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Stakeholder Maximization vs the Friedman Rule: What should business schools teach?

Milton Friedman’s view (1971) that the social responsibility of business is to maximize shareholder value has guided business behavior over the last 50 years. With the dividends or capital gains, shareholders can dump the stocks of firms that violate their ethical standards; and can consume goods productive of externality of their choice.

Governments, on the other hand, set the rules of the game according to the preference of society and address market failures (externalities). This separation rule makes pressing accountability easier. Shareholder value maximization (SHVM) within the parameters of the rules will benefit society.

Arrayed against SHVM is the increasingly popular ethic of stakeholder value maximization (STVM). What to inculcate in our business schools? A virtual conference organized by Philippine Institute for Development Studies (PIDS) partly tackled this issue. The star of the show was Prof. Luigi Zingales of the University of Chicago, one of the advocates of re-thinking of the Friedman orthodoxy.

“Stakeholder” means many things to many people: it includes everyone the firm touches: workers, consumers, and the whole world when it comes to externalities. The set of pied pipers seems ill-defined to start, prompting moderator Romy Bernardo’s quip about serving “too many masters.” Romy’s ruminations and moderator Dr. Maggie Debuque’s review piece “Rethinking Capitalism” helped this piece mightily. I was just an interested kibitzer. One issue uncovered by the webinar, viz., sustainability, is our focus here. Let’s start with an example.

Meralco is the franchised monopoly power distributor serving Metro Manila and environs. It operates at a price-quantity combination (pr, qr) approved by the Energy Regulatory Commission or ERC (different than the unregulated combination [pm, qm] in the graph; see Figure 1).

ERC’s intervention enlarges consumer welfare by “Additional Consumer’s Surplus” (no shade) and reduces social waste (smaller Deadweight Loss [DWL hereon], black) than when unregulated.

Consider the following: a power consumer advocacy group, Kuryente.com proposes to Meralco the following deal: You produce at perfectly competitive combination (c, qc) (see Figure 1) and we promise to pay you your previous profit (shaded rectangle) plus (1/2) DWL; Meralco is strictly better off but so are consumers who collect the following: (CS + Add’l CS + (1/2) DWL). Should Meralco accept?

If Meralco is a stakeholder maximizer, “Yes.” That is because the contract will result in zero social waste (DWL = 0) which maximizes stakeholder value. But will Meralco survive the deal as a market player? No!

Kuryente promises to pay Meralco “firm profit + (1/2) DWL” by collecting prorated contributions from consumers. Can Kuryente deliver? No! If some or all power consumers resist paying back, the transactions cost of collecting will be so high, it will eat up all the potential gains of the bargain (the DWL). Kuryente’s promise becomes “cheap talk.” And acceptance will put Meralco on the path to bankruptcy or a government takeover.

Kuryente, however, can deliver if every power consumer is also a stakeholder maximizer eagerly paying for what is good for the whole community. Belief in such elevated humanity is noble but naive. Recall the overambitious but long discarded adage, “From each according to his capacity, to each according to his need.”

On the consumer side, suppose two firms otherwise identical produce same commodity X, say, beef. Cow-based CO2 emission is about 15% of global CO2 emission. Stakeholder maximizer Firm 1 pays extra for pricier new calcium nitrate-boosted feeds that produce less methane in cow farts and burps while Firm 2 does not. Thus, Firm 1’s cost is higher per unit than Firm 2’s. Will consumers buy the pricier Firm 1 beef over the lower price Firm 2 beef? Yes, if beef consumers are themselves stakeholder maximizers (see also, Philippine Daily Inquirer, Oct. 28, on this). But betting real money on such “ifs” is foolhardy.

On the financial side, will the equity investors push the price of Firm 1 stocks higher to match Firm 2’s even if Firm 2 pays higher dividends? Yes, if investors are also stakeholder maximizers. Once more, hard-nosed businessmen don’t bet on such “ifs.”

The message here is clear: stakeholder maximization is sustainable only if the ethic is universally shared. Only when roguery has vanished from the land can the police be dispensed with. If only reality was kinder to utopias.

Hart and Zingales (2017) wisely batted for a halfway target of “shareholder welfare” (what makes shareholders happy rather than what makes shareholders rich). If Firm 1 shareholders are slightly altruistic, and allowed to vote effectively, Brocardo, Hart and Zingales (2020) show that they will force Firm 1 to maximize shareholder welfare. But If Firm 2’s shareholders are not kindred spirit, Firm 1 will still lose out to Firm 2 in the market. Whether “shareholder welfare” or “stakeholder value,” market sustainability requires universal sharing of the ethic.

In the post-WWII era, the compromise was government ownership of commanding heights of the economy such as Meralco. The state collects taxes to subsidize the operations of such entities. Not being profit-oriented, state-owned corporations will “theoretically” operate at (c, qc). But this theory crumbled when the rubber hit the road: Schumpeter’s “creative destruction” folded its tent resulting in stunted innovation and aborted rebirthing; “soft budget constraint” for state firms fueled bad and/or self-serving decisions on manning and investment. These battered the sails of the commanding heights economy of Great Britain and the Socialist sphere. The Thatcher revolution put finis to the endeavor.

The Friedman rule is vulnerable where the state-market separation is breached — massive corporate resources can bend political rules in their favor. Which is why Zingales (2021) batted for the Friedman rule to hold only for small, but not for large, corporations. In weak rule-of-law jurisdictions, the firewall between rule-making and profit-seeking is porous. And the Philippines is a weak rule-of-law jurisdiction. According to the WJP 2021 Rule of Law index, the Philippines now ranks at No. 102, showing a steady decline from No. 51 in 2015. Thus, questions of the sort beg ventilation: Is a certain high-flying businessman’s unusually rapid rise to economic power due to remarkable business acumen maximizing shareholder value or due to some cozy exclusive connection with the sitting powers? Was the Pharmally P8-billion contract truly above board or did it take some extra-curricular avenues?

The central question here, however, is different: Would STVM make a difference in a weak rule-of-law jurisdiction? Once more, if the ethic is not universally shared and especially not by the sitting political power, it won’t make a difference in market economies. If one prospective high-flying businessman shuns undue favors, another one will come forward or will be created, who won’t.

The requirements for sustainable STVM in market economies are so onerous the ethic is utopian. The coalition of the virtuous will collapse if remnants of villainy remain. But villainy, like death and taxes, will always be with us. Life is colorless otherwise. This means that the Friedman rule remains properly hinged. There will always be a place for the likes of Bill and Melinda Gates Foundation in the market economy.

Business schools take note.

References: (not included in published material)

Debuque, Margarita, 2021. “Rethinking capitalism,” PIDS monograph.

Hart and Zingales, 2017. “Companies should maximize shareholder welfare not shareholder value,” Journal of Law Finance and Accounting 2 (2), 247-75.

Brocardo, Hart and Zingales, 2020. “Exit vs. voice” WP #2020-114, Becker Friedman Institute for Economics, University of Chicago.

Friedman, M., Sept. 13, 1970. “The social responsibility of business is to increase its profits,” The New York Times.

Zingales Luigi, October 2021. “Resetting capitalism,” Powerpoint presentation for PIDS Webinar, September 2021.

Philippine Daily Inquirer, Oct. 28, 2021. “Gas giants: Can we stop cows from emitting so much methane?”

 

Raul V. Fabella is a retired professor of the UP School of Economics, a member of the National Academy of Science and Technology and an honorary professor of the Asian Institute of Management. He gets his dopamine fix from bicycling and tending flowers with wife Teena.

A story bigger than Pharmally

TAMAS TUZES KATAI-UNSPLASH

We studied COVID-19 government contracts worth P20 billion. We found more red flags and systemic risks that the Commission on Audit (CoA) and the Senate should investigate.

In the time of a pandemic, the national government needs a resilient procurement system to enable the timely delivery of public services and prevent corrupt and fraudulent behavior.

In this article, we discuss findings from our research, “Strengthening Procurement in the Time of a Pandemic: Evidence from the Philippines.” I co-authored this paper with Laurence Go, John Michael Lava, James Russell Ramos, Reinabelle Reyes, Ella Rosales, and Jose Rueda IV, with the help of more than 60 volunteers and contributors at the Citizens’ Budget Tracker and WeSolve Foundation. The study was funded by Hivos Southeast Asia’s Open Up Contracting Program. The full study can be read via http://wesolve.ph/research/strengthening-procurement. For transparent and accountable research, we published our full data set and code via http://bit.ly/phlcovidcontracts.

Our team looked at a sample of P20 billion contracts, nearly 60% of the P36 billion publicly available COVID-19 government contracts as of Aug. 3, 2020. Our study spans 2,832 items from 581 contracts, purchase orders, notices of award, and annual procurement plans published on the Government Procurement Policy Board website, the official repository of procurement documents for the Bayanihan to Heal as One Act.

Because our analysis covers only limited publicly available documents, our team cannot conclude fraud or corruption. But our analysis can identify red flags in transactions, suppliers, and procuring entities.

We find that the story is much bigger than Pharmally Pharmaceutical, the contractor being investigated by the Senate for its lack of financial capacity to deliver billions of pesos of medical goods.

The Senate and the CoA should look beyond Pharmally and investigate these five red flags and risks in our procurement system, so we can make better use of taxpayer funds in future purchases:

First, we estimated that taxpayers could have saved P319 to P550 million if items had been bought at typical prices.

Of our sample worth P20 billion from March to August 2020, we were able to analyze only P5.4 billion worth of goods from priority goods that had comparable market prices. From this set of transactions, we found items bought for up to 66 times the typical or median market prices, and up to 52 times the typical or median prices of comparable government contracts. Here are some examples:

• Surgical masks bought at P1,400 per piece versus P21 median price per piece.

• RT-PCR test kits bought at P344,000 per kit versus P285,914 median price per kit.

• N95 masks bought at P641 versus P150 median price per unit.

• Blood pressure monitors bought at P9,000 versus P1,360 median price per unit.

• Cooking oil bought at P988 per liter versus P50 median price per liter.

While quality, import costs, or other factors may account for some of the differences that we document in our analysis, we believe that identifying these items will help concerned authorities prioritize their limited time and resources. These transactions, which we flag in our dataset, warrant a second look from authorities to ensure that the procurement of these items was judicious.

Second, we found that many contracts were not specified properly. Sixty-six percent of goods representing P13.3 billion did not have sufficient descriptions or specifications to enable price or quality comparisons.

Procuring entities should properly specify contracts to prevent price gouging and to ensure our taxes are spent well. To illustrate, we cannot compare prices involving a contract for a “mask,” an “N95 mask,” and a “personal protective equipment set.” General descriptions make procurement opaque; procurement watchers from civil society also cannot make prices, quality, and delivery comparisons of these contracts.

We quantified 15 different types of risks from the 581 contracts we studied. Most contracts had missing basic information, inconsistent amounts, broken web links, or unclear data or signature in the uploaded documents. Some transactions had significant typographical or mathematical errors and differences in amounts across the documents they uploaded. But we also did find examples of good documentation from agencies like the Bangko Sentral ng Pilipinas and the Department of Agriculture.

Third, market concentration affects how prices are negotiated. The buying power of procuring entities and the selling power of suppliers affect how price and quality are negotiated during negotiated procurement.

From the demand side, the top 10 procuring entities accounted for P18 billion or 88% of total sample value as of Aug. 3, 2020. The Department of Budget and Management Procurement Service (DBM-PS) accounted for P14 billion or 70% of our total sample value. We would therefore expect procuring entities to do their due diligence in selecting suppliers and researching market prices.

From the supply side, the top 10 of 435 suppliers represented 66% of our P20 billion sample value as of Aug. 3, 2020. Pharmally Pharmaceutical topped this list. There were three suppliers in our sample with foreign addresses which had high-value transactions worth at least P300 million as of Aug. 3, 2020. These suppliers with foreign addresses represented more than a tenth of the value of emergency procurement as of Aug. 3, 2020.

Fourth, three suspended suppliers were able to participate in negotiated procurement. Some procuring entities entered into contracts with suspended suppliers. More than P700 million of government money was exposed to these contracts, though these contracts are already in the process of cancellation. According to the government’s “consolidated blacklisting report,” accessed September 2020:

1. Company A “did not fulfill delivery of suppliers for drugs and medicines” with a city and had been sanctioned with a two-year blacklisting. But it was able to initiate a P700+ million contract that has since been in the process of cancelation by the DBM.

2. Company B was sanctioned with a one-year suspension for failing to complete more than three-fifths of the contract with a national government agency. But it was able to enter into a P1-million coronavirus-related contract.

3. Company C was sanctioned with a one-year suspension because a previous contract was terminated when it “defaulted” on a P100+ million contract with a national government agency. But it was able to enter into a small contract of less than P1 million.

As of Dec. 18, 2020, these three companies had served their full period of suspension. While Company A’s COVID-19-related contract has since been in the process of cancelation and companies B and C are a small proportion of the total value, these three cases point to risk of exposure of government to future suspended suppliers, if the supplier information is not integrated into the emergency procurement database.

Fifth, many transactions had inconsistent or missing dates or times across their uploaded documents. There were some transactions that were approved on a weekend. More than 10% of the contracts had dates of awards that were inconsistent with their other supporting documents. The proper order of approvals is needed to ensure people follow the proper process.

These are systemic risks that are critical for the Joint Congressional Oversight Committee in the House and Senate and the CoA to investigate.

 

Kenneth Isaiah Ibasco Abante is the coordinator of the Citizens’ Budget Tracker and a member of the Right to Know, Right Now! Coalition, in which Action for Economic Reforms is a convener.

Is Asia and the Pacific ready for the global climate stage?

WWW.UNEP.ORG

AS THE LEADERS of Asia and the Pacific prepare to head to Glasgow for the 26th United Nations Climate Change Conference of the Parties (COP26), they can be sure that our region will be in the spotlight: many of the most vulnerable countries to the impacts of climate change are located here; the seven G20 members from this region are responsible for over half of global GHG (greenhouse gas) emissions; and five of the 10 top countries with the greatest historic responsibility for emissions since the beginning of the 20th century are from Asia.

THERE IS AN URGENT NEED TO RAISE AMBITIONS
The starting point is not encouraging, however. A joint study by ESCAP, UNEP, and UN Women (United Nations Economic and Social Commission for Asia and the Pacific, United Nations Environment Program, United Nations Entity for Gender Equality and the Empowerment of Women) shows that the Asia-Pacific region is falling even further behind in its efforts: greenhouse gas emissions are projected to increase by 34% by 2030 compared to 2010 levels. Getting the 30 Asian and Pacific countries that have so far updated their Nationally Determined Contributions (NDCs) to drastically raise ambitions and securing adequate NDCs from the other 19 who have yet to submit will determine if the region — indeed the world — can maintain any hope of keeping the temperature increase well below two degrees.

MOMENTUM FOR CLIMATE ACTION IS BUILDING
There is some reason for hope. Leaders have been lining up to make their carbon neutrality pledges, shrinking the gap from commitment to action across the sectors that drive the region’s development. With major players moving away from foreign investments in coal, momentum is building for a transition to cleaner energy sources. There is a growing share of renewables in the energy mix, and going forward we should support increasing subregional and regional energy connectivity to enable the integration of higher shares of renewable energy. However more support to exporters is needed to wean them off lucrative coal and fossil fuel reserves, supported by long-term low emissions development strategies (LT-LEDS). The shift to sustainable transport has been slow but the EV-mobility (electric vehicle mobility) is growing. Countries are also emphasizing low-carbon mobility in a new regional action plan under negotiation ahead of a ministerial conference on transport later this year. Local government commitments to carbon neutrality also support the greening of our cities. The ESCAP Climate-smart Trade and Investment Index (SMARTII) and carbon-border adjustment mechanisms shows that Asian and Pacific economies have significant room to make their trade and investment more climate-smart. A growing number of countries include climate and environment-related provisions in trade agreements. More are requiring energy efficiency labeling and standards on imports. Digitalization of existing trade processes also helps reduce CO2 emissions per transaction and should be accelerated, including through the regional UN treaty on cross-border paperless trade facilitation.

The ESCAP Sustainable Business Network is crafting an Asia-Pacific Green Business Deal in pursuit of a “green” competitive advantage, while companies are responding to greater shareholder and consumer pressure for science-based targets that align businesses with climate aspirations. Entrepreneurs, SMEs, and large industries in the region could adopt this new paradigm, which would also enable countries to meet their commitments for sustainable development.

SUPPORTING AMBITION WITH THE POWER OF FINANCE
Such ambitious climate action will require a realignment of finance and investment towards the green industries and jobs of tomorrow. Innovative financial instruments and the implementation of debt-for-climate swaps can help to mobilize this additional funding. Putting a price on carbon and applying carbon pricing instruments will create liquidity to drive economic activity up and emissions down. Mandatory climate-related financial disclosure will help investors direct their investments towards climate action solutions that will help manage risks associated with climate-related problems.

PEOPLE-CENTERED ACTION, FOCUSING ON GROUPS IN VULNERABLE SITUATIONS
It is clear from the science and the frequency of disasters in the region that time is not on our side. The combination of disasters, pandemic, and climate change is expanding the number of people in vulnerable situations and raising the “riskscape.” Countries are ill-prepared for complex overlapping crises; the intersection of COVID-19 with natural hazards and climate change remains poorly understood and gives rise to hotspots of emerging and intensifying risks. Building resilience must combine climate mitigation efforts and investments in nature-based climate solutions. Moreover, it also requires increasing investments in universal social protection systems that provide adequate benefits over the lifecycle to people and households. The active engagement of women and girls is critical to ensuring inclusive climate action and sustainable outcomes.

THE WAY FORWARD
Without concerted action, carbon neutrality is not within the reach of the Asia-Pacific region by 2050. All stakeholders need to collaborate and build a strong case for decisive climate action. Our leaders simply cannot afford to go to Glasgow with insufficient ambition and return empty handed. Since it was founded nearly 75 years ago, ESCAP has supported the formation of strategic alliances that have lifted millions out of poverty and guided the region to enabling a better standard of life. The time is right for such an alliance of governments, the private sector and financial institutions to help turn the full power of the region’s ingenuity and dynamism into the net zero development pathway that our future depends on.

 

Armida Salsiah Alisjahbana is the United Nations under-secretary-general and executive secretary of the Economic and Social Commission for Asia and the Pacific (ESCAP).

Letter to the Editor (10/31/21)

(This letter refers to Bienvenido Oplas, Jr.’s column “High deaths, low births, reduced smoking and the WHO,” which came out on Oct.  25;  https://www.bworldonline.com/high-deaths-low-births-reduced-smoking-and-the-who/. — Ed.)

Dear Editor,

I write to commend you for adding an editorial note about the safety of COVID-19 vaccines despite Mr. Oplas’s claims that the increase in recorded deaths may have been due to the COVID vaccinations. There are other inaccuracies in his statements regarding non-communicable diseases (NCD).

Oplas says deaths from NCD have flatlined “even as people are getting wealthier and consume more processed and sugary food and drinks, and consume more alcohol and tobacco.” Yet, he contradicts himself by noting that smoking prevalence is declining, citing the example of the Philippines. Clearly, there are less people smoking, and not more, and this has contributed to the flattening of NCD mortality figures. In the Philippines, the decline in smoking is largely due to the sin tax reform that significantly raised cigarette taxes and prices in 2013 with further tax increases since then. Still, millions of Filipinos remain addicted to nicotine and suffer disease, poverty, and early death from smoking, so it is only right that governments and the World Health Organization continue to fight the tobacco pandemic.

Another false claim of Oplas is that tobacco control measures such as taxation created the illicit cigarette market. He cites World Bank data but failed to cite the World Bank publication on tobacco taxation and illicit trade: “Confronting Tobacco Illicit Trade: A Global Review of Country Experiences” (https://www.worldbank.org/en/topic/tobacco/publication/confronting-illicit-tobacco-trade-a-global-review-of-country-experiences), which includes the case of the Philippines and clearly states that tobacco taxes play only a minor role in illicit trade. In fact, many countries with low tobacco taxes have high rates of illicit trade, while many countries with high tobacco taxes and prices have low rates of illicit trade. Global evidence shows corruption as a primary driver of the illicit market and the complicity of tobacco companies in the black market.

This misinformation by Oplas reminds me of the time I heard him misinform our congressmen by claiming that plain (standardized) packaging of tobacco products in Singapore had led to increased illicit trade, when in fact Singapore had legislated but not yet implemented its plain packaging law. (Underscoring by the letter writer. — Ed.)

Oplas concludes by griping that tobacco industry front groups are being excluded from the Conference of Parties to the WHO Framework Convention on Tobacco Control (FCTC), despite the P78 billion of excise tax revenues collected from tobacco products. Of course, he disregards the fact that the economic costs of smoking for just four diseases are at least P210 billion per year. Also, the FCTC is a tobacco control treaty, so it is logical to exclude the tobacco industry and those promoting its interests. Shouldn’t drug pushers be excluded from a drug control treaty?

Oplas and his organization (Minimal Government Thinkers), as well as the Property Rights Alliance that published his paper, are mouthpieces of the tobacco industry to misinform about tobacco taxation, plain packaging, and other evidence-based tobacco control measures.

Sincerely,

Ulysses Dorotheo, MD, FPAO
Executive Director,
Southeast Asia Tobacco
Control Alliance

Rejoinder to the letter by Dr. Ulysses Dorotheo

1. “Clearly, there are less people smoking… contributed to the flattening of NCD mortality figures”

Yes, less smoking of legal tobacco as many smokers shift to illegal tobacco. Cong. Joey Salceda has the number — P30 billion per year of tobacco tax revenues gone due to illicit tobacco in the Philippines. See “PH losing P30B annually due to cigarette smuggling — Salceda” (Philippine Daily Inquirer, March 1, 2021).

Since taxes comprise about half of retail prices, that means some P60 billion in street value of illicit tobacco goes to the smugglers, criminals, terrorists and their protectors in governments. Are the more tobacco taxes groups (MTTGs) happy with this?

2. “failed to cite the World Bank publication on tobacco taxation and illicit trade… states that tobacco taxes play only a minor role in illicit trade.”

Tobacco taxes kept rising and government estimates of revenue losses from tobacco smuggling by the NCIPR-IPO (National Committee on Intellectual Property Rights-Intellectual Property Office): P19.9 billion in 2014, P17.9 billion in 2015, P20.25 billion in 2018. See “Special Report: Government cracks down on cigarette smuggling, counterfeiting” by Mary Grace Padin, Philippine Star, March 4, 2019.

3. “Singapore had legislated but not yet implemented its plain packaging law.”

Illicit trade in Singapore started even before plain packaging was implemented. Both legal and illegal tobacco would look the same, so the illegal can sell at very low prices, attract more smokers, not less.

4. “the economic costs of smoking for just four diseases are at least P210 billion per year.”

If MTTGs succeed in zero smoking of legal tobacco, meaning these tobacco excise tax revenues of P77 billion in 2019, P77.9 billion in 2020, P82.2 billion projected in 2021, and P94.8 billion projected in 2022 — become zero, zero contribution to UHC (universal healthcare), will they be happy? I doubt it.

5. “mouthpieces of the tobacco industry to misinform about tobacco taxation, plain packaging.”

Wrong. We are mouthpieces of limited government, low taxes, free trade, rule of law, and personal responsibility.

Is it possible that the Southeast Asia Tobacco Control Alliance and MTTGs are the mouthpieces of the Bloomberg Philantrophies lobby? Mouthpieces of more government, more taxes, health is not personal responsibility, only state responsibility.

World makes new bid to avert climate disaster

REUTERS

GLASGOW —- World leaders will start descending on the Scottish city of Glasgow on Sunday for the United Nations COP26 summit, billed as a make-or-break chance to save the planet from the most calamitous effects of climate change.

Delayed by a year because of the COVID-19 pandemic, COP26 aims to keep alive a target of capping global warming at 1.5C above pre-industrial levels — the limit scientists say would avoid its most destructive consequences.

Meeting that goal, agreed in Paris to much fanfare in 2015, will require a surge in political momentum and diplomatic heavy-lifting to make up for the insufficient action and empty pledges that have characterized much of global climate politics.

The conference needs to secure more ambitious pledges to further cut emissions, lock in billions in climate finance, and finish the rules to implement the Paris Agreement with the unanimous consent of the nearly 200 countries that signed it.

“Let’s be clear — there is a serious risk that Glasgow will not deliver,” UN Secretary General Antonio Guterres told leaders of the Group of 20 (G20) rich nations last week.

“Even if recent pledges were clear and credible — and there are serious questions about some of them — we are still careening towards climate catastrophe. “

Countries’ existing pledges to cut emissions would see the planet’s average temperature rise 2.7C this century, which the UN says would supercharge the destruction that climate change is already causing by intensifying storms, exposing more people to deadly heat and floods, killing coral reefs and destroying natural habitats.

The signals ahead of COP26 have been mixed. A new pledge last week from China, the world’s biggest polluter, was labeled a missed opportunity that will cast a shadow over the two-week summit. Announcements from Russia and Saudi Arabia were also lackluster.

The return of the United States, the world’s biggest economy, to U.N. climate talks will be a boon to the conference, after a four-year absence under President Donald Trump.

But like many world leaders, President Joseph R. Biden will arrive at COP26 without firm legislation in place to deliver his own climate pledge as Congress wrangles over how to finance it and new uncertainty about whether US agencies can even regulate greenhouse gas emissions.

Leaders of the G20 meeting in Rome this weekend will say they aim to cap global warming at 1.5C, but will largely avoid firm commitments, according to a draft statement seen by Reuters.

The joint statement reflects tough negotiations, but details few concrete actions to limit carbon emissions.

The G20, which includes Brazil, China, India, Germany and the United States, accounts for about 80% of global greenhouse gas emissions, but hopes the Rome meeting might pave the way to success in Scotland have dimmed considerably.

SHADOW OF COVID-19
Adding to the challenging geopolitical backdrop, a global energy crunch has prompted China to turn to highly polluting coal to avert power shortages, and left Europe seeking more gas, another fossil fuel.

Ultimately, negotiations will boil down to questions of fairness and trust between rich countries whose greenhouse gas emissions caused climate change, and poor countries being asked to de-carbonize their economies with insufficient financial support.

COVID-19 has exacerbated the divide between rich and poor. A lack of vaccines and travel curbs mean some representatives from the poorest countries cannot attend the meeting.

Other obstacles — not least, sky-high hotel rates in Glasgow — have stoked concerns that civil society groups from the poorest nations which are also most at risk from global warming will be under-represented.

COVID-19 will make this U.N. climate conference different from any other, as 25,000 delegates from governments, companies, civil society, indigenous peoples, and the media will fill Glasgow’s cavernous Scottish Event Campus.

All must wear masks, socially distance and produce a negative COVID-19 test to enter each day — meaning the final-hour “huddles” of negotiators that clinched deals at past climate talks are off the table.

Attendees who test positive must quarantine for 10 days — potentially missing most of the conference.

World leaders will kick start COP26 on Monday with two days of speeches that could include some new emissions-cutting pledges, before technical negotiators lock horns over the Paris accord rules. Any deal is likely to be struck hours or even days after the event’s Nov. 12 finish date.

Outside, tens of thousands of protesters are expected to take to the streets to demand urgent climate action.

Assessing progress will be complex. Unlike past climate summits, the event won’t deliver a new treaty or a big “win” but seeks to secure smaller but vital victories on emission-cutting pledges, climate finance and investment.

Ultimately success will be judged on whether those deals add up to enough progress to keep the 1.5C goal alive – still a long way off.

Since the Paris accord in 2015, scientists have issued increasingly urgent warnings that the 1.5C goal is slipping out of reach. To meet it, global emissions must plummet 45% by 2030 from 2010 levels, and reach net zero by 2050 – requiring huge changes to countries’ systems of transport, energy production, manufacturing and farming. Countries’ current pledges would see global emissions soar by 16% by 2030.

“The way I think about this is, there is a meteor coming at our planet and it has the very real potential of wiping out humanity,” said Christiana Figueres, the former U.N. climate diplomat who led the talks that yielded the Paris Agreement. — Reuters

Thailand’s reopening is a major test for pandemic-era tourism

REUTERS

THAILAND is ending quarantine for vaccinated visitors from more than 60 countries, the biggest reopening gamble in Asia and one that could mark a turning point for the revival of mass tourism during the pandemic.

Starting Monday, fully-vaccinated travelers flying in from the US, China, Singapore, Japan, India and most of Europe will be able to freely tour Thailand’s sandy beaches, temples and tropical islands after testing negative for COVID on arrival. Inoculated visitors from countries not on the list can travel to Bangkok and 16 other regions, but they will be confined to their initial destination for the first seven days before being allowed to travel elsewhere.

It’s the biggest step Thailand has taken to welcome back a slice of the nearly 40 million visitors it hosted the year before the pandemic, and is billed as a “fight to win foreign tourists” as countries from Australia to the UK also loosen Covid curbs. A successful Thai experiment could help salvage its battered economy and serve as a model for countries wary of a virus resurgence from reopenings.

“We’re not expecting the rooms to be full overnight, but it’s a great first step,” said John Blanco, general manager at luxury hotel Capella Bangkok. “All countries are taking the same posture — that is, we need to learn to live with Covid. It’s a general theme around the world.”

Hotels in places such as the US, Mexico and Turkey have reported higher occupancy after easing travel restrictions, but the rush may not be as strong for Thailand given how low it sits on the Covid resilience ranking, especially for tourists who still have to quarantine on returning home.   

While Thailand fumbled in its previous reopening attempts due to a virus flareup and tardy progress in its vaccinations, it has had some success with the so-called Phuket Sandbox experiment that allowed vaccinated visitors to travel to other parts of the country after a limited stay on the resort island. Almost 60,000 tourists have visited the country since the plan started in July.

To boost the confidence of tourists and the public, Thailand is linking the reopening to a higher vaccination rate, which “is a measured approach that has a lot of logic to it,” according to Amar Lalvani, chairman of US boutique hotel operator Standard International.

“You have examples in places like Mexico and Turkey, which have been quite wide-opened and very low on restrictions, and their business is actually booming,” Mr. Lalvani said. “Countries in Asia, Thailand included, have prioritized public health. Now that you have that under control, you’re going to feel more comfortable opening up.”

The travel industry is already preparing for the Thai reopening. International carriers have scheduled more flights to the Southeast Asian nation, while hotels and beach resorts are offering bargains and the island of Phuket is hosting a New Year’s Eve party featuring Italian opera tenor Andrea Bocelli.

Academy award winner Russell Crowe, who was in Phuket and Bangkok for a film shoot, lauded Thailand’s tourism experiments and tweeted about the country’s plan to welcome back tourists.

While Chinese tourists, who made up almost a third of the total arrivals before the pandemic, will be deterred by 21-day quarantine on return home, the reopening may still draw hundreds of thousands of visitors and stave off another year of economic contraction. Thailand’s economy shrunk 6.1% last year, the worst performance since the Asian financial crisis in 1998.

There are also fears the wider reopening could worsen the COVID outbreak, with Thailand already reporting about 8,000 new infections a day. More than 90% of the participants in a recent survey had some concerns about the Nov. 1 move.

Still, for Thailand’s pandemic-hit economy and millions of people who depend on tourism for a living, it’s never too early for the return of tourists.

“The economic sector, which is the heart and affects the people of the whole country, is important,” said Sanan Angubolkul, Chairman of the Thai Chamber of Commerce. “Opening up the country is necessary. Because that is the way to ensure the survival of the people and the country.” — Bloomberg

US, EU strike trade deal to remove steel, aluminum tariffs

REUTERS

THE US and the European Union (EU) have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year.

Negotiators reached an agreement Saturday as they worked to balance market demands and climate change, US officials said, speaking on the sidelines of a Group of 20 summit in Rome. Bloomberg News reported earlier that the two sides were on the brink of an agreement.

The two sides were working hard to reach a deal before Dec. 1, when the European retaliatory tariffs were set to double. The 25% tariffs will apply to EU exports beyond 3.3 million tons, according to two people familiar with the talks, who asked not to be identified before a formal announcement.

“We’ve reached an agreement with the EU which maintains the 232 tariffs, but allows limited volumes of EU steel and aluminum to enter the US tariff-free,” said US Commerce Secretary Gina Raimondo told reporters on Saturday. “It was a very successful negotiation and we agreed on a way forward for how to face our shared challenge which is global excess capacity mainly by China.”

The deal marks a significant moment in repairing the US trade relationship with Europe, a historic ally, after Donald Trump’s disruptive presidency. The EU from the start of the tariffs in 2018 rejected the premise that production from the bloc presents a national security threat to the US.

US officials said that the deal involves so-called tariff-rate quotas, which allows countries to export specified quantities of a product to other nations at lower duty rates, but subjects the shipments above a pre-determined threshold to higher tariffs.

A US official told reporters on Saturday that the specific levels at which tariffs would apply would be announced later, and that they are in line with historic levels. The US imported 2.5 million tons of steel from the EU last year and 3.9 million tons in 2019, down from 5 million tons each in 2018 and 2017.

“The agreement, ultimately, to negotiate a carbon-based arrangement on steel and aluminum trade addresses both Chinese over production and carbon intensity in the steel and aluminum sector,” National Security Adviser Jake Sullivan said.

“We are also experiencing unprecedented supply-chain disruption and we fully expect this agreement will provide relief in the supply chain and drive down cost increases as we lift the 25% tariffs and increase volume,” she said.

The deal contains agreed rules to prevent steel from China from being re-exported tariff-free to the US via the EU, the US officials said. The US and EU also agreed to negotiate a carbon-based arrangement on steel and aluminum trade and create greater incentives for reducing carbon intensity in production of the metals, they said.

The United Steelworkers union applauded the deal, saying it will help keep US industry competitive.

“It will also provide a much-needed opportunity to address the non-market predatory practices of China and other countries that have distorted global markets, while also spurring a dialogue over climate concerns stemming from countries whose industries are far more carbon intensive than those in the United States and the EU,” the group said in a statement.

The dispute started in 2018, when Mr. Trump imposed duties on steel and aluminum from Europe, Asia and elsewhere, citing risks to national security. The EU subsequently retaliated, targeting products including Harley-Davidson, Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey. With Saturday’s deal, the EU agreed to drop those retaliatory tariffs.

“Lifting this tariff burden on American whiskeys not only boosts US distillers and farmers, it also supports the recovery of EU restaurants, bars and distilleries hit hard by the pandemic,” Chris Swonger, head of the Distilled Spirits Council of the US, an industry group, said in a statement.

Jake Colvin, president of the National Foreign Trade Council, a business-lobbying group that had advocated for removal of the steel duties, said that while the agreement is a step in the right direction, the use of tariff rate quotas will still cause uncertainty for workers and businesses.

The deal “should serve to ratchet down trade tensions between the US and Europe and clear the decks for more productive and forward-looking transatlantic conversations,” Mr. Colvin said. Still, managed trade mechanisms like tariff rate quotas “undermine competitiveness, create winners and losers, add significant supply chain costs and disproportionately affect small and medium sized companies,” he said. — Bloomberg

China’s Xi calls for COVID-19 vaccine mutual recognition

BEIJING — Chinese President Xi Jinping on Saturday called for mutual recognition of COVID-19 vaccines based on the World Health Organization’s (WHO) emergency use list, according to a transcript of his remarks published by the official Xinhua news agency.

Speaking to the Group of 20 (G20) Leaders’ Summit in Rome via video link, Mr. Xi said China had provided more than 1.6 billion COVID shots to the world, and was working with 16 nations to cooperate on manufacturing doses.

“China is willing to work with all parties to improve the accessibility and affordability of COVID-19 vaccines in developing countries,” Mr. Xi said.

Mr. Xi reiterated China’s support of the World Trade Organization (WTO) making an early decision on waiving intellectual property rights for COVID-19 vaccines, and he called for vaccine companies to be encouraged to transfer technology to developing countries.

Two Chinese vaccines, one from Sinovac Biotech and one from Sinopharm, have been included in the WHO’s emergency use list.

Mr. Xi also called for policies to maintain global economic and financial stability, saying China will strengthen macroeconomic policy coordination and maintain policy continuity, stability and sustainability.

“Major economies should adopt responsible macroeconomic policies to avoid negative spillover effects to developing countries and maintain the steady operation of the international economic and financial system,” he said.

Mr. Xi reiterated that China would work to hit a carbon emissions peak by 2030, with the goal of reaching carbon neutrality by 2060. — Reuters

Philippines’ richest man set to see his supermarket IPO sizzle

AllDay Marts Inc., a supermarket chain founded by the richest person in the Philippines, is poised to jump in its trading debut thanks to heavy retail investor interest.

AllDay’s offer was about four times oversubscribed, with the company and billionaire Manuel Villar raising a combined P4.52 billion ($89 million) by selling 7.52 billion shares at 60 centavos each. Trading is scheduled to begin Wednesday in Manila.

“The interest from retail investors is quite strong,” said Andrei Soriano, an analyst at AP Securities Inc. “We got a lot of inquiries and many of our clients subscribed to the IPO. They expect this will be another MerryMart.”

Its peer MerryMart Consumer Corp. surged by the 50% daily limit from its IPO price in each of its first three trading days in June 2020. Shares have tripled since they listed, though off their January peak.

AllDay is debuting at a time when the Philippine IPO market is booming. Six deals have raised a record $2.33 billion this year, Bloomberg-compiled data show.

Villar, whose fortune is $7.3 billion according to the Bloomberg Billionaires Index, is a draw for investors, say analysts, as is AllDay’s low nominal IPO price. The firm should be able to meet its target of tripling its stores in five years, they say, as Villar can provide locations through his Vista Land & Lifescapes Inc., a builder of residential, office and retail developments in 147 cities and towns nationwide.

AllDay’s IPO price of 60 centavos is “reasonable” relative to MerryMart, which priced its float at 200 times forward earnings and had just seven outlets when it went public, said AP Securities’ Soriano. AllDay, which already has 33 stores, has a multiple of 31.1 times its 2022 earnings at the offer price.

The supermarket group targets the “affluent mid-premium segment,” where its market share has widened to 9.5% in 2020 from 6.9% in 2019, according to a COL Financial Group Inc. report. It plans to use 20% of the net proceeds from the sale of new shares to expand.

AllDay will use the remaining proceeds from the new shares to pay down debt, helping save P206 million in annual financing costs, according to its prospectus.

The reopening of the Philippines’ pandemic-hit economy and increased campaign spending ahead of the May 2022 presidential and national elections are also favorable for AllDay.

“Reopening means more employment and consumer spending while the elections will help boost spending capacity of households,” said Manny Cruz, a strategist at Papa Securities. – Bloomberg

Globe shows support for global and national mental health celebrations

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing work and family, children trying to cope with online learning, people living alone, those with pre-existing mental health conditions—the pandemic has adversely affected the lives of many.

Thus, as the Philippines and the world celebrate mental health this month, Globe shows its support through various initiatives that help raise awareness on mental health and well-being. This is the company’s way of showing Filipinos that they are not alone in this fight.

“Today there are many people who are experiencing mental health issues due to the pandemic. And just like how we need to take care of our body, we also need to take care of our emotional and psychological well-being. We are trying to reach out to as many people as we can to remind them that there are existing support platforms they can reach out to,” said Yoly Crisanto, Globe Chief Sustainability Officer and SVP for Corporate Communications.

Through its #PlantHappinessPH mental health campaign, which went live last September 27, Globe encouraged everyone to find joy in simple pleasures. The campaign has, so far, received more than 1,400 video entries from people from all walks of life and has already amassed a whopping 264.9 million views on TikTok.

With a musical score of “Better Days 2.0,” performed by renowned Filipino artist Quest, #PlantHappinessPH put the spotlight on dancing and planting as a way to relieve people of both stress and anxiety during these difficult times. It sought to spread joy and happiness to show hope, no matter how challenging these days may be.

Globe also took part in the National Mental Health Week and the Philippine Mental Health Association’s (PMHA) “Light Up Blue for Mental Health!” By lighting its corporate headquarters lobby chandelier, Globe was able to provide support for the initiative. The activity reminded people that they are never alone in their mental health journey and that stories of hope and courage come from all corners of the world.

Meanwhile, KonsultaMD, a joint venture of Globe’s 917Ventures and Salud Interactiva, brought together some of the country’s most popular artists for a concert entitled “Be Kind to Your Mind” last October 9.

The artist lineup included actress and singer Nadine Lustre, indie rapper, singer-songwriter Curtismith, folk-pop band Ben&Ben, and two of the nation’s hottest DJs—Nix Damn P and Marvelous. The event was the culmination of KonsultaMD’s month-long “Be Kind To Your Mind” campaign, which sought to spread awareness about the importance of mental health among Filipinos.

As part of the campaign, customers can get a free one-month health plan with 24/7 unlimited access to KonsultaMD’s licensed mental health professionals until Oct 31. To avail of the promo, download the KonsultaMD app and use the voucher code BEKINDTOYOURMIND.

Earlier, Globe also collaborated with the DepEd Disaster Risk Reduction Management Services (DepEd-DRRMS) and the Bureau of Human Resource and Organizational Development-Employee Welfare Division (BHROD-EWD) to back the well-being of teachers through the TAYO Naman! (Tulong, Alaga, Yakap at Oras para sa mga Tagapagtaguyod ng Edukasyon) program. TAYO Naman! is an online Mental Health and Psychosocial Support (MHPSS) initiative for all education advocates, including teachers, non-teaching personnel, and parents, under Globe’s Global Filipino Teachers Program.

Globe is also working with numerous organizations to encourage people suffering from mental health issues to reach out and get help through free emotional crisis hotlines. This includes lifelines like the HOPELINE, which offers free mental health support, 24 hours a day, seven days a week. People in mental distress can contact the hotline through 2919 (toll-free for all Globe and TM subscribers), (02) 804-HOPE (4673), or 0917 558 HOPE (4673).

HOPELINE is also included in the telehealth service integrator HealthNow app. Globe and TM subscribers may quickly call HOPELINE for FREE anytime they want to talk to someone.

World Mental Health Day is a project of the World Health Organization. It is celebrated every October 10 to raise awareness of mental health issues worldwide and mobilize efforts in support of mental health. The day also provides an opportunity for all stakeholders working on mental health issues to talk about their work and what needs to be done to make mental health care a reality for people worldwide.

Globe strongly supports the United Nations Sustainable Development Goals, particularly UN SDG No. 3, on providing good health and well-being, and SDG No. 9, which highlights the roles of infrastructure and innovation as crucial drivers of economic growth and development. Globe is committed to upholding the United Nations Global Compact principles and contributing to 10 UN SDGs.

Learn more by visiting www.globe.com.ph/about-us/sustainability.html.

 

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Beauty is always enlightened with the new vivo Y15 Series selfie phone

The newest entrant to the Y series keeps your beauty in focus

Young and young-at-hearts can fill the humdrum of every day with picture-perfect moments as vivo, a leading global smartphone brand, continues to bank on its consumers’ demand to provide quality and stylish phones at an affordable price.

The vivo Y series, the brand’s best-selling product segment in the country, comes with the latest update with the upcoming release of the new vivo Y15 Series.

This hip and stylish smartphone gives a bang for the buck with its vibrant colorways and compelling features. At a budget-friendly price range of P5,000 to P7,500, users can have a reliable device to attend to their day-to-day tasks — from social media activities, gaming, online video calls, and other creative pursuits.

Beauty enlightened

Dimly-lit selfies? We don’t know her. The vivo Y15 Series integrates an 8MP Night Selfie camera. This feature ensures that all images taken are focused on the subject to capture an enlightened beauty against a bokeh or haloing backdrop. Additionally, it also comes with a Selfie Soft Light Band that supports photos taken in dark environments. This one provides a real-time preview of fill light effects and automatic adaptation, so users can be assured that they get the best lighting every time.

Beauty in power

Aside from its fashionable hardware design and modern camera features, the vivo Y15 Series also supports a user’s daily journey with its built-in powerful technology.

A single full charge of the Y15 Series can provide up to 18 hours of HD movie streaming or 7 hours of intensive game playing. With this, people can pursue their gaming or film-buff hobbies anytime, anywhere. It also has the groundbreaking 5V1A Reverse Charging technology. This feature means that the smartphone can also be used to charge other devices — doubling as a device of its own as well as a backup power bank.

With all these technologies fused in the new vivo Y15 Series, lovers of fun and creative pursuits can take advantage of a smartphone that enlightens beauty at a value-for-money price. Watch out for its upcoming release on vivo Philippines’ official Facebook, Twitter, and Instagram, and www.vivoglobal.ph.

 

Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their stories directly on the BusinessWorld Web site. For more information, send an email to online@bworldonline.com.

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