Quezon notches breakthrough WNBL victory

October 3, 2021 | 6:32 pm

The Stan Quezon Lady SparTAN finally won a game in the Pia Cayetano WNBL Season 2021 after beating the Pacific Water Queens, 69-54, on Sunday at the Bren Z. Guiao Convention Center in San Fernando, Pampanga.

Kath Araja led the Lady SparTAN to victory after finishing with 16 points including five triples to go along with eight assists and four steals as her team bagged its first win after four games.

Quezon is in fourth place in the standings, two games behind third-place Taguig, which won over the Lady SparTAN last Saturday, 58-50.

Jade Valenzuela scored 14 points and grabbed seven rebounds, and Kristine Duran had 13 points and seven rebounds.

Quezon outscored Pacific Water, 16-10, in the third period, with the lead reaching 19 late, 69-50, on a triple by Ms. Valenzuela in the fourth.

Misses Valenzuela and Duran had seven points apiece in the first half as the Lady SparTAN jumped to a 33-30 halftime lead before Ms. Araja took over on both ends, scoring three triples in the fourth.

Jollina Go had 22 points and Snow Penaranda had 16 points and 15 rebounds but the Water Queens lost for the fourth time this season.

The WNBL games during the weekend will be aired on Solar Sports on Monday and Tuesday, 8 p.m.

Addition by subtraction

October 3, 2021 | 6:31 pm

What a difference a handful of days makes. The week began with the Sixers continuing to say the right things, at least in public. Stalwarts of the red, white, and blue spent Media Day noting just about any which way that Ben Simmons continues to be an integral part of their campaign for the title, never mind his scorched-earth stance. By weekend, however, they began taking a more hardline approach; following a declaration from the National Basketball Association (NBA) front office underscoring no-work, no-pay provisions in the uniform players contract, they held in escrow the second tranche of the three-time All-Star’s salary.

The amount is no small potatoes; at $8.25 million, it represents a quarter of Simmons’ pay for the year. The intent is clear: The Sixers want him to report for work as soon as possible, and they will be deducting from the withheld salary any and all fines he incurs until he does. Which, needless to say, is part and parcel of the negotiating playbook. The carrot did not work; hopefully, the stick will. Then again, it’s not as if he did not anticipate things coming to a head. In fact, by all accounts, he figured there would be an impasse, and already expressed willingness to forego any earnings due him if it means getting his point across.

The bottom line is that Simmons no longer wants any part of the Sixers. It isn’t simply that he got hurt by the immediate reaction to his poor performance in the 2021 Playoffs to the point of burning bridges; it’s that he can no longer stomach playing in front of hostile fans he feels should have had his back instead. President of basketball operations Daryl Morey and head coach Doc Rivers both know they’re way past the point of no return. And if they make like they want him back, it’s only because they’re trying to prop up his trade value.

The risk, of course, is in Simmons calling the Sixers’ bluff. What if he felt the heat and found himself compelled to suit up? Does Rivers really think he will be in the proper frame of mind to give his all? It’s precisely because he proved to be nowhere near his best when though he was fully committed that the poop hit the fan in the first place. Imagine what he can and will produce with his heart not in his job. In any organization, the worst kind of employee is that who feels he is being forced to stay; he becomes even more of a liability by being around rather than if he remained away.

At this point, the Sixers have no choice. They need to trade him, and fast. It doesn’t matter if they get pennies to the dollar in the process. The longer the situation drags out, the more the wounds will fester. Just ask the Rockets with James Harden. Or the Pelicans with Anthony Davis. In the NBA, addition by subtraction is real — and Morey knows it.

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is a consultant on strategic planning, operations and Human Resources management, corporate communications, and business development.

Power Regulation: In the dark

October 3, 2021 | 6:14 pm

electric pylon tower — ANDREY METELEV-UNSPLASH

Since we passed EPIRA 20 years ago, the energy sector has come a long way. It has not been a smooth journey and, understandably, mistakes have been made. We have, however, made much progress in ensuring that our country has the energy needed to power its economy, support investment, and generate jobs, and thereby improve outcomes for our people. To continue to build a sustainable and responsive energy system we must understand the role of our energy policymakers and regulators and challenges they face.

Let me start with some disclosures. I was an Undersecretary of Finance during the last two years of the Cory Aquino and the first four years of the Ramos administrations, and was involved in addressing the 1990/92 power crisis. I am currently an independent director in a diversified publicly listed holding company with major investments in power generation (both fossil fuels and renewables) and distribution.

The nation’s long term structural response to prevent a repeat of the massively costly 1990/92 crisis was the passage of the Electric Power Industry Reform Act (EPIRA; 2001), after seven years of intensive study and debate involving all stakeholders. As envisioned, private sector players are expected to deliver electricity under a competitive playing field. A critical element of EPIRA was to “break up” the business — separating those selling energy from those buying it. This transformed the energy sector into a real marketplace, which is the key to lowering energy prices while ensuring quality supply. The government’s role is to ensure market players abide by market rules to produce the competitive outcome.

Over the past two decades, much has changed. The once stable power sector has been disrupted by a number of forces, resulting in higher levels of uncertainty for market participants and stakeholders.

The market liberalization set in motion by EPIRA is alone a challenge, but accelerating technology curves, and elevated expectations around environmental sustainability have increased the complexity of our energy system. As the system evolves, our regulators also need to evolve to maintain their ability to manage the system.

As we approach elections and tackle near-term challenges such as thinness in energy supply, we must reflect on our experiences and craft a long-term vision for the industry. This includes a future vision for our energy sector public institutions. I would like to put forward a few reflections for your consideration.

First, our policy-makers and regulators must ensure a focus on the long-term, especially when the short-term political stakes are high. In the slow-moving energy industry, decisions can be made fast but the consequences of those decisions — whether positive or negative — will not emerge for years. This environment can be challenging for public leaders whose performance is measured in real-time by the Twitterati. It is often easier to address the short-term political pressures at the expense of the long-term health of the system.

Case in point are the decisions to impose price caps on the wholesale market twice over. Price controls are an effective way to reduce prices in the short term and to respond to a burst of public criticism, but in the context of a free market, where pricing signals encourage or discourage new investment, they can distort the market and unintentionally result in supply gaps in peaking capacity.

Fortunately, it is not too late to fix this. The price caps can be withdrawn and the market can be allowed to work as designed.

It must also be said that our regulators have demonstrated the necessary foresight and restraint needed to manage such a complex industry. The repeated resistance to the idea of retroactive changes to distribution rates has provided market participants with confidence that the sanctity of commitments will be protected and is paramount in an environment where large-scale, long-term capital investments are necessary. These decisions that put the long-term interests of the country and its energy stakeholders ahead of the popular (or perhaps more aptly, populists) interests of today are the foundations for a successful long-term energy system.

To address the underlying tension, however, we must hold our energy institutions to a higher standard and insulate them from political pressure, much as we have with the Banko Sentral ng Pilipinas (BSP). The BSP has evolved over time to be recognized both here and globally for excellence of its independent and non-politicized stewardship of the monetary system and supervision of banks and other financial institutions for price stability and development.

Electricity is arguably as critical to the day-to-day health of our country as banking. Perhaps there are lessons for the energy sector to draw from our institution-building experience in the financial sector.

Secondly, we must ensure we match the capabilities and strategies of our public institutions to meet the challenges of the job at hand, not use blunt, heavy-handed regulation as a means of avoiding the complexity of the job.

Today, the electricity value chain includes varying levels of industry structure and market power. The power generation sector is competitive and includes a diversity of market mechanisms that allow the buying and selling of electricity to occur. The transmission line sector, on the other hand, is a single nationwide monopoly that is tasked with connecting our power plants to our distribution networks and contracting power reserves. The low voltage distribution sector is composed of jurisdictional monopolies that transmit power to our homes and businesses.

The diversity of market participation, market design, and market power across the value chain makes the job of regulation and management a difficult one. It requires a high level of sophistication in organizational design, capability, and culture.

Fundamentally, the approach to regulating natural monopolies should be vastly different from the approach to a competitive market. The regulator should take a hands-on approach to regulating the natural monopolies’ market power, while taking a more hands off approach, a lighter touch, in overseeing the competitive sector, allowing the market to work and focusing instead on long term guidance and market optimization that increases competition and market responsiveness.

Since the onset of EPIRA, unfortunately, our regulators have done the reverse, taking what seems to be a hands-off approach to the least competitive segment of the value chain, the transmission line segment, and an overly hands-on approach to the most competitive segment of the value chain, the generation segment.

This is evidenced in the organizational structure of the regulator, whereby they have evolved to create two teams called the Investigation and Enforcement Division to police the generation and distribution segments, but have not established one for the transmission line segment. This may partially explain why numerous documented cases of non-compliance to franchise and other regulations by the National Grid Corporation of the Philippines (NGCP) have yet to be enforced.

On the unregulated end of the spectrum, gencos are required to obtain 326 signatures to build a new power plant. Once built, they have to undergo a burdensome process of Certificate of Compliance renewal every five years, lest they cannot continue the operations of their power plant. This is in stark contrast to the 25-year franchise renewal process of monopolies such as NGCP. This approach of trying to regulate what is designed to not be regulated has had the unintended consequence of increasing the level of uncertainty in the operating environment. This in turn is dampening investor confidence and increasing the costs of compliance.

As I look ahead into the future of the energy industry in the Philippines, my hope is that we as a country are able to come together to develop the foresight, the political will, and the institutional capability necessary to make the challenging tradeoffs involved in navigating the complex issues facing the energy industry.

As stewards of the future, we owe it to the next generation to take the long view and to have the clarity of vision and the courage to take the necessary, even if unpopular, actions along the way.

Romeo L. Bernardo was finance undersecretary during the Cory Aquino and Fidel Ramos administrations.

romeo.lopez.bernardo@gmail.com

Who is obstructing the reform of the Public Service Act?

October 3, 2021 | 6:13 pm

In seven months’ time, Filipinos will once again elect the leaders and lawmakers of our country. Aside from studying campaign platforms and promises that candidates regularly make, we ought to examine closely their track records and past behaviors. How legislators vote and deliberate on critical measures now can reveal their underlying motives as well as their expected future behavior. One controversial measure that legislators are tackling is Senate Bill (SB) 2094, a long-overdue reform to amend the Public Service Act (PSA).

The Public Service Act was enacted 85 years ago as Commonwealth Act No. 146. Due to the PSA’s ambiguous definition of “public utilities” and the term’s conflation with “public services,” many sectors have been limited by foreign ownership restrictions. The Organization for Economic Cooperation and Development (OECD) ranked the Philippines as the third most restrictive out of 83 economies on the FDI (Foreign Direct Investments) Regulatory Restrictiveness Index in 2020, just behind Palestine and Libya.

As a result of this outdated law, our public services have essentially become family businesses. A lack of competition and innovation has been practically institutionalized, and consumers have suffered the consequences of expensive and unreliable services.

SB 2094 clarifies the definition of public utilities, which at present require 60% ownership of Filipinos. SB 2094 will limit the scope of public utilities to distribution of electricity, transmission of electricity, petroleum pipeline distribution systems, and water pipeline and sewerage pipeline systems, among others. At the same time, SB 2094 will lift foreign ownership restrictions on some crucial public services, such as telecommunications and transportation.

These amendments will lead to new foreign investments in transportation and telecommunications, which will lead to more stable supply chains, improved logistics, expanded and more accessible internet or digital services, rapid innovation, job creation, and a clearer path to development in the country.

For nearly the past two years, COVID-19 has revealed the gross inequities in internet penetration in the country. We have all become more reliant on internet connectivity for education, employment, public services, and healthcare. However, many Filipinos still lack accessible, affordable, and high-quality internet access, especially in rural areas. This is a constraint that we must necessarily address to spur economic growth in the new normal. And while the first step has been achieved through Executive Order 127 liberalizing access to satellite services, amending the PSA to allow the entry and competition of more players in the market will provide the necessary condition for digital transformation.

Senator Ralph Recto has argued that allowing total foreign ownership of telecommunications companies through SB 2094 will pose serious risks to our national security. However, the Senate version of the bill already includes safeguard provisions to address these risks. In the proposed bill, foreign investments in “critical industries” (including telecommunications) must undergo periodic review by both the National Security Council and Congress, which may result in permit or franchise cancellation if security threats are found.

AS SB 2094 is now on the Senate floor for amendments, Senator Recto has repeatedly made interpellations to delay its progress. He has rehashed the arguments of invoking national security. Unfortunately, his protectionist views and obstructionist tactics only serve the interests of entrenched oligarchs at the expense of the Filipino consumers.

This kind of obstructionist behavior is nothing new from Senator Recto. His long track record of putting vested interests above the greater good can be seen in his numerous attempts to dilute and block prior reforms.

In 2012, he attempted to weaken the health gains from the Sin Tax Law by proposing lower rates that would have favored the tobacco industry. Today, he is pushing aggressively for Senate Bill 2239, a retrogressive bill that will dilute the regulation of harmful vaping and electronic cigarette products by lowering the minimum age of access to 18.

In 2018, he inserted amendments to the automobile tax in TRAIN, rendering the tax structure less efficient and less progressive, but more favorable to a segment of car manufacturers. He wanted the progressive fuel tax scrapped. He weakened the rationalization of the value-added tax (VAT) by retaining unwarranted exemptions.

During the Senate interpellations of the CREATE Bill in 2020, he objected to the rationalization of fiscal incentives and proposed several amendments diluting its reform.

Each one of the above reforms represented opportunities to improve the fiscal space and strengthen economic institutions in the country. And each time, Recto has used his position as a senior legislator to weaken or hinder reforms, thus further entrenching some vested interests.

With national elections just around the corner, Senator Recto’s obstruction of the Public Service Act amendments is signaling his intent and strategy. Filipino voters and consumers be damned.

AJ Montesa is an economic analyst and Pia Rodrigo is the strategic communications officer of Action for Economic Reforms.

Simplistic reasoning leads to 18 months of child isolation

October 3, 2021 | 6:12 pm

online learning — PHILIPPINE STAR/ MICHAEL VARCAS

The country is paying a steep price for President Duterte’s simplistic reasoning and fondness for expedient solutions. Let me cite some examples.

In his COVID-19 response, scientific containment measures were not pursued with the urgency they deserved. He even said that mass testing is not important. Rather, Mr. Duterte decided to impose the world’s longest and most restrictive lockdown to quell the virus. This was his ultimate solution.

No surprise then that even after 18 months, government has not rolled-out a nationwide COVID testing network that is affordable and accessible to all. Neither has it established a functioning tracking and tracing system (StaySafe.ph is plagued with software bugs and not widely used). Medical capacities were not significantly augmented and supplies of COVID meds such as Tocilizumab, Remdesivir and Avigan were not built up. As for vaccination, the Philippines is last in the region, along with Myanmar, in terms of percentage of the population vaccinated.

Although his intentions may have been good, Mr. Duterte’s simplistic prescription (the long protracted militaristic lockdown) failed to flatten the infection curve. Instead, it flattened the economy.

Another example of simplistic reasoning is how he related the drug problem to economic development. Mr. Duterte peddled the idea that if the illegal drug trade was terminated, the economy would boom, investors would come in droves, poverty would be eliminated, and all of us would be more affluent. What he failed to appreciate is that peace and order is only a small part of the equation. There are more important issues that must be addressed, not the least of which is ease in doing business, sanctity of contracts, a non-politicized legal system, supply chain linkages, labor capacitation, etc. Not giving due priority to these issues caused the economy to decelerate even before the pandemic.

Lamentably, our young learners and their parents are the severest casualties of Mr. Duterte’s simplistic reasoning. While the rest of the world kept their schools closed for an average of only 79 school days, Mr. Duterte has kept our children out of school for a staggering 18 months and running. As of Sept. 8, UNICEF announced that only two countries in the world have kept their schools closed, the Philippines and Venezuela. Although Mr. Duterte finally acceded to open 120 schools for face-to-face learning on a trial basis, 18 months of child imprisonment has already inflicted immeasurable mental and emotional damage to both children and parents. The permission granted to 120 schools is too insignificant to make an impact.

To be fair, both the IATF (Inter-Agency Task Force for the Management of Emerging Infectious Diseases) and DepEd (Department of Education) twice recommended that schools be reopened. They did so last December and again last February. It was the President’s decision to keep the schools closed despite safety protocols offered by the IATF. For him, it was all about controlling the virus spread, never mind the dire consequences of out-of-school learning.

What exactly are these consequences?

A UNICEF study affirms that kinder to grade three schooling sets-up the building blocks of a child’s future learning since it forms the foundation of reading, writing, and math. In-person learning, in these formative years, helps children gain independence, adapt to new routines, and develop meaningful relationships with teachers and peers. It enables teachers to identify and address learning delays, mental health issues, and child abuse that could negatively affect the children’s development. Our young learners were deprived of this.

Moreover, school experiences are predictors of a child’s future social, emotional, and educational outcomes. Children who fall behind in learning during their formative years often stay behind for the remaining time they spend in school. The learning gap widens over the years.

Studies show that 47.7% of children who learn from home do not actually understand their lessons. This is because teachers are unable to correct misunderstanding and clarify gray areas. Statistics further show that half the modules complete by home learners are riddled with grammatical and mathematical errors which remain uncorrected.

The UNICEF study also affirmed that prolonged closure of schools could lead to increased drop outs. True enough, a whopping 1.1 million Filipino students dropped out of school this year, many of whom have become victims of child labor and child marriage. Meanwhile, 865 private schools in the Philippines have already closed due to the long, protracted lockdown.

Mental and emotional distress on the part of the students and parents are another consequence.

As much as 54% of students reported suffering from anxiety, depression and panic disorder as a result of the long, hard lockdown. An uncomfortable number have begun to manifest nervous ticks, meltdowns, and some have attempted suicide. In the midst of the child’s suffering, they are deprived of seeking solace/advise from their teachers and peers. Children have never been more alone as they are today and it is taking a toll on their mental well-being.

Parents of home learners are the pandemic lockdown’s collateral damage too. On top of worrying about their family members getting infected by COVID, job security weighs heavy on parents minds as well. Despite all the stress, they must still assume the role of being their children’s primary educator. The mental and financial stresses on parents is intense, especially those that had to quit their jobs just to educate their children. Many parents have reported extreme fatigue and have themselves become mentally unwell. One out of three families claim that home learning has strained relationships within the family.

Many parents, especially in the countryside, may not be educated themselves. Having to teach their children lessons they do not understand has caused failing grades on the part of the student and mental anguish on the part of the parent.

This proves that good intentions, without scientific reasoning, can be just as damaging as bad intentions. It also proves that there is no short cut or quick fix solutions to complex social problems.

Mr. Duterte was elected on the back of promises to solve the country’s problems with expediency. Now we know that expediency, without scientific reasoning and processes, do not work. In fact, they backfire. How unfortunate that our youngsters must pay the price for this.

Andrew J. Masigan is an economist

andrew_rs6@yahoo.com

Facebook@AndrewJ. Masigan

Twitter @aj_masigan

3 reasons people with power are more likely to make bad decisions

October 3, 2021 | 6:12 pm

The AFR Magazine’s annual power issue, ranking Australia’s most powerful people in politics, business and professions, always makes for some interesting discussions.

This year, for the first time since it began in 2000, the prime minister has been pushed out of top spot. Thanks to the pandemic Scott Morrison is in second place, behind four state premiers (Daniel Andrews, Gladys Berejiklian, Mark McGowan and Annastacia Palaszczuk).

Third spot goes to Treasurer Josh Frydenberg, fourth to the nation’s chief health officers, and fifth to Reserve Bank Governor Philip Lowe. Former ministerial staffer Brittany Higgins places sixth, followed by Deputy PM Barnaby Joyce, Commonwealth Bank Chief Matt Comyn, Opposition Leader Anthony Albanese and Defense Minister Peter Dutton.

There are subsidiary lists for most covertly powerful, the most culturally powerful, the most powerful in business, and in sectors such as technology, education, property, and consulting.

One thing the issue really lacks is a comprehensive assessment of the downsides of power. To put it simply, feeling powerful tends to inhibit a person’s ability to make good decisions.

Research shows having a formal position of authority with influence over people, resources and rewards is associated with cognitive and behavioral costs. People who feel powerful (either in the moment or consistently) make significantly lower estimates of the likelihood of negative outcomes. They are more likely to take risks both to obtain gains and avoid losses.

Feeling powerful makes us more prone to three behavioral patterns that increase the likelihood of making poor decisions: overvaluing our own perspective; dismissing the expertise of others; and failing to recognize limitations.

Taking the perspective of others is important in any leadership role. Those who feel more powerful tend, however, to overvalue their own perspective and discount the perspectives of others.

This has been demonstrated in behavioral experiments by social psychologist Adam Galinsky and colleagues.

The researchers evoked feelings of greater or lesser power in participants by asking them either to recall a time they had power over someone else, or a time someone else had power over them. Others, who were asked to do neither, formed the control group.

Participants were then asked to perform three different tests measuring their ability to see the perspective of other people. One test, for example, required them to identify emotions expressed by others. Those encouraged to remember feeling powerful were, on average, 6% less accurate than the control group. They were also less likely to detect expressions of displeasure in e-mails compared to the group made to feel less powerful.

Feeling powerful makes us more prone to dismiss expert advice. This effect has been measured by organizational behavioral researcher Leigh Tost and colleagues.

In their experiments they used the same method as Galinsky and colleagues to make participants feel more or less powerful. They then asked participants to estimate of the weight of three people or guess the amount of money in three jars of coins.

After the first round of estimates, participants were given access to advice from people who had done the tasks before. They were told if these advisers were “experts” (with a strong performance record) or novices (with estimates that were just average).

Those encouraged to feel less powerful were more inclined to listen to the advice of the experts. Those who felt more powerful were more likely to dismiss the expert and novice advice equally.

Participants also completed a survey about their feelings during the task. The results from this element of the study show those who felt more powerful had a greater sense of being in competition with others. The authors conclude that dismissing advice from experts is connected to a desire to “preserve their social dominance.”

The more powerful we feel, the more likely we will pursue goals aggressively and fail to recognize constraints. This is because power means we are, in fact, less constrained. The powerful have more resources to do what they like, and to tell others what to do.

Organizational researcher Jennifer Whitson and colleagues measured this tendency in experiments in which participants were given nine facts that could hinder achieving a goal — such as “not much money to invest” — and nine facts that could help, such as “there is high demand.”

Those that felt powerful (again established through the method used by Galinsky and colleagues) were significantly less able to recall the constraints. The authors conclude “the powerful are more likely to act on their goals because the constraints that normally inhibit action are less psychologically present for them.”

Refusing to acknowledge constraints can sometimes be a useful thing. Apple founder Steve Jobs, for example, was notorious for ignoring his engineers’ complaints that they couldn’t do what he asked for. There’s a story of him tossing an iPod into a fish tank to demonstrate there was wasted space enabling air pockets.

But such stubbornness is more likely to lead to bad outcomes, such the fate of Elizabeth Holmes, who modelled herself on Jobs and refused to accept her idea of compact medical blood-testing device couldn’t be made to work. Now she’s on trial for fraud.

These downsides to power are worth remembering at a time when listening to different points of view and heeding expert advice has never been more important. Our experience from the pandemic is that power is best distributed. We need leaders who understand that power corrupts, and who are humble enough to listen.

Daniel De Zilva is a risk culture expert at Macquarie University.

Merck’s new antiviral promises to make COVID less deadly

October 3, 2021 | 6:12 pm

MERCK & CO. and Ridgeback’s antiviral pill molnupiravir is a potential pandemic game-changer, judging from the positive test data that arrived Friday. To make the most of this promise, governments and global health organizations need to prepare to manufacture the pills in great quantities.

The clinical trial results are preliminary, but impressive. People with fresh symptoms of COVID-19 who took the pills for five days were about half as likely as those on placebo to be hospitalized or die. The difference was so stark — eight who took a placebo died while none who got the pill did — that independent monitors stopped the trial early.

The success is especially auspicious because of the practical advantages of such pills. They can be easily stored and dispensed at any local pharmacy or clinic. And compared with vaccines and antibody therapies, they’re easy and cheap to make.

All this adds up to an unmissable opportunity. By moving quickly to invest in manufacturing capacity, it will be possible to save lives and avoid the global inequity that has plagued the vaccine rollout.

Many people are familiar with Tamiflu and Xofluza, antiviral pills that treat flu infections. Molnupiravir looks to work far better than those. The flu pills, to be effective, need to be taken within two days of symptom onset. The COVID-19 pill can be taken within five days of symptoms, and it appears to disrupt the virus enough to keep a significant share of at-risk people alive and out of the hospital.

Merck expects to produce 10 million courses of the treatment (40 pills per patient) this year, and an April deal to license its formula to generic manufacturers in India should eventually boost global supply. The company also intends to offer developing nations lower pricing than the $700 per course the US will pay for the 1.7 million doses it already has arranged to buy. With the world still suffering three million COVID-19 cases a week, and limited vaccine coverage, 10 million is not nearly enough.

COVID-19 vaccine availability lags because forward-thinking investments in manufacturing weren’t made, and rich countries have hoarded the shots. But with pills, which are much simpler to manufacture, it should be easier to plan for adequate supply. Pharmaceutical manufacturers make tens of billions of prescription pills annually, most of them cheap generics. So, there’s plenty of spare and easily adaptable capacity.

To capitalize on this advantage, wealthy countries and global public health organizations should directly finance manufacturing, and anticipate bottlenecks to ensure that the pills are widely distributed. Manufacturing should not be limited to a few sites or countries, but spread globally. It’s also worth investing in expanded capacity for plants that make needed precursors and components for Merck’s drug.

And this effort should go beyond molnupiravir. Roche Holding AG and Atea Pharmaceuticals, Inc. are conducting a late-stage test of another antiviral pill, as is Pfizer, Inc.

Beyond saving lives and preserving hospital capacity, effective antivirals can make COVID-19 a far more manageable disease. Merck’s pills can be expected to get approval for use by the end of the year. The trick is to be ready to scale up manufacturing right away.

BLOOMBERG OPINION

China’s energy crisis highlights weaknesses in Xi’s power plans

October 3, 2021 | 3:47 pm

CHINA’S energy crisis has highlighted weaknesses in one of President Xi Jinping’s top priorities — energy security — that could have ramifications for the power system for years to come.

To avoid repeats of the chaos ravaging the world’s second biggest economy, the country will probably have to take major steps toward reshaping its grid and power market, building fuel reserves, and adding more renewable and flexible energy sources.

“These are all on the cards and there will be great impetus once the dust has settled on this episode,” said Michal Meidan, director of the China Energy Research Programme at the Oxford Institute for Energy Studies.

Here are some policy options that Beijing is likely to explore.

SET THEM FREE
A trigger for the current crisis was power plants shutting down because of heavy losses on buying expensive coal and selling into a highly regulated electricity market. Today’s pricing regime dates only to 2019, when fixed electricity benchmarks were replaced with a hybrid model offering some flexibility, but far short of the free-floating rates seen in parts of Europe and the US.

POWER PLAY
Hunan province is planning to trial a pricing system linked to coal costs from October. Guangdong has raised tariffs to incentivize more supply. And the country is considering raising rates on industrial users. But a major obstacle to more liberalization is the potential hit to downstream users including manufacturers.

“If China liberalizes the power market, then it may provide enough power supply, but rising power costs could also make a dent on the local economy,” said BloombergNEF’s head of China research Kou Nannan.

GET CONNECTED
More connectivity between power grids in different regions could ease localized shortages. China’s two main grid operators -— State Grid Corp. of China oversees more than 80% of the country, while China Southern Grid Corp. handles five southern provinces — have rapidly built out long-distance power lines across the country, but there’s still more work to do.

At present, there are significant disconnects — both physically and in terms of coordination — between different parts of the country, or even in some cases within the same provinces, said David Fishman, a manager at Lantau Group, an energy consultancy. And there’s very little inter-provincial power trading.

“That’s why you can have issues where one part of the country has lots of power and another place doesn’t have any,” Mr. Fishman said. “The more connectivity you have, the more you can efficiently allocate supply. So there is a case for more investment in ultra-high voltage lines and more local lines.”

GO GREEN
The global energy crunch has, for some, exposed the pitfalls of moving away from fossil fuels before renewable energy is mature. In China, the government “will probably be a bit more cautious about retiring the coal fleet,” said BloombergNEF’s Kou.

But the current situation — where China’s being forced to hunt for gas and coal in a global bidding war — highlights the security benefits of domestic wind, solar and hydropower. What’s needed in addition to the country’s plans to add massive amounts of clean energy are investments in flexible storage such as pumped hydro or large-scale batteries to manage the ups and downs of renewable flows.

“Recent months have exposed the vulnerability of China and many other economies to fossil fuel prices and strengthened the case for moving to zero-carbon energy sources,” said Lauri Myllyvirta, lead analyst at the Centre for Research on Clean Energy and Air.

STOCKING UP
Even with China’s renewables binge, coal isn’t going away any time soon, and September’s debacle has exposed serious problems in the management of the fuel’s supply and reserves, Lantau’s Mr. Fishman said. Inventories at power plants are running critically low with prices soaring even before winter arrives.

One way to cushion such shortages would be to copy the success of its strategic oil reserves by building and filling state-owned coal storage facilities throughout the country. Not only would that provide a backstop in future times of need, but buying to fill up inventories during periods of fallow demand could help miners as well.

Plans for such a program are already underway. After power shortages last winter, the country’s five-year plan through 2025 included a vow to strengthen coal reserve capacity. And in June, the government said it aimed to raise those stockpiles to 600 million tons, or about 15% of annual consumption. — Bloomberg

At 39 aircraft, China sets new high for Taiwan defense zone incursion

October 3, 2021 | 3:44 pm

TAIPEI — A total of 39 Chinese air force aircraft entered Taiwan’s air defense zone on Saturday, the defense ministry in Taipei said, setting a new high for missions which have infuriated the island’s government and further raised tensions with Beijing.

Taiwan, a democratically governed island that is claimed by China, has complained for over a year of repeated missions near it by China’s air force, often in the southwestern part of its air defense zone close to the Taiwan-controlled Pratas Islands.

Taiwanese fighters scrambled against the 39 Chinese aircraft in two waves on Saturday, the Taiwan Defense Ministry said. It said Taiwan sent combat aircraft to warn away the Chinese aircraft, while missile systems were deployed to monitor them.

That was one more aircraft than on Friday, the day China marked its national day, which was at the time more planes than the country had ever sent before to harry Taiwan’s air defense zone.

Taiwan’s Defense Ministry said that on Saturday the Chinese aircraft first came during the day — 20 aircraft — followed on Saturday night by a further 19. Most of the aircraft were J-16 and Su-30 fighters, it added.

The aircraft on both missions flew near the Pratas, the ministry said, in separate statements late Saturday and early Sunday morning.

Taiwan Premier Su Tseng-chang condemned China for its actions on Saturday, saying the country was engaging in military aggression and damaging regional peace.

China has yet to comment.

It has previously said such flights were to protect the country’s sovereignty and aimed against “collusion” between Taiwan and the United States, the island’s most important international backer.

Taiwan marks its national day next Sunday, with a major speech by President Tsai Ing-wen and military parade in central Taipei, which will include a fly-by of fighter jets.

China has stepped up military and political pressure to try to force Taiwan to accept Chinese sovereignty.

Taiwan says it is an independent country and will defend its freedom and democracy. — Reuters

Busiest summer for Asia IPOs on record

October 3, 2021 | 2:06 pm

Asia has had its best third quarter on record for initial public offerings, even with Hong Kong turning quiet as many firms put listing plans in the regional powerhouse on hold amid China’s sweeping regulatory clampdown.

Thanks to blockbuster deals in markets like South Korea and India, first-time share sales in the region raised $56 billion in the three months through Sept. 30, the most ever for such a period, data compiled by Bloomberg show.

“Activity will continue — 2021 remains an extraordinary year for equity capital markets volume,” said William Smiley, co-head of Asia ex-Japan equity capital markets at Goldman Sachs Group Inc. “Global investors still want access to Asian growth.”

OPPOSITE WAYS
Asia’s record third quarter came despite the slowdown in Hong Kong, one of the world’s busiest listing venues. As Beijing broadened its efforts to rein in corporates and align business models with President Xi Jinping’s “common prosperity” campaign, about $1 trillion was wiped off the value of Chinese stocks globally in July and Hong Kong’s stock benchmark sank into a bear market in August.

That saw listing volumes in the financial hub dip to $6 billion in the third quarter, trailing Korea for the first time in four years. It was also the lowest quarterly IPO haul for Hong Kong since the start of 2020, when the pandemic was taking hold and equity capital markets ground to a halt.

Share performance also suffered. Firms that listed in Hong Kong in the third quarter and raised at least $100 million saw their stocks climb just 2.8% from their offer prices on average, according to data compiled by Bloomberg. That’s versus 20% in South Korea and 25% in India, both of which saw big increases in volumes compared with the first two quarters.

“Following a very strong first half for the Street, we are still seeing good activity levels for the remainder of this year albeit at a slower pace,” said Magnus Andersson, co-head of Asia Pacific equity capital markets at Morgan Stanley. “We expect to have a healthy pipeline as we enter next year.”

KOREA, INDIA
IPOs by the likes of game developer Krafton Inc. and online-only bank KakaoBank Corp. pushed third-quarter volumes to $10.4 billion in Korea, around four times what was fetched in each of the previous two quarters.

Similarly, in India, food-delivery startup Zomato Ltd. raised $1.3 billion in July. Many more listings are lined up for the final quarter, starting with digital payments company Paytm, which has filed to raise as much as 166 billion rupees ($2.2 billion) in what would be the nation’s biggest IPO ever.

“India now has a savvy, tech-educated population with good internet penetration,” said Anvita Arora, co-head of Asia Pacific equity capital markets at Bank of America Corp. “The combination of factors for tech success is there. In general the tech pipeline is very strong.”

While Shanghai pulled off the biggest third-quarter deal in Asia with China Telecom Corp.’s bumper offer, few bankers expect a heavy pipeline of Chinese listing candidates to come back soon. That’s owing to the continued uncertainty on the regulatory front and as issuers await new rules on overseas IPOs.

Chinese firms that had initially eyed Hong Kong or U.S. listings may now opt to raise money privately instead as they wait for the clouds to clear.

Even with the slowdown in Hong Kong, first-time share sales in Asia have raised $140.5 billion so far in 2021, more than the same period in any other year, Bloomberg-compiled data show.

And while IPOs by Chinese issuers may slow down over the next three months, listed companies are still raising funds.

London-based insurer Prudential Plc fetched $2.4 billion in a Hong Kong share sale in September in one of the city’s biggest follow-on offerings of the year.

The complexion of transactions in Asia will differ from 2020, and a more thoughtful approach to price, size and structure may be needed, but deals will keep being done, said Goldman’s Smiley. — Bloomberg

Headwinds mounting for world economy into final stretch of 2021

October 3, 2021 | 1:24 pm

The global economy is entering the final quarter of 2021 with a mounting number of headwinds threatening to slow the recovery from the pandemic recession and prove policy makers’ benign views on inflation wrong.

The spreading delta variant continues to disrupt schools and workplaces. U.S. lawmakers are wrangling over the debt ceiling and spending plans. China is suffering an energy crunch and pursuing a regulatory crackdown, while markets remain on edge as China Evergrande Group struggles to survive.

Fuel and food costs are soaring worldwide, combining with congested ports and strained supply chains to elevate price pressures. Labor shortages continue to plague some employers.

Although the expansion seems intact, such a backdrop is fanning fears of a mix of weaker growth and faster inflation to come, threatening to complicate nascent efforts by central banks to dial back stimulus without rattling markets.

“Expectations of a swift exit from the pandemic were always misplaced,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “Full recovery will be measured in years, not quarters.”

Here’s a breakdown of the major risks:

CHINA CRUNCHED

China’s energy travails have forced manufacturers to curb production and prompted economists to cut their growth forecasts. Bloomberg Economics expects the power shortages to have the biggest hit to expansion since a nationwide lockdown when the pandemic first erupted.

Regions impacted by the curbs represent about two-thirds of the economy and include the top five provinces in terms of gross domestic product -– Guangdong, Jiangsu, Shandong, Zhejiang and Henan. In a sign of what’s to come, factory activity contracted in September for the first time since the pandemic began.

That’s compounding a drag from the crisis engulfing Evergrande, the world’s most indebted developer, and a broader slowdown in the all-important housing sector. President Xi Jinping’s push for tighter regulations of industries including technology is also unnerving investors.

COSTLIER FOOD

China’s energy problems also risk triggering a renewed surge in world agriculture and food prices as it means the country is set for a difficult harvest season from corn to soy to peanuts and cotton. Over the past year, Beijing imported a record amount of agricultural products due to a domestic shortage, driving prices and global food costs to multiyear highs.

A United Nations index is up 33% over the past 12 months. At the same time, some gas, coal, carbon and electricity benchmarks are hitting records.

The price of oil passed $80 a barrel for the first time in three years and natural gas is the costliest in seven, helping to push the Bloomberg Commodity Spot Index to its highest level in a year. TotalEnergies SE Chief Executive Officer Patrick Pouyanne said the gas crisis that’s affecting Europe is likely to last all winter.

It could get even worse. Bank of America analysts are telling clients there is a chance of oil reaching $100, spurring an economic crisis.

SUPPLY SQUEEZED

With the northern hemisphere winter approaching, the delta variant remains another worry.

That helps explain why congestion is building at key crossroads for international commerce, from ports in Shanghai and Los Angeles, to rail yards in Chicago and warehouses in the U.K.

Retailers including Costco Wholesale Corp. in the U.S are ordering everything possible to ensure shelves are stocked, particularly for the late-year boost of holiday shopping.

Manufacturers, meanwhile, are having trouble sourcing key parts such as semiconductors, chemicals and glass.

Dubai’s DP World, one of the biggest global port operators, expects bottlenecks that have rattled global trade flows will continue at least for another two years.

There is also a shortage of labor in some industries with the coming week’s U.S. payrolls report providing an insight into how much of a problem that was for firms in September.

POLICY PROBLEMS

The shine is also coming off U.S. economic policy as a locomotive for the global recovery. While President Joe Biden swerved a disruptive shutdown of the federal government for now through a stopgap funding bill, fractured talks continue on his $4 trillion economic agenda with deep divisions among his Democrats on the way forward.

Compromise on the shutdown came after Treasury Secretary Janet Yellen warned that her department will effectively run out of cash around Oct. 18 unless Congress suspends or increases the federal debt limit. Failure to do so would trigger both a recession and financial crisis, Yellen said.

Globally, fiscal policy support is set to slow into 2022 after governments ran up the biggest debts since the 1970s.

Biden and Yellen must also decide whether to hand a second term to Federal Reserve Chairman Jerome Powell, a decision which could also roil markets.

For Powell and his international counterparts, the combination of slowing growth and stubborn inflation is a challenge.

Friday alone saw news of the fastest euro-area inflation in 13 years and a U.S. gauge rose the most on an annual basis since 1991.

For now, Powell and European Central Bank President Christine Lagarde are voicing cautious optimism that inflation will ease. But economists are asking at what point transitory becomes more persistent.

And that makes plans to reduce bond purchases or raise interest rates a risky proposition. Many Latin American central banks and some in eastern Europe have already hiked borrowing costs, Norway just became the first developed nation to do so and the Fed is signaling it will pare its bond-buying program as soon as November.

Deutsche Bank AG strategist Jim Reid reckons the world economy may be facing its most hawkish period for monetary policy in a decade.

“Central banks are playing with fire by tapering to avert inflationary pressures without being fully sure of where we stand in the cycle,” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. – Bloomberg

Duterte says he is retiring from politics, but not everyone is convinced

October 3, 2021 | 9:48 am

Duterte-PCOO-4 — FORMER PRESIDENT RODRIGO R. DUTERTE — PCOO

MANILA – Philippines President Rodrigo Duterte said on Saturday he was retiring from politics, a surprise move that fuelled speculation he was clearing the way for a presidential run by his daughter.

Sara Duterte-Carpio is currently mayor of Davao, the Philippines’ third-largest city, and filed on Saturday to contest the role again. She has previously said she would not run for national office next year.

“Today, I announce my retirement from politics,” Duterte said as he accompanied his ally Senator Christopher “Bong” Go of the ruling PDP-Laban party to register Go’s candidacy for vice president in next year’s election.

But political analysts were skeptical, noting that last-minute changes were still possible, as in 2015 when Duterte entered the presidential election race at the eleventh hour and won by a huge margin.

Duterte, 76, had been expected to run for the No. 2 job, a plan most Filipinos oppose as violating the spirit of the constitution, which sets a one-term limit for the president to stop power being abused.

“In obedience to the will of the people, who after all placed me in the presidency many years ago, I now say to my countrymen, I will follow your wish,” Duterte said as he urged the public to back his longtime aide.

Analysts say it is crucial for Duterte to have a loyal successor to insulate him from potential legal action – at home or by the International Criminal Court – over the thousands of state killings in his war on drugs since 2016.

“I would take his announcement with a lot of salt,” Carlos Conde, Philippines researcher for New York-based Human Rights Watch, told Reuters. “But assuming that he’s really going to retire, that doesn’t mean he won’t get the protection from the ICC that he craves.”

Duterte, a maverick leader famous for his embrace of China and disdain for the United States, traditionally a close ally of the Philippines, remains popular even though his opponents accuse him of being authoritarian and intolerant of dissent.

Activist and human rights lawyer Neri Colmenares also viewed Duterte’s announcement sceptically, saying “he will still dictate (to) his political machinery”.

“Unfortunately for him, he will not be spared from accountability. Retirement from politics will not save him from a prison sentence,” said Colmenares, who is also providing legal assistance to drug war victims.

Authorities have killed more than 6,100 suspected drug dealers and users since Duterte took office in June 2016. Rights groups say the police summarily executed suspects, which the police deny, saying they acted in self-defence during sting operations.

‘ANYTHING CAN HAPPEN’

More than 60 million Filipinos will vote in May for a new president, vice president and more than 18,000 lawmakers and local government officials.

Political observers had long suspected Duterte could spring a surprise, such as a presidential bid by his daughter next year.

Duterte-Carpio’s re-election filing, shortly after her father announced his retirement, did little to douse speculation she has her eye on the presidency.

Mar Masanguid, who backed Duterte’s 2016 run and has now founded a group to back Duterte-Carpio, said the signs still pointed to a run, which would mirror her father’s last minute bid in 2016.

“In politics, anything can happen,” he said.

Duterte-Carpio has topped opinion surveys on prospective candidates, but said last month she was not a candidate for higher office next year because she and her father had agreed only one of them would run for a national role in 2022.

The older Duterte’s decision not to join the race next year would clear her way.

“This allows Sara Duterte to run,” said Antonio La Vina, professor of law and politics at the Ateneo de Manila University. “She sees through the father’s scheme or it is a drama to confuse everyone.”

But La Vina said he could not rule out the possibility the firebrand leader might have a change of heart and be Go’s substitute.

Candidates have until Friday to register, but withdrawals and substitutions are allowed until Nov. 15. — Reuters

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