGUEL DE GUZMAN

On Feb. 26, 1986, the day after People Power chased Ferdinand Marcos and his entire family out of the country, Makati Business District office workers marched on Ayala Avenue, the leaders of the march holding up a large streamer with the words “NEVER AGAIN!” Never again will they let a tyrant rule over the land, the marchers vowed. Never again will they submit to Conjugal Dictatorship, they swore. “Never again” reverberated all over the land.

Now looms the return of the evil People Power banished from the land in 1986. The specter of Ferdinand Marcos the Dictator, as he was generally known, and “Greatest Robber of Government” as the Guinness Book of Records describes him, is coming back to life. There is now BBM, which stands for Babangon muli and for Bongbong Marcos. Babangon muli implies that President Ferdinand Marcos will rise again. He will rise again in the person of his son Bongbong. And Bongbong Marcos as president will bring about a new Golden Age.

Bongbong’s vast and lavishly funded propaganda machine has been propagating these past six years the fiction that the Ferdinand Marcos presidency was the Golden Age — the years of robust economy, construction of magnificent infrastructures, and enduring peace and order — of Philippine history. The pre-election surveys indicate that the majority of the people believe the story.

The folks in the countryside were too distant from the center of power and those belonging to the low socio-economic strata were too pre-occupied with meeting their basic survival needs to have been aware of the ransacking of the national treasury. People who were born during the martial law years were too young to realize how hard life was then.

These people assume that the son is capable of replicating the supposed achievements of the father. They do not take cognizance of the fact that the son does not have the brilliance of mind, the zeal for work, and the perseverance to finish what he had set out to accomplish to be capable of beginning another Golden Age.

Philippine history books prescribed as textbooks in schools gloss over the atrocities and abuses of martial law. Not only that, Philippine History as a subject was removed from the high school curriculum in 2013. The truth is the Marcos Presidency was a horrific period in the annals of the country — 13 years of tyranny and 20 years of looting.

Ferdinand Marcos swore twice, in 1965 and in 1969, to uphold and defend the Constitution but disregarded it totally when he held on to the post of president after his term had expired under that Constitution. He promulgated laws and decrees that the basic law of the land had not empowered him to do. He made a travesty of the 1973 Constitution, which was drafted based on his promptings, by usurping the powers vested by that Constitution before it was ratified.

Upon proclamation of martial law, he ordered his troops to arrest and detain his political opponents, militant student and labor leaders, and media critics. According to Task Force Detainees, more than 70,000 citizens were arrested and detained, and at least 2,250 tortured and salvaged, from the time martial law was imposed on Sept. 23, 1972 to October 1985. In most cases, no charges or complaints were filed against those arrested. Many gave gruesome accounts of beatings with rifle butts, burning of private parts, the water cure, electric shock, and savage gang rapes.

He muzzled the press. He shut down media establishments and imposed government control over the other means of communication. He padlocked printing machines and broadcast facilities. However, he reopened within hours Kanlaon Broadcasting System Channel 9, a broadcast facility owned by his crony Roberto Benedicto, to announce the proclamation of martial law and to propagandize his New Society.

He subjugated and prostituted the judiciary. He turned the Supreme Court, which in the early 1950s earned the sobriquet “the last bulwark of the civil liberties,” into a political instrument by packing it with fawning former classmates and docile followers. He reduced the judiciary into a submissive adjunct of Malacañang. By issuing LOI No. 11, which required judges to submit their resignations, a judge could be dismissed from the service for any fancied cause by simply accepting his resignation. The judiciary could only do the despot’s bidding.

He politicized and corrupted the officer corps of the military. He licensed commanding generals and provincial commanders to exercise political powers previously exercised by civilian authorities. Generals regularly sat in Cabinet meetings and even in his party, the Kilusan Bagong Lipunan, caucus sessions. Many amassed unexplained wealth. A number of generals ran smuggling, gambling, drug, and even carnapping syndicates.

He looted the country clean. The Imelda Marcos trial in New York gave the minutest details of this thievery. The details were never disputed. If the jury acquitted Imelda, it was because the naïve members (Americans) of the jury fell for the ludicrous claim that Imelda never knew of the 20 years of looting.

He forced takeovers of flourishing business enterprises and received kickbacks and commissions from multinationals doing business in the Philippines. He skimmed foreign aid and other forms of international assistance.

He issued decrees and executive orders so that his cronies would have monopoly of certain industries: sugar, coconut, tobacco, banana for export, cigarette, plastics, synthetic fiber, construction, logging, broadcast media, print media, and catering for multilateral summits and international conventions. He ordered the government to guarantee the loans the companies of his cronies got from government-owned financial institutions. When his cronies’ companies failed to amortize the loans, the government absorbed the obligations.

Speaking of special friends, First Lady Imelda Marcos had her own coterie of friends, infamously known as Blue Ladies. She and the Blue Ladies embarked on chartered flights a number of times to go on unbridled shopping sprees in New York, their travel and hotel expenses and fabulous purchases charged to the Philippine government.

The Marcos years were also known for soaring prices of basic commodities, long lines for rice rations, frequent widescale blackouts, the construction of white elephants, huge foreign borrowings, and an economy ever on the brink of collapse.

Leni Robredo lived through eight years of martial law, including the tumultuous years between the assassination of Ninoy Aquino and the Snap Election, as a teenager. If she as a young woman did not get a full grasp of the iniquity of Marcos’ martial rule, I am sure her father, Antonio Gerona, a municipal trial court, would have pointed out the immorality and malevolence of that horrific period in our history.

When pre-election polls on preferred presidential candidates showed high ratings for Davao City Mayor Sara Duterte and Bongbong, prominent personages of civil society approached VP Leni to convince her to oppose either of the two scions of authoritarian presidents. Leni said she would decide to run for president only if she was chosen as the standard bearer of a united opposition and if Ferdinand Marcos’ son Bongbong runs for president. “I don’t want him to win,” she declared.

On Nov. 17, 2021, Bongbong and Sara agreed to run as a tandem, Bongbong as the candidate for president and Sara his vice-presidential running mate. That made Leni decide to accept the nomination of the coalition of the pro-democracy forces.

Said Leni Robredo on Oct. 7:

“We should change not just the surnames of those in power, the corruption, the incompetence, the lack of compassion must be replaced by competence and integrity in leadership. We should be prepared to take out entirely the agendas, the interests, the very people, and kind of politics that is the root of all that we are going through right now.

“Today, I stand with full resolve: We must free ourselves from the current situation. I will fight. We will fight. I offer myself as a candidate for the Presidency in the 2022 elections.”

I vote for Leni.

 

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.

The Global Food Crisis and us

JCOMP-FREEPIK

A global food crisis is coming, if it’s not already here.

The major driver of this food crisis is the Ukraine-Russia war. Both Ukraine and Russia are major exporters of wheat, barley, sunflower oil, and corn. Together, Ukraine and Russia account for about a third of global wheat exports and 20% of corn exports. Disruptions due to the war, from sanctions against Russia to fighting in the fields in Ukraine, have sent wheat and corn prices soaring.

Expect the price of bread, pasta, and ensaymada to soar due to rising wheat prices, but also pork, chicken, and beef, because corn is feedstock for livestock.

However, rising wheat and corn prices are just the tip of the iceberg. More importantly, fertilizer prices are skyrocketing. One factor is the soaring price of natural gas, from which nitrogen-based fertilizer is derived. Another factor is that Russia (and its ally Belarus) and Ukraine are major producers of potash, ammonium nitrate, and phosphorous, which are ingredients for the soil.

If farmers use less fertilizer because of high prices, agricultural production will fall — worldwide.

Although our food staple is rice rather than bread, and therefore the impact of rising wheat prices is not as bad, we won’t be unaffected by the global food crisis. Worse, our agricultural sector is so weak that it can’t be relied upon to produce more in response to the global food shortage.

The next administration will, therefore, confront an enormous crisis. The fiscal stresses caused by the pandemic will be nothing compared to the food crisis that is to come.

A food crisis will affect everybody, especially the poor, whose meager incomes are spent mainly on food. Hunger and malnutrition will increase by several orders of magnitude.

The problem is that a food crisis is inevitably a political crisis. A hungry populace will lash out at the political leadership, even if geopolitical events are the real cause. An analyst pointed out that rising food prices in 2008-2010, caused by high oil and wheat prices, sparked the Arab Spring wherein riots and revolts rocked Tunisia, Egypt, and other Middle Eastern countries.

Therefore, the next administration, if it’s not to lose the mandate and political goodwill it got from the May election, must act decisively as soon as it takes over.

It must dramatically increase supply, even if it must resort to imports. Our local production capacity is so weak that it can’t ramp up supply. Bereft of fertilizers, local agricultural production will fall even further.

The next administration should move quickly to expand the agriculture import quotas, or abolish the quantitative restrictions of corn, chicken, pork, and fish. If possible, agricultural trade must be liberalized, as it is with our Southeast Asian neighbors. (Corn tariffs in Vietnam is just 4% vs. 35% for our in-quota tariffs and 50% for out-quota tariffs). This will enable the private sector to quickly import much-needed food, albeit at higher prices, to alleviate the expected shortage of food.

Protectionism is not serving the interests of farmers and Filipino consumers, not if massive hunger and malnutrition is the alternative. As for government, it must act as if there’s a war or as if we are facing another pandemic. It must discard years of neglect of the agricultural sector and adopt a whole of society approach to solve the food crisis.

Government must mobilize the private sector, particularly conglomerates like San Miguel, RFM, Universal Robina, and Ayala, to go into food production. Let’s face it: big is better. Study after study have shown that bigger farms have higher productivity and lower costs than smaller farms. In a study for the Philippine Institute for Development Studies (PIDS), agricultural economist Dr. Roehl Briones reported that the cost of swine meat in 2018 was P148 per kilo for backyard operators and P112.40 for commercial operators or about a 30% difference. For broilers, the cost per kilo was P78 for backyard operators compared to P71 for commercial operators.

However, compared to its ASEAN peers, the Philippines is the champion cost producer. In 2018, the Philippines came in at P112.4 per kilo; compared to Vietnam, P93.85 per kilo; Thailand P99.16 per kilo; and China, P106.97 per kilo.

Bigger is not only about scale economics but also biosecurity. Bigger farms are much better when it comes to biosecurity controls, so they are less susceptible to African Swine Fever or other plant and animal viruses. The principal cause of the spread of the African Swine Fever has been backyard operators.

However, a deeper reason why chicken and pork prices are so high in the Philippines is that corn prices are high, at least double that of Thailand. Corn accounts for about 60% of the cost of chicken and pork.

Local corn prices are high because productivity is so low. According to agricultural economist Dr. Karlo Adriano, corn production per hectare is 4.215 MT, among the lowest in ASEAN, compared to Indonesia, which is one MT higher at 5.2 MT/hectare.

The real culprit is our small-scale agriculture, thanks to the Comprehensive Agrarian Reform Law (CARL). The average farm size of corn farmers’ plots is only .54 hectare, according to Dr. Adriano.

Productivity is so low in this sector that poverty incidence among corn farmers is 45%.

Kawawa naman (Pity them). That’s the objection to liberalizing imports and enabling larger commercial farms into the sector.

First, we can’t allow the status quo to remain. A food crisis will hurt the entire nation, including the very farmers who are supposedly being protected but who are also consumers. It will exacerbate hunger and malnutrition, which is already causing poor educational performance among our schoolchildren. It will spark demands for higher wages and make industry even more uncompetitive.

Second, these farmers are already poor, among the poorest of the poor. The status quo won’t help them. Better that change happen so that they can increase their productivity or that they move toward more productive endeavors with the help of social transfer payments from the government.

Third, if the farmers can lease their land (and they can’t due to their indebtedness with the Land Bank), they can earn a lease income and possibly be hired as farm workers in a commercial farm. As farm workers, they can be entitled to a stable salary and social security benefits, which they don’t enjoy as farmer-owners.

They can also be encouraged to migrate to urban centers or agriculture processing zones, where their productivity and wages will be much higher. However, this needs labor market reform to ease their transition from the rural to urban areas.

Therefore, the next administration must consider debt condonation for farmers (to allow farmer-entrepreneurs and agricultural companies to sell or lease their lands) together with amending the Comprehensive Agrarian Reform Law to increase the land retention limit from five hectares to a commercially viable 25 hectares. This is the only way to usher in commercial farming.

For the sake of food security, agricultural modernization must happen. The decades-long policy of agricultural protectionism and traditional small-scale agriculture must end. The food crisis is an opportunity to end this policy because the alternative is a status quo of rising food prices, food shortages, rising hunger, severe malnutrition — and who knows what else? — perhaps political and social instability.

The global food crisis is coming for us. Because our agricultural sector is so weak, we are like an unvaccinated diabetic 80-year-old who’s going to catch COVID. The next administration can’t resort to the usual populist nostrums like free irrigation, free fertilizer, government subsidies, and protectionism. That would be like prescribing Ivermectin instead of vaccinations. Food inflation and social instability will ensue. Instead, it must use its new mandate to modernize agriculture by cutting the Gordian Knot of agricultural protectionism, land fragmentation, and traditional small-scale agriculture.

 

Calixto V. Chikiamco is a member of the board of IDEA (Institute for Development and Econometric Analysis).

totivchiki@yahoo.com

Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports

FREEPIK

Under Section 162 of the Revised Corporation Code (RCC), any person who “willfully certifies” a report required under the Code, knowing that it contains “incomplete, inaccurate, false, or misleading information or statements,” shall be punished with a fine ranging from P20,000 to P200,000; but that, when injurious or detrimental to the public, the fine shall range from P40,000 to P400,000.

Although Section 162 defines the criminal act as one that constitutes “willful certification,” it nevertheless uses criminal measurements that are overly broad, thus, “incomplete,” “inaccurate,” or “misleading.” To drive home the point, if the Securities and Exchange Commission (SEC) rules require that the taxpayer identification numbers of directors and officers should be included in the General Information Sheet (GIS), and the Corporate Secretary unfortunately forgets to include the same in the report filed with the SEC, does that constitute a criminal offense under Section 162 to have certified to an “incomplete” GIS?

When does the “inaccuracy” of information or a statement in a report rise to the level of being criminal or malicious? Whose point of view shall be determined when a report item is “misleading” as to rise to a criminal offense? In short, the subjective and broad language used to describe the essential requisites of the offense defined under Section 162 may constitute a denial of the accused director’s, trustee’s, or officer’s right to due process of being properly informed of the offense that he had supposedly committed.

It would be possible to involve the Corporate Secretary or a reporting officer in prolonged criminal litigation to be able to prove whether the criminal acts under Section 162 should be considered mala in se (wrong or evil in and of itself) rather than mala prohibita (conduct that constitutes an unlawful act only by virtue of statute). The inaccurate Section 162 can be a real source of harassment suits against directors, trustees, and officers.

Finally, when the corporation or its business activities are not vested with public interest, it would be difficult to show how the reports had been especially injurious or detrimental to the public as to warrant the increased penalty provided under Section 162 of the RCC.

SEC’S RESTATEMENT OF SECTION 162 OFFENSE
SEC Memorandum Circular No. 16-2020, entitled “Guidelines on Authentication of Articles of Incorporation in Applications for Registration of New Domestic Corporations,” restates Section 164 of the RCC by providing under Section 7 as follows:

SECTION 7. Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports. — Willfully certifying a report required under the RCC, knowing that the same contains incomplete, inaccurate, false, or misleading information or statements, shall be punished with a fine ranging from P20,000 to P200,000. When the wrongful certification is injurious or detrimental to the public, the responsible person may also be punished with a fine ranging from P40,000 to P400,000.

It is pretty clear that the SEC is not defining an administrative offense through the foregoing provision in its memorandum circular, since the fines imposed are beyond the amounts authorized under Section 158 of the RCC, and that both the language and amounts tract the language of Section 162 (Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports; Penalties) of the Code. Certainly, the SEC cannot in the exercise of quasi-legislative powers complete the parameters of an inadequately defined statutory offense, especially not in a memorandum circular pertaining to the filing of the articles of incorporation, which does not fall within the coverage of “reports” under Section 162 of the RCC.

Consequently, SEC Memorandum Circular No. 16-2020 fails to define an offense that can be the subject of an administrative sanction, nor can it complete the inadequacies of the language of Section 162 of the RCC to comply with rudiments of criminal due process.

INDEPENDENT AUDITOR’S CRIMINAL COLLUSION
Under Section 163 of the RCC, an independent auditor who, “in collusion with the corporation’s directors or representatives,” certifies the corporation’s financial statements (FS) despite its incompleteness or inaccuracy, its failure to give a fair and accurate presentation of the corporation’s condition, or despite containing false or misleading statements, shall be punished with a fine ranging from P80,000 to P500,000.

In addition, Section 163 provides that when the statement or report certified is fraudulent, or has the effect of causing injury to the general public, the auditor or responsible officer may be punished with a fine ranging from P100,000 to P600,000.

The use under Section 163 of the term “An independent auditor who … certifies the corporation’s financial statements,” is quite unfortunate and misses the professional role of the independent auditor. An independent auditor’s professional obligation is to undertake auditing procedures on the financial and other records of the corporation in accordance with generally accepted auditing standards that would allow him render an “opinion that the audited financial statements present fairly, in all materials respects, the corporation’s financial position (as of a given date) and its financial performance (for the covered period).”

When the independent auditor finds through his audit procedures that the FS do not fairly present the corporation’s financial condition and/or performance, he issues an “adverse opinion” to that effect in his report. Unless the engagement agreement provides otherwise, it is not the purpose of the auditing procedures to detect fraud in the operations of the company, although when fraud is detected, it is the professional responsibility of the auditor to so indicate this in the report. On the other hand, when the audit procedures cannot be completed because of the state of the financial and corporate records to allow the rendering of the opinion, the independent auditor renders a “no opinion” report, explaining its reasons. An independent auditor, therefore, does not certify, but actually renders a professional opinion on the fairness in material respects (not in the details) of the audited FS.

ESSENCE OF SECTION 163 OFFENSE
Section 163 of the RCC defines an offense that can only be committed by the corporation’s independent auditor but specifically done “in collusion with the corporation’s directors or representatives.” It has no application to a situation where the independent auditor wrongfully certifies a corporation’s FS on the basis of professional incompetence, i.e., when no collusion is shown to exist with the directors or representatives of the corporation.

Since demonstrating that the wrongful certification of the audited FS must be part of a collusion with the corporation’s directors or representatives, no conviction of the independent auditor may be obtained under Section 163 without showing that the directors or representatives of the corporation have sought to achieve the wrongful certification of the corporation’s audited FS to achieve a wrongful end. Although the primary guilt must necessarily lie with the corporation’s directors or representatives, the latter cannot be held liable with the independent director under Section 163 of the RCC which specifically applies only to the independent auditor.

Section 162 of the RCC which covers “willful certification of incomplete, inaccurate, false or misleading statements or reports,” may be applied in tandem with Section 163 since it is now the practice that the particular officers render a “statement of management responsibility” on the FS of the corporation.

Section 165 of the RCC on “fraudulent conduct of business” is likewise a provision in the Code that supports an accusation against the directors or representatives of the corporation for seeking to collude with the independent auditor to wrongfully certify the corporation’s audited FS. However, as discussed below, there are due process considerations that make conviction under Section 165 difficult.

What is clear is that when the essential element of “certification in collusion with the corporation’s directors or representatives” is not proven, no conviction of the independent auditor under Section 163 may be obtained, even when the other elements of “false or wrongful certification of audited FS” are proven. As will be shown by the succeeding discussions, the element of “certification in collusion with the corporation’s directors or representatives” is the most defining element for the offense covered by Section 163 of the RCC, without which the other elements would have no criminal significance to stand on.

FALSE OR WRONGFUL CERTIFICATION OF AUDITED FS
In defining the offense of false or wrongful certification of an audited FS by an independent auditor, Section 163 of the RCC uses criminal measurements that are either too subjective (subject to various interpretations) or overly broad, as to constitute a denial of the criminal due process right of the accused independent director to be informed, thus: a.) “incompleteness or inaccuracy” of the audited FS; b.) the audited FS “fail… to give a fair and accurate presentation of the corporation’s condition:” or, c.) the audited FS contains “false or misleading statements.”

In providing for each of the afore-quoted elements, Section 163 does not use the term “knowingly” in reference to the independent auditor, but rather substitutes the criminal term “certification in collusion with the corporation’s directors or representatives.”

INCOMPLETE OR INACCURATE AUDITED FS
Section 163 of the RCC does not indicate what aspect of the audited FS’ “incompleteness or inaccuracy” would rise to the level of being malicious and criminal on the part of an independent auditor. Since the section does not define the mala prohibita offense, not every incompleteness or inaccuracy of the audited FS would rise to be level of being malicious and criminal.

Auditing standards do not impose an obligation on the part of external auditors to certify to the “completeness” or “accuracy” of the audited FS, since auditing procedures involve representative testing on key areas of corporation’s operations and record keeping in order to render an opinion; they do not involve examination of all the transactions, supporting documents, and book entries that go into the figures appearing in the audited FS. In fact, the independent auditor’s report essentially expresses an “opinion that the accompanying FS present fairly, in all material respects, the financial position of the company,” as of a given date or period.

Unless it is done in collusion with the directors or representatives of the corporation (which has substituted the term “knowingly” as to contain the element of malice), the independent auditor who has undertaken the proper audit procedures, cannot really be held accountable, much less criminally liable, for certifying an audited FS that turns out to be incomplete or inaccurate.

FAIR, ACCURATE PRESENTATION OF FINANCIAL CONDITION
When the independent auditor has undertaken proper audit procedures and renders an opinion that the corporation’s FS presents fairly, in all material respects, the financial condition of the corporation as of a given date, outside of showing collusion with the corporation’s directors or representative to commit fraud, would the judge be in a position to substitute his honor’s own assessment that in fact the FS did not fairly present the corporation’s financial condition based on perhaps another auditor’s financial findings? In addition, the very nature of auditing standards do not require that the independent directors certify that the audited FS “accurately” reflects the financial condition and performance of the corporation.

The requisite quantum of evidence to establish guilt beyond reasonable doubt for conviction under Section 163 would mean that outside of proving “collusion with the corporation’s directors or representatives” who must be shown to have committed fraud, the prosecution would be hard-pressed in obtaining a conviction.

FALSE OR MISLEADING FS
What amount of “falseness” in the audited FS would lead to criminal malice under Section 163 of the RCC? From whose point of view would the judge determine how “misleading” the FS are?

It must be emphasized that the corporation’s FS, even when audited, is not the “work” or the “product” of the independent auditor. The relationship of the independent auditor to the corporation’s FS is to express an opinion — officially called “Independent Auditor’s Report” — that they fairly present, in all material respects, the financial position and performance of the corporation. Outside of when he colludes with the directors or representatives of the corporation who are proven to have committed fraud, an independent director cannot be held criminally liable for rendering an opinion on a FS which contains false or misleading statements.

HIGHER CRIMINAL PENALTIES
Section 163 of the RCC provides for higher criminal penalties on “the auditor or responsible officer” when “the statement or report certified is fraudulent, or has the effect of causing injury to the general public.”

Section 163 imposes criminal penalties on an “independent auditor,” whether such auditor is a natural person or a partnership; in the case of the latter, the penalty of a fine is imposed upon the partnership as a separate juridical person. Therefore, when Section 163 authorizes the imposition of higher penalties on the “responsible officer,” whom does it actually cover?

Certainly, it cannot be the responsible officer of the corporation whose FS is being audited since the crime defined under Section 163 pertains solely to the independent auditor. Also, it cannot be the “responsible officer” of the auditing firm because the penalty is imposed on an independent director of which the auditing firm as a partnership is the very one indicated as “auditor.”

The term “fraudulent” is not defined, and may include all sorts of accusations such as when the statement or report tends to defraud the government of the right amount of taxes that would have been paid by the corporation, to that of depriving the shareholders of the rightful amount of dividends that could have been declared from the unrestricted retained earnings, to that of luring banks to extend loans to the corporation at a premium rate, to that of luring investors to invest in the corporation, all based on the statements or the report that was verified.

Under the principles of criminal due process, no matter how fraudulent any act or report is, it cannot be criminally penalized unless the fraudulent act itself is defined as a criminal offense by law.

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.

 

Attorney Cesar L. Villanueva is co-chair for Governance of the MAP ESG Committee, the chair of the Institute of Corporate Directors, the first chair of the Governance Commission for GOCCs, a former dean of the Ateneo Law School, and a founding partner of Villanueva Gabionza & Dy Law Offices.

map@map.org.ph

cvillanueva@vgslaw.com

http://map.org.ph

Under scarcity: Leni service, BBM welfarism, and Isko overspending

The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. — Thomas Sowell, American economist, historian and social theorist

This piece will quickly review some of the fiscal and economic performances of the three leading candidates for President in the coming May 9 elections — Vice-President Leni Robredo, former Senator Bongbong Marcos (BBM), and Manila Mayor Isko Moreno.

THE UPSE ALUMNI, STUDENTS STATEMENT
Ms. Robredo is a graduate of the University of the Philippines School of Economics (UPSE) batch 1986, before she took up Law. More than 400 of her fellow alumni and some 150+ students signed a Manifesto expressing support for her and her running mate Kiko Pangilinan for Vice-President. The signature drive was initiated in early March and cut off was March 31. Alumni range from as old as batch 1968 to batch 2019.

The main reason given by the nearly 600 UPSE alumni and students for their support is that the Leni-Kiko pair is “subok na sa kakayanan at integridad at may track record. Si VP Leni ay ekonomista at isang public interest lawyer…. Si Kiko ay abogado (UP Law batch 1993) at batikang Senador (tested in competence and integrity and has a track record. VP Leni is an economist and a public interest lawyer… Kiko is a lawyer (UP Law batch 1993) and a veteran senator).”

VP Leni has shown that having big agency budgets via big taxes and huge borrowings is not a guarantee of real public service and improving the ordinary Filipinos’ lives. The budget for six years (2017-2022) of the Office of the Vice-President (OVP) was only P0.6 to P0.9 billion a year, always below P1B/year. The total budget for 2022 is P5 trillion, of which the OVP budget is only P0.71 billion, or 0.0001 or 1% of 1%. Thus, for every P100 in total budget, the OVP budget is only P0.01 or 1 centavo. Compare that to the budget of the Office of the President (OP) amounting to P8.24 billion plus discretionary and intelligence funds and other offices of P65.1 billion.

And yet VP Leni was able to inspire confidence and transparency and attracted many private donations during the pandemic that enabled her office to deliver PPEs to many frontline health workers and COVID treatment kits to poor households.

In Table 1, Other Executive Offices (OEO) under the OP include, among others, the Presidential Management Staff (PMS), National Intelligence Coordinating Agency (NICA), National Security Council (NSC), and the Office of the Presidential Adviser on the Peace Process (OPAPP).

BBM’S NON-ACHIEVEMENT AND PROGRAMS
Of public achievement over the past six years, BBM practically has none. His own official website shows no private business engagement, no government position even as a consultant — 2016-2022 is blank. He just spent the past six years campaigning and revising Philippine history to say that the country had great economic performance, often referred as “the golden years,” under his father’s Presidency from 1966-1985.

So, achievement-wise — zero. Yet he promises plenty of welfarist, bordering on socialistic, programs: 1.) free health insurance for all senior citizens, rich and poor; 2.) subsidized food nationwide via permanent Kadiwa rolling stores in every barangay; 3.) free EDSA Carousel rides all year round; 4.) immunization registry and mass vaccination in every local government unit (LGU); and, 5.) energy rationing by killing all coal plants and use mainly renewables.

He and his running mate Sara Duterte also promise to continue many economic programs of the current administration. Well, the Philippines had a GDP contraction of -9.6% in 2020, the worst in Asia that year and the worst in Philippine economic history since the post-World War 2 era. Public debt also rose big time, from P8.22 trillion (actual and guaranteed) in 2019 to P10.25 trillion in 2020, P12.15 trillion in 2021, and P12.51 as of February 2022. High public debt will require high and multiple taxes.

From 2016 to 2021, the Philippines has had the lowest increase in per capita income among the ASEAN-6 — only 15%, while Vietnam has had 37%, Singapore 28%, while Malaysia, Indonesia, and Thailand have had 19-22% (Table 2).

ISKO MORENO’S OVERSPENDING
While VP Leni’s office has an annual budget of only P0.6 to P0.9 billion a year for the past six years, Isko Moreno as Manila Mayor has had expenditures of P30 billion in 2021 and P71 billion in 2022. He is the only Mayor in the National Capital Region (NCR) to undertake annual and large-scale privatization of city assets. Here are the revenues or proceeds from the sale of City government assets: P90 million in 2019, P4.936 billion in 2020, P14.761 billion in 2021, and P44.146 billion in 2022.

So, with huge one-time revenues, he splurged in huge public spending. The ending share of Manila City’s expenditures to total NCR (16 cities and one municipality) rose from 10% in 2019 to 22% in 2022. (Table 3).

Let’s go back to the quote of Dr. Thomas Sowell. VP Leni is a practitioner of doing public service while given a very small budget and resources. BBM and Isko are the politicians who disregard the lesson of scarcity and just spend huge amounts or promise to spend for huge freebies. These spend-spend-spend politicians will also be the tax-tax-tax authoritarians when they splurge on nationwide public spending. Voters will note this when they cast their votes in two weeks.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

In troubled France, no honeymoon for re-elected Macron

FRENCH PRESIDENT EMMANUEL MACRON — REUTERS

PARIS — Now comes the hard part. Emmanuel Macron may have seen off far-right leader Marine Le Pen, but his second term could be even rockier than the first with mounting political opposition and boiling social discontent.

As his supporters savored a hard-earned re-election at a rally by the Eiffel Tower on Sunday, Mr. Macron acknowledged in his victory speech that many people who voted for him did so to block Le Pen and not because they support his ideas.

“No one will be left by the wayside,” Mr. Macron said, flanked by his wife Brigitte.

“This next era will not be the same as the last mandate, we will invent a new way of doing things together, for a better five years.”

The next hurdle is only a few weeks ahead. Parliamentary elections in June will define the make-up of the government Mr. Macron must rely on to see through reform plans that would be an unprecedented shake-up of France’s welfare state.

Newly elected presidents can usually expect to get a majority in parliament whenever legislative elections directly follow the presidential vote because of the generally low turnout among supporters of all the defeated candidates.

However, in her concession speech, Ms. Le Pen sounded defiant, promising a strong opposition bloc in parliament. While hard-left Jean-Luc Melenchon has his mind set on becoming prime minister after securing the bulk of the left-wing vote in the first round.

Mr. Melenchon hopes to carry that momentum into the parliamentary elections and force Macron into an awkward and stalemate-prone “cohabitation” with him in charge of a left-wing majority.

Even if Mr. Macron allies do get a majority or a workable coalition pact, he will also have to deal with resistance in the streets to his reform plans, notably a pension reform that would gradually raise the minimum age to 65 from 62.

‘LAME DUCK’
Pensions are always a hot issue in France and Mr. Macron’s lower score against Ms. Le Pen compared to 2017 means he won’t have the same authority to implement reforms he had five years ago, despite becoming the only French president to be re-elected in two decades.

“His election is a choice by default. He risks being a lame duck faced with major social discontent if he wants to implement sensitive reforms such as for pensions,” Christopher Dembik, an economist for Saxo Bank, told Reuters.

In a possible sign of the trouble ahead, he was repeatedly admonished by angry voters about the pension reform on the campaign trail, forcing him to concede a possible cap at 64.

Philippe Martinez, the head of the Communist-backed CGT union, one of the biggest in France, has already warned Mr. Macron that there would be “no honeymoon” for him and he could expect demonstrations if he did not back down entirely.

Another volatile issue to deal with in the immediate aftermath of the election will be skyrocketing energy prices.

Mr. Macron’s government has capped electricity prices and offered discounts on prices at the pump until after the election. He said during the campaign he would shield voters for as long as necessary, but offered no timeline.

What is clear is that the costly measures will have to be lifted at some point. Meanwhile, lawmakers say constituents are already complaining about the soaring price of all sorts of staples, such as Ukraine-made sunflower oil or rice and bread.

In 2018, rising pump prices triggered France’s worst social unrest since the 1968 students revolt with the “yellow vest” rebellion that caused months of disruption in Paris and roundabouts across France.

Mr. Macron will therefore have to tread carefully if he doesn’t want the tinderbox to explode again.

His first term has been littered with PR gaffes that made him come across as arrogant or patronizing. Many French detest him: one man on the campaign trail told him to his face he was “the worst president of the Fifth Republic.”

Political allies warn he will need to consult lawmakers, unions and civil society more and do away with the top-down governing style of his first term which he himself loftily described as “Jupiterian”.

“Emmanuel Macron got the message: You can’t decide about everything from on high, he’s not the head of a company,” lawmaker Patrick Vignal told Reuters. “He needs to accept this idea of negotiation, consultation.” — Reuters

Indonesia’s palm oil export ban leaves global buyers with no plan B

REUTERS
A WORKER shows palm oil fruits at palm oil plantation in Topoyo village in Mamuju, Indonesia, Sulawesi Island, March 25, 2017. — REUTERS

MUMBAI — Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia’s surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia’s invasion of Ukraine.

The move by the world’s biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soyoil, sunflower oil and rapeseed oil, industry watchers predict. That will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices.

“Indonesia’s decision affects not only palm oil availability, but vegetable oils worldwide,” James Fry, chairman of commodities consultancy LMC International, told Reuters.

Palm oil — used in everything from cakes and frying fats to cosmetics and cleaning products — accounts for nearly 60% of global vegetable oil shipments, and top producer Indonesia accounts for around a third of all vegetable oil exports. It announced the export ban on April 22, until further notice, in a move to tackle rising domestic prices.

“This is happening when the export tonnages of all other major oils are under pressure: soybean oil due to droughts in South America; rapeseed oil due to disastrous canola crops in Canada; and sunflower oil because of Russia’s war on Ukraine,” Mr. Fry said.

Vegetable oil prices have already risen more than 50% in the past six months as factors from labour shortages in Malaysia to droughts in Argentina and Canada – the biggest exporters of soyoil and canola oil respectively — curtailed supplies.

Buyers were hoping a bumper sunflower crop from top exporter Ukraine would ease the tightness, but supplies from Kyiv have stopped because of what Russia calls its “special operation” in the country.

This had prompted importers to bank on palm oil being able to plug the supply gap until Indonesia’s shock ban delivered a “double whammy” to buyers, said Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA).

NO ALTERNATIVE
Importers such as India, Bangladesh and Pakistan will try to increase palm oil purchases from Malaysia, but the world’s second-biggest palm oil producer cannot fill the gap created by Indonesia, Chaturvedi said.

Indonesia typically supplies nearly half of India’s total palm oil imports, while Pakistan and Bangladesh import nearly 80% of their palm oil from Indonesia.

“Nobody can compensate for the loss of Indonesian palm oil. Every country is going to suffer,” said Rasheed JanMohd, chairman of Pakistan Edible oil Refiners Association (PEORA).

In February, prices of vegetable oils jumped to a record high as sunflower oil supplies were disrupted from the Black Sea region.

The price rise raised working capital requirements for oil refiners, who were holding lower inventories than normal in anticipation of a pullback in prices, said a Mumbai-based dealer with a global trading firm.

Instead, all oil prices have rallied further.

“Refiners have been caught on the wrong foot. Now they can’t afford to wait for a few weeks. They have to make purchases to run plants,” the dealer said.

As Indonesia has allowed loading until April 28, consuming countries will have enough supply for the first half of May, but could face shortages from the second half, said a refiner based in Dhaka.

South Asian refiners will only slowly release oil into the market as they know supplies are limited, he said.

In India, the world’s biggest vegetable oil importer, palm oil prices rose by nearly 5% over the weekend as industry prices in shortages in the coming months. Prices also rose in Pakistan and Bangladesh. — Reuters

In ‘philantourism,’ remember to do no harm

PIXABAY

By Patricia B. Mirasol, Reporter

Over half of travelers (59%) are interested in “philantourism” and immersive community experiences. According to panelists at the 2022 World Travel & Tourism Council (WTTC) Summit, travelers can help improve a community’s quality of life without being patronizing if they approach things with humility. 

“We need to position ourselves [as if] we are the ones who are learning,” said Guillaume Landry, executive director of ECPAT International, a network of civil society organizations that works to end the sexual exploitation of children. “We shouldn’t come in with a colonial perspective — like we were going to solve their problem, like they were just waiting for us to arrive.”  

Mr. Landry added that an exchange of experience necessitates an open mindset. 

For Andrea Grisdale, tourism is a “great way to educate and do good.”  

“When we look at our client feedback, no one is talking about the marble bathroom,” said the chief executive officer of IC Bellagio, an Italy-based destination management company. “It’s always about that person, or that experience.”  

IC Bellagio has virtual lessons that help guests understand local culture even before they set foot in Italy. It also teams up with associations that enhance the client experience, such as a non-profit that helps people with autism through art therapy. 

“Our guests have painting lessons with some of these artists, and great friendships have resulted from it,” Ms. Grisdale said, pointing out that “people don’t travel halfway across the world to do what they do back home.”  

“They want to meet different people and have different experiences,” she said. “Our participation with these associations has been a win-win for [them] and for the locals.” 

The key is adhering to the “do no harm” principle, Mr. Landry said, adding that caution should be exercised when joining tours that include orphanages.  

“Children are not a tourist attraction,” he said, explaining that there were better ways to help. “Especially in orphanages where you have children who have experienced complex journeys — which includes being neglected. Having people come and go does not benefit them.”  

Travel recovery is on the way, per data from ForwardKeys, a travel and analytics company. Asia Pacific countries, in particular, saw an increase in arrivals for the first quarter of 2022 as compared to the previous year, with bookings up 275%. In the Philippines, bookings have been up 29% in the second quarter of 2022 as compared to the previous one.  

“Asian nations are reopening, and this is very encouraging,” said ForwardKeys vice president for insights Olivier Ponti, in a separate speech at the WTTC Summit. “If you allow people to fly, they will travel.”

Brussels prepares to hit Russia with ‘smart sanctions’ on oil imports —The Times

REUTERS

The European Union (EU) is preparing “smart sanctions” against Russian oil imports, The Times reported on Monday, citing the European Commission’s executive vice president, Valdis Dombrovskis. 

“We are working on a sixth sanctions package and one of the issues we are considering is some form of an oil embargo. When we are imposing sanctions, we need to do so in a way that maximizes pressure on Russia while minimizing collateral damage on ourselves,” Mr. Dombrovskis told The Times. 

He said that precise details of the oil sanctions had not yet been agreed but could include a gradual phasing-out of Russian oil or imposing tariffs on exports beyond a certain price cap, the newspaper reported. 

Russia is Europe’s biggest oil supplier, providing 26% of EU imported oil in 2020. Europe gets roughly a third of its gross available energy from oil and petroleum products, in sectors from transportation to chemicals production. 

Ukraine and some EU states, including Poland and Lithuania, want a ban on Russian oil and gas, whereas Germany and Hungary are opposed to an immediate oil embargo. 

Oil and oil products made up more than a third of Moscow’s export revenues last year. Currently, Europe spends around $450 million per day on Russian crude oil and refined products, around $400 million per day for gas, and roughly $25 million for coal, according to think-tank Bruegel. — Reuters

Twitter, under shareholder pressure, begins deal talks with Musk — sources

S7AKTI-PIXABAY

Twitter Inc. kicked off deal negotiations with Elon Musk on Sunday after he wooed many of the social media company’s shareholders with financing details on his $43 billion acquisition offer, people familiar with the matter said. 

The company’s decision to engage with Mr. Musk, taken earlier on Sunday, does not mean that it will accept his $54.20 per share bid, the sources said. It signifies, however, that Twitter is now exploring whether a sale of the company to Mr. Musk is possible on attractive terms, the sources added. 

Mr. Musk, chief executive of electric car giant Tesla Inc., has been meeting with Twitter shareholders in the last few days, seeking support for his bid. He has said Twitter needs to be taken private to grow and become a genuine platform for free speech. 

Many Twitter shareholders reached out to the company after Mr. Musk outlined a detailed financing plan for his bid on Thursday and urged it not to let the opportunity for a deal slip away, Reuters reported earlier on Sunday. 

Mr. Musk’s insistence that his bid for Twitter is his “best and final” has emerged as a hurdle in the deal negotiations, the sources said. Nevertheless, Twitter’s board has decided to engage with Musk to gather more information on his ability to complete the deal, and potentially get better terms, the sources added. 

Twitter has not yet decided if it will explore a sale to put pressure on Mr. Musk to raise his bid, according to the sources. The people with knowledge of the matter declined to be identified because the deal discussions are confidential. 

Twitter wants to know more about any active investigations by regulators into Mr. Musk, including by the US Securities and Exchange Commission (SEC), that would present a risk to the deal being completed, one of the sources said. 

Securities lawyers say that Mr. Musk, who settled charges that he misled investors by suggesting four years ago he had secured funding to take Tesla private, may have breached SEC disclosure rules as he amassed a stake in Twitter earlier this year. 

Twitter is also looking into whether regulators in any of the major markets it operates would object to Mr. Musk owning the company, the source added. Were Twitter to establish that a sale to Mr. Musk would be risky, it could ask for a sizeable break-up fee, according to the sources. 

The social media company adopted a poison pill after Mr. Musk made his offer to prevent him from raising his more than 9% stake in the company above 15% without negotiating a deal with its board. In response, Mr. Musk has threatened to launch a tender offer that he could use to register Twitter shareholder support for his bid. 

A concern that Twitter’s board weighed was that unless it sought to negotiate a deal with Mr. Musk, many shareholders could back him in a tender offer, the sources said. 

While the poison pill would prevent Twitter shareholders from tendering their shares, the company is worried that its negotiating hand would weaken considerably if it was shown to be going against the will of many of its investors, the sources added. 

Representatives for Twitter and Mr. Musk did not immediately respond to requests for comment. 

The Wall Street Journal reported earlier on Sunday that Mr. Musk and Twitter would meet to discuss the acquisition offer. 

‘INTRINSIC VALUE’
The price expectations among Twitter shareholders for the deal diverge largely based on their investment strategy, the sources said. 

Active long-term shareholders, who together with index funds hold the biggest chunk of Twitter shares, have higher price expectations, some in the $60s-per-share, the sources said. They are also more inclined to give Parag Agrawal, who became Twitter’s chief executive in November, more time to boost the value of the company’s stock, the sources added. 

“I don’t believe that the proposed offer by Elon Musk ($54.20 per share) comes close to the intrinsic value of Twitter given its growth prospects,” Saudi Arabia’s Prince Alwaleed bin Talal, a Twitter shareholder, tweeted on April 14. 

Short term-minded investors such as hedge funds want Twitter to accept Mr. Musk’s offer or ask for only a small increase, the sources said. Some of these are fretting that a recent plunge in the value of technology stocks amid concerns over inflation and an economic slowdown makes it unlikely Twitter will be able to deliver more value for itself anytime soon, the sources added. 

“I would say, take the $54.20 a share and be done with it,” said Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares in Twitter, or 0.15% of the company, and has been an investor since early 2020. 

One silver lining for Twitter’s board is that Mr. Musk’s offer did not appear to convert much of his army of 83 million Twitter followers into new shareholders in the San Francisco-based company who could back his bid, the sources said. 

Twitter’s retail investor base has increased from about 20% before Mr. Musk unveiled his stake on April 4 to some 22%, according to the sources. — Svea Herbst-Bayliss and Greg Roumeliotis/Reuters

France’s Macron defeats far-right, pledges change

French President Emmanuel Macron delivers a speech at the Elysee Palace in Paris, France, February 1, 2022. — REUTERS

PARIS — Emmanuel Macron comfortably defeated far-right rival Marine Le Pen on Sunday, heading off a political earthquake for Europe but acknowledging dissatisfaction with his first term and saying he would seek to make amends.

His supporters erupted with joy as the results appeared on a giant screen at the Champ de Mars park by the Eiffel tower.

Leaders in Berlin, Brussels, London and beyond welcomed his defeat of the nationalist, eurosceptic Ms. Le Pen.

With 97% of votes counted, Mr. Macron was on course for a solid 57.4% of the vote, interior ministry figures showed. But in his victory speech he acknowledged that many had only voted for him only to keep Ms. Le Pen out and he promised to address the sense of many French that their living standards are slipping.

“Many in this country voted for me not because they support my ideas but to keep out those of the far-right. I want to thank them and know I owe them a debt in the years to come,” he said.

“No one in France will be left by the wayside,” he said in a message that had already been spread by senior ministers doing the rounds on French TV stations.

Two years of disruption from the pandemic and surging energy prices exacerbated by the Ukraine war catapulted economic issues to the fore of the campaign. The rising cost of living has become an increasing strain for the poorest in the country.

“He needs to be closer to the people and to listen to them,” digital sales worker Virginie, 51, said at the Macron rally, adding he needed to overcome a reputation for arrogance and soften a leadership style Macron himself called “Jupiterian.”

Ms. Le Pen, who at one stage of the campaign had trailed Macron by just a few points in opinion polls, quickly admitted defeat. But she vowed to keep up the fight with parliamentary elections in June.

“I will never abandon the French,” she told supporters chanting “Marine! Marine!”

NO GRACE PERIOD 

Mr. Macron can expect little or no grace period in a country whose stark political divisions have been brought into the open by an election in which radical parties scored well. Many expect the street protests that marred part of his first term to erupt again as he presses on with pro-business reforms.

“There will be continuity in government policy because the president has been reelected,” Health Minister Olivier Veran said. “But we have also heard the French people’s message.”

How Mr. Macron now fares will depend on the looming parliamentary elections. Ms. Le Pen wants a nationalist alliance in a move that raises the prospect of her working with rival far-rightists like Eric Zemmour and her niece, Marion Marechal.

Hard-left Jean-Luc Melenchon, who emerged as by far the strongest force on the left of French politics, said he deserves to be prime minister – something that would force Mr. Macron into an awkward and stalemate-prone “cohabitation.”

“Melenchon as prime minister. That would be fun. Macron would be upset, but that’s the point,” said Philippe Lagrue, 63, technical director at a Paris theater, who voted for Mr. Macron in the run-off after backing Mr. Melenchon in the first round.

Outside France, Mr. Macron’s victory was hailed as a reprieve for mainstream politics rocked in recent years by Britain’s exit from the European Union, the 2016 election of Donald Trump and the rise of a new generation of nationalist leaders.

“Bravo Emmanuel,” European Council President Charles Michel, wrote on Twitter. “In this turbulent period, we need a solid Europe and a France totally committed to a more sovereign and more strategic European Union.”

“Congratulations to the President and a true friend @EmmanuelMacron on the election victory,” Ukraine President Volodymyr Zelenskyy wrote on his Twitter account in early hours on Monday.

“The financial markets will breathe a collective sigh of relief following Macron’s election victory,” said Seema Shah, Chief Strategist at Principal Global Investors.

FRENCH DIVIDES 

The disillusion with Mr. Macron was reflected in an abstention rate expected to settle around 28%, the highest since 1969.

Initial polling showed the vote was sharply split both by age and socio-economic status: Two-thirds of working class voters backed Ms. Le Pen, while similar proportions of white-collar executives and pensioners backed Mr. Macron, an Elabe poll showed.

Mr. Macron won around 59% of votes by 18–24-year-olds with the vote almost evenly split in other age categories.

During the campaign, Ms. Le Pen homed in on the rising cost of living and Macron’s sometimes abrasive style as some of his weakest points.

She promised sharp cuts to fuel tax, zero-percent sales tax on essential items from pasta to diapers, income exemptions for young workers and a “French first” stance on jobs and welfare.

“I’m shocked to see that a majority of French people want to reelect a president that looked down on them for five years,” Adrien Caligiuri, a 27-year-old project manager said at the Le Pen rally.

Mr. Macron meanwhile pointed to Ms. Le Pen’s past admiration for Russia’s Vladimir Putin as showing she could not be trusted on the world stage, while insisting she still harbored plans to pull France out of the European Union — something she denies. — Mimosa Spencer, Layli Foroudi, and Ingrid Melander/Reuters 

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