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House approves bill establishing apex hospitals in all regions

BW FILE PHOTO

A PROPOSED law that seeks to set up apex hospitals in the country’s 17 regions was approved on second reading in the House of Representatives Tuesday.

House Bill 10650 or the Apex Hospital Act, sponsored by DIWA Rep. Michael Edgar Y. Aglipay, aims to improve the health service delivery system by upgrading existing and building new apex hospitals.

An apex hospital, as defined by the Department of Health, is a government-run medical institution that offers specialized services and is contracted by the Philippine Health Insurance Corp. (PhilHealth) as a stand-alone facility. 

Under the bill, the Health department will identify regional hospitals that will be turned into apex hospitals based on the Philippine Health Facility Plan.

The department will also be tasked to submit yearly reports on the regional hospitals to Congress once the bill is signed into law. — Jaspearl Emerald G. Tan 

A strategic plan for the Philippine economy

VECTORPOUCH-FREEPIK

(Last of a series)

A very crucial strategic move in the coming years to attain both improvement in the productivity of our farming and fisheries sector and to reduce poverty has to do with addressing the problem of the ageing of Filipino farmers whose average age is reaching 60 years.

Much attention and effort should be devoted to human resources development, both of existing farmers and future ones. The farmers of today should be helped to improve their individual knowledge and skills and to build strong producers’ organizations. There is no way agriculture will survive unless the spirit of cooperativism is widely developed. The Government, business, and civil society should put their resources together to give continuous education and training to farmers through nonformal and informal means of education. What are immediately needed are TESDA-type technical schools that can upskill, reskill, and retool potential young farmers outside of the formal educational system. There should be a campaign to convince those in their senior year of high school to choose agribusiness as a career path, eschewing the traditional route towards a college diploma which has resulted in a mismatch between the products of our tertiary educational system and the actual demand of the economy for industrial or agri-tech appropriate skills.

There should be a pause in the further fragmentation of land through agrarian reform. Without necessarily removing individual ownership of land from the beneficiaries of the agrarian reform program of the past, there should be a recognition that the failure of the Government to deliver the indispensable support to the small farmers, such as farm-to-market roads, irrigation facilities, post-harvest and other services, agrarian reform actually led to increasing poverty of the farmers who did not have the wherewithal to productively cultivate the small farms they received.

The reversal of the policy of land fragmentation and allowing free market forces to prevail are especially required in the sugar industry, which will not survive competition from Thailand, for example, as imports of sugar are increasingly liberalized under AFTA (ASEAN Free Trade Area) agreements. Different modes of reconsolidating land in the sugar industry must be found or else it will face extinction. It can be recalled here that the government of Taiwan, which had the strictest land redistribution program during the leadership of Chiang Kai-shek, had enough common sense to exempt the sugar industry from fragmentation.

One of the most cogent advocates for allowing free market forces in the utilization of farm lands is Calixto V. Chikiamko, a member of the board of Institute for Development and Econometric Analysis (IDEA). In his regular column in this paper (Aug. 2, 2021) entitled “Small Is Not Beautiful,” quoting hard evidence from recent international economic literature, he stressed the importance of recognizing that it should not be government law but the market that ought to determine the desirable allocation of land. As a specific example, he observes that the land market in the Philippines is distorted because of the land retention limit of five hectares. Successful farmers are prohibited from expanding via ownership of land beyond five hectares. He rightly observes that if farmers are not allowed to expand, they have no incentive to mechanize and increase efficiency. Because of the restrictions in land transfer, inefficient farms will forever be inefficient, condemning their owner-cultivators to perpetual poverty.

Another regular columnist in this paper, Andrew Masigan, whom I cited previously, echoed the views of Mr. Chikiamko and I quote, “The average farm size today is below one hectare with a maximum holding of five. The maximum size of land holdings must be increased to permit industrial farming. Budgetary support for the agricultural sector must also increase from 3% of GDP to 8%. Finally, the Government must lift its restrictions on the free flow of agricultural products, especially the badly considered rule that corn farmers cannot export unless the Department of Agriculture declares a surplus of the crop.”

Special efforts of the relevant government agencies should be exerted to attract private investments in agribusiness, with special emphasis on foreign investments that can bring in large amounts of capital required in commercial plantations (such as coffee and cacao) as well as technology, management, and expertise. Our experiences with Del Monte and Dole have been generally beneficial in which foreign capital dominated at the beginning but through the years, the Filipino partners, having benefited from technology transfer, have been able to eventually acquire majority ownership. The access to foreign markets was not an insignificant contribution of the foreign investors.

The agricultural sector should be a major component of any long-term strategic plan to combat the adverse impacts of climate change. Together with the mining sector, agribusiness should be subjected to the strictest compliance with sustainability reporting. An integrated environmental strategy among the farming, fisheries, and forestry sectors should aim at climate proofing the agricultural sector.

Another strategic measure suggested by Dr. Rolando Dy et al. has to do with “rationalizing the budget to move away from being rice-centric.” The long-term obsession with rice sufficiency should be replaced with a more realistic acceptance of the fact that the Philippines does not have the competitive advantage to produce all the rice its large population needs. It does not have the abundance of water that Vietnam and Thailand have where the Mekong River provides almost unlimited access to water which is an indispensable input in the production of rice. In this regard, despite continuing protest among some sectors still advocating 100% rice sufficiency, the rice tariffication law was a move in the right direction. Moving away from a rice-centric mentality, we may soon see a large increase in our exports of such high-value fruits like mangoes, avocados, coffee, cacao, and many other tropical fruits to the rich markets of Northeast Asian countries like China, Taiwan, South Korea, and Japan.

The final strategic measure recommended by Dr. Dy and his team can apply to other departments of the Executive branch of the Philippine Government. It has to do with installing a meritocratic and restructured bureaucracy. As we have written almost ad nauseam in previous articles, the key to success in economic development is institution building. Because of the primordial need for both technical and management expertise in the Department of Agriculture, it has to be treated with utmost care in the appointment of appropriate managers and technical experts. Fortunately, the present Secretary of the Department of Agriculture under the Duterte Administration epitomizes management ability and technical expertise combined. Secretary William Dar has decades of practical experience, not only within the Philippines, but also with prestigious institutions in many parts of the world. I can only hope that in one position or another, the next Administration can still make use of his services in the public sector.

I would like to end this compilation of views of experts on agricultural policy by seconding the recommendation of Ernesto Ordoñez, Agriwatch chair and former undersecretary of the Departments of Agriculture and Trade and Industry, that we have to demand more details from the “presidentiables” who made motherhood statements about their support for agriculture in recent interviews they gave to heads of five organizations representing different agriculture sectors. The agricultural issue must be kept alive all throughout the pre-election period, not only for the presidential aspirants but also for other national and local candidates.

As I have mentioned in previous parts of this series, we must find out from LGU heads if any of the extra funding they will receive as a consequence of the Mandanas-Garcia ruling will go to agriculture, and what for. As an example of what can be done at the LGU level to address the interconnected problem of low agricultural productivity and mass poverty, let me cite here a communication from a mayor in Ilocos Norte, Eddie Guillen, summarizing what he and fellow officials in the LGU unit of Piddig did to significantly improve farm productivity and reduce poverty in their community. Mayor Guillen was one of the graduates of the Strategic Business Economics Program of the University of Asia and the Pacific.

Based on the experiences of Piddig in improving farm productivity, the Consolidated Farming System project was a sustainable production system designed to provide productivity enhancement services. These included assistance in technology, capital investment, people’s participation through public-private partnership, farmer’s enterprise development, and better extension services. The pooled resources under the Convergence Initiative Program supported the LGU in its vital role in creating important enablers, i.e., physical infrastructures such as farm-to-market roads, farm machinery, processing facilities, strengthening and capability building of cooperatives and farmers’ technical education and skills improvement. Strengthening and capability building of cooperatives is of the utmost importance. Cooperatives are the most effective partners of the LGU in promoting peoples’ participation and in developing farmer’s enterprises. The Cooperative Development Authority must include among its functions, in addition to registration and regulation, the nurturing of entrepreneurial ability among the cooperatives.

The agricultural crisis has been with us for the longest time. It must be given the highest priority by our next public officials, whether at the national or local levels.

 

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia

Accelerating recovery with the private sector

VECTORJUICE-FREEPIK

The past five and a half years have been a volatile time for the private sector, not just in surviving the pandemic-triggered economic crisis but in terms of its relationship with the government. No less than the chief executive of the country has alternately acknowledged its contribution to nation building, sought its help, worked on numerous projects with it, but also derided it with alienating rhetoric, and presented no clear blueprint for public-private cooperation over the long term.

At best, this was an opportunity wasted.

Now that we are in the process of choosing our leaders for the next six years, and now that the daunting task of economic recovery amid the pandemic is upon us, we should include one important criteria in our scorecard: Capacity and willingness to engage and work with the private sector.

DOING MORE
In the past, we at Stratbase identified eight strategic initiatives where the private sector can help create a sustainable and inclusive economic recovery. These are: 1.) Addressing inequality and ensuring livelihood by creating jobs; 2.) Reducing the digital divide through digital acceleration; 3.) Addressing climate change and reducing greenhouse gas emissions; 4.) Strengthening the health system; 5.) Pushing for public-private collaboration driven by public interest; 6.) Focusing on and advocating stakeholder capitalism; 7.) Creating access to opportunity, quality education and social protection for all; and, 8.) Demanding transparency and accountability in governance by encouraging an entrepreneurial state and smart local governments.

The potential of a genuine, strategic, and sustained partnership is also not lost on the ordinary Filipino. We commissioned surveys by the top two polling companies and their findings on how citizens regarded the private sector mirror each other.

In October 2021, the Social Weather Stations (SWS) found that at least eight in 10 Filipinos believed that the growth of the Philippine economy would be accelerated if the government collaborated more actively with the private sector. Respondents to the same survey also said that the private sector can help boost the economy by creating jobs (65%), expanding livelihood opportunities (57%), and helping lift the lives of Filipinos out of poverty (46%).

Two months later, Pulse Asia Research also conducted a survey that revealed Filipinos thought the private sector can help create jobs (58%), lift Filipinos out of poverty (57%) and expand livelihood opportunities (52%).

In fact, 81% of the respondents agreed that the government should engage the private sector to invest in public infrastructure such as roads, bridges, and airports to save government funds for COVID-19 response.

We do not need to look any farther than the context of COVID-19. In 2020, when the lockdowns first brought a shock to the people, business groups pitched in to provide much-needed help, complementing government’s ayuda drive. The following year, when the vaccines were finally available, again corporations stepped up to the plate by having their own vaccination drives for workers and their families. Many companies also helped improve the delivery of online education, especially to children in poor communities and the provinces.

Much, much more can be done, not only in the context of the pandemic response, but in economic recovery and, eventually, sustainable economic development.

INVESTING IN TECH, INVESTING IN PEOPLE
Our experience with COVID-19 showed us that technology is crucial not only as it applies to our jobs — work-from-home arrangements, for example, that still allow access to company documents, collaboration with colleagues, and remote meetings — but also in our everyday, personal lives. Many of us discovered the convenience of online banking or delivery apps that allowed us some semblance of normalcy and productivity even when we were locked down at home. Our children learned their lessons through online platforms.

Unfortunately, the ability to do this is not shared by all Filipinos. The worker’s or the student’s experience in Metro Manila is starkly different from the experience of someone in the provinces.

It is here where the private sector, through investments in digital technology, can greatly help. And the public knows this, too. In the October SWS survey, 89% of respondents agreed that “the benefits of digital technology such as strong cell phone signals, fast e-banking and social media can greatly help create jobs and businesses.”

Of course, building the digital infrastructure is the responsibility of the government, primarily. But with the multitude of problems that our public officials are facing, the government needs help — help that is available and very capable.

Investments in technology — which include infrastructure and the upskilling of people — contemplate the future; they generate exponential benefits not only for today’s Filipinos but the next generation. There is a golden opportunity to realize this, if only through a more strategic plan to involve the private sector in all areas of development.

SEIZING THE OPPORTUNITY
We need a leader that acknowledges and comprehends the potential of a true partnership between the public and private sectors, and acts from that appreciation. Imagine if PPP were not just some clever acronym but a guiding principle that governs each stakeholder’s role in the process. Imagine a scenario where everybody knows the destination, what their role is based on their expertise, mandate, and resources. Imagine the principles of corporate governance at work in government transactions. Imagine inching closer to the goal — together.

This election, we can change the course of our country for the better. Let us not squander that opportunity.

 

Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.

No Vaccination, No Ride Policy: Are we traversing the right path?

PHILIPPINE STAR/ MICHAEL VARCAS

It has been about two years since the COVID-19 pandemic broke out. Just when it appeared that we were about to reach our desired destination of a COVID-free Philippines, the situation seemingly became worse than ever. After two years, the number of daily reported cases in the Philippines is higher than ever. Just recently, the Philippines recorded its all-time high number of COVID-19 cases at 39,004. It is difficult to believe that only a month ago, the Philippines recorded as low as 235 cases, the lowest reported number of new COVID-19 cases since May 19, 2020.

As a result, the National Capital Region and several other cities and municipalities have been placed again under Alert Level No. 3 until Jan. 31. This may possibly be extended depending on the COVID-19 situation by Jan. 31. If the healthcare utilization rate breaches 70%, both for total beds and ICU, these areas may even be placed under Alert Level No. 4.

The Government has since implemented measures to, at the very least, mitigate the surge of COVID-19 cases. Among the measures implemented by the Government is the so called “No Vaccination, No Ride Policy.” The Department of Transportation (DoTr) issued its Department Order No. 2022-001 to limit access to public transportation only to the portion of the population in the National Capital Region (NCR) which is fully vaccinated against COVID-19 when the region is placed under Alert Level No. 3 or higher.

Under the Department Order, when the NCR is placed under Alert Level No. 3 or higher, only fully vaccinated persons may use public transportation by land, rail, sea, or air. Public utility vehicle operators who violate the Policy may be penalized with a fine ranging from P1,000 to P10,000, or suspension or revocation of the PUV franchise, depending on the gravity of their offense.

To have a clearer picture of the number of people affected by the Policy, as of Jan. 19, the total number of administered COVID-19 vaccinations in the Philippines was 120,645,514. The number of fully vaccinated individuals is 56,027,759, while 59,255,237 have only been vaccinated with their first dose. (https://doh.gov.ph/covid19-vaccination-dashboard). As previously discussed, only those who have been fully vaccinated may use public transportation. Therefore, 59,255,237 Filipinos who have only been vaccinated with their first dose, in addition to the millions more who have not yet been vaccinated, or who have no intention to be vaccinated, may not use public transportation.

It now begs the question, is the issuance and implementation of the “No Vaccination, No Ride Policy” the proper path to take in hopefully reaching our desired destination? Legally speaking, is the Policy a valid exercise of the state’s Police Power?

The Supreme Court defined Police Power as the power of the state to promote public welfare by restraining and regulating the use of liberty and property. As ruled by the Supreme Court, to warrant such interference, two requisites must concur:

a.) the interests of the public generally, as distinguished from those of a particular class, require the interference of the state. This means that the activity or property sought to be regulated affects the general welfare; if it does, then the enjoyment of the rights flowing therefrom may have to yield to the interests of the greater number; and,

b.) the means employed are reasonably necessary to the attainment of the object sought to be accomplished, and not unduly oppressive upon individuals. Otherwise stated, there must be a concurrence of a lawful subject and lawful method.

By illustration, in the case of Lucena Grand Terminal v. JAC Liner, the city of Lucena issued several ordinances with the objective of relieving traffic congestion in the city. The Supreme Court ruled that the questioned ordinances were invalid because the means employed were unreasonable as the questioned ordinances prohibited the operation of all bus and jeepney terminals within Lucena, including those already existing, and allowed the operation of only one common terminal located outside the city proper.

Thus, in determining the validity of the “No Vaccination, No Ride Policy,” the questions which need be considered are whether its provisions are reasonably necessary for the accomplishment of its purposes, and whether they are unduly oppressive upon individuals.

On one hand, those who are for the Policy claim that it is necessary to address the exponential increase of COVID-19 cases in the Philippines, and to hopefully mitigate the situation. Further, they claim that the Policy is not unduly oppressive against unvaccinated individuals as the Policy is actually for their benefit because it protects unvaccinated persons from possibly being infected with COVID-19 as they are supposedly the most vulnerable.

On the other hand, those who are against the Policy opine that the issuance of the Policy restricts the exercise and enjoyment of fundamental rights. Worse, the Policy is allegedly anti-poor as it is the poor who are allegedly directly affected by the Policy since they cannot afford to have their own vehicles, and thus, have no choice but to use public transportation in their daily lives. As such, implementation of the Policy allegedly deprives these individuals their basic right to travel with the use of public transportation.

The seeming solution is a compromise of allowing workers to travel regardless of vaccination status, thus restricting the curtailment of travel to what might be considered as non-essential travel. Worldwide, there are efforts to use state influence to modify behavior which is deemed necessary for public health. In Singapore, there is an initiative to even restrict access of those who are unvaccinated to work places. In countries in Europe and the United States, there are some policies encouraging the use of masks, but with varying degrees of effectivity because of resistance from the population.

Legalities aside, however, it seems that the question involving this Policy is one of philosophy. Some sectors believe that incentivizing vaccination status instead of penalizing is the better approach. Some are obviously of the belief that it is with punishment that behavior is best shaped. Whatever the philosophy, one can only hope that policies are implemented seriously and fairly across all sectors so that the populace can be properly guided.

This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.

 

Jonn Kenneth Laurence A. Gonzales is an associate of the Litigation and Dispute Resolution Department (LDRD) of the Angara Abello Concepcion Regala & Cruz Law Offices or ACCRALAW.

(632) 8830-8000

jagonzales@accralaw.com

How venture capital created the modern world

VECTORJUICE-FREEPIK

VENTURE CAPITAL (VC) is by far the most interesting form of capital — and, along with tech entrepreneurs, venture capitalists are the most interesting sort of capitalists. Over the past 60-odd years VCs have propelled Silicon Valley to the heart of the world economy. Now they are driving the rise of artificial intelligence and other clever technologies in China. Most capitalists focus on predictable returns. VCs are in the business of betting on the future. If capitalism is about creative destruction, as Joseph Schumpeter argued, then venture capital is creative destruction taken to the nth degree.

How does the venture capital industry work its wonders? Is there a replicable formula for successful VC investing, or is it just a matter of being in the right place at the right time? And how secure is Silicon Valley’s dominance of the industry? Sebastian Mallaby’s absorbing new book, The Power Law: Venture Capital and the Art of Disruption, seeks to answer these questions.

Mallaby, a veteran journalist and a senior fellow at the Council on Foreign Relations, has set himself the grand task of chronicling the rise of our current finance-focused version of capitalism, and does so in much the same liberal, optimistic spirit in which Thomas Macaulay chronicled the rise of parliamentary liberty in the mid-19th century. (Full disclosure: I was Mallaby’s colleague at The Economist for many years.) In More Money Than God he told the story of hedge funds. In The Man Who Knew he profiled Alan Greenspan and through him the Federal Reserve in its pomp. He now brings his trademark mixture of exhaustive research and clear analysis to his most interesting subject so far.

In our author’s view venture capital owes its success to two principles: the power of networks and the logic of what is known as the Pareto principle. This book is in a sense the story of two great economists, Ronald Coase and Vilfredo Pareto.

Coase, a Nobel Prize-winner, analyzed the modern economy in terms of the interaction of firms and markets: Firms make sense if the cost of doing things internally is lower than the cost of going to the market. Mallaby argues for the importance of a third force — networks.

In legal terms, venture funds are private limited partnerships that pool the partners’ money to fund particular ventures (they are very similar to the funds that financed individual sea voyages before the rise of the limited liability company). In practical terms, they are networks of contacts and expertise. Venture capitalists have achieved their disproportionate impact because they combine the strengths of both corporations and markets. They are like companies in that they can provide startups with management skills, corporate resources, and strategic vision, and like markets in that they are fluid and flexible. Networks don’t so much trump markets and corporations as supercharge both.

For his part, Pareto famously observed that 80% of the land in Italy was held by 20% of the people just as 20% of the pea pods in his garden produced 80% of the peas. In the world of the normal distribution curve, nearly all the observable variations in a data set cluster around the average and the tails of the curve get ever thinner until they disappear. In the world of the Pareto principle, or what was later called the power law, the tail extends and expands. The rich go on getting richer and the famous more famous. This is the world venture capitalists inhabit: The vast majority of startups end up being worth nothing, but a handful will become superstars, paying for all the dud investments many times over. “Venture capital is not even a home-run business,” Bill Gurley of Benchmark once remarked. “It’s a grand-slam business.”

Yet how do you build a successful industry on the power of networks and the logic of the Pareto principle? Venture capital is an inherently inexact business. There are no precise metrics to measure world-changing ideas in the same way that conventional investors can measure the book value of a company and hedge funders can discover hidden patterns in markets. VCs are in the business of making long-term bets on talent, but talent is impossible to measure with any exactitude. Sometimes jerks who appear to be geniuses turn out to be plain jerks. Sometimes people with astonishing ideas can’t hack it in business. Still, in reading Mallaby’s detailed narrative I counted five informal rules for success.

First: You need to be a consummate valley insider, preferably a former tech entrepreneur yourself, like Peter Thiel, the PayPal cofounder who went on to create the Founders Fund in 2005. The venture capital firm Accel even had a “90% rule” — they should know 90% of what founders are going to say before they open their mouths.

Second: You need to combine two qualities that are not often found together, revolutionary zeal and patience. VCs are in the business of disrupting established ways of doing things, but they usually have to wait years for their hunches to pay off. Today’s most revolutionary form of capital is also the most patient.

Third: You must understand that you are in the liberation business, freeing talent to do what it does best. Arthur Rock created the modern VC industry in the late 1950s because he set himself the task of freeing talented scientists from the prison of Shockley Semiconductor Laboratory, where they were being driven to distraction by William Shockley’s egomania, and then providing the liberated scientists with the resources that they needed to turn ideas into products.

Fourth: You must understand that liberation takes the form of management as well of money. VCs must provide entrepreneurs with management either in the form of advice, expertise, or even an outside CEO. This task is rendered more complicated by talent’s ambivalence about liberation: It’s not uncommon for entrepreneurs to resist the imposition of a management team, particularly a new CEO, even if they have repeatedly demonstrated that, left to themselves, they can’t run a whelk stall.

Fifth: You need to be willing to disrupt yourself with the same ruthless enthusiasm that you disrupt other industries, including dismissing older partners if their networks age and their ideas go out of fashion. Kleiner Perkins dominated the valley for a quarter of a century only to decline precipitously. Sequoia, one of the most persistently successful ventures, reminded itself of its mortality by producing a slide of “the departed”: partnerships that had flourished and then failed.

How secure is the valley’s global leadership of the industry that it invented? The most successful rising venture capital powers are small countries such as Singapore and Israel. Europe has failed miserably in getting into the game. The exception to this picture is the country that really matters, China. In the early 2000s the dot-com bust persuaded hungry venture capitalists to look elsewhere for growth, and no big market was growing faster than China. The Chinese, as is their way, quickly learnt from the masters, using their newfound skills as VCs not only to make money but to build strategic industries. In 2017 China overtook the US as the top country for venture returns measured by current returns on investment. China is leading the world in a growing number of new technologies, including drones, mobile payments, next generation 5G networking equipment, face recognition and AI. With the US military-industrial complex frozen in the 1950s, the Americans continue to pour billions into aircraft carriers while the Chinese mass-produce cheap, expendable, autonomous drones that, deployed in vast swarms, may render the floating hulks obsolete.

Mallaby nevertheless concludes that America’s venture-capital machine is “an enduring pillar of national power.” Here his argument is a bit too Whiggish for my taste: The 2020s are not the 1990s, and we deserve a bit of Oswald Spengler mixed in with our Macaulay. Is an economy based on the power law compatible in the long term with a political system based on democracy and equality? Is the domination of the tech industry by so many freaks and misfits a cause for concern? (Among the many extraordinary facts that our author has unearthed is that four of the six early PayPal employees built bombs when they were in high school.) And is there a connection between the Californian business elite’s success at producing technological marvels and the political elite’s failure to prevent social breakdown? I worry that the answers to these questions are dark ones, not least because, the last time I visited San Francisco, the streets were paved not with venture-capital gold but with human excrement and used syringes.

There is no doubt that California venture capitalists have been geniuses at thinking up new ways of making money, as Mallaby engagingly demonstrates. But when it comes to thinking about how to preserve a healthy civilization California’s politicians have been as thick as a brick.

BLOOMBERG OPINION

NATO sends ships, fighter jets to eastern Europe

MOSCOW/BRUSSELS — NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western “hysteria” in response to its build-up of troops on the Ukraine border.

The US Department of Defense in Washington said about 8,500 American troops were put on heightened alert and were awaiting orders to deploy to the region, should Russia invade Ukraine.

Tensions are high after Russia massed an estimated 100,000 troops in reach of its neighbor’s border, surrounding Ukraine with forces from the north, east and south.

Russia denies planning an invasion and Moscow is citing the Western response as evidence that Russia is the target, not the instigator, of aggression.

President Joseph R. Biden, pushing for transatlantic unity, held an 80-minute secure video call with a number of European leaders on Monday from the White House Situation Room to discuss the Ukraine crisis.

Mr. Biden told reporters “I had a very, very, very good meeting” with the Europeans, which included the leaders of Germany, France, Italy, Britain and Poland. He said there was “total unanimity.”

A White House statement said the leaders “discussed their joint efforts to deter further Russian aggression against Ukraine, including preparations to impose massive consequences and severe economic costs on Russia for such actions as well as to reinforce security on NATO’s eastern flank.”

Welcoming a series of deployments announced by alliance members in recent days, Secretary General Jens Stoltenberg earlier said NATO would take “all necessary measures.”

“We will always respond to any deterioration of our security environment, including through strengthening our collective defense,” Mr. Stoltenberg said in a statement.

He told a news conference that the enhanced presence on NATO’s eastern flank could also include the deployment of battlegroups in the southeast of the alliance.

So far, NATO has about 4,000 troops in multinational battalions in Estonia, Lithuania, Latvia and Poland, backed by tanks, air defenses and intelligence and surveillance units.

US officials said the Pentagon was finalizing efforts to identify specific units that it could deploy to NATO’s eastern flank.

One of the officials said up to 5,000 could be deployed, while a NATO diplomat said Washington was considering gradually transferring some troops stationed in western Europe to eastern Europe in the coming weeks.

Denmark, Spain, France and the Netherlands were all planning or considering sending troops, planes or ships to eastern Europe, NATO said. Ukraine shares borders with four NATO countries: Poland, Slovakia, Hungary and Romania.

A Polish official said Warsaw would draw the line at sending troops to Ukraine.

GROWING TENSIONS
As tensions grow, Britain said it was withdrawing some staff and dependents from its embassy in Ukraine, a day after the United States said it was ordering diplomats’ family members to leave. US diplomats are being allowed to leave voluntarily.

Kremlin spokesman Dmitry Peskov accused the West of “hysteria” and putting out information “laced with lies”.

“As for specific actions, we see statements by the North Atlantic Alliance about reinforcement, pulling forces and resources to the eastern flank. All this leads to the fact that tensions are growing,” he said.

“This is not happening because of what we, Russia, are doing. This is all happening because of what NATO and the US are doing and due to the information they are spreading.”

Global stock markets skidded as the prospect of a Russian attack quashed demand for riskier assets such as bitcoin, and bolstered the dollar and oil. The rouble hit a 14-month low against the dollar, and Russian stocks and bonds tumbled.

Russia has used its troop build-up to draw the West into discussions after presenting demands to redraw Europe’s security map. It wants NATO never to admit Ukraine and to pull back troops and weapons from former Communist countries in eastern Europe that joined it after the Cold War.

Washington says those demands are non-starters but it is ready to discuss other ideas on arms control, missile deployments and confidence-building measures.

Russia is awaiting a written US response this week after talks last Friday — the fourth round this month — produced no breakthrough. — Reuters

Bigger spend needed for net-zero world than assumed — McKinsey

REUTERS

THE EXTRA amount the world must spend each year to create a “net-zero” emissions economy is equivalent to half all profits currently generated by companies globally, consultancy group McKinsey estimated in a report on the energy transition.

It said its calculation was much higher than most other estimates by economists but stressed such investments could be lucrative and the long-term costs of not doing enough to tackle climate change would be greater.

“We find that the transition would be universal, significant, and front-loaded, with uneven effects on sectors, geographies, and communities, even as it creates growth opportunities,” it concluded.

Although time is running out, reaching net-zero carbon emissions by 2050 would give the world a chance of capping temperature rises at 1.5 degrees Celsius above pre-industrial levels — avoiding the worst fall-out from climate change.

The report’s main finding was that this would require spending on physical assets for energy and land-use systems of about $275 trillion, or $9.2 trillion per year on average — an annual increase of $3.5 trillion on current spending.

“The increase is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue and 7 percent of household spending,” it calculated.

The amount of cumulative spending would be equivalent to about 7.5% of world output from 2021-2050, far higher than the 2-3% of global output which climate economists polled by Reuters in 2021 estimated was needed each year.

McKinsey put the difference down to the fact that it was including a broad view of spending by households, businesses, agriculture and forestry as well as some continued spend on high-emissions assets like fossil fuel–based vehicles.

“While these spending requirements are large and financing has yet to be established, many investments have favorable return profiles and should not be seen as merely costs,” it added. Gernot Wagner, a climate economist at New York University not involved with the report, welcomed its attempt to come up with a comprehensive view of the investments needed.

“Climate policy means massive investment, and a massive rejigging of market forces from the current high-carbon and low-efficiency path onto a low-carbon and high-efficiency one,” said Wagner.

“We just spent trillions of dollars because of COVID relief. So, would it be feasible? Yes. Would it involve massive changes? Of course, that too. Where is the money coming from? Ratepayers, taxpayers or shareholders?”

The McKinsey report noted large uncertainties relating to how such a transition would play out and that some populations and sectors would be more exposed than others to disruption, notably poorer countries and those reliant on fossil fuels.

It added: “The economic and social costs of a delayed or abrupt transition would raise the risk of asset-stranding, worker dislocations, and a backlash that delays the transition.” — Reuters

Red packets from global banks become Hong Kong collectors’ items

UNSPLASH

AS MILLIONS of Hong Kongers prepare to hand out packets stuffed with cash to mark the lunar new year, the hottest envelopes are coming from an unlikely source: global investment banks.

The red packets, often embossed with gold or signs from the Chinese zodiac, are in huge demand on a vibrant secondary market even though banks give them away for free. This year’s design from UBS Group AG is commanding the highest price, selling for more than HK$10 ($1.30) per envelope on Facebook Marketplace and Carousell Pte. That’s more than 50% above second-ranked Credit Suisse Group AG and almost triple the price being paid for those from local rival HSBC Holdings Plc.

Red envelopes containing cash are an annual tradition across much of Asia as a way to bring good luck for the upcoming year of the tiger. Known as laisee in Cantonese and hongbao in Mandarin, they are handed out to everyone from colleagues and customers to friends and family. Designs can take months to evolve with banks often including classic emblems like flowers and goldfish. The ritual is taken so seriously that the final layout usually requires approval from the top executive ranks.

Zodiac symbols, such as the tiger used by Credit Suisse, are even more attractive for collectors because they only come around once every 12 years. Hong Kong companies are estimated to spend as much as HK$300 million ($38.5 million) annually on red packet printing.

While the era of electronic payments has seen the rise of so-called e-laisee, giving out delicately designed paper envelopes remains part of a decades-long practice to pay respect to local customs. Close to 7,000 packet listings were created in the first half of January, double the pace of the year earlier, said Kevin Huang, managing director of Carousell Hong Kong in an email response. The most popular bank searches were for UBS, HSBC and DBS Group Holdings Ltd.

Most buyers online are purchasing them as keepsakes. Saby Cheng, a buyer and seller on Carousell, said she has been collecting banks’ packets for at least four years. While she expected the branded items’ price to rise over the time, she kept most of them and would only resell the surplus.

Spokespeople for UBS, Credit Suisse, Goldman Sachs Group Inc., Deutsche Bank AG, DBS and Morgan Stanley declined to comment while representatives of HSBC and BNP Paribas SA didn’t respond to requests for comment. — Bloomberg

S.Korea’s GDP growth climbs to 11-year high, but recovery uneven

A MAN walks along a nearly empty street in Seoul, South Korea, July 12, 2022. — REUTERS

SEOUL — South Korea’s economy expanded at the fastest pace in 11 years in 2021 helped by a jump in exports and construction activity, tempering declines in capital investment and a slow recovery in the coronavirus-hit service sectors.

Record exports drove the rebound but swathes of the economy have fallen behind. Jobs are still vanishing across manufacturing and service sectors, a reminder that liberal President Moon Jae-in’s promises to boost employment have not materialized.

Hours after Bank of Korea (BOK) data showed the economy expanded 4.0% last year, hundreds of small business owners plan to gather near the National Assembly in Seoul to shave their heads in protest against social distancing rules that have hammered retail and service sector sales.

Sentiment remains pessimistic as South Koreans head to the polls for the 2022 Presidential election slated for March 9.

The main candidates from the ruling and opposition parties have seized on the discontent, making an equitable society a centerpiece of their policy visions.

The BOK expects gross domestic product (GDP) to grow 3.0% this year as Asia’s fourth-largest economy benefits from strength in semiconductor exports and increased public spending, though record domestic coronavirus disease 2019 (COVID-19) cases this week are a threat to consumption.

“Global demand for our chips is resilient and strong exports will keep (South Korea’s) growth momentum solid,” said Hwang Sang-pil, head of BOK’s Economics Statistics department.

“People are getting used to social distancing curbs. Activity was slower in December but the hit is smaller than before.”

The economy expanded a seasonally adjusted 1.1% in the October-December period from three months earlier, beating the 0.9% expansion tipped in a Reuters poll and up from a 0.3% rise in the third quarter.

From a year earlier, the economy expanded 4.1% in the fourth quarter, also beating a median forecast of 3.7% in the poll.

The BOK on Jan. 14 raised its benchmark interest rate to pre-pandemic levels and signaled it may tighten further as growth and inflationary pressures remain strong.

South Korea’s economy has had a sharp albeit uneven bounce from the coronavirus slump in 2020, when it contracted 0.9%, with exports expanding at their fastest annual pace in 11 years last year while the consumption recovery has been patchy due to social distancing curbs.

A recent Reuters poll of 20 economists forecast the economy will grow 2.9% this year, below the 3.0% projected by the BOK.

Tuesday’s data showed exports were the main driver of growth in the fourth quarter, jumping 4.3% on-quarter.

Growth was also helped by private consumption and construction investment, which expanded 1.7% and 2.9%, respectively.

The service sector grew 1.3% in the fourth quarter, stronger than the third quarter but slower than the second.

Capital investment declined 0.6% on-quarter, following a 2.4% drop in the preceding three months. — Reuters

Titlist Japan advances to quarters with win over Vietnam

JAPAN’S Yuika Sugasawa heads at goal. — REUTERS

Australia beats the Philippines, 4-0

DEFENDING champion Japan beat Vietnam 3-0 at the Women’s Asian Cup in Pune on Monday to book their place in the quarterfinals alongside Australia and South Korea.

Yui Narumiya scored twice, with her goals coming either side of an effort from former Asian Women’s Player of the Year Saki Kumagai.

Victory means Japan goes into their final game in Group C against South Korea on Thursday guaranteed a top-two finish.

Futoshi Ikeda’s side had to wait until the 38th minute to take the lead when Narumiya netted from close range, while Kumagai claimed a rare international goal from similar range five minutes into the second half.

Narumiya beat Vietnam goalkeeper Tran Thi Kim Thanh to her left in the 58th minute to put the seal on a comfortable win for the 2014 and 2018 winners.

The result ensures South Korea also advance after their 2-0 win over Myanmar earlier in the day.

The Koreans struggled to break down their defensively disciplined opponents but finally opened their account five minutes into the second half when Lee Geum-min netted following Cho So-hyun’s cushioned header.

Chelsea midfielder Ji So-yun was instrumental in the second goal six minutes from time when her header back across the target brushed against defender Tun Khin Mo Mo before crossing the line via the inside of the post.

The Australians confirmed their place in the next round when a decisive second-half showing saw Tony Gustavsson’s side defeat Philippines 4-0 in Mumbai.

After a goalless first half, Sam Kerr opened the scoring with a 51st-minute header before Dominique Randle’s own goal two minutes later put the Matildas in control of the Group B encounter.

Emily van Egmond and Mary Fowler were also on target as the Australians defeated a Philippines side directed by former Matildas coach Alen Stajčić.

The win, coupled with their 18-0 thrashing of Indonesia on the opening day, means the Australians are guaranteed a place in the last eight ahead.

Thailand kept alive their hopes of a quarterfinal place with a comfortable 4-0 win over Indonesia.

Kanyanat Chetthabutr scored a hat trick before Dee Makris scored her side’s fourth as the Thais moved level on three points with the Philippines, with Australia on top of the group.

The top two finishers in each of the three groups will advance to the knockout rounds along with the two third-place finishers with the best records.

The competition is doubling up as Asia’s qualifier for next year’s Women’s World Cup, with the continent awarded five guaranteed spots at the finals in Australia and New Zealand.

Australia qualifies for the World Cup as co-host while two other Asian nations will feature in an intercontinental playoff round. — Reuters

Overtime rules come under fire after Chiefs win playoff thriller

THE National Football League’s (NFL) overtime rules have again come under fire after the Buffalo Bills’ high-powered offense never got a chance to touch the ball in the extra period of their crushing playoff loss to the Kansas City Chiefs.

The game on Sunday was an instant classic between two of the most gifted NFL quarterbacks and included three lead changes in the final two minutes of regulation before Patrick Mahomes’ Chiefs prevailed 42-36 over Josh Allen’s Bills.

Unlike most other sports that give challengers from both sides an equal shot at winning in overtime (OT), the NFL uses a coin toss to determine which team gets the ball first.

Under the current overtime format, a team can win on the opening possession only if they score a touchdown. Otherwise, each team gets at least one possession.

After Allen made the wrong call on the coin toss, the Chiefs received the ball and Mahomes needed just eight plays to drive his team 75 yards down the field for the winning touchdown.

“If you are still arguing, in a game like that, it’s not in best interest of EVERYONE that both Mahomes and Allen get the ball in OT I don’t know what to tell you,” former NFL tight end Greg Olsen wrote on Twitter.

“In a game where neither team could stop the other at the end, a literal coin flip determined the ending.”

If a team gets a field goal on the opening possession of overtime, their opponent gets a possession and can win the game with a touchdown or tie it with a field goal. If both teams get field goals, the next team to score wins.

The NFL’s overtime format, which critics argue gives too much value to something as random as a coin toss, has come under scrutiny before, including on the game’s biggest stage.

Five years ago, the New England Patriots beat the Atlanta Falcons when they scored on the opening drive of the only Super Bowl to go to overtime.

In 2019, the Chiefs could only sit and watch as the Patriots advanced to the Super Bowl with a game-winning 75-yard touchdown drive to begin overtime.

That offseason the Chiefs proposed a change to the overtime rules with hopes of giving each team’s offense an opportunity to touch the football. — Reuters

Second half show against Philippines takes Australia into quarters

AUSTRALIA advanced to the quarterfinals of the Women’s Asian Cup on Monday after a decisive second-half showing saw Tony Gustavsson’s side defeat Philippines 4-0 in Mumbai.

After a goalless first half, Sam Kerr opened the scoring with a 51st-minute header before Dominique Randle’s own goal two minutes later put the Matildas in control of the Group B encounter.

Emily van Egmond and Mary Fowler were also on target as the Australians defeated a Philippines side directed by former Matildas coach Alen Stajčić.

The win, coupled with their 18-0 thrashing of Indonesia on the opening day, means the Australians are guaranteed a place in the last eight ahead of their final group game against Thailand on Thursday.

“The first half, they made it difficult for us to break them down, and in the second half we came out and capitalized quite early, which gave us good momentum for the last 45 minutes,” said Van Egmond.

“But credit to the Philippines, they came out and they were disciplined and made it tough for us. But we’re proud of our group of girls, to follow the game plan and get it done.”

South Korea moved a step closer to booking their place in the next round despite laboring to a 2-0 win over Myanmar.

Coach Colin Bell was forced to introduce Chelsea midfielder Ji So-yun from the bench 11 minutes from the end of the first half to invigorate his side as they struggled to break down their defensively disciplined opponents.

The Koreans finally opened their account five minutes into the second half when Cho So-hyun’s cushioned header across the six-yard box was controlled by Lee Geum-min before she scored.

Ji was instrumental in the second strike six minutes from time when her header back across goal brushed against defender Tun Khin Mo Mo before crossing the line via the inside of the post.

South Korea will confirm their place in the next round if Japan defeats Vietnam in the late game in Group C in Pune.

The top two finishers in each of the three groups will advance to the knockout rounds along with the two third-place finishers with the best records.

The competition is doubling up as Asia’s qualifier for next year’s Women’s World Cup, with the continent awarded five guaranteed spots at the finals in Australia and New Zealand.

Australia qualifies for the World Cup as co-host while two other Asian nations will feature in an intercontinental playoff round. — Reuters

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